OUR EDITORIAL – Essential Reading for Everyone. The remainder – useful if you are running a business.
30 June is fast approaching and we are focused on a number of key projects right now, the big one being tax planning for 2014 and preparation of trust distribution minutes prior to year-end. Mainly a tax planning exercise to ensure our trust tax distributions and company dividends declared are set at the best levels as well as ensure your super contributions are made before 30 June. But what about next year and the next ten years? What should I be doing now looking ahead. Whether you are running a business, a salaried employee, an investor, or retired, now is the time to review your affairs and ensure you are doing everything the best way possible. Budgets and Plans – Sure, now is the time to set your budgets and plans for the next 12 months. But remember that the best budgets are not static and you should be updating your budget and plans every quarter, adding on one new quarter and dropping off the completed quarter so that you are always planning 12 months in advance. For the last quarter, compare actuals against budget and determine what worked and what did not. What should you do differently for the next quarter? Treat every quarter as a year-end! Attend a “Quarterly Board Meeting” with Sondergaard Accountants, where we review with you all the key aspects of your business. For business owners complete our “Sellability Score Questionnaire” on our website for a free report on how saleable your business is. If you are not a client yet, complete the “Questionnaire” also on our website and email to me for a free half-hour Financial Health Check. This can be worth thousands of dollars to you. Property Investors – if your property is negatively geared, vary your PAYG-W tax down now so you get next year’s refund every month in your paycheque – don’t wait 12 months for your refund. Existing variations expire on 30 June. Investors – review your Investment Portfolio Strategy with Sondergaard Accountants. Will it achieve your long-term goals? Self-Managed Superfunds – should I start one, am I doing everything I should with my existing SMSF. Estate Planning – Are my wills and related affairs in order? When was your last will made?
The real value you get from working with Sondergaard Accountants is much more than just getting your tax returns completed accurately and efficiently. It is the Proactive Approach we take to all your affairs. We care about you and your family and do our best to make a difference to your life. Don’t hesitate to contact us on any matter. If it is out of our scope then we will find the right person to assist you. Call us first before making any financial decisions!
Wishing you all a Happy New Financial Year!
Chief Strategist (and Chartered Accountant)
IN THIS ISSUE – THE NECESSARY BUT BORING STUFF FOR BUSINESSES! SO ONLY READ FURTHER IF
YOU ARE REALLY INTERESTED
- The end of the financial year is coming
- Changes to measures that were to be funded by the mining tax
- Rescheduling the increase in superannuation guarantee rate
- Changes to tax administration from the Budget
- Measures affecting companies and trusts from the Budget
- Fringe Benefits Tax
- Farm Management Deposits
- Changes to guidance from the ATO about the CGT small business concessions
- What’s new from the ATO
The end of the financial year is coming!
The end of the financial year is coming and it’s time to start thinking about your 2014 Income Tax Return. Now is a good time to start reviewing certain assets and liabilities owned by your business and consider if there is anything you should do prior to 30 June 2014 rolling around.
- Are there any repairs and maintenance you should carry out prior to 30 June 2014 so you can claim the deduction in your 2014 return?
- Are there any bad debts to write off out of your receivables?
- Are there any recently announced measures in the May 2014-15 Budget you should talk to your tax adviser about?
- If you have an outstanding investment loan, see if you can prepay some of the interest prior to 30 June 2014 (you will need to speak to your lender.)
- Are there purchases or disposals of assets you should make prior to the next financial year starting?
- Review your depreciable assets (capital allowances) register and write-off or dispose of any assets no longer used eg assets used in your business such as computer equipment, office furniture (eg desks and chairs) and kitchen appliances.
