News, views and clues, December 2018

Work-related tax deductions down for 2018

The ATO has reported a decline in the overall value of work-related deductions for tax time 2018. In his opening statement to Senate Estimates on 24 October 2018, Commissioner Chris Jordan said taxpayers appear to be taking extra care when claiming work-related expenses in their 2017–2018 income tax returns. This follows recent ATO awareness and education efforts to close the income tax gap for individuals.

ATO identifies 26,000 incorrect rental property travel expense claims

The ATO has identified 26,000 taxpayers who have claimed deductions during tax time 2018 for travel to their investment residential rental properties, despite recent changes to tax laws.

From 1 July 2017, investors cannot claim travel expenses relating to inspecting, maintaining or collecting rent for a residential rental property as deductions, subject to certain exceptions. An exclusion does apply for this restriction if the expenditure is necessary for the income-producing purposes of carrying on a business (for example, a rental property business), or if the costs are incurred by an “excluded entity”.

Small business corporate tax rates Bill is now law

The company tax rate for base rate entities will now reduce from 27.5% to 26% in 2020–2021, and then to 25% for 2021–2022 and later income years. This means eligible corporate taxpayers will pay 25% in 2021–2022, rather than from 2026–2027.

The new law also increases the small business income tax offset rate to 13% of the basic income tax liability that relates to small business income for 2020–2021. The offset rate will then increase to 16% for 2021–2022 and later income years.

The maximum available amount of the small business tax offset does not change – it will stay capped at $1,000 per person, per year.

GST reporting: common errors and how to correct them

Some businesses are making simple mistakes reporting their GST. The ATO reminds taxpayers that avoid the following common GST reporting errors:

  • transposition and calculation errors – these mistakes often happen when manually entering amounts, so it’s important to double-check all figures and calculations before submitting your BAS;
  • no tax invoice – you must keep tax invoices to be able to claim GST credits on business-related purchases;
  • transaction classifications – it’s important to check what GST applies for each transaction; for example, transactions involving food may be GST applicable; and
  • errors in accounting systems – a system with one coding error can classify several transactions incorrectly.

Government announces super refinements

The Government has announced it will amend the super tax laws to address some minor but important issues, as part of the ongoing super reforms. The changes include:

  • deferring the start date for the comprehensive income product for retirement (CIPR) framework;
  • adjusting the definition of "life expectancy period" to account for leap years in calculations, and amending the pension transfer balance cap rules to provide credits and debits when these products are paid off in instalments;
  • adjusting the transfer balance cap valuation rules for defined benefit pensions to deal with certain pensions that are permanently reduced after an initial higher payment;
  • correcting a valuation error under the transfer balance cap rules for market-linked pensions where a pension is commuted and rolled over, or involved in a successor fund transfer;
  • making changes to ensure that death benefit rollovers involving insurance proceeds remain tax-free for dependants.

CGT on grant of easement or licence

Taxation Determination TD 2018/15, issued on 31 October 2018, considers the capital gains tax (CGT) consequences of granting an easement, profit à prendre or licence over an asset.

In the ATO’s view, CGT event D1 (creating contractual or other rights) rather than CGT event A1 (disposing of an asset) happens when any of the following rights are granted over an asset:

  • an easement, other than one arising by operation of the law;
  • a right to enter and remove a product or part of the soil from a taxpayer's land (a profit à prendre); or
  • a licence (which does not confer the exclusive right to possess the land).

First Home Super Saver scheme and downsizer super contributions: ATO guidance

In November 2018, the ATO issued a Super Guidance Note to provide people with general information about how the First Home Super Saver (FHSS) scheme works. The guidance note explains who is eligible to use the scheme, the kind of contributions that can be made and then released from super for buying a first home, how to apply to the ATO for a FHSS determination, and the requirement to purchase a house.

The ATO also issued guidance on the recently enacted downsizer superannuation contribution measures, which allow people aged over 65 to contribute the proceeds from selling certain property into their super.

ATO scam alert: fake demands for tax payments

Although tax time 2018 is over, the ATO has warned taxpayers and their agents to remain on high alert for tax scams. Scammers are growing increasingly sophisticated and hope to exploit vulnerable people, often using aggressive tactics to swindle people out of their money or personal information.

Be wary if anyone contacts you demanding payment of a tax debt that you didn’t know about. The ATO will never ask you to make a payment into an ATM or using gift or pre-paid cards such as iTunes and Visa cards, and will never you to deposit funds into a personal bank account.

TIP:Scammers have been known to impersonate tax agents as well as ATO staff. If you have any doubts about the legitimacy of a phone call or other communication, you can call the ATO directly (toll free) on 1800 888 540.

Government to establish $2 billion fund for small business lending

The Government has announced that it will establish a $2 billion Australian Business Securitisation Fund and an Australian Business Growth Fund to provide longer-term equity funding for small businesses.

Treasurer Josh Frydenberg has said some small businesses currently find it difficult to obtain finance on competitive terms unless it is secured against real estate. To overcome this, the proposed Australian Business Securitisation Fund will invest up to $2 billion in the securitisation market, providing additional funding to smaller banks and non-bank lenders to on-lend to small businesses on more competitive terms.

ATO information-sharing: super assets in family law proceedings

Superannuation is often the most significant asset in a separated couple’s property pool, particularly for low-income households with few assets. Parties to family law proceedings are already legally required to disclose all of their assets to the court, including superannuation, but in practice parties may forget, or deliberately withhold, information about their super assets.

The Government has announced an electronic information-sharing mechanism to be established between the ATO and the Family Law Courts to allow superannuation assets held by relevant parties during family law proceedings to be identified swiftly and more accurately from 2020. This measure was included as part of a broader financial support package for women announced on in November.

Clients should not act solely on the basis of the material contained in this article. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We, therefore, recommend that our formal advice be sought before acting in any of the areas. This article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.


Tax news, views and clues, November 2018

Transfer balance cap: ATO highlights admin issues

On 30 August 2018, ATO Assistant Commissioner Superannuation Tara McLachlan gave a speech on “Administration issues under the transfer balance cap” at the Tax Institute Sixth National Superannuation Conference.

