Spring Tax Newsletter- November 2017

Tax Time 2017 is well under way and so is the beautiful summer weather. Days are getting longer, the sun is shining, flowers are blooming and we're back to wearing shorts again. Whoo Hoo!

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Now, I'm betting that the burning question for many of you is "when do I get my refund?". The good news is the answer to that question, and many more, are waiting for you below.  

Yet again, there have been many changes to laws and legislation which may impact your personal or your businesses' obligations and requirements for tax. We've put together some of these important changes in this newsletter to help keep you informed.

So take a seat, let your inner tax nerd surface, and read on.

In This Issue:

If you have any queries or need to book an appointment, as always, don't hesitate to give us a shout!

When Do I Get My Refund?

The ATO started full processing of 2016-17 tax returns on 7 of July 2017. They began to pay out any refunds shortly after that. The ATO aims to finalise the majority of electronically-lodged current year returns within 12 business days of receipt. 

However, tax returns lodged on paper could take up to 50 business days from receipt to be finalised. The ATO encourages you to lodge electronically if at all possible.

Go to this timeline to view the key dates for Tax Time 2017.

When do I get my refund?

When do I get my refund?

Claiming Work-Related Expenses?

The ATO is paying attention to people who are over-claiming work-related expenses

To get your deductions right, you need to satisfy the following rules: 

  • You must have spent the money and were not reimbursed;
  • It must be directly related to earning your income, and not of a private nature;
  • You must have a record to prove it

To do! Talk to us about any claims you would like to make in your tax return. We can help you ensure you get them right.

myDeductions - a Record Keeping Tool

If you are a sole trader and have simple tax affairs, the ATO's myDeductions tool can help you if you are looking for a quick and easy way to manage your records.

Available through the ATO app, the tool allows taxpayers to use their smart devices to capture and record business income, expenses and vehicle trips and in doing so minimise the need for paper receipts.

Taxpayers can also use the tool to record a range of personal and employee work related expenses.

To learn more, visit the ATO website.

We also recommend Xero as it is by far the best product available on the market. If you are interested in using Xero, come in and talk to us about setting up an account and training. 

Tip! While the online tools for lodging tax returns are improving for individuals, we are more experienced in preparing and lodging tax returns. For specialist advice and to ensure you claim the right deductions for you, please book an appointment with us. Getting your tax return wrong could be costly for you.

Housing Tax Deductions: Disallowing Travel Deductions and Limiting Depreciation Deductions

The Government has released exposure draft legislation and explanatory material for the housing affordability and tax integrity measures the Government announced in the 2017-18 Budget.

The Government introduced these measures as they have concerns around the abuse of deductions in relation to rental properties that do not represent a legitimate commercial need. Travel deductions for individual investors with residential investment properties, including travel costs associated with inspecting and maintaining properties, will no longer be deductible. This change will not prevent investors from claiming a deduction for the expense of engaging third parties such as real estate agents to provide property management services for investment properties.

It appears that significant abuse of the tax system has been witnessed in relation to property investors and advisers claiming excess deductions. This change will improve the integrity of the tax system by limiting plant and equipment depreciation deductions to outlays actually incurred by individual investors in residential real estate properties.

 To do! If you own a rental property, have a chat with us about whether these changes affect you in any way.

ATO Warning on Holiday Rental Properties

The ATO has issued a media release reminding taxpayers that it is paying close attention to rental properties located in popular holiday destinations around Australia.

Claiming deductions for your holiday home? 

Make sure it is genuinely available for rent by answering these four questions: 

  • How do you advertise your rental property?
  • What location and condition is your rental property in?
  • Do you have reasonable conditions for renting the property and charge market rate?
  • Do you accept interested tenants, unless you have a good reason not to? 

Changes to Capital Gains Withholding Rules for Foreign and Australian Residents

The ATO has issued a reminder that changes to the rules for foreign resident capital gains withholding (FRCGW) have come into effect for all property contracts entered into on or after 1 July 2017:

  • For real property disposals where the contract price is $750,000 and above (previously $2 million);
  • The FRCGW withholding tax rate is now 12.5% (previously 10%).

The changes mean that Australian residents selling real estate with a market value of $750,000 or more will need to apply for a clearance certificate from the ATO to ensure amounts are not withheld from the sale proceeds.

Where a valid clearance certificate is not provided by settlement, the purchaser is required to withhold 12.5% of the purchase price and pay this to the ATO.

The previous threshold and rate will apply for any contracts that were entered into before 1 July 2017, even if they are not due to settle until after 1 July 2017.

Main Residence Exemption

From the 9 May 2017, the Government will remove the entitlement to the CGT main residence exemption for foreign residents that have dwellings that qualify as their main residence. Therefore, any such capital gain or loss arising upon disposal of a foreign resident's main residence will need to be recognised.

