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July 2019

2019: Tax Time Checklists – Individuals; Company; Trust; Partnership; and Super Funds

Printing and completing these checklists makes it more efficient for your tax agent to complete your tax returns.  Doing so also helps maximise any refunds you receive or payments you have to make.

             

 

Please click on the following links to access the checklists most appropriate to your needs.

Individuals

Company Trust Partnership

Superannuation Funds

 

 

 

Small business clients need to be ready for STP by 30 September

The original deadline of 1-7-2019 has been extended.  Read more about what every small business needs to do by then.

 

 

Reporting through Single Touch Payroll (STP) for small employers started on 1 July. Small businesses have until 30 September 2019 to take action. There are a range of resources available on the ATO website to help, click on the link below.

STP is mandatory for all small businesses.

 

SINGLE TOUCH PAYROLL (STP) and what do do before 30 September 2019.

 

 

The Australian Taxation Office

 

 

Big four firm outlines new financial year checklist for SMSFs

With the new financial year starting, one of the big four accounting firms has highlighted the key areas on which SMSF professionals should focus their attention for SMSF clients.

           

 

With end of financial year planning now out of the way, Deloitte Private partner Liz Westover outlined some of the areas that might need to be reviewed with SMSF clients for the 2019–20 financial year.

Minutes for withdrawals above the pension minimum

Speaking at a recent Chartered Accountants Australia and New Zealand event, Ms Westover said where clients are planning to withdraw more than the pension, there may be certain minutes that need to be made.

“If you’re above the minimum and you want to treat some of them as lump sums from accumulation and so on, then get your documents in place because the ATO has a view that they must be prospective, they can’t be retrospective,” Ms Westover said.

Update clients on the new rates and thresholds

SMSF professionals should also ensure their clients are up to date with the rates and thresholds for the 2019–20 financial year.

“The ATO released this months ago, but there are plenty of organisations that just have a two-page list of rates and thresholds that you might want to distribute to your clients,” she said.

Sort out data feeds

Ms Westover said using proper SMSF administration software can create a lot of efficiency for SMSF firms, but practitioners need to ensure that the data feeds are actually in place.

“Now is a good opportunity to get clients to sign authorisations to get those data feeds in place,” she said.

Contributions splitting

Contributions splitting is a good strategy for evening up the balances between spouses, she said.

If an SMSF client made contributions last financial year, then this financial year they can make an election to split up to 85 per cent of those concessional contributions to their partner.

“So, if I’m looking to bring my partner’s balance up, then that’s a great way to do it. It’s a bit of a slow burn, but if you’re talking to younger clients where they can benefit from that over time, contribution splitting can be a good way to build up that second person’s balance,” she explained.

Determining lodgement dates for 2019–20

If it’s a new fund, then the client’s lodgement date will be in February, or if there are funds that were late last financial year, then they will have an October deadline, Ms Westover explained.

“Most clients will generally be in that May–June bucket, but as you’re planning your work, if you just get a good sense of when funds are actually going to be due for lodgement, that can help you work through your workflows and make sure that nobody is late,” she said.

“The ATO has a very strong focus on non-lodgements at the moment.”

Individual versus corporate trustee

While the ATO’s statistics show that 81 per cent of funds are now being set up with a corporate trustee, she said, there are still a lot of funds around with corporate trustees.

“I won’t set a client up [in an SMSF] without a corporate trustee. Nevertheless, we are still in a situation where 59 per cent have corporate trustees and 41 per cent have individual trustees,” she said.

While the process of changing a fund with individual trustees to a corporate trustee is a lengthy process, she said, the new financial year may be a good opportunity to revisit this with clients that still have individual trustees and encourage them to switch to a corporate trustee.

“Everyone has a fresh mind in the new financial year, so that might be a great exercise to actually do,” she said.

Addressing potential residency issues

If SMSF professionals have clients that are heading off overseas on secondments, they will need to consider how this might impact the fund and whether it will jeopardise the fund’s residency status, Ms Westover warned.

“I had a client recently who joined his mum’s fund because he wanted to help her out in terms of the investment side, which was fine, but then he decided he was going to move overseas and semi-permanently, so we had some real issues around the fund in terms of residency and what we did,” she said.

“We talked him through what all the implications were, what he could actually do, and in the end we made the decision that we were going to get him back out of the fund, and in actual fact he was in a better position to help his mother with some of the investments out of the fund than he was being in the fund because he didn’t have control over then.”

One of the other options would have been to turn the fund into a small APRA fund, she said.

“He didn’t want to do that one, but it’s important to have those discussions with your clients. Are you moving overseas and what impact is it going to have on your fund?” she said.

Estate planning

Ms Westover said estate planning is probably the single biggest issue for SMSF clients, especially following the implementation of the super reforms on 1 July 2017.

Previously, it didn’t matter how much clients had in their income streams, she said, as they could just have a reversionary pension, and in their mind, it was sorted.

