Claiming work related deductions

Car expenses

  • When claiming work related motor vehicle deductions remember that you still need to be able to substantiate how you worked out the number of business kilometres you travelled using the cents per kilometre method.
  • In order to claim under the log book method – you must have a complete and valid log book.
  • Under the log book method, a log book will last for 5 years UNLESS you change the vehicle, your useage pattern changes, your employment changes. If any of these things change you MUST complete a new log book.
  • The motor vehicle expense deduction is not available to vehicles over 1 tonne – these expenses get claimed at D2 on the tax return (Travel Expenses).

Travel expenses

  • Remember that just because you receive an allowance from an employer does not automatically entitle you to a deduction. Travel allowance claims are only deductive where the tax payer sleeps away from home.
  • 1 tonne vehicles are not allowed to claim 100% of expenses – private useage must be taken into account
  • Parking expenses are not allowed to be claimed where an employee is traveling to and from work and parking at or near the workplace for more than 4 hours
  • Car washing expenses are not allowed where the vehicle is provided for the employee’s exclusive use

Uniform, Clothing & Laundry Expenses

  • Everyday clothing is not tax deductible, nor can a claim for laundry be made on these items.   This includes heavy duty conventional clothing such as drill shirts and trousers.
  • Only outdoor workers can claim sun protection clothing.
  • If your claim for Laundry expenses exceeds $150 you must have written evidence eg diary entries and receipts An estimate of $0.50 per mixed load or $1 for work clothes only loads can be used.
  • Conventional footwear including non slip are non deductible

If you are unsure as to the deductibility of your clothing and shoes consider the following tax rulings TR 97/12, TD 1999/62 and TR 98/5 or ask your accountant.

Self education expenses

There must be a nexus between the self education expense and the current income producing activity (Employment) otherwise these expenses can not be claimed.

Other work related expenses

  • Sunscreen and sunglasses – outdoor workers can claim these but you must adjust for private useage.
  • Home office – running costs can not be claimed on a floor percentage basis, you must use the ATO rate of $0.45 cents per hour only
  • Home Office – Occupancy costs – (Rent, mortgage interest, rates) you can not claim theses if the home is not a place of business – (A place of business would include signage and stationery nominating the address as a place of business and the area should not be readily suitable or adaptable for use as a private or domestic purpose such as a bedroom) Having a room set aside for doing admin work at the end of the day does not constitute a place of business.
  • Bank fees – you cannot claim these
  • All other expenses including computers, mobile phones, internet etc MUST be apportioned between private and business useage.
  • Vaccinations are not deductible
  • Subscriptions to staff associations or social clubs are not deductible

What are the requirements of your Tax Accountant?

  • Reasonable and direct questions need to be asked, we have also provided various checklists for you to use. (Available on our website)
  • It is not necessary for you to provide to us or have us view/sight all your receipts, we only need you to advise that you have adequate substantiation. REMEMBER, in the event of an audit you will be required to provide that substantiation to the ATO.
  • If we have suspicion that a client is making fraudulent claims we have the right to request to see the substantiating evidence, if the client refuses to provide the substantiation we can refuse to input the deduction and also terminate our services to the client.

What is written evidence?

The following can be used to substantiate your claims:

  • A document in English
  • Document from the supplier of the goods and services showing the name of the supplier, amount of the expense, nature of the goods and services, date incurred
  • Bank statements
  • credit card statements
  • BPAY reference numbers
  • email receipts
  • Invoices
  • Delivery notes
  • PAYG payment summary
  • Paper or electronic copies of documents
  • Warranty documents

PURCHASING VERSUS LEASING

THE COMPELLING CASE FOR PURCHASING VERSUS LEASING by Peter Tewksbury

Despite the lack of office rental growth in Brisbane in the last 8 years, the downward spiral of interest rates has made the case for purchasing an office rather than leasing still compelling.

For business owners with equity or a Self Managed Superannuation Fund the numbers speak for themselves.

We have two “live” examples below. The first is a smaller strata for a business of less than 6 people and the second is a much larger space that can accommodate more than 50 people.

pic

pic1

pic2

*Please note that the numbers used above are indicative only and are based on a number of assumptions.

Interested parties should seek independent financial and legal advice and not rely on these numbers.

