Newsletter
16 Oct 2014

Straight Numbers & Tax Talk October 2014

by | posted in: Newsletter |

In this edition:

There’s some great news for Small Business Owners and Tradies in this month’s edition.

In collaboration with David Myles, Sandra Price and Michaela Clark, AD Hamilton & Associates are offering the first Tradies Advantage seminar ever in Queensland. If you’ve been wondering how to get past some of your road blocks to making more money and saving time check out the attached event flyer.

In addition, all Self-Managed Super Funds will want to know what’s best to do regarding succession planning and trauma insurance. We’ve got it covered for you in this edition.

Remember that the deadline for Individual Tax returns is fast approaching. If you need help to get your return lodged and make sure you save as much on tax as possible, just give us a call 07 3399 8844 to make an appointment.

Best regards from the Team at Straight Money Talk

 

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

FREE Tax Blaster Session:
Get your financial house in order before 2015!

Saving money for Christmas and the summer holidays this year could be a breeze, especially if you can save on tax. Now is a great time to check your financial position and put steps in place to help you reach your financial goals this year.

Don’t wait to put your financial house in order now to maximise your tax savings. Book in for a 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.

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

New ATO initiatives for small businesses

Editor: In a recent speech, the Commissioner of Taxation, Chris Jordan, announced some new initiatives for small business. The following are excerpts from his speech.

Red Tape

The Commissioner stated that the ATO was trying to reduce the amount of red tape because it understands “that meeting your obligations takes you away from your real business, and what you are good at.”

He said that the ATO has to:

provide more personalised, accessible and reliable services;
think about the effects their activities have on cash flow, and the everyday running of small business; and
work harder to ensure its information and advice is timely, streamlined, personalised, accurate and consistent.

New initiatives

To that end the ATO has introduced:

Small Business Fix-it Squads which are rapid-design groups made up of small business operators and intermediaries, and representatives from federal, state and local government, all working together to examine problems and solutions from the perspective of small business.

A new business-friendly approach to managing small business debt.
He said that his message remains, “if you run a small business and you get into trouble, pick up the phone or go online and let us know, so we can work with you to find a solution that suits your circumstances.”

A new Small business newsroom on their website which is a move away from multiple newsletters, giving taxpayers a one-stop online shop where they get tax and superannuation news and alerts.
As well as receiving the latest news, they will be able to watch short video clips, add tax dates to their own calendars to create reminders and share articles with each other.

Memorable Quotes…

“Everything we have in our modern world is the result of desire. Indeed, desire is the motivating force of life itself… It’s the generating power of all human action and without it no one can get very far.”

Claude Bristol 1891-1951, Author

Introducing Louise Gray

LouiseGray-150x150Louise has worked in the financial services industry for the past ten years and has an important role to fill in the Administrative Team.

Her responsibilities include (but are not limited to!) preparing documents and letters for clients, lodging investment and wealth protection applications, tracking their progress and liaising with clients.

She believes that the client comes first and will always go the extra mile to achieve that goal.

Outside of work Louise has 2 young children who keep her on her toes being Mum’s taxi service.

ATO warns property developers to declare income

Editor: The ATO has issued a media release warning property developers against using trusts to return the proceeds from property developments as capital gains instead of income.

Deputy Commissioner Tim Dyce said, “A growing number of property developers are using trusts to suggest a development is a capital asset to generate rental income, and claim the 50% capital gains discount.

Furthermore, he said that the ATO has begun auditing property developers who are carrying out activities which seem to be in conflict with their claim that they are undertaking a capital investment.

Some pointers to that are:

  • finance arrangements indicate the property is to be sold within a certain timeframe;
  • communication with local councils indicate sales plans; or
  • real estate agents are engaged early in the process for off-the-plan sales.

In addition, the property is often sold soon after completion of the development, where the underlying property may have been held for as little as 13 months.

He suggested that taxpayers in these situations should consider self-amending to correct their tax return, as penalties of up to 75% of the tax avoided can apply.

A little bit of Trivia…

  • 1st October 1931—Disney World, the world’s largest amusement resort was opened in central Florida.
  • 9th October 1940—John Lennon, singer/songwriter of the incredibly successful English rock band, the Beatles, was born on this day in Liverpool.
  • 10th October—National Day of Fiji
  • 14th October 1492—Christopher Columbus discovered America. On this day in 1992 extensive celebrations were held throughout the United States to mark five hundred years of settlement.
  • 17th October 1860—The first professional golf tournament was held in Scotland, at Prestwick. I was won by Willie Park.
  • 22nd October 1917—The Trans Australian Railway was opened, running from Kalgoorlie to Port Augusta.

SMSFs and succession planning

In a recent speech, an ATO Deputy Commissioner emphasised how important it was for trustees of SMSFs to have a plan in place for the succession and control of the SMSF on the death or incapacity of members who are trustees (or directors of the corporate trustee).

