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July 2017

ATO heavyweight responds to hacking fears

The ATO second commissioner made a statement yesterday clarifying the ATO’s digital forensic capability, saying all investigation is conducted within legislative approval, following media reports that raised concern over “hacking”.

         

 

Concern was raised yesterday when an ABC article alleged that an ATO staffer had published information online regarding the ATO’s fraud investigation tactics.

The ATO second Commissioner of Taxation and CIO, Ramez Katf, issued a response seeking to clarify the ATO’s digital forensic capability.

“The ATO does not monitor taxpayers’ mobile phones or remotely access their mobile devices,” Mr Katf said.

“Circumstances where the ATO uses technology such as the Universal Forensic Extraction software provided by Cellebrite, is to support criminal investigations.”

“For example, where assets such as laptops or mobile devices may contain information about activity related to suspected organised crime or alleged large scale promotion of aggressive tax schemes.”

Mr Katf said that assets would first need to be accessed following a court ordered warrant, where it is determined that material specifically relating to the court warrant is held on those assets.

“As this activity is conducted legally, and never involves remote access to a device, it is not correct to refer to it as ‘hacking’,” Mr Katf said.

“Any use of software that may bypass the security lock of a phone, is conducted with the relevant legislative approval (primarily section 3E of the Crimes Act) or following written consent from the owner of the device.”

Mr Katf confirmed that the ATO will continue to work with other enforcement agencies in supporting criminal investigations, including through use of Universal Forensic Extraction software.

 

LARA BULLOCK
13 July 2017
www.accountantsdaily.com.au

Crowdfunding legislation gets greenlight

Crowdfunding: Alternative funding option for small business.

       

 

The newly passed equity crowdfunding legislation will give small scaled businesses a new and unprecedented access to a new source of finance.

A small scaled business now has the legal capacity to raise funds from a large number of investors, without breaching the securities legislation and requiring far more extensive disclosure.

This opportunity only applies to unlisted Australian Public Companies, with gross assets of less than $25 million and annual revenues less than $25 million.

This first step is seen as a forerunner to legislation that will also allow similar funding for private companies.  In other words, this is very early days.

 

AcctWeb

Government to shut down salary sacrifice loophole

The government has announced it will remove a loophole from legislation that allows unscrupulous employers to use their employee’s salary sacrifice contributions to pay their Superannuation Guarantee obligations.

           

 

The government has announced it will remove a loophole from legislation that allows unscrupulous employers to use their employee’s salary sacrifice contributions to pay their Superannuation Guarantee obligations.
In a statement today, the Minister for Revenue and Financial Services Kelly O’Dwyer said the Turnbull government will introduce a bill into Parliament this year that will ensure that contributions made under a salary sacrificing arrangement do not reduce their employer’s superannuation guarantee obligation.

This follows a recommendation from the Superannuation Guarantee Non‑compliance report to remove the loophole.

The report made a number of practical recommendations to improve employer’s compliance with their superannuation guarantee obligations, and was compiled by senior representatives from the ATO, the Treasury, the Department of Employment, ASIC and APRA.

“If Australians are to continue to have confidence in the integrity of the superannuation system, we must ensure employers are paying workers their full entitlements, whether they are wages or superannuation,” Ms O’Dwyer said.

The government also welcomed another outcome of the working group, which has been strengthening cross-agency collaboration to improve the superannuation system for Australians. 

“The ATO has increased its focus on superannuation guarantee compliance and information sharing across agencies has improved. Agencies are committed to a continued focus on protecting employee rights and entitlements and providing a level playing field for employers,” said Ms O’Dwyer.

The government is carefully considering the remaining recommendations made by the working group report to ensure that any measures progressed will improve compliance without unduly burdening employers.

 

STAFF REPORTER
14 July 2017
www.smsfadviser.com

Key Economic Indicators, 2017

This month's focus is on Australia's Labour Force and Demography.

Click here for full access to Australia's economic indicators – National Accounts, International Accounts, Consumption and Investment, Production, Prices, Labour Force and Demography, Incomes, and Housing Finance.