TIP:The superannuation transfer balance cap is a limit on the total amount of super that you can transfer into retirement phase. The current cap is $1.6 million.

Ms McLachlan highlighted several issues regarding common superannuation events that will need to be reported to the ATO (such as the start of new pensions that began to be in retirement phase on or after 1 July 2017), multiple transfer balance events, excess transfer balance determinations and more.

Australian Small Business White Paper: tax reform a key

After more than 18 months of extensive research and consultation, the Institute of Public Accountants (IPA) and the IPA Deakin SME Research Centre have released the second edition of the Australian Small Business White Paper.

“Numerous policy recommendations have been adopted from the first edition which was launched in 2015. However, we recognise that the state of our economy is reliant on the productivity, growth and prosperity of the small business sector, so this work must be ongoing”, said IPA CEO Professor Andrew Conway.

The Paper covers a range of topics, including productivity, regulation and workplace relations, and makes several tax reform recommendations relevant to small businesses and personal income tax.

ATO expects 200,000 to miss out on refunds by failing to lodge

The ATO expects that 200,000 people could miss out on a tax refund this year because they haven’t lodged a tax return.

Assistant Commissioner Kath Anderson has said that many salary and wage earners end up with a tax refund, but some are missing out because they fail to lodge on time.

Taxpayers had until 31 October to either lodge their own return, or ensure they are on an agent’s books, Ms Anderson said. Failing to lodge by the deadline can attract a penalty of $210 for every 28 days that the return is overdue, up to a maximum of $1,050.

TIP:Have you run out of time to sort out your tax return this year? We’re here to help – get in touch to talk about your options.

Black economy: electronic sales suppression tools now banned

Activities involving electronic sales suppression tools (ESSTs) and that relate to people or businesses with Australian tax obligations are now legally banned under recent changes to the law.

ESSTs come in many forms, such as:

  • an external device connected to a point of sale (POS) system;
  • additional software installed into otherwise-compliant software; or
  • a feature or modification, like a script or code, that’s part of a POS system or software.

These tools generally misrepresent or hide income by deleting or changing electronic transaction information, and falsifying sales or POS records.

TIP:The ATO recognises some businesses may have bought POS software without knowing it contains suppression functions. There is a grace period to self-report without penalty. If you think you may be affected, contact us to find out more.

People and businesses may face penalties of up to $1 million if they produce, supply, possess or use an ESST or knowingly assist others to do so.

Super work test exemption for recent retirees

The Government has released draft legislation and regulations to provide a one-year exemption from the work test for superannuation contributions by recent retirees aged 65–74 who have a total superannuation balance of less than $300,000. This proposal was announced in the 2018–2019 Budget.

Currently, people aged 65–74 must pass the “work test” – working at least 40 hours in any 30-day period during the financial year – in order to make voluntary super contributions.

Bringing forward small business tax cuts by five years

The Prime Minister has announced that the Government will bring forward its planned tax cuts for small business by five years. The Labor Party has also indicated it supports bringing forward the tax cuts.

This means businesses with a turnover below $50 million will pay a tax rate of 25% in 2021–2022, rather than from 2026–2027 as currently legislated.

Corporate tax rates and small business tax offset changes

The Bill to accelerate the reduced tax rates for base rate entities has passed through Parliament and will soon become law. Under the new law, the corporate tax rate will reduce from 27.5% to 26% in 2020–2021, before being cut to 25% for 2021–2022 and later income years.

The new law also increases the small business income tax offset rate to 13% for 2020–2021. The offset will then increase to 16% for 2021–2022 and later income years.

TIP: A“base rate entity” is a company that receives less than 80% of its taxable income from “passive” sources such as dividends, franking credits, interest, royalties and rent.

Residential rental property travel expenses: ATO guidance

Since 1 July 2017, people, self managed super funds (SMSFs), “private” trusts and partnerships have not been permitted to claim non-business travel costs connected to residential rental properties as tax deductible. These costs also cannot form part of the cost base or reduced cost base of a capital gains tax (CGT) asset.

The ATO has released new guidance about this, including details about the legal meanings of “residential premises” and “carrying on a business”.

TIP:Not sure if you can deduct the costs of maintaining your investment rental property?
Talk to us today to work it out.

Tax on compensation received for inappropriate advice

On the heels of the banking and financial services Royal Commission, the ATO has published information about how tax applies for people who receive compensation from a financial institution that provided inappropriate advice and/or did not provide advice it should have. This can include compensation for the loss of an investment, or a refund of fees or interest.

Capital gains tax comes into play, and the compensation amount may count as part of your assessable income if it’s a refund of adviser fees that you’ve already claimed as a tax deduction.

TIP:Contact us if you’ve received compensation from your bank or adviser and need to know more.

ATO set to issue excess super contribution determinations

The ATO has started issuing excess concessional contributions (ECC) determinations for the 2017–2018 financial year. Superannuation fund members will receive these ECC determinations if they have made super contributions above the concessional cap amount for 2017–2018.

TIP:Concessional” contributions are taxed at the reduced rate of 15% in your super fund, but there’s a limit to how much you can contribute at this rate ($25,000 for 2017–2018).

Fund members may also receive an amended income tax return assessment together with the ECC determination and may need to pay additional amounts to the ATO. This is because any super contributions you make over the concessional cap need to be included in your assessable income for the financial year, and an interest charge applies.

Clients should not act solely on the basis of the material contained in this article. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We, therefore, recommend that our formal advice be sought before acting in any of the areas. This article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.


Community values & professional services - two key pillars to success for Marriot Support Services

Janine Simpkin, CEO, Marriott Support Services speaks with us today about the organisation she is proud to lead. In this interview, Janine shares how the organisation creates exceptional opportunities and support for people with disabilities, what it takes to lead a business in today's times and how others can get involved in such a wonderful and much needed support service. Thank you, Janine and congratulations on the success of Marriot Support Services, its social enterprises and the fantastic work you, your team and the volunteers conduct.