He said that other documentation such as wills, enduring powers of attorney (EPoA), binding death benefit nominations and reversionary pension documents should be checked to ensure they are consistent and in agreement with the members’ goals.

In some cases, surviving member/s of the fund may not wish to continue as trustee/s (or director/s of the corporate trustee).

An exit strategy, that can enable the surviving members to enjoy the benefits of the fund without having to remain trustees, is to appoint an approved trustee licensed by APRA (that is, become a small APRA fund).

Editor: If you would like to discuss any of this please contact our office.

Ignorance of the law is no excuse

In a recent case, a taxpayer decided to transfer shares he owned and had inherited, into a joint account he held with his wife without first asking his accountant/tax agent.

His accountant subsequently correctly advised him that he had triggered a capital gain of $19,415.

He appealed the ATO’s decision to tax him to the AAT and argued that he just wanted to transfer his shares into joint names with himself and his wife who, in this case, was “entitled in equity to half of them anyway.”

However, in deciding against the taxpayer the AAT said “. . . partners to a marriage or marriage-like relationship who hold the assumption that his or her assets are ‘our’ assets, would be well advised to continue with that assumption, without taking the step of formalising any joint ownership arrangements, as there will be a taxing point if they do, if the transferred assets have increased in value.”

SMSFs and trauma insurance

From 1 July 2014, an SMSF can generally only provide an insured benefit for a member that is consistent with one of the following conditions of release of a member’s superannuation benefits:

  • death;
  • terminal medical condition;
  • permanent incapacity (causing the member to permanently cease working); or
  • temporary incapacity (causing the member to temporarily cease working).

Trauma insurance is not consistent with any of these conditions of release.

Trauma insurance typically pays out a lump sum where an insured person is diagnosed with one of the critical illnesses, or injuries, defined in the policy, such as cancer, stroke, coronary bypass and heart attack.

Therefore, from 1 July 2014, an SMSF that takes out a new trauma insurance benefit in relation to a member will generally be in breach of the new regulation. The new regulation does not apply to insured benefits for members who joined a fund before 1 July 2014, and were covered by that benefit before 1 July 2014.

CPI – June 2014 quarter

The CPI indexation factor for the June 2014 quarter is 105.9 (an increase of 0.5 from the December 2013 quarter of 105.4).

This indexation factor is now basically only used (in a taxation context) for FBT purposes in relation to remote area housing.

Berry Delicious Buttermilk Pancakes

BlueberryPancakesHere’s a special pancake treat fit for any Sunday morning – in or out of bed.

Ingredients:

  • 1 cup whole-wheat flour
  • 1/3 cup quick-cooking oats
  • 1/3 cup yellow cornmeal
  • 1/3 cup all-purpose flour
  • 2 tsp. baking powder
  • 1/4 tsp. baking soda
  • 2 Tbsp. dark brown sugar
  • 1/4 tsp. salt
  • 2 cups non-fat or low-fat buttermilk
  • 2 large eggs
  • 2 Tbsp. butter, melted
  • 1 tsp. vanilla extract
  • 1 cup frozen blueberries, defrosted and drained
  • Canola oil cooking spray
  • Fresh blueberries, blue-berry syrup or warm honey for accompaniment (optional)

Directions:

  • In a bowl, lightly mix together dry ingredients until well combined. In blender place buttermilk, eggs, melted butter and vanilla. Blend on low speed until smooth and well mixed.
  • Add dry ingredients to blender in 2 to 3 batches, blending on low speed until just mixed. Pour into wide pitcher or measuring cup and stir in blue-berries to blend.
  • Spray griddle or heavy large skillet with oil spray and heat over medium heat until hot.
  • Slowly pour batter, a little at a time, to make individual pancakes. (Stir batter occasionally to prevent berries from settling to bottom.) Turn when tops are covered with tiny bubbles and underside is golden brown, about 3 minutes per side.
  • As each pancake is cooked, transfer to warm platter and keep warm until all are cooked.
  • Serve with fresh blueberries, blueberry syrup, or warm honey, if desired. Makes 20 pancakes or 5 servings.

Mining tax repeal & other notable tax changes

With the abolition of the mining tax from 1 October 2014, a number of other tax measures have come into force:

  • Abolition of the company loss carry-back concessions from 1 July 2013.
  • Reduction of the instant asset write-off for small business entities from $6,500 to $1,000 – that applies from 1 January 2014*.
  • Abolition of accelerated depreciation (of up to $5,000) for motor vehicles from 1 January 2014*.

Note(*): It is important to note that the changes to the depreciation rules for small business entities (e.g., the immediate write-off threshold reducing to $1,000) applies to assets first ‘used’ or ‘installed ready for use’ from 1 January 2014.

ATO launches voice authentication

The ATO says that they need to ask the caller to verify their identity in about 75% of the 8 million calls it receives each year.

Australians contacting the ATO by phone will now be given the choice to record a short “voiceprint” that can be used to verify their identity for future calls.

