16 Apr 2016

Straight Numbers & Tax Talk for Business – April 2016

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In this Issue:

At this time of the year, many business owners feel the pinch a bit with budgets of many businesses and customers being a bit stretched from the expenses incurred over the holiday period.

The best way to deal with this is to go back to basics and make sure you’ve got the cash flow to keep you going through these tough times. That means that you need to pay attention to follow up outstanding invoices on a regular basis.

We’ve recently posted our guest article “Are You Chasing Up Outstanding Invoices?” in the March Online Magazine of the Aussie Painters Network. Visit www.aussiepaintersnetwork.com.au to read the full article on page 28.

In the run up to the end of the Financial Year 2015-16, this would have to be one of the best times to get your business plans and finances in order to maximise your tax savings.

With nearly 9 months of business financial data available, you can make certain projections and put further strategies in place to save on tax. If you don’t know where to start, we invite you to take advantage of our FREE Tax Blaster Session—for more information see page 5 of the newsletter.

If you have any questions about the items published in this newsletter, please don’t hesitate to give us a call on 07 3399 8844 or stop by at our office for a coffee. We’re never too busy to sit down and talk to you.

Best regards from the Team at Straight Talk Accounting & Tax

ATO announces two important data matching protocols

The ATO has just announced that it is starting a new “asset” data matching protocol, and extending another CGT and rental protocol that has been running successfully for the last ten years.

Property sales and rental income

10044559_s-300x240The ATO has also advised that it is continuing its ongoing “Real property transactions 1985–2017 data matching program protocol”.

It is undertaking this program to basically ensure that tax payers are correctly meeting taxation obligations in relation to their dealings with real property, i.e., CGT on property sales and income tax on rental income.

For the period 20 September 1985 to 30 June 2017, data will be obtained from all State and Territory Revenue authorities, as well as many Finance departments, and Land and Residential Tenancies authorities.

The ATO will obtain the data on:

  • landlords, properties, rental income, etc., from the rental bond authorities; and
  • taxpayer details on property valuations, sales, purchases, etc., from the revenue and land titles authorities.

Number of records

It said that, based on current data holdings, it is estimated these records will identify approximately 11.3 million unique individuals.

Data matching on insurance taken out on certain assets owned by “wealthier” taxpayers

The ATO has advised that it is working with insurance providers to identify policy owners on a wide range of asset classes. These include:

  • marine;
  • aviation;
  • enthusiast motor vehicles;
  • fine art; and
  • thoroughbred horses.

It said that this will provide them with a more accurate estimate of taxpayers’ wealth.

Editor: And therefore income. Taxpayers who have used untaxed monies to acquire such assets might be well advised to get on the front foot and disclose it to the ATO, rather than waiting for a call from the taxman.
They advise that they expect to receive 100,000 records where the different asset classes meet certain threshold amounts.

Warning to employers to withhold tax from some car allowances

The ATO has reminded taxpayers that, in relation to claiming car expenses, the one-third of actual expenses method and 12% of original value method were abolished from 1 July 2015.

The cents per kilometre method now uses a standard rate of 66 cents per kilometre for all cars, rather than a rate based on a car’s engine size.

Employers should be aware that the ATO set the approved pay as you go (PAYG) withholding rate for cents per kilometre car allowances at 66 cents per kilometre from 1 July 2015.

Employers should withhold tax from any amount above 66 cents for all future payments of a car allowance, as failure to do so may result in the employee having a tax liability when they lodge their tax return.

Employees, who from 1 July 2015 have been paid a car allowance at a rate higher than the new approved amount, should consider whether they need to increase their withholding to avoid any tax liability at the end of the year.

Editor: If this applies to your business, please contact our office if you need help with the calculations.