Peter Tewksbury

M 0412 723 448

PH 07 3870 2555

E peter@tewksburycommercial.com.au

You should seek independent professional advice from a suitably qualified and licenced professional (Plant and Associates Pty Ltd) to determine whether buying a property is feasible and suitable for your needs, in particular advice on SMSF’s requires the professional to hold at least a Limited AFSL licence allowing them to discuss whether an SMSF is suitable for you.  We hold the relevant licences and offer a free 1 hour consultation to discuss your needs.  Assuming you meet the initial criteria then an Statement of Advice assessing your needs and making recommendations in relation to setting up a SMSF and whether property is for you will cost $1,100.  The cost to set up a SMSF is $770.  A corporate Trustee is $1,100.  (This includes Legals, ASIC fee, and our time in applying for the new entities and registering them with TFN and ABN).

Contact us to book an appointment. (07) 55965758 email: admin@plantandassociates.com.au

 

Dodgy Tax Claims

Dodgy Tax Claims – Work Related Expenses and Rental Expenses

ATO Targets Work-related Expenses and Rental Expenses

The tax office have confirmed that they will continue to monitor work-related and rental expenses claimed in 2016 income tax returns. In particular, they will be focusing on work-related car, travel, mobile phone and internet expenses as well as repairs and maintenance for rental properties.

The tax office advise there are 3 key rules for claiming work-related expenses:
– You have spent the money yourself
– It must be related to your current job; and
– Your must a record to prove it.

The tax office is receiving more data from third parties than ever before, including banks, employers, health insurers, state and federal agencies and overseas treaty partners. In some cases, the deductions claimed by tax payers have been disallowed because their information did not match with information provided by these third parties. Some examples include:

– An employee claimed car expenses for their home to work travel on the basis that they transport bulky tools, however the tax office contacted the employer who confirmed that these items can be securely stored at the place of employment.
– An employee claiming travel expenses for an overseas holiday as work-related, however his employer confirmed that he was on annual leave and the trip did not relate to his work.
– A taxpayer claiming expenses for attending an overseas conference, however immigration records indicated that he was in Australia at the time of the conference.
– A taxpayer claiming car expenses based on the log book method, however toll road records did not correspond with the log book and further enquiries indicated that he was out of the country on the dates listed in the log book.

If claiming repairs and maintenance for a rental property, you must ensure that they were genuinely incurred while the property was available for rent and that they were to repair damage caused by the tenants.

If a claim is found to be incorrect, the expense will be disallowed and penalties may be imposed on the taxpayer.

We will also be providing an additional report to employee taxpayers this year. This report will advise if your work-related expense claims are outside the average for your occupation and income level. The tax office will be conducting reviews and may contact any clients whose deductions exceed the average. You should ensure that you are able to substantiate all expenses claimed in the event that this information is requested by the tax office. You are responsible for this proof even when you use a registered tax agent.

If you have any concerns regarding what you can claim in your tax return, please do not hesitate to contact our office.

The ATO have published an Article on Exposing dodgy deductions, to read the full article click here. Below is some case studies from the article:

Case Studies

Case study one

A railway guard claimed $3,700 in work-related car expenses for travel between his home and workplace. He indicated that this expense related to carrying bulky tools – including large instruction manuals and safety equipment. The employer advised the equipment could be securely stored on their premises. The taxpayer’s car expense claims were disallowed because the equipment could be stored at work and carrying them was his personal choice, not a requirement of his employer.

Case study two

A wine expert, working at a high end restaurant, took annual leave and went to Europe for a holiday. He claimed thousands of dollars in airfares, car expenses, accommodation, and various tour expenses, based on the fact that he’d visited some wineries. He also claimed over $9,000 for cases of wine. All his deductions were disallowed when the employer confirmed the claims were private in nature and not related to earning his income.

Case study three

A medical professional made a claim for attending a conference in America and provided an invoice for the expense. When we checked, we found that the taxpayer was still in Australia at the time of the conference. The claims were disallowed and the taxpayer received a substantial penalty.

Case study four

A taxpayer claimed deductions for car expenses using the logbook method. We found they had recorded kilometres in their log book on days where there was no record of the car travelling on the toll roads, and further enquiries identified that the taxpayer was out of the country. Their claims were disallowed.

Case study five

A taxpayer claimed self-education expenses for the cost of leasing a residential property, which was not his main residence. The taxpayer claimed he had to incur the expense of renting the property as he ‘required peace and quiet for uninterrupted study which he could not have in his own home’. This was not deductible.

In addition to the rental expenses, the cost of a storage facility was claimed where ‘the taxpayer needed to store his books and study materials’. They claimed they needed this because of the huge amount of books and study material associated with his course and had no space in his private or rented residence where these could be housed. This was not deductible.

The cost of renting the property was around $57,000, with additional expense of $7,500 for the storage facility. The actual cost of the study program he attended that year was only $1200.