“Now we potentially have to pull a lot of money out of super as a result of the transfer balance cap provisions, so you need to be thinking about how to deal with the accumulation accounts. I might have a reversionary pension in place on the income stream account, but what about the accumulation account, do I need a binding death benefit nomination?” she said.

“I still see a lot of clients who do not understand that superannuation does not automatically form part of their estate and that their will won’t have any jurisdiction over their superannuation benefits. I’m actually quite astounded by the amount of times that I still see that.”

 

 

Miranda Brownlee
28 June 2019
smsfadviser.com

 

Alert – Online Share Accommodation

Home-owners should consider the wider taxation implications of renting the family home before taking a short-term benefit.

       

 

The online platform (e.g. AirBnb) that facilitates the rental of your residence also provides much of that information to the Australian Taxation Office (ATO).  Thereafter, it is a simple matter from them to ensure all taxpayers disclose this rental income in their income tax return.

It is unlikely that many costs of the property during that period will be deductible.

However, a much more significant concern is the loss of full main residence exemption from Capital Gains Tax when the family home is sold.  An apportionment for the “business use” of the property will mean some of the “tax-free” gain has become taxable.

How accurate are your records (compared to the ATO who have the on-line platform records)?  How complex has it become?

Most taxpayers will forget the details but be surprised by an amended assessment without enough information to dispute ATO assessment.

 

 

AcctWeb

ATO flashes warning over $7.2bn car expenses claims

Over $7.2 billion in work-related car expenses claimed last year have placed the popular deduction firmly in the headlights of the ATO this tax time.

         

 

According to ATO assistant commissioner Karen Foat, over 3.6 million people made a work-related car expense claim in 2017–18, totalling more than $7.2 billion.

The deduction will be a key focus area for the Tax Office this year, with one in five claims exactly at the maximum 5,000km limit for the cent per kilometre method.

“While some claims of exactly 5,000km are legitimate, we’ve found many people are unable to show how they’ve arrived at this amount, and as a result, they’ve had their claim reduced or disallowed in full,” Ms Foat said.

“We are still concerned that some taxpayers aren’t getting the message that overclaiming will be detected, and if it is deliberate, penalties will apply.

“While some people do make legitimate mistakes, we are concerned that many people are deliberately making dodgy claims in order to get a bigger refund. We see taxpayers claiming for things like private trips, trips they didn’t make and car expenses their employer paid for or reimbursed them for.”

Ms Foat said the ATO’s sophisticated analytics will compare taxpayer claims with others earning similar amounts in similar jobs.

In one unsupported claim last year, a taxpayer claiming $4,800 using the logbook method had triggered an ATO red flag, with a request for the logbook resulting in the taxpayer presenting a car service logbook instead of a logbook kept for calculating their work-use car percentage. The taxpayer was found to have not undertaken any work-related car travel during the year.

Another claim was flagged after the ATO identified an office worker claiming $3,300 for 5,000 kilometres of work-related travel using the cents per kilometre method. The taxpayer advised that his employer did not require him to use his car for work and that his claim was based on trips he made from home to work. 

According to Ms Foat, where the Tax Office identifies questionable claims, they will contact taxpayers and ask them to show how they have calculated their claim. In some cases, where further scrutiny is warranted, the ATO may even contact employers to confirm whether a taxpayer was required to use their own car for work-related travel.

“Simply driving between work and home is not enough to warrant a deduction. You must have a work-related need to travel while performing your job, like traveling from site to site or be required to transport bulky tools,” Ms Foat said.

Apart from work-related deductions, the ATO has also indicated its focus on the overclaiming of rental deductions and the non-declaration of rental income, after commissioner Chris Jordan said that a random audit sample of returns with rental deductions found that nine out of 10 contained an error.

 

Jotham Lian 
25 June 2019 
accountantsdaily.com.au

 

Vital statistics for our great nation.

         

 

One great source of data about Australia. Become better acquainted with the country we love.

An up-to-date snapshot of Australia's vital statistics.  

Please click on the following link to see all this interesting information. The areas covered are:

  • Overview
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Access all this data here.

3 out of 4 tax dob-ins are about business

The Tax Office has confirmed that the majority of “tip-offs” it receives about possible tax avoidance are related to business, amid concerns competitors may play dirty by “dobbing in” innocent businesses.

           

 

The ATO recently revealed it is on track to receive more than 70,000 tip-offs about undeclared income and dodgy tax practices this financial year — a major increase on the 51,000 received last year.

“We’re seeing an upwards trend in the volume of referrals about people suspected of participating in the black economy, which suggests that honest businesses have had enough of competitors cheating the system and getting an unfair advantage,” said ATO assistant commissioner Peter Holt at the time.

At least one My Business reader expressed concerns that some of these tip-offs may have nefarious intentions.

“My concern is what happens if someone wants to cause harm to a business or person out of spite?” the anonymous commenter said.

“Dobbing is very un-Australian and I believe that guidelines should be given so that people know what is a tax dodge and what may be a legitimate occurrence of payment either way.