Memorable Quotes…

“Truth is ever to be found in the simplicity, and not in the multiplicity and confusion of things.”
—Isaac Newton

GIC and SIC rates

The ATO has published the 2016 March quarter rates for the General Interest Charge (GIC) and the Shortfall Interest Charge (SIC):

GIC annual rate 9.22%
GIC annual rate 0.02519126%
SIC annual rate 5.22%
SIC daily rate 0.01426229%

All’s well that ends well, especially in business meetings

When a meeting drags on too long, it loses effectiveness. You’ll get better results if you know how to bring your meetings to a firm conclusion. Follow these tips for drawing to a powerful close:

  • Leave enough time. When planning your agenda, build in enough time to finish things off right. Review what you’ve decided, reinforce the actions that need to be taken, answer questions, and outline expectations. Don’t be in a rush to get back to work before making sure everyone knows what to do next.
  • Repeat key items. During the conclusion, write down every action that needs to be taken as a result of the meeting; assign each action to a person, with a specific deadline; and distribute copies of these assignments to everyone as a follow-up.
  • Finish on time. A meeting that ends on time will earn you the respect and gratitude of everyone who attends. It will also force everyone (including you) to be sharp during the meeting and stay focused on the agenda. The worst meetings are those that keep going long after anything worthwhile has been accomplished. Write an agenda, stick to it, and end on time.

Taxpayer misses out on small business CGT concession

A taxpayer’s claim that a related trust was entitled to the small business 15-year exemption* was rejected because a loan from his trust had to be included in the net value of his CGT assets.

Note (*): One of the requirements to get this concession is to satisfy the “maximum net asset value test” (MNAVT), whereby the net value of CGT assets of a taxpayer (and their connected entities and affiliates) must not exceed $6 million.

It was agreed between the ATO and the taxpayer that the total net value of the taxpayer’s other assets in 2008 was $5.93 million.

The parties disagreed, however, as to whether an amount of $1.14 million shown as a loan in the 2008 balance sheet of the taxpayer’s trust should be included as an asset – the taxpayer claimed that he was “statute-barred” from recovering the loan by the Limitation of Actions Act 1936 (SA).

If it was an asset, then the net value of the total assets for the purposes of the small business exemption exceeded $6 million, and the taxpayers were not entitled to CGT relief.

Decision

The Federal Court held that any action by the trust against the taxpayer to recover the pre‑1998 loan would be an action to recover “trust property”, and the Limitation of Actions Act does not prescribe any limitation period in respect of claims of that kind.

Therefore, “the contention that the pre‑1998 loan was statute‑barred and did not have to be brought into account in the calculation of the MNAVT must be rejected”.

Science of the World – Amazing Science Facts

Science helps to explain the universe, but it can also succeed in making our problems and dramas seem petty in comparison to what is going on “out there.” Warning: The following facts may just blow your mind:

The deepest part of the entire ocean is the Mariana Trench, which is in the Pacific Ocean. The Trench is almost seven whole miles down – a barely comprehensible 12,067 yards deep.

People often complain about the weather, but Earth’s most extreme climatic moods seem tame in comparison to the weather in the rest of the universe. The wind on Neptune, for example, blows at a rate of 1,600 miles per hour; you would also be out of luck if you are one of those people that prefer some seasons to others in a year, given that the average season on Neptune lasts for over four decades.

The weather is no better on Mercury either, with temperatures reaching 788 degrees Fahrenheit on the side of the planet that is closest to the sun.

Increase Your ‘tech’ IQ—Facebook safety tips

There are seemingly endless opportunities to create, collaborate, and explore on the internet, but to get the most from these opportunities it is crucial to ensure that you stay secure and safe, and Facebook is no exception.

The good news is Facebook provides plenty of ways in which people can do just that. Of vital importance if you have a Facebook account is to perform a Privacy Checkup. There is a small symbol of a lock on your Facebook feed’s right hand corner; click on this symbol and a drop down menu will appear, at the top of which will be Privacy Checkup.

Click on the small blue dinosaur symbol, and you will be given a walk through of the main three tools you can use to manage who is allowed to look at your apps, your posts, and your profile.

You can also manage what you share and with whom. You can enable your posts to be seen by everyone or just your friends or certain groups. You can even choose for each individual post if you wish.