Principal Asset Test

From 9 May 2017, the Government will modify the foreign resident CGT regime to clarify that, for the purpose of determining whether an entity's underlying value is principally derived from taxable Australian real property, the principal asset test will apply on an associate inclusive basis.

Housing-Related Superannuation Measures

The Government recently released draft legislation which will establish a First Home Super Saver Scheme, and allow a special “downsizing" contribution into superannuation.

The draft legislation for the First Home Super Saver Scheme would allow individuals to save for their first home inside superannuation. Under the scheme, first home savers who make voluntary contributions into the superannuation system would be able to withdraw those contributions, and an amount of associated earnings, for the purposes of purchasing their first homes. Concessional tax treatment would apply to amounts withdrawn under the scheme.

The draft legislation for the downsizing measure would allow individuals aged 65 years or over to make non-concessional contributions of up to $300,000 from the proceeds of selling their main residences to their superannuation accounts. Downsizer contributions will be able to be made regardless of the other contribution caps and restrictions that might apply to making voluntary contributions. This measure would apply to proceeds from contracts for the sale of a main residence entered into (exchanged) on or after 1 July 2018.

Superannuation - Key Rates and Thresholds

The ATO has released the key superannuation rates and thresholds that apply to contributions and benefits, employment termination payments (ETP), super guarantee and co-contributions. 

For the 2017-18 income year, the: 

  • Concessional contribution cap is $25,000
  • Non-concessional contribution cap is $100,000 (conditions apply)
  • CGT cap amount is $1,445,000
  • Div 293 tax threshold amount is $250,000
  • Low rate cap amount is $200,000
  • ETP cap for life benefit termination payments is $200,000
  • ETP cap for death benefit termination payments is $200,00. 

The full list of rates and thresholds can be found on the ATO website.

Do the Super Changes Affect You?

Most of the changes to the superannuation system commenced on 1 July 2017.  

The ATO has released a breakdown of the new super changes. The changes are categorised by the situation they apply to. Check the ATO website to see if you are directly affected.

Superannuation Changes to be Aware of

i)                     Change to Personal Super Contributions Deductions

In 2016-17, an individual (mainly those who are self-employed) can claim a deduction for personal super contributions where they meet certain conditions. One of these conditions is that less than 10% of their income is from salary and wages. This is known as the 10% maximum earnings condition. 

From 1 July 2017, the 10% work test for claiming a deduction for personal super contributions will be removed. This means most people under 75 years old will be able to claim a tax deduction for personal super contributions (including those aged 65 to 74 who meet the work test).

ii)                   Changes to Concessional Contributions – Constitutionally Protected and Unfunded Defined Benefit Funds

From 1 July 2017, there are changes to the definition of concessional contributions for constitutionally protected funds (CPFs) and unfunded defined benefit funds. These contributions will count towards your concessional contributions cap. 

The ATO has released information on the following topics, which can be accessed on the ATO website

  • What are CPFs and unfunded defined benefit funds?
  • What are the changes?
  • New rules for accumulation interests
  • New rules for defined benefit interests
  • Excess concessional contributions.

iii)                 Removal of Election to Treat Super Income Streams as Lump Sums

From 1 July 2017, the Government will remove the ability to treat super income stream benefits as super lump sums for tax purposes. 

This change means that, if you are receiving a super income stream, and normally would have made this election, you will no longer have access to the super lump sum low rate cap for payments from your income stream. Therefore, the amount of tax you have to pay on your super income stream may change. 

iv)                 New Transfer Balance Cap – Child Death Benefit Recipients

From 1 July 2017, the Government has introduced a new transfer balance cap for retirement phase accounts. Different rules apply for child recipients of death benefit income streams. 

Child recipients of a death benefit income stream from a deceased parent may have a modified transfer balance cap, rather than the general transfer balance cap ($1.6 million in 2017-18). 

The normal transfer balance rules apply, but the modified transfer balance cap depends on the deceased parent's super interests.

v)                   New Transfer Balance Cap – Death Benefit Income Streams

From 1 July 2017, there is a $1.6 million cap on the total amount that can be transferred and held in the tax-free retirement phase. Special rules apply to death benefit income streams. 

If you start to receive a death benefit income stream, a credit will arise in your transfer balance account. The amount of the credit and when it counts towards your transfer balance cap will depend on whether the death benefit income stream is reversionary or non-reversionary: 

  • Reversionary – the income stream reverts to you automatically upon the member's death
  • Non-reversionary – the trustee has the power to choose between paying you a lump sum or an income stream (or a combination of these). 

vi)                 Transfer Balance Account – Credits and Debits

From 1 July 2017, the Government introduced a new transfer balance cap for retirement phase accounts. Your transfer balance account tracks the amounts you transfer into or out of retirement phase and allows you to see whether you have exceeded your transfer balance cap.