Redraw and Offset Accounts – How they can save you money

Tax Minimisation and savings

Mortgage and Finance Broker Grant Robertson provides the following advice to Plant and Associates clients:

Offset accounts and redraw facilities work in similar ways; they both allow you to reduce the balance of your home loan, and therefore the interest charged, by applying extra money to your debt.

Redraw facilities allow you to deposit spare income into your home loan account, allowing you to redraw a sum equal to the extra repayment amounts in future.

In the meantime, the extra money paid will lower the amount of interest charged while still giving you access to your money.

However, there may be restrictions on how much money can be withdrawn and when.

“For redraw, it depends on whether the facility applies to a fixed-rate or variable loan,” Moses says. “Most institutions only allow redraw from a variable-rate loan, or fixed-rate loan but with limited access.”

It is important to find out how a loan’s redraw facility works before taking it on, as the fees and restriction attached might outweigh the benefits of interest savings.

Deciding between an offset account and a redraw facility on your home loan largely depends on how accessible you need your extra money to be.

Offset accounts are like savings accounts that function alongside your home loan. You earn interest on the money in the offset account and you often have a debit card attached for simple withdrawals.

“Let’s say that you are paying five per cent interest on your home loan and earning two per cent interest on your offset account,” explains Heritage Bank NSW State Manager Paul Moses.

“In a offset setup, the difference would be 3%, but would mean that the 2% interest that you earn is coming off the interest you are paying on your home loan.”

With 100 per cent offset accounts, you earn interest equal to the interest you are paying on your loan. Rather than earning savings account rates, you are earning home loan account interest rates on the money held within the offset account.

“Let’s say you have $10,000 in your 100 per cent offset account. Instead of paying interest on your $100,000 loan, you are only paying interest on $90,000,” Moses says. “That’s probably the best type to have, if you are looking at offset accounts.”

Offset accounts, like many savings accounts, often come with account fees, but the fee may be worth the interest savings and the added flexibility compared to redraw facilities.

“There are less restrictions attached to 100 per cent offset accounts, they’re very flexible. But really, it does just depends on each lender,” Moses says.

Finding a loan that matches your needs is a lot easier with an expert on your side. Speak to Grant Robertson 0466 977 170 or email: grant.robertson@astrafinacial.com.au to find a loan that matches your current needs and future plans.

Grant Robertson Mortgage and Finance Broker Dip. Finance and Mortgage Broking Management

Phone : 0466 977 170 Fax : 07 5525 3887 Address : PO Box 1186, Mudgeeraba, QLD 4213 Email: grant.robertson@astrafinancial.com.au

Budget Changes for Business and Superannuation

Superannuation pension phase – $1.6m transfer balance cap for retirement accounts
From 1 July 2017, the Government has proposed to introduce a transfer balance cap of $1.6m on the total amount of accumulated superannuation an individual can transfer into a tax-free “retirement account” (also known as retirement phase or pension phase). Subsequent earnings on these pension transfer balances will not be restricted.
According to the Government, this $1.6m transfer balance cap for amounts transferred into pension phase will limit the extent to which the tax-free benefits of retirement phase accounts can be used for tax and estate planning. For those who will have more than $1.6m in super you can leave the excess in accumulation mode.

Retirement account cap – $1.6m
Where an individual accumulates amounts in excess of $1.6m, they will be able to maintain this excess amount in an accumulation phase account (where earnings will be taxed at the existing concessional rate of 15%). The
$1.6m cap will be indexed in $100,000 increments in line with CPI (the same as the Age Pension assets threshold does).

Existing pension balances
Members already in the retirement phase as at 1 July 2017 with balances in excess of $1.6m will be required to either:
transfer the excess back into an accumulation superannuation account to reduce their retirement account balance to $1.6m by 1 July 2017; or
withdraw the excess amount from their superannuation.
Excess balances for these members may be converted to superannuation accumulation phase accounts. A tax on amounts that are transferred in excess of the $1.6m cap (including earnings on these excess transferred amounts) will be applied, similar to the tax treatment that applies to excess non-concessional contributions.

Date of effect
This measure will apply from 1 July 2017.

____________________________________________________________________________________________________

Transition to retirement pensions – tax concessions to be reduced
The Government said it will remove the tax exemption on earnings for pension assets supporting Transition to Retirement Income Streams (TRISs), also known as transition to retirement pensions (TTRs). Under the changes, earnings from assets supporting TRISs will be taxed at 15% (instead of the current 0%). The change will apply from 1 July 2017 irrespective of when the TRIS commenced. For clients whose personal tax rate is higher than 15% this will still represent a tax effective strategy.