How Big Business Can Learn Inspiration From Start-ups

Productivity and inspiration often go hand-in-hand, and the former is often cited as the key to increasing salaries – but how to inspire people to be more productive? There are a few things that small start-up companies can actually teach big businesses in this regard.

For one thing, start-up companies tend to give everybody involved a voice, making employees feel personally responsible for strategies, innovative ideas, and the success that results from them.

It is crucial for the sake of inspiration for all businesses, no matter how large, to create a culture in which any employee, regardless of their level within the company, to feel that they might be able to come up with the next great idea. Many large firms tend to forget this, alienating staff members when decision-making and brain-storming becomes the purview only of a few select individuals or committees.

Making offices more social and fun is also a good way to create an environment more likely to foster inspiration. Teams of employees that are able to work and play together are much more likely to be more creative and to want to stay with that company.

DHS specified benefits and entitlements data matching

The ATO has advised that it will collect information from the Department of Human Services (DHS) for the following benefits and entitlements:

  • family tax benefits – part B;
  • paid parental leave scheme;
  • carers’ allowance; and
  • Medicare entitlement statements.

This data will be compared with claims made in income tax returns for the invalid and invalid carer tax offset, and for exemptions from paying the Medicare levy and surcharge.

The program will enable the ATO to detect those who are NOT genuinely entitled to claim these offsets and exemptions. Due to a number of legislative changes in recent years, some people continue to claim these offsets and exemptions incorrectly.

The ATO says that it has been undertaking this data matching program for more than five years and intends to continue conducting it for a further three years.

Buyers to withhold tax for ATO when buying certain properties

Editor: Parliament recently passed legislation amending the taxation law to impose withholding obligations on the purchasers of certain Australian assets – generally property purchased from a non-resident. However, the changes will affect most purchases of property in Australia!

The amendments impose a 10% withholding obligation on purchasers of ‘Taxable Australian Real Property’ (generally, this means an interest in Australian land) from certain foreign residents, as well as certain ‘indirect Australian real property interests’ (such as shares in companies that own a lot of land) and options to acquire such assets.

The amendments will generally apply where the contract to purchase an applicable asset is signed on or after 1 July 2016.

Tax Warning!

Where the land, or the interest in the land, is worth $2 million or more, the new law requires the purchaser to withhold 10% of the purchase price and send it to the ATO unless the vendor has obtained a ‘clearance certificate’ from the ATO and provided it to the purchaser prior to settlement.

This obligation arises regardless of whether the vendor is a foreign resident or not.

Example

On 1 August 2016, Harvey enters into a contract to purchase a residential property in an affluent Sydney suburb for $2.5 million, with settlement proposed to occur on 1 October 2016. He does not know whether the vendor is a foreign resident.

Despite many requests from Harvey’s lawyer, the vendor refuses to obtain a clearance certificate from the ATO to give to Harvey.

As Harvey is acquiring Australian land with a market value greater than $2 million and he has not received a clearance certificate from the vendor by the time settlement occurs, Harvey will be required to withhold and pay to the ATO $250,000, whether or not the vendor is an Australian resident.

GST implications when employer pays for a super fund’s expense

An employer cannot claim an input tax credit where it pays an expense on behalf of a superannuation fund, as the supply is not made to the employer; but to the super fund.

However, if the fund is registered for GST, then it may be entitled to claim an input tax credit (or a reduced input tax credit if the requirements in Division 70 of the GST Act are otherwise satisfied).

For example, assume a super fund engages a legal firm to provide advice about its activities, but the employer connected with the super fund pays the legal fees associated with this advice.

Because the supply of the advice was made by the legal firm to the super fund, the employer is not entitled to an input tax credit (i.e., the employer has not ‘acquired anything’, even though it made the payment).

However, depending on the circumstances and whether the super fund is registered for GST, it may be entitled to a full or reduced input tax credit.