Note! There have been a lot of changes to the superannuation rules recently. It is worth booking an appointment with us to discuss how these changes might affect you.

Tax Incentives for Early Stage Investors

From 1 July 2016, investors who purchase new shares in a qualifying early stage innovation company (ESIC) may be eligible for tax incentives. 

The tax incentives provide eligible investors who purchase new shares in an ESIC with a:

  • Non-refundable carry forward tax offset equal to 20% of the amount paid for their qualifying investments. This is capped at a maximum tax offset amount of $200,000 for the investor and their affiliates combined in each income year
  • Modified capital gains tax (CGT) treatment, under which capital gains on qualifying shares that are continuously held for at least 12 months and less than 10 years may be disregarded. Capital losses on shares held less than ten years must be disregarded.

More information on qualifying for the tax incentive, the sophisticated investor test and calculating the early stage investor tax offset can be found on the ATO website.

Stop! Scammer Time!

The ATO is reminding Australians to stop and think before giving their personal details or hard-earned money to scammers this tax time. 

Assistant Commissioner Kath Anderson said 48,084 scams were reported to the ATO between July and October last year. 

For tips on how to avoid tax time traps, visit the ATO website

Claiming the HECS-HELP Benefit

If you have graduated from studies in early childhood education, math, science, education or nursing, you may be eligible to apply for the HECS-HELP benefit. 

This benefit is an incentive for these graduates to take up related occupations or work in specified locations to reduce their compulsory HELP repayments. 

The HECS-HELP benefit is coming to an end and the 2017 income year is the last year your clients can claim the benefit.

Notice of an Update to ATO Data Matching Program

On 5 June 2017, the ATO released a notice of an update to a data matching program – Ride-sourcing 2015-16 to 2018-19 financial years in Gazette – C2017G00611. 

This data matching program has been amended from the original version published in December 2016 to include ride-sourcing facilitators as additional data providers and to extend the financial years included in the program. 

The ATO will acquire data to identify individuals that may be engaged in providing ride-sourcing services during the 2015-16 to 2018-19 financial years. 

Changes to Medicare Levy and Medicare Levy Surcharge

The Treasury Laws Amendment (Medicare Levy and Medicare Levy Surcharge) Act 2017 amends the Medicare Levy Act 1986 and the A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999 to increase:

  • The Medicare levy low-income thresholds for individuals and families (along with the dependent child/student component of the family threshold) in line with movements in the consumer price index (CPI);
  • The Medicare levy low-income threshold for individuals and families eligible for the seniors and pensioners tax offset (along with the dependent child/student component of the family threshold), in line with movements in the CPI; and
  • The Medicare levy surcharge low-income threshold in line with movements in the CPI. 

In addition:

  • The singles threshold will increase from $21,335 to $21,655.
  • The family threshold will increase from $36,001 to $36,541 plus $3,356 for each dependent child or student.
  • The single seniors and pensioners threshold will increase from $33,738 to $34,244.
  • The family threshold for seniors and pensioners will increase from $46,966 to $47,670 plus $3,356 for each dependent child or student.

GST on Low Value Imported Goods – Summary of Reforms

The Government has passed the Treasury Laws Amendment (GST Low Value goods) Act 2017 which will extend GST to low value imports of physical goods imported by consumers from 1 July 2018. 

Businesses that meet the registration threshold of A$75,000 will need to take action now to review their business systems to ensure that they are able to comply. 

The existing processes to collect GST on imports above $1,000 at the border are unchanged. 

In summary, the reforms: 

  • Make supplies of goods valued at A$1,000 or less at the time of supply connected with Australia if the goods are purchased by consumers and are brought into Australia with the assistance of the supplier; 
  • Treat the operator of an electronic distribution platform (EDP) as the supplier of low value goods if the goods are purchased through the platform by consumers and brought into Australia with the assistance of either the supplier or the operator; 
  • Treat re-deliverers as the suppliers of low value goods if the goods are delivered outside of Australia as part of the supply, and the re-deliverer assists with their delivery into Australia as part of a shopping or mailbox service that it provides under an arrangement with the consumer; 
  • Allow non-resident suppliers of low value goods that are connected with Australia to elect to access the simplified registration and reporting system; and 
  • Prevent double taxation. 

More information on the new GST on low value imported goods can be found on the ATO website.

ATO Announcements

Certainty for Stakeholders Who Rely on ATO Systems

On 12 July 2017, the ATO issued a media release stating that they remain committed to ensuring the ongoing stability, availability and resilience of their IT systems for Tax Time 2017 and into the future. The issues they have encountered with ATO systems over the past few weeks highlight the sheer size, scale, and complexity of the ATO's IT environment. The ATO stated that they will continue to examine the triggers and cause of these issues and this analysis is informing the ongoing remediation work they are undertaking. 