No election to treat as lump sum
In addition, the Government said individuals will no longer be able to make an election under reg 995-1.03 of the ITA Regs to treat certain TRIS payments as lump sums for tax purposes, which currently makes them tax-free
up to the low rate cap ($195,000).

Example
Sebastian is 57 years old, earns $80,000 and has $500,000 in his super account. He pays income tax on his salary and his fund pays $4,500 tax on his $30,000 earnings. Sebastian decides to reduce his work hours to spend more time with his grandchildren. He reduces his working hours by 25% and has a corresponding reduction in his earnings to $60,000. He commences a TRIS worth $20,000 per year so that he can maintain his lifestyle while working reduced hours. Currently, Sebastian pays income tax but his fund pays nothing on the earnings from his pool of super savings. Under the Government’s changes, while the earnings on Sebastian’s super assets will no longer be tax-free they will still be taxed concessionally (at 15%). He will still have more disposable income than without a TRIS. This ensures he has sufficient money to maintain his lifestyle, even with reduced work hours.
Date of effect
These measures will apply from 1 July 2017 (irrespective of when the TRIS commenced).

________________________________________________________________________________________________________

Non-concessional contributions: $500,000 lifetime cap from Budget night
The Government has introduced a lifetime non-concessional contributions cap $500,000 effective from Budget night, i.e. 7.30 pm (AEST) on 3 May 2016. The lifetime non-concessional cap (indexed) will replace the existing annual non-concessional contributions cap of up to $180,000 per year (or $540,000 every 3-years under the bring-forward rule for individuals aged under 65). Non-concessional contributions include contributions which are not included in the assessable income of the receiving superannuation fund, e.g. non-deductible personal contributions made from the member’s after-tax income (formerly known as undeducted contributions).
The $500,000 lifetime cap will take into account all non-concessional contributions made on or after 1 July 2007.
Contributions made before commencement (i.e. 7.30 pm AEST on 3 May 2016) cannot result in an excess of the lifetime cap. However, excess non-concessional contributions made after 7.30 pm AEST on 3 May 2016 will need to be removed or subject to penalty tax. The cap will be indexed to average weekly ordinary time earnings (AWOTE).

Concessional contributions cap cut to $25,000 from 1 July 2017
The annual concessional contributions cap will be reduced to $25,000 for all individuals regardless of age from 1 July 2017. The cap will be indexed in line with wages growth. The concessional concessional cap is currently set at $30,000 for those under age 49 on 30 June for the previous income year (or $35,000 for those aged 49 or over on 30 June for the previous income year) for the 2015-16 and 2016-17 income years.
Concessional contributions (i.e. before tax) include all employer contributions, such as superannuation guarantee and salary sacrifice contributions, and personal contributions for which a deduction has been claimed. Members of defined benefit schemes will be permitted to make concessional contributions to accumulation schemes. However, the $25,000 cap will be reduced by the amount of their “notional contributions”.

Excess concessional contributions
Existing processes for the administration of the concessional contributions caps and the imposition of the additional 15% on contributions, including the ability to withdraw the excess from super to pay the additional liability, will be maintained. Currently, concessional contributions exceeding an individual’s annual concessional cap are automatically included in an individual’s assessable income and taxed at the individual’s marginal tax rate (plus an interest charge). An individual is also entitled to a 15% tax offset for the contributions tax paid by the fund. Individuals can elect to release up to 85% of their excess concessional contributions from their superannuation fund to the Commissioner as a “credit” to cover the additional personal tax liability.

Concessional contributions catch-up for account balances less than $500,000
From 1 July 2017, individuals with a superannuation balance less than $500,000 will be allowed to make additional concessional contributions for “unused cap amounts” where they have not reached their concessional
contributions cap in previous years. Unused cap amounts will be carried forward on a rolling basis for a period of 5 consecutive years. Only unused amounts accrued from 1 July 2017 will be available to be carried forward. It will
improve flexibility for those with interrupted work arrangements. The measure will also apply to members of defined benefit schemes. Consultation will be undertaken to minimise additional compliance impacts for these schemes.
According to the Government, allowing individuals with account balances of $500,000 or less to make catch-up concessional contributions will make it easier for people with varying capacity to save and for those with interrupted work patterns, to save for retirement to the same extent as those with regular income.