“Many small business[es] receive cash or pay cash to non-tax-claiming employees such as casual jobs of a couple of hours to teenagers for simple jobs.”

Almost three-quarters relate to business: ATO

The ATO was approached for comment on these concerns about the authenticity of tip-offs it receives.

While it did not directly respond to questions about the proportion of tip-offs that are found to be unsubstantiated, the ATO confirmed via a spokesperson that not all reports lodged result in action being taken.

“We take all tip-offs seriously. All information is assessed and referred to experienced staff who consider the information provided with other indicators to determine the veracity of risk and if any further action is required. We do not take action on all reports,” the spokesperson told My Business.

The spokesperson did, however, confirm that the majority of tip-offs it receives are business related.

“The new Tax Integrity Centre system will enable better reporting capability. However, at a high level, approximately 70 per cent of tip-offs were where someone identified a business,” the spokesperson said.

That would equate to around 49,000 of the projected 70,000 tip-offs the ATO will receive for the 2018–19 financial year.

My Business was advised that the ATO does not keep track of an individual’s motivation for making a tip-off.

New tip-off website set to launch

Asked about what guidelines are provided to taxpayers who may want to lodge their concerns about a third party, the ATO said that it is preparing to launch a dedicated reporting guide.

“From 1 July, our website will be updated (ato.gov.au/tipoff) to include information to support providing a tip-off, including how to make a good tip-off and what information to provide,” the spokesperson said.

“Our hotline staff have [also] received additional training.”

The spokesperson urged anyone making an honest tip-off to be as detailed as possible.

“Even if you only know part details, this information is still very useful,” they told My Business.

“To help us to identify who you are reporting, proving information like their name, an ABN and any social media details are helpful.

“If you know, it is also helpful for us to hear about:

  • what they are doing and where it is happening
  • how long it has been happening
  • information about others involved
  • any advertising they are doing
  • copies of receipts or other materials you have that support your report
  • details of any supporting information you are aware of, what it is and who holds it

 

 

Adam Zuchetti 
27 June 2019 
accountantsdaily.com.au

 

Tax on compensation received for inappropriate advice

Again, the answer to a tax question is “it all depends”.

       

 

On the heels of the banking and financial services Royal Commission, the Australian Taxation Office has published information about how tax applies for people who receive compensation from a financial institution that provided inappropriate advice and/or did not provide advice it should have. This can include compensation for the loss of an investment, or a refund of fees or interest.

Capital gains tax comes into play, and the compensation amount may count as part of your assessable income if it’s a refund of adviser fees that you’ve already claimed as a tax deduction.

Contact us if you’ve received compensation from your bank or adviser and need to know more.

 

 

AcctWeb

‘Extra care’ crucial in avoiding ATO spotlight this tax time

Tax agents have been urged to apply “an extra bit of thought and extra care” into handling clients’ claims this tax time as ATO scrutiny mounts.

         
 
Speaking to Accountants Daily, H&R Block director of tax communication Mark Chapman said that a combination of factors — the publication of the $8.7 billion individual tax gap and a major increase in ATO funding — has created a perfect storm for the Tax Office to come down hard on errant claims this year.
 
“The ATO has done their research on it and they’ve got this $8.7 billion tax gap figure in their minds, so they’ve got a bit of science behind their suspicions regarding work-related expenses,” Mr Chapman said.
 
“They’re not just looking at clients, they are profiling tax agents, so if the claims you are putting through are outside the benchmarks for other tax agents, that can increase scrutiny on the agent themselves.
 
“They risk-profile every tax agent these days and if you fall well outside these benchmark,s then you can expect the Tax Office to turn up on your doorstep and going through your files.”
 
Mr Chapman, a former senior director at the Tax Office, believes agents can steer clear of any potential scrutiny this tax time by have a firm grasp of the tax law and applying some common sense to claims.
 
“The ATO sometimes tries to put across this message that they almost expect tax agents to audit their clients before they lodge their returns, and I don’t buy into that at all, but just using your common sense and that feeling about whether something stacks up, and if it doesn’t, ask some questions and take some notes to justify why the claim is being made,” he said.
 
“If you just put in that extra bit of thought and extra care, that will pay dividends for the client because they won’t be audited and pay dividends for the practice because you won’t get that ATO spotlight on you for making incorrect excessive claims.”
 
Mr Chapman also believes it might be prudent to turn away clients who are aggressive with their claims.
 
“Sometimes clients come into the office and are very forceful about what they want to claim, very forceful about what they are entitled to, and if you don’t put the claim through they will go somewhere else,” Mr Chapman said.
 
“If a client takes that attitude then, unfortunately, you might have to prepare to tell them to go and find someone else because you don’t think these claims stack up.
 
“A lot of it comes down to understanding the basics of tax law, and secondly, it comes down to the common sense understanding of what claims stack up and what don’t.”
 
 
Jotham Lian 
27 June 2019 
accountantsdaily.com.au