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Tax Time Changes

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Tax Time Changes ImageThe ATO start full processing 2018-19 tax returns on 5 July 2019 and are expected to start paying refunds from 16 July 2019, with the majority of electronically-lodged current year tax returns completed within 12 business days of receipt. There a few changes to tax returns individuals should take note of going into this end of financial year.

Private health insurance statements:

From 1 July 2019, health insurers are no longer required to send private health insurance statements, it is now optional to send this information. Private health insurance information will be available in the pre-fill report, expected by mid-August. If it is not populated by then, taxpayers may need to request a statement from their health insurer.

Low and middle-income tax offset:

Taxpayers may be eligible for an income tax offset if they are an Australian resident for income tax purposes or their taxable income is in the appropriate income range. It is not compulsory to claim this offset, the ATO will work it out when their tax return is lodged.

In the event the changes proposed in the 2019-20 Budget become law after 1 July 2019, the ATO will automatically amend assessments. The offset can only reduce the amount of tax paid to zero and it does not reduce Medicare levy.

Income statement:

Employers reporting through Single Touch Payroll are not required to provide a payment summary to their employees as income statements will replace them. Employees can access their income statements through ATO online services at any time. Employees will receive a notification through myGov when their income statement is ‘Tax ready’, so they can complete their tax return. Employees will be able to contact the ATO for a copy of their income statement if they do not have access to myGov.

What and When you need to report in your SMSF

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self-managed super funds imageThe event-based reporting (EBR) framework for self-managed super funds (SMSFs) commenced on 1 July 2018. This system allows the ATO to administer the transfer balance cap. Reporting under the EBR framework commences when your first member begins a retirement phase income stream. The transfer balance account report (TBAR) is then used to report certain events and is separate from the SMSF annual return.

An SMSF must report events that affect a member’s transfer balance, these should include details of:

  • Pre-existing income streams being received on 30 June 2017 that;
    – continued to be paid to them on or after 1 July 2017.
    – were in retirement phase on or after 1 July 2017.
  • New retirement phase and death benefit income streams including value and type.
  • Limited recourse borrowing arrangement (LRBA) payments, including the value and date of each relevant payment, if entered into on or after 1 July 2017.
  • Compliance with a commutation authority issued by the ATO.
  • Personal injury contributions.
  • Commutations of retirement phase income streams that occur on or after 1 July 2017.

Events that an SMSF do not need to report include:

  • Pension payments made on or after 1 July 2017.
  • Investment earnings and losses that occurred on or after 1 July 2017.
  • When an income stream ceases because the interest has been exhausted.
  • The death of a member.

All SMSFs must report events that affect their members’ transfer balances. If no event occurs, there is nothing to report.

Timeframes for reporting are determined by the total superannuation balances of an SMSF’s members. In the events affecting members’ transfer balances, reports must be made within 28 days after the end of the quarter in which the event occurs. Unless a member has exceeded their cap and the fund needs to report an event sooner, the first due date for the lodgment of TBARs is 28 October.

Avoiding Unfair Business Practices

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Avoiding Unfair Business Practices ImageUnder Australian Consumer Law, there are a number of sales practices that are illegal for businesses to engage in when dealing with their customers. Unfair business practices encompass a wide range of activities, such as misleading or false statements and deceptive conduct.

Here are some examples of illegal activities that you should be aware of as a business owner in order to avoid harsh penalties.

False or misleading statements:

It is unlawful for a business to make false or misleading representations about their goods or services that they are supplying, offering to supply, or promoting. For example, businesses may not make false or misleading statements about the standard or quality of goods or services, testimonials from other customers about the goods or services, or their price. While it will depend on the circumstances of each particular case, the maximum fine for this offence is $220,000 for individuals and $1.1 million for a body corporate.

Accepting payment without intending to supply:

Payment cannot be accepted for goods and services if businesses do not intend to supply, they intend to supply materially different goods or services, or if they are aware that they will not be able to supply the goods or services in a timely manner. However, this is not intended to affect businesses who demonstrate a genuine attempt to meet supply agreements. For example, a business may avoid prosecution if the failure to supply was due to something beyond its control.

Unconscionable conduct:

Businesses are prohibited from acting in a manner that is against good conscience. For conduct to be classified as unconscionable, it is extremely harsh or aggressive where one party exploits another and must be more than just unfair or unreasonable. Examples of this conduct include coercing a person to sign a blank or one-sided contract, failing to disclose contractual terms, or taking advantage of low-income consumers by misleading them about prices. Whether certain conduct is deemed to be unconscionable will depend on the particular circumstances involved and may require legal action. There is a list of factors that courts may consider, including the relative bargaining strength of the parties, and the extent to which the parties acted in good faith.

The Federal budget for 2019-20 is now available!

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(Click here to View/Download the complete document)

The 2019-20 Federal Budget contains few surprises and only a modicum of major initiatives: one is tempted by the view that even the Government doesn’t have its heart in it.

The major – and widely expected – initiative is an extension of the Government’s personal income tax cuts from those announced in the 2018-19 Budget which match and raise the more generous benefits which Labor announced in response to the Government’s previous measures: at a cost of $5.7 billion over four years.

Treasurer Josh Frydenberg said in his Budget “Lockup” press conference the Government would not try and force this measure through Parliament before it is dissolved for the election but would take the package to the electorate.

This contrasts with the Government’s “Power Rebate” announced before the Budget and included in it, which the Government does plan to try and push through before the election.