Superannuation contributions tax (extra 15%) for incomes $250,001+
The income threshold above which the additional 15% Division 293 tax cuts in for superannuation concessional contributions will be reduced from $300,000 to $250,000 from 1 July 2017.
Currently, individuals above the high income threshold of $300,000 are subject to an additional 15% Division 293 tax on their “low tax contributions” (essentially concessional contributions). The Division 293 tax effectively doubles the contributions tax rate from 15% to 30% for concessional contributions. Note that Labor has also proposed that, if elected, it would reduce the high income threshold to $250,000. A taxpayer’s “low tax contributions” are essentially their concessional contributions less any excess concessional contributions for the financial year. Concessional contributions (before tax) include all employer contributions, such as superannuation guarantee and salary sacrifice contributions, and personal contributions for which a deduction has been claimed. Importantly, the extra 15% Division 293 tax does not apply to concessional contributions which exceed an individual’s concessional contributions cap (which is proposed to be set at $25,000 for all taxpayers from 1 July 2017: see para [567] of this Bulletin). Such excess concessional contributions are effectively taxed at the individual’s marginal tax rate in any event. As such, the maximum amount of Division 293 tax payable each year will be limited to $3,750 (i.e. 15% of the $25,000 cap) from 1 July 2017.

Division 293 tax – high income threshold
The Division 293 tax high income threshold is currently based on the individual’s “income for surcharge purposes” plus the individual’s low tax contributions. Given the broad definition of “income for surcharge purposes” (which adds back net investment losses to taxable income), negative gearing and many salary packaging arrangements generally will not assist in bringing a taxpayer under the high income threshold. If a taxpayer’s income for surcharge purposes is less than the high income threshold, but the inclusion of their low tax contributions pushes them over the threshold, the 15% Division 293 tax only applies to the part of the low tax contributions that are in excess of the income threshold.

Tax deductions for personal super contributions extended
From 1 July 2017, the Government will improve flexibility and choice in super by allowing all individuals up to age 75 to claim an income tax deduction for personal super contributions. This effectively allows all individuals,
regardless of their employment circumstances, to make concessional super contributions up to the concessional cap. Individuals who are partially self-employed and partially wage and salary earners (e.g. contractors), and
individuals whose employers do not offer salary sacrifice arrangements will benefit from these proposed changes. To access the tax deduction, individuals will be required to lodge a notice of their intention to claim the deduction
with their super fund or retirement savings provider. Generally, this notice will need to be lodged before they lodge their income tax return. Individuals will be able to choose how much of their contributions to deduct.
Individuals that are members of certain prescribed funds would not be entitled to deduct contributions to those schemes. Prescribed funds will include all untaxed funds, all Commonwealth defined benefit schemes, and any
State, Territory or corporate defined benefit schemes that choose to be prescribed. Instead, if a member wishes to claim a deduction, they may choose to make their contribution to another eligible super fund.

Superannuation contribution rules – work test to be removed for age 65 to 74
The work test for making superannuation contributions for people aged 65 to 74 will be removed from 1 July 2017. Instead, people under the age of 75 will no longer have to satisfy a work test and will be able to receive contributions from their spouse.

Low income super tax offset (LISTO) to be introduced
From 1 July 2017, the Government will introduce a Low Income Superannuation Tax Offset (LISTO) to reduce tax on super contributions for low income earners. The LISTO will provide a non-refundable tax offset to super funds,
based on the tax paid on concessional contributions made on behalf of low income earners, up to a cap of $500. The LISTO will apply to members with adjusted taxable income up to $37,000 that have had a concessional
contribution made on their behalf. Note that the proposed LISTO will replace the current Low Income Superannuation Contributions (LISC). The Government said this will provide continued support for the accumulation of super for low income earners and ensure they do not pay more tax on their super contributions than on their take-home pay. The ATO will determine a person’s eligibility for the LISTO and will advise their super fund annually. The fund will
contribute the LISTO to the member’s account. The Government said it will consult on the implementation of the LISTO.

Low income spouse super tax offset to be extended
From 1 July 2017, the Government will increase access to the low income spouse superannuation tax offset by raising the income threshold for the low income spouse to $37,000 from $10,800. The offset will gradually reduce
for income above $37,000 and will phase out at income above $40,000. The low income spouse tax offset provides up to $540pa for the contributing spouse. The Government noted the proposed changes build on its co-contribution and superannuation splitting policies to boost retirement savings, particularly of women.