Affected by Recent Company Payroll Issues?

If you have used the services of payroll company Plutus Payroll Australia Pty Ltd and associated entities, the ATO has applied a range of support measures to help you meet your tax and super obligations. 

The ATO has developed some scenarios that they are aware of for Plutus payroll and associated companies. Whether your situation falls within a particular scenario will depend on your circumstances.  For more information, go to the ATO website.

What's New for Small Businesses

i)              Tax Concessions

Tax concession rules for small businesses have changed. The changes are effective from 1 July 2016, and will apply from your 2017 tax return. 

Find out about:

  • Expanded access to small business concessions
  • Increased small business income tax offset
  • Company tax rate cut for small businesses
  • Simpler depreciation rules – instant asset write-off

a)            Expanded Access to Small Business Concessions

More businesses are now eligible for most small business tax concessions. From 1 July 2016, a range of small business tax concessions became available to all businesses with turnover less than $10 million (the turnover threshold). Previously the turnover threshold was $2 million.

The $10 million turnover threshold applies to most concessions, except for:

  • The small business income tax offset, which has a $5 million turnover threshold from 1 July 2016
  • Capital gains tax (CGT) concessions, which continue to have a $2 million turnover threshold.

The turnover threshold for fringe benefits tax (FBT) concessions increased to $10 million from 1 April 2017.

b)         Increased Small Business Income Tax Offset

You can claim the small business income tax offset if you are a small business sole trader, or have a share of net small business income from a partnership or trust.

From the 2016–17 income year, the small business income tax offset:

  • Increased to 8%, with a limit of $1,000 each year
  • Applies to small businesses with turnover less than $5 million.

The tax offset increases to 10% in 2024–25, to 13% in 2025–26 and to 16% from the 2026–27 income year. The amount of your offset is based on amounts shown in your tax return.

c)         Company Tax Rate Cut for Small Businesses

For the 2016–17 income year, the company tax rate for small businesses decreased to 27.5%. Companies with turnover less than $10 million are eligible for this rate.

The maximum franking credit that can be allocated to a frankable distribution has also been reduced to 27.5% for these companies – in line with the company tax rate. The reduced company tax rate of 27.5% will progressively apply to companies with turnover less than $50 million by the 2018–19 income year. From 2024–25, the rate will reduce each year until it is 25% by 2026–27.

If you lodged your 2016–17 company tax return early:

  • If your turnover is less than $2 million, the ATO will amend your return for you and apply the lower tax rate.
  • If your turnover is from $2 million to less than $10 million, you will need to review your tax return and lodge an amendment if required.

A Bill was tabled on 11 May 2017 to gradually extend the reduced company tax rate to all companies.

Tax rate cuts – “not meant to apply to passive investment companies”

On 4 July 2017, the Minister for Revenue and Financial Services, Ms Kelly O'Dwyer MP, issued a statement on the tax rate cuts for small companies.

Minister O’Dwyer said, “Reports today that the ATO has broadened the interpretation of company tax cuts are premature … however, the policy decision made by the Government to cut the tax rate for small companies was not meant to apply to passive investment companies.”

Minister O’Dwyer said the ATO has issued a draft ruling and will in due course provide other guidance.

d)         Instant Asset Write-Off Extension

Australia's 3.2 million small businesses can continue to purchase equipment up to $20,000 and write it off immediately thanks to legislation passed by the Senate on 15 June 2017, advised Small Business Minister Michael McCormack recently. The period in which small business entities can access the instant asset write-off has been extended by 12 months to 30 June 2018. It was originally intended to end on 30 June 2017.

The Small Business Minister said recent tax cuts for small business – which delivered a 27.5% tax rate – also redefined ‘small business', meaning more Australian businesses are now eligible for the instant asset write-off. 

More businesses are now eligible to buy equipment (new or second hand) up to $20,000 and write it off immediately after this legislation passed the Senate. Multiple claims can be made under the program. 

‘Small business’ has also been redefined for tax purposes as having a turnover less than $10 million, up from $2 million. 

For more information on support for small business, please visit the Small business website.

To do! If you are confused about how the recent changes for small businesses apply to you or your business, come in and have a chat with us. 

Taking Care of Business

The ATO is encouraging small businesses to get a head start on the new financial year by taking care of business now. To find out how to stay informed, get on top of records, utilise the ATO's tools and products (eg Simpler BAS), look after employees and know where to get help, see the ATO’s media release.

ATO Protecting Honest Business

The ATO acknowledges that most business owners are honest, but that there are some businesses that operate in the cash and hidden economy, gaining an unfair advantage over those who declare their income and do the right thing. 