  1. Where does the funding come from to support Marriott Support Services and what does the organisation do?

We are moving to The National Disability Insurance Scheme [NDIS] which is a new way of providing support for people with a disability, their families and carers. Marriott supports over 100 people with more significant disabilities. We focus on their strengths and help them to reach their potential in whatever space they choose like employment, volunteering, social connection or skills development and learning. Sometimes that is by accessing their community with help and other times by upskilling them in areas where they can learn to be more independent like learning to use public transport. Many of the younger ones in this group will move to less support or employment options as their skills increase. It is all based on individuals and their goals in life.

  1. Can you explain about the two social enterprise businesses which Marriott operates?

We have two social enterprises. The first, Marriott Industries employs about 85 people with disability to work in our warehouses. We pack gifts for Xmas, repack items from overseas and pack sample bags for new mums or events. We pack spices into jars to sell in gourmet shops and complete light assembly jobs; these are a snapshot of some of the work that we do.

Our second social enterprise is the Enviro-Management Services which is classified as a large business that tenders for work in the open market. Enviro integrates people with disability into crews and work is always off-site. We hope to expand this service to training people with disabilities with the skills to work in the open employment market.

Both social enterprises contribute to our bottom line – thus allowing us to be innovative and strategic in the way we deliver services. However, we do rely on financial assistance for the added extras that can change someone’s life forever. Our new Enviro project will not start until this happens.

  1. If an organisation is looking to recruit and support a person with a disability what advice could you offer them?

Look at someone’s strengths. Design a job around the person, what can they achieve – chances are the time you spend doing this will create a loyal employee who will be hard working and dedicated. With the NDIS there is customised employment support which will help the individual learn a new skill or modify an existing one. Everybody, regardless of education, race, socioeconomic situation or abilities have strengths and areas that need some work – a person with a disability is no different. They can learn, adapt and will always work harder if they are doing something that they are naturally good at – as we all do. People with disability have been found to be very loyal employees with less absenteeism.

  1. What types of volunteers can add value to Marriott Support Services and how can someone get involved?

Marriott loves volunteers. Our Community program has volunteers to support art, tennis, dancing, cooking, basketball competition and gym– and so the list goes on. Volunteers also help out with admin – as we run on the “smell of an oily rag” and want to use our resources in more direct support. We have skilled volunteering too like with marketing or IT; almost any skill is great to have in a volunteer and can be short term or long term. We also have corporate volunteers, like from NAB, who come in groups as part of their corporate social responsibility programs.

  1. How would you describe the auditing team at McPhail and Partners?

Very reliable, approachable, pleasant and communicative. Let’s not forget extremely thorough, all of the qualities we admire and need in an auditor.

  1. What makes you smile at work?

My staff and the way they communicate with everybody – regardless of their abilities. Corridor chats with staff and the people we support uncover so many good stories, and we tend to be very open.

  1. What makes you feel frustrated at work?

Compliance to the extreme, however absolutely required in this field. We work with a marginalised and vulnerable group who need extra support and protection.

  1. How would you describe your leadership style?

Open, honest, consultative, and I work to people’s strengths. I believe a CEO should be the face of an organisation and lead by example, especially in this field.

  1. Industries are extremely competitive nowadays, how does Marriott Support Services remain relevant and competitive?

We are honest about what we do well and work to our strengths. We work well with “behaviours of concern”, these may limit someone’s ability to participate in the community, and we have great success in enabling people with behaviours of concern to be able to engage with the community by learning to manage their behaviours. It is life changing for the individual and their families. Another strength is getting people into employment, and that is also life-changing, giving some financial independence, developing skills and peer connections is excellent for the individual, their family and the community.

We use our local community and partner with them to expand opportunities and build social inclusion. For example, we have a small group volunteering in a commercial kitchen in an aged care facility to develop their skills and social connection and maybe a pathway to training and employment. We will do everything we can to help an individual reach their goals. We are also not afraid to say that someone may be better with another organisation that better suits their interests or needs. This will always be with an organisation that we trust and know well. We are “niche” in the support we provide and work closely with our community to develop and grow to meet their needs.

  1. How important is social media to Marriott Support Services?

In the past, we have worked on “word of mouth” and reputation. We recognise that to remain viable and grow in the spaces that we wish to expand we need social media. Social media is a wonderful way for the people we support to connect and grow and to reach new customers. We use stories to inspire people to aim high and to follow a dream and to inform people about what is out there, for example, helping people understanding the NDIS. Social media is an excellent way for us to communicate and we are always looking to improve.

For more information about Marriott Support Services visit their website by clicking here.

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Shining the light on Sargents Cakes with Kim and Paul Sharwood

Husband and wife team, Kim and Paul Sharwood, share their business story with us. Sargents has such a long-standing history and we wanted to know all about it! Thanks to Kim and Paul for opening your doors and sharing your success with us. 

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  1. How old is the business?

Established 1952...so 66 years old!

  1. Where did the name Sargents come from?

Jim Sargent established the business in 1952. Paul’s Dad Barry lived next door to him. Jim only had one daughter who showed no interest in being involved with the business, so he asked Barry’s parents if Barry could begin work at Sargent’s as an apprentice. Barry was like the son he never had. Barry and Jim worked together until Jim retired and Barry bought the business in 1982. He decided to honour Jim by keeping the name Sargent’s Cakes. When Paul and I took over the business in 1997, changing the name wasn’t even a consideration. The name Sargent’s Cakes is synonymous with Reservoir, and the people of Reservoir don’t like change!

  1. Who owns the business now?

Paul and Kim Sharwood.

  1. Congratulations on being a super husband and wife team. How do you do it? What’s the secret to your success because not every husband and wife can work together!

I believe that as a couple, both in business and at home, we have a lot of respect and love for one another. We have been together since we were 14 years old, so we know each other extremely well. As far as the business is concerned, Paul starts very early in the mornings and his focus is on the production and quality control of the goods. I work part-time at the business, and my focus when I am there is on the staff and of course the customers. When problems arise within the business, we always openly discuss our options/solutions, and we make sure we are on the same page. A lot of the time Paul will have the answers to any manufacturing issues, due to his extensive knowledge in that area, (which I don’t have!)

  1. Which social media platform do you use and what is the name so that we can find it?

We have a website (www.sargentscakes.com.au), that is not utilised much since our introduction to Instagram, (sargents_cakes). It is much more time effective to post a cake photo and description on Instagram.