__________________________________________________________________________

Changes affecting Businesses

 

The Budget announced that the small business entity threshold will increase from $2m to $10m from 1 July 2016. As a result, a business with an aggregated annual turnover of less than $10m will be able to access a number of

small business tax concessions from 1 July 2016, including:

  • the simplified depreciation rules, including immediate tax deductibility for asset purchases costing less than $20,000 until 30 June 2017 and then less than $1,000;
  • the simplified trading stock rules, which give businesses the option to avoid an end of year stocktake if the value of the stock has changed by less than $5,000;
  • a simplified method of paying PAYG instalments calculated by the ATO, which removes the risk of under or over estimating PAYG instalments and the resulting penalties that may be applied;
  • the option to account for GST on a cash basis and pay GST instalments as calculated by the ATO;
  • immediate deductibility for various start-up costs (e.g. professional fees and government charges);
  • a 12-month prepayment rule; and
  • the more generous FBT exemption for work-related portable electronic devices (e.g. mobile phones, laptops and tablets) – the FBT car parking exemption for small business already applies to entities with “annual gross income” of less than $10m.

 

CGT concessions

The threshold changes will not affect eligibility for the small business CGT concessions, which will only remain available for businesses with annual turnover of less than $2m or that satisfy the maximum net asset value test (and other relevant conditions such as the active asset test).

 

Reduced tax rates for small business

The company tax rate for small business entities will reduce to 27.5% (from 28.5%) from the 2016-17 income year. The rate is set to reduce further to 27% in 2024-25 and then by 1 percentage point per year until it reaches 25% in 2026-27.

 

GST reporting on a cash basis

The reporting of GST on a cash basis will be extended as an option to businesses with a turnover of less than $10m (previously $2m)

 

GST and the importation of low-value goods

The Government is to impose GST on goods imported by consumers regardless of value. The new rules will commence on 1 July 2017.

The liability for the GST will be imposed on overseas suppliers, using a vendor registration model. This means that those suppliers which have Australian turnover of $75,000 or more will be required to register for, collect and remit GST for all goods supplied to consumers in Australia, i.e. regardless of value.

The Budget papers state that the measure will have a gain to GST revenue of $300m over the forward estimates period (i.e. the next 4 years). There will be additional funding of $13.8m over the next 4 years to implement the measure. The arrangements will then be reviewed after 2 years to “ensure they are operating as intended and take account of any international developments”.

 

www.plantandassociates.com.au

admin@plantandassociates.com.au

07 55965758

How to Change Accountants

Changing accountants is simple!

Many people stick with their old accountant, despite not being happy with them simply because they believe to change accountants is difficult.  They couldn’t be more wrong.

Ethical letter

In the accounting industry we have a process where the new accountant sends a courtesy ethical letter to your previous accountant advising that you have approached us to change accountants.  In that letter a request is made for any corporate registers and trust deeds and other pertinent information to you.

99% of the time you personally would already have all of your:

  • original documents,
  • copies of your previous financials and tax returns and
  • any accounting programs where applicable.

Going Forward

So contact us for an obligation free discussion, either in person, by email or by phone to discuss how we can help you.  We can conduct a free review of your previously lodged financials to advise you whether there are any significant areas that you need to pay attention to for asset protection, tax minimisation and future issues.

Why do people change accountants?
  • Feel they are not getting proactive advice or timely response
  • Feel they are being overcharged – some are and some are not
  • Feel they are paying too much tax – again sometimes they are
  • Don’t feel they have adequate asset protection or don’t trust the advice of their Accountant
  • Their accountant is not properly qualified
  • They require a more local accountant or an accountant more technologically advanced.

www.plantandassociates.com.au

admin@plantandassociates.com.au

07 55965758

Questions to ask your accountant

1.     When buying business insurance is it best to work with a broker representing various carriers or should I go direct to insurance companies?

2.     I am in the market for a bank loan. What kinds of information should be included in the business plan I present to the bankers? How should this information be presented

3.     Which indicators of my company’s performance should I be tracking weekly, monthly, annually? Should I calculate these key indicators, or should I ask my accountant to do it?

4.     How do I prepare cash flow statements and how do I use them as management tools?

5.     How can I tell if my company has reached the limit of its borrowing capacity? Can I comfortably handle additional debt?

6.     How do my financial ratios and percentages compare with the averages of other businesses in my industry?

7.     What taxation implications are there for me when I go to sell my business?

8.     What strategies can I use to defer my income tax?

9.     When buying business insurance is it best to work with a broker representing various carriers or should I go direct to insurance companies?

10.   Which indicators of my company’s performance should I be tracking weekly, monthly, annually? Should I calculate these key indicators, or should I ask my accountant to do it?