Editor: The rules relating to GST are more complicated for super funds than for other entities, so please phone our office if you would like discuss this important issue.

FREE Tax Blaster Session

AD_eBook_SlashTax_CTA_Vert-EmailThere are a number of ways that individuals and small business operators can legally slash their tax. We find that many of our clients only begin to realise after a chat with one of our professional tax agents how much tax they could have saved if they had taken action earlier.

Don’t delay it any longer and book in for your FREE 20-minute Tax Blaster session. We’ve got limited spaces available for people who want to increase their earnings, save on taxes and put more money into their retirement fund.

Find out NOW how you could be making more money for your retirement and facing less financial stress now and in future.

Call our Team on 07 3399 8844 to book your FREE meeting NOW.

Laughter is the best medicine

Need for confession

A young priest went to his older mentor for help. “Father, no one wants to let me hear their confession. What should I do?”

“Let me sit in the confession booth with you and listen to how you conduct yourself,” the elder priest suggested.

After hearing a few confessions, the two priests met in the senior priest’s office. “Now, I want you to try a few things,” the elder priest said. “Practice crossing your arms over your chest and rubbing your chin with one hand.”
The young priest did as he asked.

Then he was told, “Try saying some things like, ‘I see … Yes … Go on … I understand … How do you feel about that?”
The priest rehearsed the lines until the other one nodded.

“Now,” said the senior priest, “don’t you think that works better than slapping your knee and saying, ‘No way! What happened next?’”

Taxpayer not a ‘share trader’ despite substantial share trades

Editor: In a recent case, a taxpayer undertook significant trades on the stock exchange and made losses, but was still found to be a ‘share investor’, rather than a share trader, meaning she could not deduct her losses against her other income (i.e., her losses were ‘capital losses’ that can only be offset against capital gains).

The Facts

The taxpayer (who otherwise worked as a child care educator and earned approximately $40,000 in wages) started trading shares in July 2010, utilising her (and her husband’s) savings of approximately $60,000 and a margin loan of initially $40,000.

During the 2011 income year, she made:

  • 71 purchases to a value of $379,630; and
  • 37 sales to a value of $215,019.

She made a loss on her share transactions during the 2011 income year to the order of $20,000, and she was seeking to claim that as a deduction.

The Decision

The Senior Member of the AAT considered the following factors in deciding that the taxpayer was not a share trader.
Factors in favour:

  • the turnover was substantial, particularly having regard to her wages; and
  • the taxpayer maintained a home office for the purpose of undertaking the share transactions.

Factors against:

  • the share transactions were not regularly and systematically carried out throughout the 2011 income year – the bulk of the transactions took place in the first 6 months of the 2011 income year, with only 10 transactions of approximately $70,000 in the second half of the financial year.
  • the activities were very basic and lacked sophistication to constitute a share trading business;
  • there was no demonstrated pattern of trading, although it was accepted there was a business plan even before she later produced written evidence of this; and
  • she had no skills or experience or prior interest in shares.

Inactive Trusts – ABNs to be cancelled

The ATO has advised that they will begin cancelling the ABNs of approximately 220,000 trusts, where there is evidence those trusts are no longer carrying on an enterprise.

Trust ABNs will be cancelled from February, where information available indicates that, for the last two years, the trust has not lodged BASs and/or trust income tax returns.

The ATO will send a letter if an ABN has been cancelled, including the reason for the cancellation, and a phone number to ring to get the ABN reinstated immediately if the recipient does not agree with the decision.

Editor: If you receive such a letter and think the trust should still be entitled to an ABN, let us know and we’ll try and sort it out for you. Please also let us know if there are any outstanding BASs or returns you need us to lodge!

Social Media—Giving a longer life to social media posts

The lifespan of social media posts tends to relate to the kind of platform that they are made on. Twitter posts tend to have the shortest lifespan of just eight hours, while Facebook posts tend to endure for around three and a half hours. Yet, posts on Pinterest have a much longer lifespan of up to as much as three months.