  1. What makes you smile at work?

Paul...” Seeing the shop full of customers, lining up to give us their money!” Kim...” Having a chat with customers who have become like family over the years; banter with my staff; looking at the final result of a beautiful cake that our decorators have completed!”

  1. You must have such a loyal customer following. How do you ensure that your quality and service keeps up to date with customers’ expectations?

We do have a huge local following. Many customers have been coming to us for over 50 years! Great enthusiasm and lots of hard work and time are dedicated to making sure that customers return. They expect a friendly greeting, knowledgeable and reliable information on our goods, a clean and appealing shop, and of course food that tastes amazing! This is achieved through the training and supervision of our staff; making sure that they know what our expectations are of them and for our customers. Our staff are very loyal many have worked for Sargent’s Cakes for over 20 years! The main drawcard for Sargent’s Cakes is that we bake fresh daily you can’t beat an apple pie or jam donut that has just come out of the oven!

  1. In a family business, they say success lies in each other knowing their strengths and weaknesses. What business roles [hats] do each of you do [wear?]. For example, who looks after the HR, who looks after the finances etc.?

Paul is a qualified pastry cook. He is hands on every morning, six days a week, making all the pies and cakes that we sell. I work part-time at the shop and work at home keeping the finances under control, doing the bookwork and answering emails/enquiries. Paul does not do technology, so needless to say all the HR falls into my hands. One of my young decorators has taken over the Instagram page from me, as she is more tech-savvy and more in tune with the lingo!

  1. You’ve been a client of McPhail and Partners for many years. How would you describe what it is that they do?

McPhails have looked after us the whole time we have owned Sargent’s Cakes, and also when Barry had the business. They give us peace of mind that our accounting needs are being managed by qualified accountants who have the knowledge to keep our business out of strife with the Tax Office (!) and running as efficiently as possible. They offer us advice and are always available to help us when we have enquiries.

  1. What motivates you every day?

Running and maintaining a successful business that people love to visit keeps us both motivated every day. Knowing that people are enjoying our food gives us great pleasure. Of course, wanting to provide for our family and to continue to provide us with a lovely lifestyle motivates us as well.

  1. How has retail changed for your business over the years?

Retail has changed for us over the years. We have a younger demographic moving into the area, so the demand for different products has increased. Customer expectations are higher than before, and value for money is extremely important. It is not as busy as the good old days, with competition from other bakeries and the big supermarkets. However, we have learnt to adjust to this. Our prices are very reasonable, and our quality is always high, so we know that Sargent’s Cakes is here to stay!!

Thanks Kim and Paul and congratulations on a wonderful success story.

 


Tax news, views and clues October 2018

Claiming work-related expenses: ATO guides and toolkits

This year, the ATO has launched its biggest ever education campaign to help taxpayers get their tax returns right. The ATO says the campaign, which is running throughout tax time, includes direct contact with over three million selected taxpayers, as well as specialised guides and toolkits for taxpayers, agents, employers and industry bodies. A key component of the campaign is simple, plain English guidance for people with the most common occupations, like teachers, nurses, police officers and hospitality workers.

ATO Assistant Commissioner Kath Anderson says that last year work-related expenses totalled a record $21.3 billion, “and we have already flagged that over-claiming of deductions is a big issue”. The most popular topics this year include car, clothing, travel, working from home, and self-education expenses, and the guides for tradies, doctors, teachers, office workers and IT professionals have been popular.

Illegal phoenix activity: public examinations in Federal Court matter

The ATO has announced that public examinations started in a Federal Court matter on 27 August 2018 in relation to a group of entities connected to a pre-insolvency advisor. The examinations will focus on the suspected promotion and facilitation of phoenix activities and tax schemes.

More than 45 service providers, clients and employees of pre-insolvency advisors, as well as alleged “dummy directors” of phoenix companies, will be examined.

Banking Royal Commission: possible super contraventions

On 24 August 2018, the Royal Commission into banking, superannuation and financial services misconduct released the closing submissions, totalling over 200 pages, that set out possible contraventions by certain superannuation entities. The evidence surrounding these alleged breaches was revealed during the fifth round of public hearings, when high-level executives of some of the largest superannuation funds were grilled about practices that may involve misconduct or fall below community expectations.

The Commission heard evidence about fees-for-no-service conduct and conflicts of interests which affect the ability of some super fund trustees to ensure that they always act in the best interests of members. Questioning during the hearings focused particularly on how trustees supervise the activities of a fund and respond to queries from the regulators. Executives were also quizzed about expenditure on advertisements and sporting sponsorships, and finally, the Commission turned its attention to the effectiveness of the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) as regulators.

What’s next?

The Royal Commission’s interim report is now due, and the sixth round of public hearings (10–21 September 2018) is investigating conduct in the insurance industry. The Royal Commission has released four background papers covering life insurance, group life insurance, reforms to general and life insurance (Treasury) and features of the general and life insurance industries.

SMSF issues update: ATO speech

ATO Assistant Commissioners, Superannuation, Tara McLachlan and Dana Fleming recently spoke at the SMSF Association Technical Days in various capital cities. The speech was mainly about practical considerations to be taken into account when setting up a new self managed superannuation fund (SMSF) and during the first year of its operation. Other issues raised included SMSF registrations, annual return lodgements, SuperStream SMSFs and exempt current pension income and actuarial certificates.

ATO data analytics and prefilling help tax return processing

The ATO reports that a record number of tax returns have been finalised in the first two months of this year’s “tax time” period, thanks to prefilling of tax return data and the ATO’s correction of mistakes using analytics and data-matching. Over $11.9 billion has been refunded to taxpayers, and errors worth more than $53 million were detected and corrected before refunds were issued.

The ATO has prefilled over 80 million pieces of data from banks, employers, health funds and government agencies to make tax returns easier for taxpayers and agents. The ATO’s advanced analytics allow it to scrutinise more returns than ever before, and make immediate adjustments where taxpayers have made a mistake.

TIP: Having a tax agent prepare and lodge your return is a tax-deductible cost. Why not let us handle your tax this year?