The ATO has been running information sessions on this. More information about the ATO’s work focusing on ‘cash-only’ businesses, including visiting these businesses and what the ATO will be doing where these businesses are not compliant can be found on the ATO's website.

GST

i)          Simpler BAS

From 1 July 2017, small businesses now have less GST information to report on their business activity statement (BAS). This will be the default GST reporting method for small businesses with a GST turnover of less than $10 million. 

The ATO automatically transitioned eligible small business' GST reporting methods to Simpler BAS from 1 July 2017.

Treasurer's press release on GST low value goods

The Treasurer, the Hon Scott Morrison MP, released a statement following the passage of the Treasury Laws Amendment (GST Low Value Goods) Act 2017 by the Parliament on 21 June 2017. 

The Treasurer said, “Turnbull Government laws will level the playing field for Australian businesses by applying the GST to goods costing $1,000 or less supplied from offshore to Australian consumers from 1 July 2018." 

Using a vendor collection model, the law will require overseas suppliers and online marketplaces such as Amazon and eBay with an Australian GST turnover of $75,000 or more to account for GST on sales of low value goods to consumers in Australia. 

iI)           Buy Services or Digital Products from Overseas?

From 1 July 2017, GST will apply to imported services and digital products. 

Australian GST-registered business can avoid GST on these purchases from a non-resident supplier if they provide their ABN to the non-resident supplier and state that they are registered for GST. 

Reminder from the ATO re Applying GST to imported services and digital products

The ATO has issued a reminder that if overseas suppliers sell imported services or digital products to Australian consumers and they meet the GST registration turnover threshold, they need to register for GST. They will meet the registration turnover threshold if their taxable sales to Australian consumers in a 12-month period are A$75,000 or more. Once registered, they will need to report and pay GST on sales to the ATO.

iII)           GST - Simplified Accounting Methods Determination for Food Retailers

The Goods and Services Tax: Simplified Accounting Methods Determination for Food Retailers - Business Norms, Stock Purchases and Snapshot Methods determination will repeal and replace Simplified GST Accounting Methods Legislative Instrument (No 1) 2007 - F2007L02577, registered on 14 August 2007.

This draft determination is substantially the same as the previous determination that it replaces. If you were eligible to use a particular simplified accounting method (SAM) specified in the previous determination, you will continue to be eligible to use that SAM under this determination.

IV)            GST Input Tax Credits Disallowed – Tax Invoices Not Enough

Re GH1 Pty Ltd (in liq) and FCT [2017] AATA 1063 (5 July 2017) a property development company was not entitled to input tax credits in relation to bulk earthwork services supplied to it by another land development company. The evidence showed that purported tax invoices did not evidence any actual supplies made to the taxpayer, evidence from various sources, including third parties, showed that all relevant development works were completed prior to the dates of the purported invoices, and the taxpayer had already claimed the input tax credits in its BASs for previous tax periods.

The Administrative Appeals Tribunal noted that the taxpayer bore a two-fold onus: to prove, on the balance of probabilities, that the assessment was excessive and what the correct assessment ought to be. In this case, the taxpayer had failed to discharge that burden.

The Tribunal observed that the mere existence of a “tax invoice" is not, by itself, sufficient to establish that a “taxable supply" (under s 9-5 of the GST Act) and corresponding “creditable acquisition" (under s 11-5 of the GST Act), had, in fact, occurred.

V)           GST – Removing the Double Taxation of Digital Currency

On 9 May 2017, the Government announced that from 1 July 2017 it will align the GST treatment of digital currency (such as Bitcoin) with money. 

Digital currency is currently treated as intangible property for GST purposes. Consequently, consumers who use digital currencies as payment can effectively bear GST twice: once on the purchase of the digital currency and again on its use in exchange for other goods and services subject to GST. 

This measure will ensure purchases of digital currency are no longer subject to the GST. 

No changes to the income tax treatment of digital currency are proposed.  

Note! There are a number of changes to GST which may have an impact on your business. You should sit down with us to discuss if any of these changes affect you or your business.

Changes for Employers of Working Holiday Makers

On 1 January 2017, the tax rate for working holiday makers on 417 or 462 visas changed. If you employ working holiday makers on 417 or 462 visas, you will need to register with the ATO. 

Employers who do not register with the ATO will have to withhold tax at the foreign resident tax rate of 32.5% from the first dollar earned. Penalties may apply for failing to register. 

Superannuation Matters for Businesses

SuperStream Roadmap

The SuperStream roadmap provides a picture of the changes for the next 18 months. The information on this web page details the changes impacting the superannuation industry up until the end of 2018. The ATO will update the information on this page every quarter. If your business has transitioned to SuperStream, it is worth keeping an eye on this web page for the latest information. You can always talk to your tax agent or adviser about this too.