       

 

Labour Force and Demography

 

Employed persons – Trend Jun 2017
'000
12 160.1
0.2%
1.9%
Participation rate – Trend Jun 2017
%
64.9
0.1 pts
0.2 pts
Unemployment rate – Trend Jun 2017
%
5.6
0.0 pts
-0.1 pts
Employment to Population ratio – Trend Jun 2017
%
61.3
0.1 pts
0.2 pts
Job Vacancies – Trend May 2017
'000
189.2
1.7%
9.2%
Estimated resident population – (Preliminary) Dec Qtr 2016
'000
24,385.6
0.3%
1.6%
Short-term overseas visitor arrivals – Trend (a) May 2017
'000
734.9
0.8%
7.7%
For unemployment and participation rates, the changes are given as percentage points.

 

Source: ABS

 

 

 

Overtime meal expenses disallowed because no allowance received

 

A taxpayer has failed in claiming deductions for overtime meal expenses.

         

 

The Administrative Appeals Tribunal (AAT) denied his appeal because he was not paid an allowance under an industrial agreement.

The AAT noted that whether overtime meal expenses are deductible according to the tax law depends on whether the taxpayer receives a food or drink allowance under an industrial instrument. The AAT agreed with the Commissioner of Taxation that the taxpayer had not received an allowance of this kind and, in fact, had not received any allowance at all. Whilst his salary had been increased to compensate him for the higher costs, this was not enough to justify a deduction.

This decision could be applied to many other allowances – e.g. travel, tools and telephone.

It should be part of future wages and salary review for any employee to consider whether “reimbursement” is a better alternative to an allowance.  There will be greater obligations on the employer, but overall it can be a better outcome. 

 

AcctWeb

Taxpayer denied deduction for work expenses of $60,000

 

The Administrative Appeals Tribunal (AAT) has confirmed that a mechanical engineer with a PhD qualification was not entitled to deductions for various work-related expenses totally approximately $60,000. 

         

 

The expense claims in question (for vehicle, self-education and other work expenses), were denied because the taxpayer was unable to establish the required connection between the amounts and the derivation of his assessable income as a mechanical engineer. Furthermore, in relation to a range of miscellaneous expenses (such as mobile phone and internet charges, professional membership fees, conference fees and depreciation), the AAT found that most of the deductions were not substantiated with sufficient (or any) evidence. The AAT did not exercise its discretion to allow these deductions on the basis of the “nature and quality” of any other evidence regarding the taxpayer’s incurring the expenses.

This case clearly shows the importance of properly substantiating any claims you make for work-related expense deductions. Contact us to discuss what documentation you should keep to make tax time easier, and refer to our annual checklist.  None of this is new!

We help to justify the connection with your income, but you need to establish that the expense was paid.

 

AcctWeb

Government ‘undermines’ tax system in new moves on property expenses

Newly-released draft legislation, which firms up the 2017 budget move to limit investors’ ability to claim travel expenses and depreciation deductions, will “upset the fundamental basis behind our tax system” according to an accounting body.

         

 

The Turnbull government on Friday released exposure draft legislation and explanatory material for the housing affordability and tax integrity measures it announced in the 2017-18 budget.

You can read the full draft here

The legislation means that property investors will no longer be able to claim travel expenses to inspect residential investment properties, and there are limitations to the depreciation deduction claims investors will be able to make on properties purchased after 9 May 2017.

Speaking to Accountants Daily, Institute of Public Accountants' senior tax adviser, Tony Greco, said that the changes go against the basis of Australia’s tax system.

“The premise behind our tax system is the ability to claim an expense against the revenues, so what they're doing is they're altering that fundamental right,” Mr Greco said.

“They’re basically saying we're not going to allow you a deduction against these kinds of expenditures, so it does upset the fundamental basis behind our tax system by excluding certain expenses.”

Mr Greco said that while these changes are essentially negative ones, many investors will be pleased that the government didn’t do more to tackle negative gearing.

“They didn't attack negative gearing in the federal budget, they didn’t make any changes other than these two measures, so some people were quite relieved on budget night that it just amounted to these two changes only,” he said.