Parliamentary committee recommends standard tax deduction, “push return” system

The House of Representatives Standing Committee on Tax and Revenue has tabled its 242-page report on taxpayer engagement with the tax system. This significant report covers issues that have also been canvassed in previous tax reform reviews such as the Australia’s Future Tax System Review and the Henry Review.

In its inquiry, the Committee examined the ATO’s points of engagement with taxpayers and other stakeholders and reviewed the ATO’s performance against advances made by revenue agencies in comparable nations. The inquiry asked what taxpayers should now expect from a modern tax service that is largely or partly automated.

Australia’s complex system for claiming work-related tax deductions, for example, was highlighted during the inquiry as being out of step with approaches in most other advanced nations, which have almost universally standardised their approach. The Committee concluded that under Australia’s self-assessment model, more should be done to make tax obligations easier for taxpayers to understand and simpler to comply with. The report includes 13 recommendations to help achieve this goal.

12-month extension of $20,000 instant asset write-off

The Treasury Laws Amendment (Accelerated Depreciation for Small Business Entities) Bill 2018has now passed through Parliament without amendment.

The Bill makes changes to the tax law to extend by 12 months the period during which small businesses can access expanded accelerated depreciation rules for assets that cost less than $20,000. The threshold amount was due to revert to $1,000 on 1 July 2018, but will now remain at $20,000 until 30 June 2019.

Australian Small Business and Family Enterprise Ombudsman Kate Carnell has welcomed the extension but reminded small businesses and family enterprises that the instant asset write-off is a tax deduction, not a rebate – your small business needs to make a profit to be eligible to claim the benefit.

Cyptocurrency and tax: updated guidelines

The ATO says that for taxpayers carrying on businesses that involve transacting with cryptocurrency, the trading stock rules apply, rather than the capital gains tax (CGT) rules.

The ATO’s guidelines on the tax treatment of cryptocurrencies have recently been updated, following feedback from community consultation earlier this year. The ATO received about 800 pieces of individual feedback and submissions, and has now provided additional guidance on the practical issues of exchanging one cryptocurrency for another, and the related recordkeeping requirements.

The ATO as SMSF regulator: observations

In the opening address to the Chartered Accountants Australia and New Zealand National SMSF Conference in Melbourne on 18 September 2018, James O’Halloran, ATO Deputy Commissioner, Superannuation, shared some observations and advice from the ATO’s perspective as regulator for the SMSF sector. He spoke about matters including the crucial role of fund trustees, the ATO’s activities to address behaviour that seeks to take advantage of SMSFs, what sort of SMSF events attract close ATO scrutiny, and issues relating to the use of multiple SMSFs to manipulate tax outcomes.

Clients should not act solely on the basis of the material contained in this article. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We, therefore, recommend that our formal advice be sought before acting in any of the areas. This article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.


Introducing Stephen Howard, Manager, Business Services

We are extremely pleased to introduce Stephen Howard. Stephen, or Steve as he likes to be known, has been appointed as Manager, Business Services. We sat down with Steve to find out a little more about him, his style and what we can expect working with him. Thanks, Steve and welcome to the team.

  1. What led you to join McPhail & Partners?

After working in various different sized firms over the last 11 years, I was looking for something that was small enough to have the personal connections between staff and the clients that often gets lost in some of the bigger firms; but also, somewhere that had the right potential to be able to grow in the longer term

  1. What qualifications do you have?

I hold a Bachelor of Business (Accountancy) from RMIT University. I’m also a CPA and a registered tax agent

  1. What is your role at McPhail & Partners?

I am a manager in the business services/tax side of the business, so I assist the directors of the firm with managing client’s day-to-day affairs and ensure we’re being proactive and engaged with them regularly and to make sure their accounting needs are always met.

  1. What qualities do you think it takes to be a leader in today’s ever-changing world?

I think leaders today require an open mind and the ability to think outside the square. As technology continues to evolve, the way things were done in the past is no longer efficient or necessarily best practice. Good leaders today need to be able to continue to move with the times and not get stuck doing things in certain ways because that’s what has always been done. It’s also important for leaders to be in touch with those that report to them and allow them to have a voice in relation to how things should be done. A lot of big corporations have seen great ideas come from people well below the top of the food chain

  1. What three words would you use to describe the team at McPhail & Partners?

Friendly, community-minded, professional

  1. What does a typical day at work look like for you?

The great thing about public practice accounting is those typical days don’t really exist. You might have a plan as to what you are going to do and then a client calls with an urgent matter and things get shuffled around. One day you might be working on a cash flow for a client, so they can get finance; the next you might be working on tax returns and the day after that might be dealing with the ATO regarding a client’s affairs. The variety of work keeps things interesting

  1. Who do you admire and why?

I admire any professional sportsperson who is in the public eye while being at the top of their sport. In our world, the continual legislative and technological changes make staying at the top of your game hard. Professional athletes have to be at the top of their game, maintain peak performance, train etc. all while being subject to media scrutiny & social media commentary from people who have never played professionally themselves. The fact that so many of them can stay at the top of their games for so long despite everything they have said about them is quite amazing.

  1. The world is changing so fast, how do you remain up to date at work?

We just need to make as much time as we can to attend seminars to keep ourselves up to date with new legislation and rules etc. The methods of delivery have improved significantly over the years so keeping up to date isn’t as difficult as it seems. Often there are webinars, email newsletters and other forms of communication that can be accessed from anywhere.

  1. What can the team at McPhail & Partners expect from you and why?

My focus is always around exceeding client expectations – M & P can expect a client-focused approach to all engagements I’m a part of.  My view is that as accountants we need to take on more than just a “number cruncher” role; we need to become our clients’ trusted advisor. That might mean simply listening to their goals and concerns and assisting put them into action; it might mean being a broker of sorts and introducing them to other professionals such as lawyers; sometimes it might involve being a counsellor of sorts. By being that trusted advisor allows us to be integrated into the client’s affairs fully and allows servicing opportunities that may not exist otherwise.