A voiceprint is a digital representation of the sound, rhythm, physical characteristics and patterns in a voice.

The ATO believes that this will provide a more secure, more convenient call experience and will speed up the authentication process, therefore reducing the time taxpayers need to spend on the phone to the ATO.

Project DO IT – the ATO’s amnesty for offshore tax avoiders

The ATO has advised that over 100 disclosures have already been received, with total additional income disclosed of over $12 million.

The ATO has also received almost 200 expressions of interest from taxpayers who intend to lodge a disclosure but are seeking more time to finalise the details.

The take-up of the disclosure offer has been slow and steady, but the ATO has anecdotal feedback that a lot of taxpayers are getting their affairs in order before filing, especially where their arrangements are complex.

The ATO is currently in the process of writing directly to taxpayers that may be in a position to avail themselves of the disclosure initiative to encourage disclosure.

How ‘bitcoins’ are treated for tax purposes

Editor: Bitcoin is a software-based online payment system, which the US Treasury has called a “decentralised virtual currency”. The media often refers to Bitcoin as a cryptocurrency or digital currency.

The ATO has issued a guidance paper, basically stating that bitcoin transactions are treated as barter transactions with similar taxation consequences.

As far as record-keeping is concerned, the ATO says that businesses should keep records of:

  • the date of the transaction;
  • the amount in Australian dollars;
  • what the transaction was for; and
  • who the other party was (even if it is just the bitcoin address).

Heard this one before?

ElvisSmiley-smallThese aren’t my boots

A teacher was helping one of her kindergarten students put on his cowboy boots. He asked for help and she could see why.

Even with her pulling and him pushing, the little boots still didn’t want to go on. By the time they got the second boot on, she had worked up a glow. She almost cried when the little boy said, “Teacher, they’re on the wrong feet.” Sure enough, they were.

It wasn’t any easier pulling the boots off than it was putting them on. She managed to keep her cool as together they worked to get the boots back on, this time on the correct feet.

He then announced, ‘These aren’t my boots’.

She bit her tongue rather than get right in his face and scream, ‘Why didn’t you say so’, like she wanted to.

Once again, she struggled to help him pull the ill-fitting boots off his little feet. No sooner had they gotten the boots off when he said, ‘They’re my brother’s boots. My Mom made me wear them.’

Now she didn’t know if she should laugh or cry. But, she mustered up what grace and courage she had left to wrestle the boots onto his feet again.

Helping him with his coat, she asked, ‘Now, where are your mittens’?

He said, ‘I stuffed ’em in the toes of my boots so’s I wouldn’t lose them.’

Why it’s sometimes worthwhile taking on the taxman

Editor: Where ‘special circumstances’ exist, taxpayers can get relief from the ‘non-commercial loss’ provisions in the income tax law.

Effectively, what this ‘relief’ means, is that a taxpayer can claim losses, (often) incurred in farming, in the year they are made, rather than having to wait until the venture turns a profit.

Case
For the 2010 to 2014 income years, the taxpayer applied to the Commissioner for relief from the ‘non-commercial loss’ provisions.

The ATO refused to accept that ‘special circumstances’ existed, even though:

  • the taxpayer’s olive grove: was in a region that was drought declared for much of the time and it was plagued by the Olive Lace bug from 2000 onwards; and
  • in late 2009, his wife, who had project management skills, an agribusiness education and extensive experience as an oil maker and blender, underwent major surgery and was only expected to be back working at 100% by 2014.

Editor: Strangely, the AAT Member was not too complimentary to the tax officers who decided that none of these circumstances were ‘special’. In fact, he found that they had taken a “regrettably inattentive approach”.

Importantly, he found that drought and the pest infestation were special circumstances.

As to the taxpayer’s wife, he found that as she was a highly qualified member of the team and an experienced oil maker and blender, her illness constituted a special circumstance On balance, the AAT Member decided the taxpayer should be granted the relief from the non-commercial loss provisions for the 2010 to 2013 income years, but not the 2014 income year, when the taxpayer’s wife was finally expected to be back full-time.

Lost super climbs to $14 billion

New statistics released by the ATO reveal that more than $14 billion in lost super is waiting to be claimed.

“There’s over $6 billion of super, sitting in accounts where funds have not been kept up-to-date with changes to personal details,” said Mr Shepherd.

“It’s easy for this to happen because when people get married or move house, the last thing on their mind is updating their name and address details with a super fund.”

An additional $8 billion in super is sitting in accounts that have not received a contribution in five years or more.

Visit www.ato.gov.au/superseeker for more advice on how to track down lost and unclaimed super.

GIC and SIC rates for the 2014 December quarter

The ATO has published the 2014 December quarter rates for the General Interest Charge (GIC) and the Shortfall Interest Charge (SIC) as follows:

GIC annual rate 9.63%
GIC daily rate 0.02638356%
SIC annual rate 5.63%
SIC daily rate 0.01542466%

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.