11.   What types of salary packaging are available to my business? What are the fringe benefits tax implications?

12.   How do I introduce a performance measurement system for my staff?

13.   What business structure is most appropriate for my circumstances – a company, trust, partnership or proprietorship? What are the relative advantages and disadvantages?

14.   How can I protect myself against fraud or other unauthorised use of funds? Should I have controls over internet banking and what should they be?

15.   How can I establish a succession plan that ensures continuity in my business when I retire or die?

16.   Can I sell off part of my business without losing control?

17.   Am I pricing my products and services correctly?

18.   What business structure is most appropriate for my circumstances – a company, trust, partnership or proprietorship? What are the relative advantages and disadvantages?

19.   What kind of questions can I expect from bankers when they review my company’s financial ratios and percentages as part of the borrowing process?

20.   How can I establish a succession plan that ensures continuity in my business when I retire or die?

21.   Can I sell off part of my business without losing control?

22.   When buying business insurance is it best to work with a broker representing various carriers or should I go direct to insurance companies?

23.   I am in the market for a bank loan. What kinds of information should be included in the business plan I present to the bankers? How should this information be presented?

24.   Which indicators of my company’s performance should I be tracking weekly, monthly, annually? Should I calculate these key indicators, or should I ask my accountant to do it?

25.   What types of salary packaging are available to my business? What are the fringe benefits tax implications?

26.   How do I introduce a performance measurement system for my staff?

27.   How can I tell if my business has reached the limit of its borrowing capacity? Can I comfortably handle additional debt?

28.   What do my bankers expect from me in terms of financial reports? How can I maintain professional and productive relationships with them?

29.   Should I look for a general computer accounting package or am I better off looking for an industry specific system. What are the benefits and drawbacks of each?

30. When is it time to eliminate low profit items from my product / service line?

Posted in Accountant

Residency vs Non Residency by Claire Chapman

RESIDENCY VS NON-RESIDENCY FOR TAX PURPOSES

There is a common misunderstanding that residency for tax purposes is the same as residency for immigration purposes. It is possible for a person to be an Australian resident for tax purposes whilst being a non-resident for immigration purposes.

Generally, if you reside in Australia, you will be considered an Australia resident for tax purposes. As there is no definition of the word ‘reside’ in the tax legislation, the tax office relies on the ordinary definition of the term ‘reside’. The Shorter Oxford Dictionary defines ‘reside’ as:

“…to dwell permanently, or for a considerable time, to have one’s settled or usual abode, to live, in or at a particular place…’[1]

Some of the matters that the tax office will take into account when determining if a person is a resident for tax purposes or not are as follows:

Individuals Coming to Australia

  • Intention or purpose of presence
  • Family and business/employment ties
  • Maintenance and location of assets
  • Social and living arrangements

In particular, if an inbound individual has been in Australia for more than half the tax year (183 days), they will generally be declared as an Australian resident.

Individuals Leaving Australia

  • Intended and actual length of stay overseas
  • Any intention either to return to Australia at some definite point in time or to travel to another country
  • Existence of an established home overseas
  • Abandonment of any residence or place of abode in Australia (while overseas)
  • Duration and continuity of the individual’s presence in the overseas country
  • Family and financial ties with Australia.

The weight to be given to each factor will vary with the individual circumstances of each case and no single factor is conclusive.

The intention of a particular individual to either become or cease to be an Australian resident is particularly important. As a result, the tax office is now placing more emphasis on this intention as indicated on the person’s Australian immigration incoming or outgoing passenger cards.

It is important to determine the correct residency status as Australian residents are taxed in Australia on their world-wide income, whereas non-residents are only taxed on their Australian-sourced income. Non-residents are also taxed at higher rates than residents. Residency status must be determined each year.

[1] TR 98/17, para. 13
Posted in Accountant, Foreign asset, Income, Property, Tax

Taxation of a SMSF (Self Managed Super Fund ) by Sharon Plant

Taxation within a SMSF

One of the basic principles of superannuation is that it is a low taxation vehicle. The Government gives these tax concessions in return for your SMSF complying with the super laws, which restrict when you can access these funds.

The following is a overview of the basics of the taxation within a SMSF, assuming that the fund is a complying superannuation fund.

Taxable income

The trustees of a complying SMSF are liable to pay tax (from the assets of the SMSF) on the taxable income of the fund for each year of income. The taxable income of a SMSF is calculated as:

Total assessable investment income + concessional contributions + taxable capital gains – allowable deductions.