 


Tax news, views and clues September 2018

Super sector must address trust deficit

In a speech to the Financial Services Council Summit on 26 July 2018, Australian Securities and Investments Commission (ASIC) Chair James Shipton said the superannuation sector must restore the “trust deficit” and be more mindful of the responsibilities that come with being the custodians of other people’s money. Mr Shipton said the super industry has been exploiting opportunities to make money from members, citing examples of conduct that could lead to poor member outcomes, including poor advice, treatment of customers and defensiveness when it came to transparency about fund operations.

Mr Shipton said there is an urgent need for super funds to invest in systems, procedures and policies that can quickly identify emerging conduct and systemic issues. A recent ASIC review of 12 banking groups found that it took an average of four years between an issue occurring and being identified internally for investigation, before a significant breach report was finally lodged with ASIC.

Call to boost instant asset write-off to $100,000

The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, has called for the $20,000 instant asset write-off for small businesses to be embedded in legislation and extended up to $100,000 every three years. Ms Carnell said increasing the instant asset write-off to $100,000 every three years would enable small businesses with higher costs for key equipment to participate.

These recommendations stem from the Ombudsman’s November 2017 paper,Barriers to investment: a study into factors impacting small to medium enterprise investment.

Tax return required for excess super non-concessional contributions

The ATO has reminded taxpayers that they need to lodge a tax return for any financial year in which they exceed their non-concessional contributions cap, and that making excess contributions may lead to having to pay extra tax.

The annual non-concessional cap for individuals is $100,000 (or $300,000 over three years for people aged under 65), provided you have a total superannuation balance of less than $1.6 million at 30 June of the prior year. The ATO determines if you have exceeded the non-concessional cap by looking at your date of birth and the information reported by your super funds and in your tax return.

Taxpayers who go over the non-concessional cap can withdraw the excess non-concessional contributions (plus 85% of the associated earnings). The full amount of the earnings (100%) are then included in the taxpayer’s assessable income (and subject to a 15% tax offset). If an individual does not withdraw the excess contributions they are taxed at the top marginal tax rate (plus the Medicare levy).

APRA’s response to Productivity Commission draft report

The Australian Prudential Regulation Authority (APRA) has released its submission in response to the Productivity Commission’s draft report on superannuation efficiency and competitiveness. APRA agreed with a number of the Commission’s findings and the direction of many, but not all, of the recommendations in the draft report.

However, APRA has rejected the Commission’s claim that APRA’s powers and role, and their significant overlap with the powers and role of the Australian Securities and Investments Commission (ASIC), have resulted in “confusing and opaque” regulatory arrangements, poor accountability and a lack of strategic regulation. APRA Deputy Chair Helen Rowell said APRA’s role is to administer the prudential and retirement income provisions of the Superannuation Industry (Supervision) Act 1993. In that context, APRA is primarily responsible for ensuring that registrable superannuation entity (RSE) licensees manage their business operations to deliver quality member outcomes. By comparison, ASIC’s role is to oversee specific conduct obligations that apply to RSE licensees dealing with individuals in relation to disclosure, financial product advice and complaints.

Protecting Super Bill: Senate Committee report

The Senate Economics Legislation Committee has released its report on the Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018, and has recommended that the Bill be passed.

The Bill, which is still before the Senate, contains the following measures to prevent the erosion of super balances:

  • super fees capped at 3% per year for balances less than $6,000;
  • exit fees banned for all super accounts, regardless of the balance;
  • an insurance opt-in rule for:
  • account balances less than $6,000;
  • new members under age 25;
  • accounts that have not received a contribution for 13 months; and
  • inactive low-balance accounts (ie balance less than $6,000) will be transferred to the ATO.

First Home Super Saver scheme: ATO guidance

Law Companion Ruling LCR 2018/5, issued by the ATO on 15 August 2018, provides guidance on the First Home Super Saver (FHSS) scheme.

TIP:The FHSS scheme is designed to help eligible first-home buyers by allowing them to make voluntary superannuation contributions and then withdraw those amounts and associated earnings to use when purchasing a first home.

People who meet the eligibility criteria can access the scheme by applying to the ATO for a determination and a release authority. They must make superannuation contributions that are eligible for release under the scheme, namely voluntary concessional or non-concessional contributions that come within the relevant contributions cap.

There are limits on the amounts withdrawn ($15,000 per financial year and $30,000 in total, subject to the contribution caps).

ATO targeting car sharing platforms

The ATO has announced it will turn its attention to anyone earning income through car sharing platforms. ATO Assistant Commissioner Kath Anderson said there is evidence that some people who are undertaking sharing activities using third-party services such as Car Next Door, Carhood and DriveMyCar Rentals might not understand the taxation implications involved.

TIP:You must declare in your tax return any income you receive, and you cannot avoid tax by calling the car sharing a hobby.

While any car sharing expenses you claim as tax deductions must relate directly to the renting, hiring or sharing of your car, the Assistant Commissioner has said that most car sharers can legitimately claim deductions for costs like platform membership fees, availability fees, cleaning fees and car running expenses.

Delay in extending reportable payments to courier and cleaning services

The legislative logjam in Federal Parliament is affecting the implementation of a wide range of tax measures, and the ATO is having to implement some practical work-arounds.

In the 2017–18 Federal Budget the Government announced that from 1 July 2018, businesses that supply courier or cleaning services will need to report payments they make to contractors for courier or cleaning services. The payments must be reported to the ATO each year using the taxable payments annual report (TPAR). However, legislation to implement this is still before the Senate.

The ATO will not require TPARs to be lodged up until the law change is passed by Parliament. Taxpayers will be expected to keep sufficient business records to enable a TPAR to be prepared and lodged “as soon as is reasonably practicable after the law is enacted”.

GST: supplies of real property connected with Australia

GST Ruling GSTR 2018/1, issued on 22 August 2018, sets out the ATO’s view on when supplies of real property are connected with the indirect tax zone (Australia).

It states that a supply of real property is connected with Australia if the real property, or the land to which it relates, is in Australia. The ATO stresses that the test is the physical land’s location, not the location of the interest or right over the land. The supply of a right to accommodation in Australia also constitutes the supply of real property connected with Australia.

Clients should not act solely on the basis of the material contained in this article. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We, therefore, recommend that our formal advice be sought before acting in any of the areas. This article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.