Streamlined Reporting with Single Touch Payroll

In previous newsletters, we have covered Single Touch Payroll in more details.  A quick recap- employers with 20 or more employees will need to report through Single Touch Payroll from 1 July 2018. The ATO will help and support you to transition during the first year of reporting.

More information can be found on the ATO website.

Changes to Tax Withholding Amounts

i)              Withholding on Salary and Wages

The way tax is calculated on salary and wages has changed.

From 1 July 2017, the:

  • Temporary budget repair levy has been removed
  • Medicare levy low-income threshold increased

ii)            TFN Withholding for Closely Held Trusts

Beneficiaries need to quote their tax file number (TFN) to the trustee to avoid having amounts withheld from their payments or unpaid entitlements.

If a beneficiary doesn't quote their TFN before a payment or entitlement occurs, the trustee must withhold from the payment or entitlement, pay the withheld amount to the ATO, and lodge an annual report with details of all withheld amounts.

iii)           Withholding in Business Transactions

Any business or organisation carrying on an enterprise should quote their Australian business number (ABN) when supplying goods or services to another enterprise. If the supplier does not quote their ABN, the general rule is that the payer must withhold 47% (from 1 July 2017) from their payment and send the withheld amount to the ATO.

iv)           Withholding from Unused Leave Payments on Termination of Employment

Under the pay as you go (PAYG) withholding system, when an employee leaves, you may have to withhold from unused leave payments. Information on how to work out the amount to withhold from payments of unused annual and unused long service leave when an employee leaves can be found on the ATO website.

v)            Withholding from Dividends Paid to Foreign Residents

If you pay dividends to a foreign resident, the unfranked component of each of those payments is subject to a final withholding tax. Information on when and how much to withhold from dividends you pay to foreign residents can be found on the ATO website.

Tip! Businesses need ensure their withholding obligations are correct. If you are unsure if your business is meeting its withholding requirements or are unsure how any of these changes may affect your business meeting its withholding obligations, you should make an appointment to come in and see us.

The ATO's Compliance Approach to Employers

The ATO has provided details of its approach to compliance by employers with their obligations.

The ATO says that its compliance approach supports employers who engage with the ATO and want to get things right. The ATO takes firmer action against those unwilling to meet their obligations. The approach is based on the relevant facts and circumstances of each case.

For more information, see the ATO website

Changes to PAYG Instalment Conditions

From 1 July 2017, changes to administrative rules about who needs to pay PAYG instalments may affect your clients. 

The ATO will automatically remove companies, superannuation funds, and self-managed superannuation funds from the PAYG instalment system if their notional tax is less than $500. This will apply even if their instalment rate is greater than zero percent, and includes those registered for GST. 

Taxable Payments Annual Report was Due

If you are in the building and construction industry and you paid contractors during 2016-17, your Taxable Payments Annual Report was due by 28 August 2017.

 

 

 

DISCLAIMER: The purpose of this newsletter is to provide information of general interest to our clients. The content of this newsletter does not constitute specific advice; this is generalised information, not specific to your personal needs and requirements.  Readers are encouraged to consult us for advice on specific matters.

Acknowledgement: The material contained in this document has been adapted, with permission from The Tax Institute, from the following publications:

The Tax Institute. 2017. ‘Taxwise Business News, September 2017’, Tax Wise Business News e-newsletter, September.

The Tax Institute. 2017. ‘Taxwise Individual News, September 2017’, Tax Wise Business News e-newsletter, September.

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Della Nicholson

Della Nicholson Accounting is a boutique accounting firm in Wynnum Manly, Brisbane. Specialising in accounting & taxation services, bookkeeping, web based software and e-commerce. We concentrate on providing superior personalised service to clients and producing high quality services in a timely manner. We would genuinely love your business. Call us today +617 3396 8868. Member of the Institute of Chartered Accountants in Australia, Registered Tax Agent, Registered ASIC Agent, Taxation Institute of Australia Chartered Tax Advisor.

Newsletter- June 2017

Finding Lost Money & End of Financial Year Approaching

Winter is here! It was a bit questionable as to whether or not a proper winter was coming, to Queensland at least, considering the very comfortable temperatures we've had up until the 1st of June. But now in true Queenslander style, since temps have dropped below the 20s we are all rugging up with pained expressions on our faces - a lot like John Snow (although he did die and get brought back to life by the Red Woman so that's understandabley gotta leave you feeling a little off). Or perhaps he does know something after all... It may not be as exciting for some as the budget, but I confess I am chomping at the bit for Game of Thrones Season 7 to come around - July 16, mark it in your calender!!!

From giphy.com

From giphy.com

Now to the serious business of tax.  

There have been the usual updates to laws and legislation which may impact your personal or your businesses' obligations and requirements for tax. We have compiled a selection of these important changes to assist you to stay up to date. 