If you still want to make use of Facebook and Twitter but would like to find a way to extend the lifespan of the posts you make on those social media sites, one good tip is to keep on reposting elsewhere for the coming days, weeks, and even months. You can also repost older content that remains relevant and not time-specific.

If you do decide to republish some of what you consider to be “evergreen” content, it is also a good idea to choose the ones that were particularly well-performing the first time such as the case studies that were the most downloaded, the most compelling data, and the posts that were the most searched-for.

Protect your workforce as employees grow older

As the workforce grows older, the risk of injury to workers who aren’t in the prime of youth grows as well. Managers and employees alike might consider these guidelines for keeping workers safe as the years go by:

Emphasize flexibility. Give older employees as much control as possible over when, where, and how they do their work.

Assign appropriate tasks. Remember that older workers may not have all the energy of their younger colleagues. Talk to them about what kinds of work they’re comfortable doing, offer sufficient breaks, and adjust tasks to their abilities.

Keep them active. Don’t offer jobs that keep older employees at their desks all day. Provide workstations that allow them to stand if they want, and encourage physical activity throughout the day.

Eliminate hazards. Older employees may be especially prone to slips and falls. Assess your workplace regularly, looking for anything that might cause an injury.

Provide reasonable accommodations. Give older workers the tools and consideration they need to work safely, particularly as they return to their jobs after an illness or accident.

Tax help for people affected by recent bush fires

The ATO has advised that, for people affected by the recent Victorian and Western Australian bush fires, refunds will be fast tracked and they will have additional time to lodge income tax returns and activity statements.

No need to apply

The Tax Commissioner said taxpayers do not need to apply for a deferral or a faster refund.

“If your business or residential address is in one of the identified affected postcodes it will happen automatically. You can visit our website to see the new lodgement dates and check if your region is included. Further postcodes may be added as needed, so check our website for more information,” Commissioner of Taxation, Mr Jordan, said.

Tips for workplace happiness

Being happy at work is crucial to your overall sense of happiness, as no one wants to feel like they are doing worthless tasks or are trapped in a dead-end job. The good news is it is not that difficult to keep your work day focused on the good stuff and ensure you are happier at work.

One good tip is to measure your successes not just by your wins, but by your tries as well. Just trying to do something to further your goals and your career can make you happier even if you are not always successful; keep a check of everything that you have done and focus on the small victories.

Another good tip is to listen to or read things that will be able to inspire you. Listen to podcasts relating to your interests or motivational talks at your desk on during your commute.

Beware of these obstacles to creativity at work

Without innovation and new ideas, your organization will grow stale. So keep a sharp eye out for obstacles that discourage creativity in your workplace:

  • Solving the wrong problem. Look at the situation from many different angles to find out what’s really going on. This keeps you from defining the problem too narrowly.
  • Judging ideas prematurely. Instead of discarding ideas because they seem impractical or unsuitable at first glance, ask, “What’s good about this idea?” You may find useful ideas embedded within aspects of otherwise unworkable concepts.
  • Stopping with the first good idea. Even when an idea sounds promising, don’t stop coming up with alternatives too quickly. Often the most creative ideas don’t appear until after the initial flash of brainstorming activity has been exhausted.
  • Obeying rules without question. Often, we ignore good ideas because they don’t seem to fit the rules we’ve always followed. If you question those rules, you may find out that you can change them.

FREE Copy of Our Book

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Just contact us on 07 3399 8844 to claim your gift and we will send it out to you.

About Straight Money Talk—A Straightforward Plan for Financial Independence

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bookstack3dWHAT PEOPLE ARE SAYING ABOUT THIS BOOK:

“I’ve read many financial books and found this one to be up there with the best. It can really kick-start your journey to get your financial situation into great shape.”
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“Robert has done a fantastic job on this book. My views on how to handle money and how to educate my kids to learn the value of savings have totally changed now. This is an excellent book to guide you to creating great financial wealth in your life!”
– Keith Abraham CSP – Professional Speaker and Best Selling Author

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.