It is also a good time to review things that you think about at the time you put them in place but don’t otherwise turn your mind to – for example, see if you have the right mix of debt and equity funding for your business to carry you through to the next financial year.
|Your tax adviser is the best person to help you with these decisions as your tax adviser knows your business and has experience with other businesses similar to yours, they are able to offer you sound advice about how to best prepare your business for the start of the 2014-15 financial year.|
Changes to measures that were to be funded by the mining tax
In previous editions of TaxWise, we mentioned that, as part of its pre-election promises, the Coalition would abolish the mining tax. The abolition of this tax also involves the wind-back of certain other measures including:
- The instant asset write-off amount of $6,500 for small businesses – from 1 January 2014, the instant asset write-off will be reduced back to $1,000;
- The accelerated deprecation for motor vehicles that is available to small businesses – from 1 January 2014, this will no longer be available; and
- The loss carry-back measure – this measure will only apply for the 2013 income year.
|The ATO has offered the following guidance for taxpayers who have relied on these measures:
Rescheduling the increase in superannuation guarantee rate
The scheduled increase to the superannuation guarantee rate is changing and will no longer be paused at 9.25% for another two years. Per the announcement made in the 2014-15 Budget, it will increase to 9.5% from 1 July 2014, will pause at this level until 30 June 2018 and will then start to rise by 0.5% reaching 12% in the 2022-23 income year, one year later than previously proposed. See the following table:
|Year||Superannuation guarantee rate|
|From 1 July 2013||9.25%|
|From 1 July 2014||9.5%|
|From 1 July 2015||9.5%|
|From 1 July 2016||9.5%|
|From 1 July 2017||9.5%|
|From 1 July 2018||10%|
|From 1 July 2019||10.5%|
|From 1 July 2020||11%|
|From 1 July 2021||11.5%|
|From 1 July 2022||12%|
However, at the time of writing, this was not yet law.
Changes to tax administration from the Budget
Tax compliance through third party reporting and data matching: start date deferred
Last year’s Budget saw the introduction of an initiative to strengthen third party reporting and data matching to assist the ATO with its compliance work and revenue collection. Per this year’s Budget, the start date for the legislative elements of this initiative will be deferred from 1 July 2014 to 1 July 2016.
The legislative elements of the measure that are being deferred involve the creation of new third party reporting regimes relating to:
- taxable government grants and other specified government payment;
- sales of real property, shares (including options and warrants) and units in managed funds; and
- sales through merchant debit and credit services.
Minor amendments to tax laws
A series of minor amendments to the tax and superannuation laws will be made to correct technical defects, remove anomalies and address unintended outcomes which have recently been identified, including technical corrections to the uniform penalty rules that prevent certain penalties that are levied under the law from being collected, and a number of amendments to address issues raised by industry in relation to the consolidation regime.
Inspector-General of Taxation to manage certain tax complaints
From 1 July 2014, the Commonwealth Ombudsman’s case management of tax complaints will be transferred to the Inspector-General of Taxation (IGT). This measure will enhance the IGT’s systematic review role, and provide taxpayers with more specialised and focused complaint handling of their tax matters.
This initiative strengthens the IGT’s role as an independent reviewer of systemic tax administration and to report to the Government with recommendations to improve tax administration for the benefit of all taxpayers.
Measures affecting companies and trusts from the Budget
There are a variety of measures that were included in the Budget that impact some companies and trusts, including:
- Deferral of the start date for the MIT system – the start date for the new system for managed investment trusts will be deferred to 1 July 2015. The tax law will be amended to allow MITs and other trusts treated as MITs to continue to disregard the trust streaming provisions for the 2014-15 income year, ensuring these interim arrangements for MITs continue to apply until the commencement of the new tax system for MITs.
- R&D tax incentive – from 1 July 2014, the rates of the refundable and non-refundable offsets for the Research and Development (R&D) Tax Incentive will be reduced by 1.5%.
- Modified consolidation integrity measures – from Budget night, certain modifications to the consolidation integrity package that was announced in the 2013-14 Budget will take effect.
- Foreign resident CGT regime: modification of integrity measure – modification will be made to the measure announced in the 2013-14 Budget to amend the principal asset test so that the measure now applies to interests held by foreign residents in unconsolidated groups.