Time to get out Nanna's blanket, get cozy and let your inner tax nerd loose.

This Newsletter will cover:

If you have any queries or need to book an appointment, as always, don't hesitate to give us a shout! 

The End of the Financial Year is Coming!

The end of financial year is almost here, so it's time to start thinking about your 2017 Income Tax Return. Now is a good time to start reviewing certain assets and liabilities owned by your business and consider if there is anything you should do prior to 30 June 2017.

  • Is there any income you are expected to receive that you may not have to recognise until next financial year?
  • If you have an outstanding investment loan, try to prepay some of the interest prior to 30 June 2017 (you will need to speak to your lender to determine if you can).
  • Are there any bad debts to write-off out of your receivables?
  • Are there any recently announced measures in the May 2017-18 Federal Budget you should come in and speak to us about? (Further information about these may be found below.)
  • Review your depreciable assets (capital allowances) register and write-off or dispose of any assets no longer used – e.g. assets used in your business such as computer equipment, office furniture (desks and chairs) and kitchen appliances.
  • Are there purchases or disposals of assets you should make prior to the next financial year starting?
  • Are there any repairs and maintenance on assets you should carry out prior to 30 June 2017 so you can claim the deduction in your 2017 return?

It is also a good time to review things that you usually just think about at the time you put them in place but don’t otherwise turn your mind to – e.g., do you have the right mix of debt and equity funding for your business to carry you through the next financial year.

To do! We can help you with these decisions. We know your business and have experience with other businesses similar to yours, so we can offer you advice about how to best prepare your business for the start of the 2017-18 financial year.

ASIC Lost Money Search

ASIC has created the ASIC Lost Money Search which helps people to find unclaimed money. Unclaimed money is money which has been lost from investments, bank accounts, life insurance policies, and shares, and is lost when a person moves and forgets to update their details with a financial institution or company.

It is estimated that there is approximately $1.1 billion lost.

To use the search you only require your name or original transaction number. Find the search tool and more information on unclaimed money, including how to claim it, here: https://www.moneysmart.gov.au/tools-and-resources/find-unclaimed-money

From Gihpy.com

From Gihpy.com

Tax Integrity in the Black Economy

On 10 May 2017, the Chair of the Black Economy Taskforce, Mr Michael Andrew AO, welcomed the Government's release of the Black Economy Taskforce Interim Report and acceptance of early recommendations identified for action. 

The black economy refers to people who operate entirely outside the tax and regulatory system or who are known to the authorities but do not correctly report their tax obligations. 

The report recommends an initial policy package to tackle the black economy, including 35 early ideas for further public consultation. The report is the result of an important partnership between government agencies and the private sector and is the first step in building a 21st century black economy strategy to halt this growing threat. 

Reduction in The Company Tax Rate

As announced in the 2016-17 Federal Budget, the company tax rate will be progressively reduced to 25% over the next 10 years. However, the measure was amended by Parliament. The amended measure will apply as follows:

  • 2016-17 financial year: 27.5% for small businesses with an aggregated turnover of less than $10 million;
  • 2017-18 financial year: 27.5% for small businesses with an aggregated turnover of less than $25 million;
  • 2018-19 financial year: 27.5% for small businesses with an aggregated turnover of less than $50 million.  

From 1 July 2024 onwards, the corporate tax rate will progressively decrease every financial year, eventually falling to 25% in the 2026-27 financial year. If the amendments are approved by the House of Representatives, then the following rates will apply:

  • Commencing 1 July 2024: 27%
  • Commencing 1 July 2025: 26%
  • Commencing 1 July 2026: 25%. 

The company tax rate remains at 30% for all companies unless they qualify for the reduced rate up until 2023-24 when all companies qualify for the lower rate.

The changes to the company tax rate and turnover threshold are contained in the table below:

On 11 May 2017, the Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017 was introduced into the House of Representatives. This Bill proposes to progressively extend the lower 27.5% corporate tax rate to all corporate tax entities by the 2023-24 income year, as was originally intended in the 2016-17 Budget measure. The corporate tax rate will then be cut, for all corporate tax entities, to:

  • For the 2024-25 income year: 27%;
  • For the 2025-26 income year: 26%; and
  • For the 2026-27 income year and later income years: 25% (per the table above). 

The intention is the progressive extension of the lower 27.5% corporate tax rate to corporate tax entities with aggregated turnover of $50 million or more will commence from the 2019-20 income year.

At the time of writing, this Bill was before Parliament.

GST

1.       Uber loses GST battle with ATO: ordered to pay GST

Uber BV v Commissioner of Taxation [2017] FCA 110 

The Federal Court has held that services provided by an Uber driver providing uberX services constituted a supply of "taxi travel" within the meaning of s 144-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act). The Uber driver was therefore required to be registered for GST. 