Banking - Future trends and business tips with Natalie Goold, Franchise Manager, Bendigo Bank

Bendigo Bank is part of the local community. You might even be a customer of theirs. Why is the Bendigo Bank brand so strong and well respected in a time when most banks are failing? We sat down with Natalie Goold, Franchise Manager to learn about the bank, future trends and her leadership style. Thanks, Natalie.

  1. The Bendigo Bank brand has always appeared strong. How does it achieve this?

According to independent research by Roy Morgan, Bendigo Bank was named the third most trusted Australian brand last month [July 2018], ahead of Bunnings, Qantas and the ABC. This is something that we are extremely proud of and reflects not just how we function as a bank, but more so how we treat our customers, our company character and conscience.  Our capabilities continue to evolve to deliver industry-leading solutions and experiences to our customers.  At the core of what we do is our customers, and this has not changed during our 160 years of operation.

  1. The world of financial services changes at rapid rates and shows no sign of slowing down. How do you remain up to date and in touch with client needs?

This is absolutely true, change is happening at a rapid rate, this is exciting for our customers as new technologies make banking more accessible, putting the consumer in control.  It is a challenge that the banking industry faces, we need to ensure we are meeting the changing needs of our customers and innovating constantly to remain relevant.   We actively encourage and monitor feedback from customers through our Customer Help Centre, feedback is monitored for emerging trends and acted upon as required.  As an organisation we also engage with Fin Tech innovators and existing partners, ensuring we are always up to date with best practice and looking for new areas to invest in.

  1. What and who motivates you as a leader?

My team of people motivate me every day!  People that are passionate about getting the best outcome for a customer are really motivational.  I really admire staff who are willing to try new things and go outside of their comfort zone at times.  I have a motto that ‘while you are in your comfort zone you are not growing as a person’.Personally, I am motivated by leaders that are passionate about achieving goals and who can set a vision for our company.

  1. What advice would you give to your 16-year-old self?

To make the most of compound interest, start investing young!!  A good work ethic and right attitude will open doors you never imagined.

  1. A large number of SME’s fail in the first few years of business. Why is that and how does Bendigo Bank assist [before they fail that is!]?

Starting a new business can be all encompassing, there are so many elements the business owner needs to be across.  Being planned in your approach and researching your market are critical.We provide new customers with access to our online Business Hub, which provides information such as Business Plan templates, updates on financial markets, information on legislative requirements for employees such as Superannuation contributions and loads of information.  We can also support start up SME’s by ensuring they have the strong advisors supporting (such as Accountants, Business Advisors etc.).

  1. How would your colleagues describe you?

That’s difficult to answer…I enjoy achieving and always moving forward.  I care about the best outcome for our customers and our staff.

  1. How would you describe the team at McPhail & Partners?

The team at McPhail & Partners are genuine in helping their clients to achieve their business goals.  It is a family based business that has strong values, work ethic and integrity.

  1. Technology has impacted business in so many ways. How has it helped Bendigo Bank and its clients?

Technology in banking has put the customer more in control of their finances.  Customers have all their banking information at their fingertips, so people are more informed about their financial position.  Payments can now be made and received so quickly by so many different means, this is great for small business and assists with cash flow challenges.

  1. How important is a partnership approach to the relationship you have with your clients and how do you ensure that is consistent throughout all three branches that you oversee?

We view banking relationships with our customers as a partnership, in which we feel that we can add value to the customer and help them achieve their financial goals.  We do this by really knowing our customer and understanding what challenges they face, how they like to manage their banking and being accessible when the customer needs assistance.

We look for ways to reach out to our customers and give suggestions on new products or different ways of structuring their banking that could be more beneficial to them.

Our group of 3 branches (Ringwood, Boronia and Bayswater) work as one team.  We meet on a regular basis as a group to discuss things like; best practice, new products and initiatives, key client relationships etc.  This ensures that we keep challenging ourselves and meeting the changing needs of our customers.

We would love the opportunity to speak with anyone who is interested in banking with Bendigo Bank and invite you to contact me on 03 9870 9244.

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Tax news, views and clues August 2018

Government launches new service to simplify business registrations

The government has officially launched a new stand-alone Business Registration Service, providing a simpler and clearer way to register a business. The service is available at www.business.gov.au.

The service can be used for things such as applying for an Australian Business Number (ABN) or goods and services tax (GST) registration. It is for people starting a new business as a sole trader, company, partnership, trust or superannuation fund. Existing businesses with an ABN can also use the service to apply for tax registrations such as GST.

The Business Registration Service has reduced the average time taken to obtain a business and associated licences to under 15 minutes.

Illegal early access to super: ATO warning about scammers

The ATO has issued a warning to be aware of scammers who promise to organise access to people’s retirement savings for a fee. Unscrupulous promoters encourage people to illegally access their super early to help with expenses such as the purchase of a car, paying off debts, sending money to overseas relatives and taking a holiday. The ATO has seen promoters, mostly in western Sydney, targeting people with small to medium super balances, those involved in local community groups, and those who may not have engaged with their super before being approached.

ATO gives small businesses the chance to seek independent review of ATO audit position

From 1 July 2018, the ATO is running a 12-month pilot to extend its independent review service to certain small business taxpayers. This means those taxpayers can have the ATO’s audit position on their tax affairs independently reviewed.

The independent review is conducted by an officer from the ATO’s Review and Dispute Resolution business line. This officer will not have been involved in the audit and will bring an independent “fresh set of eyes” to the case. The independent reviewer will consider the documents setting out the taxpayer’s position and the ATO audit position. They will schedule a case conference with the taxpayer and the ATO audit officer, generally within one month of receiving the taxpayer’s review request.

The ATO audit team will finalise the audit in accordance with the independent reviewer’s recommendations. The pilot is currently limited to small business disputes involving income tax audits in Victoria and South Australia.

Transacting with cryptocurrency: updated ATO info

The ATO says a capital gains tax (CGT) event occurs when a person disposes of their cryptocurrency (eg Bitcoin). A disposal can occur when someone:

  • sells or gifts cryptocurrency;
  • trades or exchanges cryptocurrency (including the disposal of one cryptocurrency for another cryptocurrency) – if the cryptocurrency received cannot be valued, the capital proceeds from the disposal are worked out by using the market value of the cryptocurrency disposed of at the time of the transaction;
  • converts cryptocurrency to fiat currency like Australian dollars; or
  • uses cryptocurrency to obtain goods or services.