“It does have a financial impact on the returns going forward, so it will have a negative impact, but if you thought they were going to dismantle negative gearing then you'd probably say it's not as bad as the expectation was.”

Mr Greco said that accountants must communicate these changes with their clients as soon as possible .

“Clients do claim travel for visiting and inspecting rental properties and some of those properties could be interstate, so accountants must communicate to their client that it's no longer deductible,” he said.

“Clients may not have realised, or may misunderstand, that with the travel one, irrespective of when you bought your property, it's just a total outright ban on deductibility, whereas the plant and equipment one depends on when you purchased the property.”

The government is accepting submissions to the draft legislation until 10 August 2017.

 

LARA BULLOCK
17 July 2017
www.accountantsdaily.com.au

Items that heat up your depreciation deductions

With the winter season upon us, a number of property investors may be thinking of doing nothing more than curling up under a rug in front of a wood fire with a good cup of coffee.

         

 

While this might sound tempting, it’s also tax season and the perfect time to obtain a comprehensive tax depreciation schedule that ensures you maximise the deductions you can claim from an investment property.

Many of the items which make your home a cosy place to spend the winter months can also be found within an investment property.

When an investor asks a specialist Quantity Surveyor to complete a depreciation schedule for their property, they will perform a detailed site inspection to make sure that no items are missed.

One of the reasons investors often miss out on deductions at tax time is because they don’t seek expert advice. Quantity Surveyors are recognised under Tax Ruling 97/25 as one of a few professionals with the knowledge necessary to estimate construction costs for depreciation purposes.

To demonstrate some of the items which heat up the deductions you can claim from an investment property, let’s take a look at an example of the depreciation claims available in the first financial year in the following graphic.

The depreciation deductions in the above example have been calculated using the diminishing value method.

Capital works deductions have been calculated at a rate of 2.5 per cent. The immediate write-off rule and low-value pooling have been applied for applicable items.

There are two types of claims available in any income producing property as demonstrated by the graphic above; capital works deductions and plant and equipment depreciation*.

Capital works deductions apply to structural and fixed items within a residential property; for example the kitchen cupboards, walls, doors, drawers and shelving. Structural items will depreciate at a rate of 2.5 per cent per year over forty years so long as construction commenced after the 15th of September 1987.

An investor could claim $586 in the first financial year for the kitchen cupboards and $140 for the serving bar in the above property. Tiles on the splashback would also result in $74 in capital works deductions in the first year for the owner.

Any of the easily removable plant and equipment assets found during a site inspection of a property may also entitle the owner to claim depreciation deductions. Examples of plant and equipment assets as demonstrated above include the refrigerator, the range hood, furniture, light fittings, floating timber floors, the gas heater and ducted gas floor heating.

Unlike capital works deductions, depreciation for plant and equipment are calculated based on an individual effective life and depreciation rate set for each asset by the Australian Taxation Office.

In the above example, an investor could claim $398 in first year deductions for the range hood, $767 for the refrigerator, $176 for the light fittings, $820 for the gas heater and $512 for ducted gas floor heating. The smoke alarm, which costs less than $300 will entitle the owner to an immediate write-off for this item, meaning they can deduct its full value in the first financial year and claim $232 in deductions.

In total, an investor is able to claim $800 in capital works deductions and $4,228 in plant and equipment depreciation, a grand total of $5,028 in depreciation deductions in the first year for this area of the property alone. Additional deductions will also be available for the walls, doors, ceiling and joinery and any other eligible capital works or plant and equipment items found in the rest of the property.

*Under proposed changes to legislation, investors who exchange contracts on a second hand residential property after 7:30pm on 9th May 2017 will no longer be able to claim depreciation on plant and equipment assets. Investors who purchase a new property will be able to continue to claim these items as they were previously. We are currently speaking with government to further understand the intricacies relating to the proposed changes. To learn more visit www.bmtqs.com.au/budget-2017.

 

Date: 20 Jul 2016
By: BMT team
www.bmtqs.com.au