At the heart of this proceeding is the question of whether persons who are Uber drivers are required to be registered for GST purposes. 

Enterprises with a turnover of less than A$75,000 do not need to register for GST, but there is a special rule or exemption, created by s 144-5 in Pt 4-5(1) of the GST Act, which has the effect that taxi and limousine operators are required to be registered, regardless of turnover. That provision requires a person who is carrying on an enterprise to be registered for GST purposes “if, in carrying on your enterprise, you supply taxi travel" (s 144-5(1)). 

The phrase “taxi travel" is defined in s 195-1 of the GST Act as meaning “travel that involves transporting passengers, by taxi or limousine, for fares". 

The court said that the core issue is whether, in carrying on the enterprise of providing uberX services to passengers (who are known as “uberX riders"), uberX drivers (who are known as “uberX partners") supply “taxi travel" as defined. If so, they must register for GST purposes. 

The parties to the proceedings ultimately agreed that the core issue is encapsulated in the more specific question of whether the applicant is entitled to a declaratory order that he did not supply taxi travel within the meaning of section 144-5(1) of the GST Act. 

The applicant submitted that the terms “taxi" and “limousine" should take on their ordinary meaning, supporting a “trade or non-legal technical meaning". However, the Commissioner submitted that the applicant's reliance on what it claims are 15 characteristics of a taxi as supporting a “trade or non-legal technical meaning" of “taxi" was misdirected because the States and Territories do not adopt consistent nomenclature and impose requirements and restrictions that differ from jurisdiction to jurisdiction. For example, there are certain taxis where taximeters are not mandated, such as Pt VII of the Transport (Country Taxi-car) Regulations 1982 (WA) and reg 5 of the Country Taxi-Cars (Fares and Charges) Regulations 1991 (WA). 

The Commissioner submitted that the applicant's reliance on a regulatory concept of “taxi" was also misguided because in applying s 144-5 there is no basis for concluding that the Parliament intended the Court to embark on an analysis of the operation of, and difficulties in, the “taxi industry" and the perceived need for “regulatory intervention" in that channel. 

The court rejected the applicant's contention that the meaning of the phrase “taxi travel" was influenced by the “regulatory concept" of taxi. As such, the court declared the uberX services supplied by the driver constituted supply “taxi travel" within the meaning of s 144-5(1) (as defined in s 195-1) of the GST Act. The court also considered that the word “taxi" is sufficiently broad in its ordinary meaning to encompass the uberX service supplied by the applicant.

Note! If you earn income as an Uber driver, you should speak with us about your GST obligations, if any, that could occur as a result of this case. 

2.       GST on low value imported goods

The impending application of GST to low value goods has been mentioned previous newsletters (see our April Newsletter).

It is intended that from 1 July 2017, the changes to the GST rules will:

  • Make supplies of goods valued at $1,000 or less at the time of supply connected with Australia if the goods are, broadly, purchased by consumers and are brought to Australia with the assistance of the supplier and therefore subject to GST; 
  • Treat the operator of an electronic distribution platform as the supplier of low value goods if the goods are purchased through the platform by consumers and brought to Australia with the assistance of either the supplier or the operator; 
  • Treat re-deliverers as the suppliers of low value goods if the goods are delivered outside Australia as part of the supply and the re-deliverer assists with their delivery into Australia as part of, broadly, a shopping or mailbox service that it provides under an arrangement with the consumer; 
  • Allow non-resident suppliers of low value goods that are connected with Australia only because of these amendments to elect to be a limited registration entity and as such access the simplified registration and reporting system; and
  • Prevent double taxation by making importations of goods non-taxable importations if the supply of the goods is a taxable supply only as a result of these amendments and notice is provided in the approved form.

If you are registered for GST and buy low value imported goods for your business from overseas, you will need to supply your ABN at the time of purchase so you won't be charged GST. 

If your business is not registered for GST, you will be treated as a consumer and unable to recover the GST charged by the overseas business. 

At the time of writing, the Bill containing these changes had not yet passed Parliament, though it is anticipated the Bill will pass shortly. A Senate Committee had also recommended the implementation date be deferred until 1 July 2018.

3.       GST on services and digital products: new rules to apply from 1 July 2017

The impending rules to impose GST on cross-border supplies of digital products and other services by Australian consumers has been mentioned in previous newsletters (see our April Newsletter).

Products affected include digital products such as streaming or downloading of movies, music, apps, games and e-books and services such as architectural or legal services. 

Non-resident businesses who supply these services and meet the A$75,000 annual turnover threshold will need to register for Australian GST.

To do! Come in and see us about the GST implications for you if goods and supplies you have been acquiring from an overseas business that you may have been using in your business become subject to GST.