This taxable income is taxed at the concessional rate of 15%.
However, the are some special rules for:

– capital gains
– special income

And a further reduction of tax payable by way of any rebates such as imputation credits.

Capital gains tax:

A capital gain arising from the disposal of an asset of the SMSF will form part of the fund’s taxable income and will be subject to tax at 15%. However there are some further concessions:

  • – Where the fund has held the asset for more than 12 months, the fund will receive a discount of one-third of the capital gain (effectively reducing the capital gains tax to 10%). This is known as the CGT discount method. For example, if the fund makes a $10,000 capital gain on the disposal of an asset and the discount method applies, only $6,666.66 would be counted as taxable income.

  • – Where the fund acquired the asset prior to 21 September 1999 and has held it longer than 12 months, the fund has the choice of using either the above discount method or the frozen indexation method (frozen at 30 September 1999) to calculate the capital gain. If the fund acquired the asset on or before 30 June 1988, the asset is deemed to have been acquired by the fund on 30 June 1988.

  • Special income:

  • Special income of a SMSF is taxed at the highest marginal tax rate i.e. 45%. It includes:

  • – Dividends received directly or indirectly from a private company, unless the Commissioner is of the opinion that it would be unreasonable having regard to a number of factors.

  • – Distributions from a trust, where the SMSF as beneficiary had no fixed entitlement (i.e. discretionary trust distributions)

  • – Any other income of the fund where the parties were not dealing with each other at arm’s length, or the income derived is greater than that which could be expected if the parties had been dealing with each other at arm’s length (i.e. excessive unit trust distributions).

  • Concessional (Taxable) contributions

  • Concessional contributions (or formerly known as Taxable contributions) are those contributions generally made up of Employer contributions, and those personal contributions where the member has claimed a tax deduction. Contrary to popular belief, these contributions actually make up part of the fund’s taxable income.

  • Use of imputation credits

  • Once the 15% tax rate has been applied to the taxable income of the fund, the use of imputation credits may be able to reduce, or even eliminate the actual tax payable.

  • Member goes into the pension phase:

  • Upon retirement (or other condition of release), members of your SMSF will commence a private pension from the fund. From a tax perspective, any income and capital gains generated from what is known as “segregated pension assets” of the fund is subject to zero tax within the fund. That’s right, zero. In this case, any imputation credits received can be used to reduce the tax payable by other members of the fund who are in the accumulation phase. This allows incredible flexibility. If there are no “accumulation” members, then these imputation credits can be received by the SMSF as a refund from the ATO.

    Once a lump sum or pension payment is made to a member, the lump sum or income stream itself is tax free in the hands of the member if they are over the age of 60, however there may be some tax payable if you are less than 60.

Plant and Associates Pty Ltd

Accountants Beenleigh, Accountants Nerang

www.plantandassociates.com.au

1300783394

Posted in Accountant, Asset Protection, Super, Tax

Winding up a SMSF

To wind up a SMSF you need to:

  • Refer to your SMSF Trust deed as it may contain vital information about winding up your fund.
  • Notify the ATO within 28 days
  • Deal with all the assets of the fund
  • Arrange a final audit
  • Complete your reporting responsibilities including lodging your SMSF annual return and finalising any outstanding tax liabilities.

Why would you need to wind up a SMSF

There are a number of reasons why you might need to wind up your SMSF:

  • All the members and trustees may have left the SMSF
  • All the benefits may have been paid out of the fund
  • Relationship breakdown
  • The fund may no longer meet the definition of an Australian Superannuation fund because the trustees have moved overseas permanently
  • You may have found that running an SMSF is not in your best interests
  • The trustees’ circumstances may have changed in a way that affects their capacity to effectively manage their fund.
  • There may be insufficient balance of funds in the SMSF to meet the ongoing costs of operating the SMSF.

Options available to pay out the benefits

To pay benefits to a member when you wind up your SMSF, a condition of release must be met to allow them access to their benefits. If the member does not meet a condition of release or does not want to access their benefits at the time the funds winds up, the benefits must be rolled over to another complying super fund.

Assuming a condition of release has been met, there is the option of an in specie transfer of assets to the member. This is particularly useful if the timing is not right to sell the assets in the SMSF. (This includes when a managed fund puts a stop on trading due to a financial crisis). There are various tax consequences of paying out benefits both as cash and in specie so you should always seek advice before proceeding.

Plant and Associates Pty Ltd

Accountants Beenleigh, Accountants Nerang

www.plantandassociates.com.au

1300783394

Posted in Accountant, Asset Protection, Capital Gains Tax, Deceased Estate, Property, Super Tagged with: