12 Dec 2015

Straight Numbers & Tax Talk for Business – December 2015

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In this Issue:

Time is running out… for the year 2015, that is. I hope that you’ve had a successful year and that you’ve kicked some goals with your business.

At this time of the year, most people rush like mad to finish all the jobs they have in the pipeline before the end of the year. In certain trade and industries, demand even picks up towards Christmas time.

When you finally get to have a breather, remember to take some time to reflect on your achievements of last year and celebrate them, with your Team or others who know how much it means to you.

We wish you a safe Christmas holiday season and safe travels, wherever you spend your break. Catch you in the new year!

Best regards from the Team

Visit www.adhamilton.com.au to read a multitude of recent articles of vital interest… some are genuinely irreverent but all are relevant.

ChristmasBaubles-300x188Wishing you all a Merry Christmas and a Prosperous New Year!

Christmas Holiday Business Closure

We are closed from Thursday, 24 December 2015 and re-open for business on Monday, 4 January 2016.

GST on all (taxable) online transactions from 1 July 2017

The (now former) Treasurer recently announced that the States and Territories had unanimously agreed in principle to reduce the GST threshold on imported goods and services (currently at $1,000) to zero.

The new arrangements will apply from 1 July 2017.

He said that he had put forward a proposal that relies on a vendor registration model as a method of collecting the GST.

As goods would not be stopped at the border, administering a vendor registration model would have a relatively low cost.

Non-residents (overseas suppliers) will be the ones who charge, collect and remit the GST for digital and physical products.

As is the case in Australia, only vendors with an Australian turnover of at least $75,000 will need to register and charge the GST.

Holiday rentals under the microscope

The ATO has advised that it is sending letters to taxpayers in approximately 500 postcodes across Australia, reminding them to only claim the deductions they are entitled to, for the periods a holiday home is rented out, or is genuinely available for rent.

They advise that, to avoid making mistakes on their tax return, property owners should:

  • keep accurate records to ensure they declare the right amount of rental income and have evidence for claims made; and
  • only claim deductions for the periods the property is rented out, or is genuinely available for rent.

If a property is rented at below market rates, for example to family or friends, claims for deductions must be limited to the income earned while rented.

Memorable Quotes…

“Everything is theoretically impossible, until it is done.”
—Robert A. Heinlein

GIC and SIC rates for the 2015 December quarter

The ATO has published the 2015 December quarter rates for the General Interest Charge (GIC) and the Shortfall Interest Charge (SIC):

GIC annual rate 9.14%
GIC annual rate 0.02504109%
SIC annual rate 5.14%
SIC daily rate 0.01408219%

NZ changes to GST imports to affect our ex-porters

Editor: In a similar fashion, the New Zealand government has issued a discussion paper, entitled “GST: Cross border services, intangibles and goods”, the upshot of which is to levy GST on imports under the current threshold of NZ$400.

The proposed rules would require offshore suppliers to register and return GST, when they supply services and intangibles, which exceed a given threshold in a 12-month period, to New Zealand-resident consumers.

The paper proposes that there would be a wide definition of “services”, which would include digital services (such as video, music, and apps and other software downloads).

It would also include traditional services such as consultancy fees for legal, accounting, engineering, and other services.

At the present time there is no proposed start date, although the NZ government may decide to align their start date with Australia’s proposed start date for GST on imports under $1,000 of 1 July 2017.

A little bit of Trivia…

Eyeliner Trivia Facts

Millions of beauty lovers adore eyeliner and regard it as indispensable, but most people probably know very little about its strangely fascinating history.

Eyeliner has a very long history and can be traced all the way back to the year 10,000 BC in both Mesopotamia and ancient Egypt. Nor were women the only users back in the day, with many men also making use of heavy, black eye-liner to accent their eyes. Its original function, however, was less about aesthetics and more about both warding off the “evil eye” and protecting eyes against the sun god.

Despite its long history, eyeliner has fallen in and out of popularity, and Western culture eschewed its use between the first Millennia AD and the 1920s, when it came back into fashion after the highly publicized discovery of the tomb of King Tutankhamun. 1920s users did not have it easy as eyeliner lovers today though, with liner back then consisting of kohl, which gave it a smokier style than the modern smooth style to which we have become accus-tomed.

Credit and debit cards data-matching program

The ATO has announced that it will conduct a data-matching program on credit and debit card transactions for the 2012/13 and 2013/14 years.

Data will be collected from the following financial institutions:

  • American Express Australia Limited;
  • Australia and New Zealand Banking Group Limited;
  • Bank of Queensland Limited;
  • Bendigo and Adelaide Bank Limited;
  • BWA Merchant Services Pty Ltd;
  • Commonwealth Bank of Australia;
  • Diners Club Australia;
  • National Australia Bank Limited;
  • St George Bank; and
  • Westpac Banking Corporation.

Based on previous programs, it is estimated that over 8 million records will be acquired, relating to over 940,000 merchants. These records are linked to approximately 90,000 individuals and 850,000 non-individuals.

Taxpayers can apply to the ATO for a market value ruling

The ATO has issued an information sheet to help tax-payers get their property valuations right. They say that practitioners or their clients can apply for a market value private ruling, by either:

  • asking the ATO to provide a valuation (they will be required to pay for the work of the valuer); or
  • providing the ATO with a valuation and asking them to confirm it – this generally costs less, provided the valuation meets the ATO’s requirements.

There are several advantages to requesting a market value private ruling, as opposed to obtaining a private valuation, as a market value private ruling:

  • gives the client greater certainty about their tax matters;
  • is binding advice that the client can rely on;
  • is completed by a professional valuer and the client can be involved in the selection and appointment of that valuer; and
  • removes the risk of providing the ATO with a valuation that does not meet its requirements, which could lead to further costs for the client.

ATO warns about doing your own valuation

According to the ATO, taxpayers who undertake their own valuations – or use valuations from people without adequate qualifications – risk incorrectly reporting their tax, and may be liable to pay administrative penalties.

However, taxpayers who use a qualified valuer or equivalent professional for taxation purposes will generally not be liable to a penalty if they have provided the valuer with accurate information should the valuation ultimately prove to be deficient.

Pay GST instalments quarterly and report annually

Editor: The ATO has advised that practitioners and their clients can opt to pay GST quarterly, and only report annually.

This option is available to all businesses with a turnover of $2 million or less.

If a business elects to take this option, it pays a quarterly GST instalment that the ATO works out (the taxpayer can vary it) and reports its actual GST information annually on an Annual GST return.

Editor: If you would like to discuss this option, please call our office.

Immediate deductibility of capital start-up expenses

From 1 July this year, new provisions apply to allow certain small businesses, or an entity that is not in business, to immediately claim some start-up costs, including business costs associated with raising capital.

Claimable business-related start-up costs

Expenses can be fully deductible in the year in which they are incurred if the expenditure relates to a small business that is proposed to be carried on and is either:

  • incurred in obtaining advice or services relating to the proposed structure or the proposed operation of the business (e.g., advice from an accountant or lawyer); or
  • a payment to an Australian government agency of a fee, tax or charge incurred in relation to setting up the business or establishing its operating structure (e.g., the ASIC fee for registering a company).

It does not include the cost of acquiring assets that may be used by the business.

Data matching program – on eBay online sales

The ATO has announced that it will acquire online selling data relating to between 15,000 and 25,000 individuals who sold goods and services of $10,000 or more on eBay between 1 July 2014 to 30 June 2015.

Data will be sought from eBay Australia and New Zealand Pty Ltd, a subsidiary of eBay International AG which owns and operates www.ebay.com.au.

The data requested will include information that en-ables the ATO to match online selling accounts to a tax-payer, including name, address and contact information, as well as information on the number and value of transactions processed for each online selling.

These records will be electronically matched with certain sections of ATO data holdings to identify non-compliance with registration, lodgement, reporting and payment obligations under taxation laws.

FREE Tax Blaster Session

tas_slashThere 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.

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Laughter is the best medicine

Thoughts to Ponder

These “words of wisdom” may not be so wise, but they just might tickle your funny bone:

  • For every action, there is an equal and opposite criticism.
  • Never do card tricks for the group you play poker with.
  • You never really learn to swear until you learn to drive.
  • The problem with the gene pool is that it doesn’t have a lifeguard.
  • Support bacteria – they’re the only culture some people have.
  • The only substitute for good manners is fast reflexes.
  • I drive way too fast to worry about cholesterol.
  • The sooner you fall behind, the more time you’ll have to catch up.
  • A conclusion is the place where most people get tired of thinking.

New multi-agency approach to fight serious financial crimes

Since 1 July this year, a new Serious Financial Crime Taskforce has been operating to ensure that Commonwealth financial crimes are disrupted and deterred.

The Taskforce is led by the Australian Federal Police, and also includes:

  • the ATO;
  • Australian Crime Commission;
  • the Attorney-General’s Department;
  • AUSTRAC;
  • ASIC;
  • Commonwealth Director of Public Prosecutions; and
  • the Australian Border Force.

The Taskforce will work closely with international partner agencies, governments and organisations around the world and will initially concentrate on international tax evasion and criminality related to trusts and ‘phoenix activity’ (when companies deliberately and repeatedly liquidate to avoid paying creditors, employee entitlements and taxes).

Take the Lead in Promoting a Culture of Safety at Work

As a leader, you’re ultimately responsible for safety in your organization. You can’t do it all by yourself, though. Get your team involved by asking these questions at your next meeting:

  • Is every employee actively aware of safety issues? Confirm that workers understand safety rules, how to report problems and accidents, and what their responsibilities are.
  • When and where are accidents likely to occur? Get everyone on board looking for potential trouble spots. Being aware of how the next accident could happen will sharpen everyone’s attention on prevention.
  • How are we measuring safety efforts? Goals should support good overall safety habits, not just avoiding (or hiding) accidents.
  • Do we have a safety champion? Designate some employees to focus on understanding safety protocols and sharing them with every member of your work-force. These people should act as information re-sources, helping workers be responsible for safe practices throughout your organization.

ATO and United States IRS share bank information

The ATO has announced that it has undertaken its first ever automatic sharing of bank information with the United States (US) Internal Revenue Service (IRS).

Details of over 30,000 financial accounts worth over $5 billion are being provided to the US.

The information provided on US citizens and tax residents with Australian bank accounts is the first step in transparency measures being implemented globally by Governments and tax administrations.

Beginning in 2017, close to 100 countries will be sharing non-resident data under the OECD Common Reporting Standard.

In return, the ATO will receive data from the IRS about Australians with financial accounts in the US, and will use that data to detect cases of undeclared offshore income and tax evasion.

How to Keep Your Professional and Personal Life Separate

One of the ways to ensure you keep a healthy work/life balance is to keep your professional life and your personal life as separate as possible, and there are a number of ways in which this can be achieved.

One method is to have two Facebook pages – one personal for your friends and family and another one for business. A lot of people make the error of using one page for both purposes and end up both annoying their social con-tacts with promotional posts and looking unprofessional in front of prospects. To start separating your work life from your personal life, separate them online.

It is also a good idea to ensure that you schedule as much time for your personal and social life as you do your business. Personal time should be set aside, including the likes of family activities, holidays, exercise, and hobbies. This both provides motivation to keep your schedule firmly on track and gives you something fun to look forward to. On the same note, it is vital to set boundaries and to start and stop work on time and not allow it to run into, and ultimately even take over, your personal life.

Small Business Protections from unfair contract terms

Editor: There are laws protecting consumers from unfair terms in ‘standard form contracts’ where the person has little or no opportunity to negotiate with the business concerned.

Businesses use standard form contracts to more efficiently deal with their customers.
However, because the business is often in a somewhat superior bargaining position, there are laws in place to protect consumers from unfair terms in a standard form consumer contract.

The government has announced it will extend consumer unfair contract term protections to small businesses as well.
The changes will cover standard form contracts where at least one of the parties employs less than 20 people, and where the upfront price of the contract does not exceed $300,000 or $1 million for contracts longer than 12 months.

ATO moves on cafés & restaurants

The ATO has advised that it will be visiting restaurants, cafés and take-aways in Box Hill (Melbourne) over the coming months as part of its ongoing Australia-wide program involving the café and restaurant industry.

Assistant Commissioner Michael Hardy said similar visits in Sydney and Adelaide with over 500 cafés had been well-received, with businesses keen to meet with the ATO to better understand their obligations, as well as learn about available help and support.

“Where taxpayers are unwilling to work with us or continue to cause us concern, we will undertake further investigation. In Sydney, for example, we have now moved to auditing businesses that did not want to work with us.”
The ATO and its regulation of SMSFs

Editor: In a recent speech, Kasey Macfarlane, Assistant Commissioner, SMSF Segment, Superannuation, dis-cussed the issues facing SMSFs and their aging trustees. The following is an excerpt from her speech.

Planning ahead – cognitive decline

“I’d like to touch on the increasingly important topic of cognitive decline. Dementia is on the rise and currently affects one in ten people over 65, and three in ten over 85.”

“Even mild dementia will affect a person’s ability to make financial decisions. SMSF numbers continue grow, and… require a high level of financial decision making.”

“While many trustees remain perfectly capable of effectively managing their financial affairs well past retirement age, there is a risk that some with diminished capacity to effectively manage their fund may nevertheless continue to do so.”

“As my colleague Matthew Bambrick said back in March, ‘These issues are a time bomb waiting to go off if not addressed now’.

“It’s essential to ensure that all trustees are genuinely involved in managing SMSF funds, to agree in advance about decision points and exit decisions, to have a will, and appoint an enduring guardian and power of attorney.”

Editor: If you would like to discuss this important issue further, please contact our office.

ATO’s Visa Data Matching Program

The Department of Immigration and Border Protection will provide the ATO with the following details of visa holders, their sponsors and migration agents for the 2013/14 to 2016/17 financial years:

  • Address and contact history for visa applicants and sponsors;
  • All visa grants, and visa grant status by point in time;
  • All migration agents, and their address and contact history;
  • Sponsor details (subclass 457 visa);
  • Education providers (educational institution where the student visa holder intends to undertake their study);
    Visa subclass code and descriptor; and
  • All international travel movements undertaken by visa holders (arrivals and departures).

It is estimated that records relating to approximately 1,000,000 individuals will be provided.

Wisdom from ‘the Oracle of Omaha’

Warren Buffett is one of the richest people in the world, so his advice on money should be worth heeding. Here, in his own words, are some of his tips and aphorisms on saving, investing, and spending:

  • Planning. “Someone’s sitting in the shade today be-cause someone planted a tree long ago.”
  • Spending. “Price is what you pay; value is what you get.”
  • Patience. “No matter how great the talent or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant.”
  • Mistakes. “The rearview mirror is always clearer than the windshield.”
  • Borrowing. “I’ve seen more people fail because of liquor and leverage—leverage being borrowed money. You really don’t need leverage in this world much. If you’re smart, you’re going to make a lot of money with-out borrowing.”
  • Risk. “Risk comes from not knowing what you’re doing.”
  • Debt. “The most important thing to do when you find yourself in a hole is to stop digging.”
  • Values. “Live your life by an inner scorecard.”
  • Happiness. “Too often, a vast collection of possessions ends up possessing its owner. The asset I most value, aside from health, is interesting, diverse, and longstanding friends.”

ATO supporting small business to implement SuperStream

As the SuperStream rollout for small businesses continues, the ATO claims that it is helping employers in select industries who need support implementing Super-Stream.