If you need assistance with the tax treatment of cryptocurrency, or the ATO’s record-keeping requirements for taxpayers who are involved in acquiring or disposing of cryptocurrency, please contact our office.

Tax gap for individuals is $8.8 billion, says ATO

The ATO has estimated that the net “tax gap” for individuals not in business in 2014–2015 is approximately 6.4%, or $8.8 billion. The gap is an estimate of the difference between the tax the ATO collects and the amount that would have been collected if every one of these taxpayers was fully compliant with the law.

In other words, the ATO estimates that individuals not in business paid over 93% of the total theoretical tax payable in 2014–2015.

ATO warns about scammers at tax time

The ATO has warned taxpayers to be on “high alert” for tax-related scams. ATO Assistant Commissioner Kath Anderson said the most common scam is still the “fake tax debt” phone scam, but the ATO is also seeing an increase in “fake refund” or “refund for a fee” scams, and email and SMS scams enticing people to click a hyperlink, download a file or open an attachment.

Scammers frequently claim to be from the ATO and taxpayers should be wary of any phone call, text message, email or letter about a tax refund or debt, especially if they were not expecting it.

Income tax residency rules for individuals: Board of Taxation recommends reform measures

The Board of Taxation has publicly released its initial report on its review of Australia’s income tax residency rules for individuals. The Revenue Minister said the Board found that the current individual tax residency rules require modernisation and simplification. The Board also identified opportunities for tax arbitrage, for example where individuals become “residents of nowhere” when they leave Australia and do not become tax residents of another jurisdiction.

The report considered whether the current rules (largely unchanged since 1930) are sufficiently robust to meet the requirements of the modern workforce, address the policy criteria of simplicity, efficiency, equity and integrity, and take into account a significant number of cases heard since 2009 relating to individual residency. The Revenue Minister has asked the Board to consult further on some key recommendations.

Retirement income covenant needs more flexibility: KPMG

KPMG has released a submission in response to the Treasury position paper on the proposed retirement income covenant announced as part of the 2018–2019 Budget. The proposed covenant will require trustees of superannuation funds (including self managed superannuation funds) to formulate a retirement income strategy for fund members. This requirement is aimed at supporting the government’s development of a comprehensive income products for retirement (CIPR) framework.

Illegal phoenix activity costs billions; new Phoenix Hotline

The ATO has released a new report on the economic impacts of potential illegal phoenix activity. It estimates that the annual direct impact of illegal phoenix activity on businesses, employees and the government was between $2.85 billion and $5.13 billion for the 2015–2016 financial year.

The government has also established a new Phoenix Hotline to combat phoenixing activity and to protect compliant Australian workers and businesses. Employees, creditors, competing businesses and the general public can confidentially provide information about possible phoenix behaviour via the hotline on 1800 807 875 or the ATO website. Disclosures will be protected.

Super funds deliver healthy returns for 2017–2018

The median “growth” superannuation fund delivered a healthy investment return of 9.2% for 2017–2018, with the top spot going to Hostplus with a return of 12.5%, according to superannuation ratings firm Chant West. Growth super funds are those with a 61–80% allocation to growth assets.

Every fund in the growth category had positive returns, with even the lowest performer delivering a 6.5% return. Growth funds have delivered nine consecutive years of positive returns, averaging about 9% a year, said Chant West senior investment manager Mano Mohankumar.

GST exemption for offshore sellers of hotel bookings to be removed: draft legislation released

The Treasurer has released draft legislation to ensure offshore sellers of hotel accommodation in Australia calculate their GST turnover in the same way as local sellers from 1 July 2019.

Under the proposed changes, offshore suppliers of rights to use commercial accommodation (eg hotels) in the indirect tax zone (broadly, Australia) will be required to include these supplies in working out their GST turnover. If the supplier’s GST turnover equals or exceeds the registration turnover threshold, GST must be remitted for supplies that are taxable supplies.

Clients should not act solely on the basis of the material contained in this article. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We, therefore, recommend that our formal advice be sought before acting in any of the areas. This article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.


Who is the REAL Chathu De Silva?

Chathu De Silva is our Administration Team Leader; the backbone of our business. You might not get to meet Chathu when you come to the office so we thought we’d ask her some questions to reveal the REAL Chathu – we learned some new things too!

  1. If I could have any job, I’d be - A film director.  The room for creativity in filmmaking always fascinated me. Guiding technical crew and actors to bring a script to life has captivated me since I was a kid.
  2. Best career advice I’ve received - Not to sweat the small things to focus on the bigger picture.
  3. The three qualities that got me where I am today – Hard work, persistence and logical thinking
  4. The kind of work I’d do for free - Personal shopper or stylist
  5. Change I’d like to see in the world - For every child in the world to receive a good quality education
  6. Who I admire and why - Princess Diana- I admire her grace and beauty and her fearlessness to do what she truly believed in.
  7. Last thing I binged watched - Game of Thrones like the rest of the world
  8. Book that left an impression on me - The Road from Elephant Pass - A novel by Nihal De Silva [Book written during the ethnic conflict in Sri Lanka]. Being a hopeless romantic myself this book is about a love story of two people who belong to completely different races and liberation organisations - it is definitely memorable
  9. Movie that left an impression on me - Being a parent myself definitely – Will Smith’s “The Pursuit of Happiness”
  10. On my bucket list - Carnival in Rio de Janeiro
  11. Cocktail of choice - Espresso Martini
  12. My perfect day would begin - A morning cuddle from my daughter and a warm cup of coffee
  13. My perfect day would end with - A good book, chocolate and a glass of red wine
  14. What every person should try once in their lifetime – Live in another country
  15. One thing I’m exceptionally good at - Talking
  16. One thing I’m exceptionally bad at - Being patient
  17. Advice I’d give to my younger self - Buy more size 8 shoes
  18. Three words to describe McPhail & Partners - Professional, Caring & Forward thinking

Thanks, Chathu and thanks for all your hard work!

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