Fringe Benefits Tax
Lodgement of FBT Returns
The 2014 FBT year ended on 31 March 2014. The due date for lodgement of your FBT return is 25 June 2014 if you are lodging your FBT return electronically through your tax agent. If you are not using your tax agent to lodge your FBT return or you are and are lodging using the paper form, the due date for your return was 21 May 2014.
To be able to lodge your return by 25 June 2014, you must have appointed your tax agent to lodge your FBT return on your behalf by 21 May 2014. (This was previously 4 June 2014.)
Regardless of whether you are lodging your FBT return by paper or electronically, the due date for payment has not changed, and remains as 28 May 2014.
Self-assessed deferral requests for FBT returns are no longer available. However your tax agent can lodge a request for additional time to lodge where there are exceptional or unforeseen circumstances that prevent lodgement by the due date. Be sure to include sufficient information for the request to be considered.
|If you have missed out on being able to access the later lodgement date available if you lodge your FBT return electronically through a tax agent, be sure to appoint your tax agent to look after your FBT matters for 2015.|
Car parking threshold for FBT year commencing 1 April 2014 – TD 2014/11
On 14 May 2014 the ATO released the car parking threshold for the fringe benefits tax year commencing on 1 April 2014. The threshold is $8.26. This replaces the amount of $8.03 that applied in the previous year commencing 1 April 2013: TD 2014/11 “Fringe benefits tax: for the purposes of section 39A of the Fringe Benefits Tax Assessment Act 1986 what is the car parking threshold for the fringe benefits tax year commencing on 1 April 2014?”
FBT: reasonable amounts for LAFHA food and drink expenses – TD 2014/9
On 16 April 2014, the ATO issued Taxation Determination TD 2014/9 entitled “Fringe benefits tax: reasonable amounts under section 31G of the Fringe Benefits Tax Assessment Act 1986 for food and drink expenses incurred by employees receiving a living-away-from-home allowance fringe benefit for the fringe benefits tax year commencing on 1 April 2014.”
|If you provide either of these types of benefits to your employees, make sure you are aware of the new amounts that apply to the 2015 FBT year.|
Farm Management Deposits
Some changes are being made to the farm management deposits (FMD) scheme that taxpayers who rely on the scheme should be aware of. These include:
- allowing taxpayers to consolidate multiple FMDs that they might hold with different providers;
- raising the non-primary production income threshold; and
- limiting the rules in the Banking Act for unclaimed moneys to prevent them applying to FMDs.
The increase in the non-primary income threshold and the changes to allow taxpayers to consolidate FMDs apply to income years commencing on or after 1 July 2014.
ATO reviews approach to SMSFs as industry takes off
In media release No 2014/06, issued 19 February 2014, it is noted that nearly one million Australia have chosen to take control of their superannuation future as the popularity of self-managed super funds (SMSFs) continues to grow.
ATO Deputy Commissioner Superannuation, Alison Lendon, said in light of the sector’s growth, the ATO is committed to improving the services it provides to SMSF fund managers and trustees.
“With the popularity of SMSFs continuing to grow, we want to work with trustees and their advisors to improve compliance and make sure they are prepared for several regulatory changes that will be rolled out over the next year.”
If the legislation is adopted, administrative penalties will apply to breaches of super law from 1 July 2014. This means SMSF trustees will be personally liable for penalties between $850 and $10,200 depending on the provision contravened.
“SMSF trustees should rectify any contraventions as soon as possible or they may face a penalty. In some cases these changes will impact the way SMSFs operate so for the ATO our focus will continue to be on education and support to ensure trustees understand the rules,” Deputy Commissioner Lendon said.
If you have an SMSF, be mindful of the ATO’s focus on these entities. If you have any concerns with your SMSF, speak to your tax adviser.
If you have an SMSF, be mindful of the ATO’s focus on these entities. If you have any concerns with your SMSF, speak to your tax adviser.
SuperStream changes for SMSFs
If you are an employer and deposit superannuation contributions for your employees into their SMSFs, you should note the following.