Editor: Employers with 20 or more employees were expected to be using SuperStream no later than 31 October 2015. Employers with 19 or fewer employees need to be using SuperStream no later than 30 June 2016.

The ATO has also stated: “With only two quarters left until SuperStream becomes mandatory, now is a good time for employers to adopt SuperStream and familiarise themselves with it before the deadline.

“For some businesses, December and January are quieter periods, so now is a great opportunity to check that your SuperStream option is ready, whether that be your payroll software, your super fund’s online payment system, or a clearing house, such as the ATO’s Small Business Superannuation Clearing House. You can also ask your accountant or bookkeeper for help.”

Now is also the ideal time for employers to make sure they have all the information they need to use Super-Stream correctly: “Importantly, you should collect the necessary employee identification data – being your employees’ TFNs and their funds’ unique super identifiers (USIs) – and enter it into your system ahead of the next quarterly due date on 28 January. That way, you have time to check that things are running smoothly before the deadline.

“Your employees can find their fund’s USI on their super statement or by calling their fund. You can also find these details using the Super Fund Lookup website – our online SuperStream checklist has the link.”

The ATO step-by-step checklist to help employers prepare can be found at www.ato.gov.au/SuperStreamChecklist.

The Right Behaviour on Social Media

Once upon a time, social media just gave people the chance to reconnect with friends from days gone by. Now, while social media has evolved to include networking and keeping up to date with various interests, it has also become something that seems to compromise our personal space more and more. The good news is there are ways to limit its influence.

If you want to keep business relationships strictly professional, do not accept friend requests from these people on Facebook. Politely explain that you wish to keep your account strictly for people you know in your personal life and separate from work. If you feel uncomfortable doing this, you could always add them to a restricted friend list to ensure that they are only allowed to view certain posts. If you are in the position of wanting to add someone from work to your Facebook account, it is a good idea to ask them first.

What best to avoid when using social media:

Complaining. Think twice before griping online about how boring your job is or how much you hate your boss. Such negative comments can be widely seen and easily come back to haunt you. Remember that everything you post online is public, and don’t assume no one will ever notice.

Careless comments. Avoid posting jokes or sarcastic comments about the day’s news. What seems funny in the moment can strike a nerve or prompt a backlash. Keep your tone professional and polite, even when talking among friends.

Exaggeration. This is especially dangerous for job-seekers, but it can trip up experienced veterans as well. Don’t cite qualifications or degrees you don’t actually have. Pretending you graduated from a particular university when you only took a few classes there can land you in hot water whether you’re applying for a job or you’ve been working for years.

Reminder of small business tax cuts

TaxCutThe ATO has reminded taxpayers that, from 1 July 2015, a new two-tier company tax system took effect and applies to all companies.

This system sees the whole of a company’s taxable in-come subject to the following rates:

  • 28.5% if the company’s aggregated turnover is below a $2 million threshold (i.e., a small business entity or ‘SBE’); or
  • 30% if the company’s aggregated turnover is equal to or above a $2 million threshold.

Importantly, companies don’t need to do anything now – if identified as a small business, the new rate will be automatically applied to their PAYG instalments rate or on their next activity statement.

Editor: Note that a capped 5% tax discount, designed to broadly mirror the small business company tax cut, was also introduced for unincorporated small businesses from the 2016 income year. It will be delivered to individual taxpayers in receipt of small business entity in-come via the ‘small business income tax offset’.

ATO reviewing taxable payments annual reports

The ATO has advised that it is contacting businesses in the building and construction industry about information provided on their Taxable payments annual report, where the businesses have:

  • provided a report with missing or invalid ABNs;
  • included amounts paid for GST when the contractor isn’t registered for GST;
  • not lodged a report; or advised the ATO they are not required to report, when the ATO’s records indicate they should.

The ATO will explain what their review has found and suggest ways to make it easier to complete accurate reports in the future, such as using the ABN Lookup tool or ATO app to check a contractor’s ABN or if they are registered for GST.

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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.