In media article No 2014/03, issued 19 February 2014, the ATO said it is calling on self-managed superannuation fund (SMSF) trustees to be aware of changes to the way they receive super contributions.
Starting from 1 July 2014, SMSFs will be required to receive contributions electronically from employers. Employers with less than 20 employees have another year to make this change so SMSFs should check with their employers about their start date.
To assist employers, SMSF trustees will need to obtain an electronic service address for the delivery of contribution messages. SMSFs will then need to provide their ABN, bank account details and electronic service addresses to their employer by 31 May 2014.
Changes to guidance from the ATO about the CGT small business concessions
Tax Determination TD 2007/14 contains guidance around what liabilities are included when calculating the ‘net value of CGT assets’ for the purpose of the small business concessions. In April this year, some amendments were made to the TD picking up some changes made to the law in 2007 that:
- allow a negative net value of the CGT assets of an entity to be calculated; and
- allow the following provisions to be taken into account in determining the net value of the CGT assets of an entity:
- provisions for long service leave;
- provisions for annual leave;
- provisions for unearned income; and
- provisions for tax liabilities.
These changes apply to CGT events happening in the 2006-07 income year or later income years.
A separate amendment to TD 2007/14 picks up some other changes made in 2007 that affect Division 152 that:
- increased the maximum net asset value test threshold in s 152-15 of ITAA 1997 from $5 million to $6 million;
- replaced the term ‘small business CGT affiliate’ with ‘affiliate’, moved its definition from s 152-25 of ITAA 1997 to s 328-130 of ITAA 1997 and changed its meaning in some respects; and
- enacted the small business entity ($2 million turnover) test as an alternative to the maximum net asset value test as a means of qualifying for the small business capital gains tax concessions.
These changes apply to CGT events happening in the 2007-08 income year or later income years.
A further amendment has also been made to TD 2007/14 to include the Commissioner’s view of the implications of the Full Federal Court decision of FCT v Byrne Hotels Qld Pty Ltd  FCAFC 127 in relation to ‘contingent liabilities’ for the purpose of calculating ‘net value of CGT assets’ and in particular, that contingent liabilities are generally within the meaning of ‘liabilities’.
|If you are trying to see if you are eligible for any of the small business CGT concessions and are wondering whether these changes affect you, seek advice from your professional tax adviser who is best able to assist you with this as the rules are complex and they will be able to help you navigate them.|
What’s new from the ATO
There is lots of news from the ATO that small business taxpayers should be aware of – see below for what might be relevant to you and your business.
- Standard Business Reporting
The ATO says that Standard Business Reporting (SBR) is a quicker and simpler way to prepare and lodge reports to government – including the ATO – directly from business software. The ATO sees this whole-of-government approach using common computer language as the future of electronic service delivery. So businesses will start to need to prepare themselves for this new system.
For more information and to access an ATO video on SBR, go to the ATO website.
2. Business Communicator
The April 2014 edition of the ATO’s Business Communicator contains news and updates for businesses with an annual turnover between $2 million and $250 million. These include articles on the offshore voluntary disclosure initiative; common R&D mistakes; payments of refunds of overpaid GST; new rules about communicating with the ATO; the ATO and social media; streamlining superannuation contributions; and updating your business registration details.
3. Project DO IT: ATO says “Disclose offshore income and assets now”
There is a new ATO initiative that all taxpayers with offshore income should be aware of: Project DO IT.
This initiative is about the ATO urging all taxpayers with offshore assets to declare their interests, ahead of a global crackdown on international tax havens.
The ATO says that if clients of tax agents have offshore income or assets, now is the time for them to review their overseas financial activities and make sure their tax is in order.
The recently announced “Project DO IT: disclose offshore income today” initiative provides clients with an opportunity to make a voluntary disclosure in return for reduced penalties and other incentives, but is only available until 19 December 2014.
Under Project DO IT, people disclosing their offshore assets will generally only be assessed for the last four years, be liable for a maximum shortfall penalty of just 10% and full shortfall interest charges, and will not be investigated by the ATO or referred for criminal investigation on the basis of their disclosures.
4. ATO contacting businesses with overdue 2012-13 Taxable payments annual reports
The ATO has been contacting businesses in the building and construction industry who have not yet lodged their 2012-13 Taxable payments annual reports. Businesses may have been contacted by phone or letter. To ensure your compliance obligations are met, see your tax adviser to check whether you should have prepared one of these reports for your 2013 return.
5. Reminder to businesses in the building and construction industry for 2013-14 reports
In May 2014, the ATO sent letters to businesses in the building and construction industry that may be paying contractors, to remind them to lodge their 2013–14 Taxable payments annual report by 21 July 2014. The letter was generally be sent to their business addresses.
The ATO should have also alerted tax agents if their clients were going to be sent the letter.
If you did receive one of these letters, it is best to first contact your tax agent to work out whether you need to prepare one of these reports.
6. Stopping paper activity statements
The ATO says it understands that many businesses use electronic channels to manage their day to day interactions and record keeping.
From 1 July 2014, the ATO advises that it will no longer send paper activity statements out for the majority of taxpayers whose activity statements are lodged electronically. The ATO will continue to send paper activity statements for certain form types only that cannot currently be sent electronically.
Transitioning activity statements to be fully electronic is one of the steps the ATO is taking to keep pace with community expectations as more and more business is done electronically.
7. Receiving your payment instalment by email
The ATO is running a pilot to issue emails when tax agents or their clients phone the ATO to make a payment plan. The ATO will soon offer the option to receive the first instalment amount and due date by email.
The email pilot will consist of approximately 1,000 participants including individuals, businesses and tax practitioners.
Should you become involved in this pilot, it is best to let your tax agent know so that they can keep an eye on things.
8. ATO’s Facilitation Process
The ATO is looking for ways to improve the way it resolves disputes with taxpayers.
In 2013, the ATO conducted a trial of a new dispute resolution process, “facilitation”, in smaller and less complex indirect tax objections. The process used ATO officers as facilitators in meetings between taxpayers /their agents and ATO case officers responsible for the dispute. The ATO facilitators who assisted the parties to identify and review options to resolve disputes had not been involved in the dispute.
After a review of the results of the pilot, the use of facilitation has now been extended to a range of disputes including less complex disputes arising from indirect tax, small business and individual audits and objections. If you find yourself being audited by the ATO, know that this facilitation process might well be available to you to help quickly resolve the matter.
The PAYG withholding variation application (e-variation) for 2014-15 is now available to use. The ATO says that lodging an e-variation via the internet will allow faster processing, and most e-variations are processed within 14 days.
More information about varying the rate or amount of PAYG tax withheld from payments to taxpayers for the year ending 30 June 2015, and lodging PAYG withholding variation applications can be found on the ATO website. However, if you do wish to vary your PAYG withholding amount, it is best to consult your tax adviser first to help you work out the right amount for you.
10. Records that are needed to claim CGT concessions for small business
If you are planning on claiming any of the capital gains tax (CGT) concessions for small business, you must keep relevant records including:
- the market value of relevant assets just before the CGT event (to show eligibility for the $6 million maximum net asset value test);
- carrying on a business, including calculation of turnover (to show eligibility for the small business entity test);
- how any capital losses have been calculated and carried forward to later years;
- relevant trust deeds, trust minutes, company constitution and any other relevant documents.
To make sure you have kept the right information for this and any other concessions you claim, see your tax adviser.
11. Information for primary producers
The ATO has published the following documents relevant to primary producers:
If you have a primary production business, this information might be relevant for you.
12. The ATO App for Small Businesses
The ATO has developed an app for small businesses. This app might be useful to assist you with your interactions with the ATO. If you are interested in finding out more about the app, more information can be found on the ATO website.
|Taxwise® News is distributed by Sondergaard Accountants to provide information of general interest to our clients and interested parties. The content of this newsletter does not constitute specific advice. Readers are encouraged to consult their accountant for advice on specific matters|