Other major Budget measures are:

• An extension of the small business instant asset write-off, with an increase of $5000 in the amount to $30,000 and an increase to $50 million (from $10 million) in the size of business eligible for the concession (See Small Business)

• $4 billion over four years for increased infrastructure spending

• $1 billion in increased Medicare spending (See Health) • $530 million for the Disability Royal Commission

• A small concession removing the work test for superannuation contributions for people aged 65 and 66 (See Superannuation).

The Budget’s biggest saving is a $2 billion windfall to come from a tightening of welfare payments to recipients who are also working, using the controversial automated ‘Single Touch Payroll System’ which businesses are being forced to adopt. The Budget contains little information about how this will operate but says, “From 1 July 2020, income support recipients who are employed will report income that is received during the fortnight, rather than calculating and reporting their earnings. Each fortnight, income data received through an expansion of STP data-sharing arrangements will also be shared with the Department of Human Services, for recipients with employers utilising STP.”

(Click here to View/Download the complete document)

Instant asset write-off for small businesses to be extended

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instant asset write-off

As of 29 January 2019, the Instant Asset Write-Off Scheme will be extended to 30 June 2020 for assets purchased under $25,000.
The Instant Asset Write-Off affects small businesses with a turnover of up to $10 million a year. It allows business owners to immediately deduct assets costing up to $25,000 which can then be claimed for tax return in that income year. The Prime Minister’s announcement on 29 January stated that “businesses who go out and invest today, whether it’s a vehicle, whether it’s a piece of plant or equipment, all of it, up to $25,000, immediate write down.” However, there are certain assets that are excluded from the scheme so it is best to check with your accountant or financial advisor.
It is important to remember that the Instant Asset Write-Off Scheme reduces the tax your business has to pay, it is not a rebate. Your cash flow will still have to be sufficient enough to support the purchases.
With the ATO reporting that the average claimed amounts were at $11,000 in 2016-2017, there are concerns that the scheme is underutilised. Fewer than 350,000 small businesses have taken advantage of the scheme in the 2016-2017 year.
There is no guarantee that the Federal government will extend this scheme beyond 30 June 2020.

Didn’t Pay Your Employees’ Super on Time?

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Employees SuperHow to reduce the hassle of missing your employee’s super payment.

The Super Guarantee Charge (SGC)

The SGC may apply to employers who do not pay the minimum super guarantee (SG) to their employee’s designated superannuation fund by the required date. The non-tax-deductible charge includes the SG shortfall amounts with interest and a $20 administration fee for each employee. You will need to lodge your SGC statement within a couple of months of the respective quarter. While employers are able to apply for an extension to lodge and pay the SGC, the nominal interest will still accumulate until the extension is lodged. From this point, the general interest charge will apply until the SGC is paid off.

What you can do to reduce your SGC

The nominal interest and SGC shortfall can be offset or carried forward by late contributions against the SGC in certain conditions. This excludes the administration fees, certain types of interest and other penalties. The late contribution is also not tax-deductible, nor is it able to be used as a prepayment for current or future contributions. However, you are able to carry it forward if the payment is for the same employee and is for a quarter within 12 months after the payment date. It is advised to consult with our office to work with your unique situation.

The bigger picture

Struggling to pay your employees’ super is a sign of financial insecurity for your business. While an employee’s PAYG Withholding tax and super may not be due for a while, not having the funds for them at each payday is a debt that will only accrue. You may have to consider your business’ strategy and operations or consult us if you feel it is only the symptom of a bigger issue.

Rights and Responsibilities of Landlords

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rights responsibilities landlordsProperty investment has a lot of elements throughout that contribute to a smoothly run transaction between landlord and resident. As a homeowner, you have rights and responsibilities to maintain when dealing with your property and the occupants. The relationship between proprietor and occupant is one of giving and take, it is important to familiarise yourself with what is expected from you as well as your rights as the owner.

Your Rights

Firstly, you have the right to choose and know your tenant. As long as your choices do not conflict with the Equal Opportunity Act, you have the right to choose a renter you see fit to live in and upkeep your property. As the homeowner, you also have the right to landlord insurance to guard you against potential financial loss. This cover usually relates to the property specifically but there are plans available to cover the belongings of both the renters and yourself. As long as you provide a fair warning, you have the right to increase rent at the end of a fixed term lease where the resident wishes to continue the agreement. In the unfortunate case of a tenant not paying rent for over 14 days, you have the right to evict them from the property.

Your Responsibilities

Being a landlord comes with many responsibilities that you need to consider. The security of the property is up to you, you will need to make sure alarms and locks on both doors and windows are secure before a new resident moves in, it is also your job to upkeep these security measures. It is also your responsibility to maintain and repair elements of the property. Treating the property as if you were living there is important, your tenants deserve a well-kept environment and reliable assistance on repairs. Finally, the law restricts how much access you have to your property if occupied. You must contact renters before coming over to give notice, do not just drop in unannounced.

ATO Update: Tax Deduction Rules on Travel to Rental Properties

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Tax Deduction RulesThe ATO has enforced strict guidelines on tax deductions for rental property owner’s travel expenses.

As a rental property owner, you are not able to claim deductions for travel expenses relating to inspecting, maintaining or collecting rent. If you have already claimed a tax deduction for the cost of travel to and from your property in your 2018 return, you will need to request an amendment. The law change came into effect on 1 July 2017 and affects tax returns from 2017-18 onwards.

Exclusions

You may claim these travel expenses on your tax return if you are carrying on a rental property business or are an excluded entity.

An excluded entity is a:

Corporate tax entity
Superannuation plan that is not an SMSF
Public unit trust
Managed investment trust
A unit trust or a partnership, all of the members of which are entities of a type listed above

ATO Warns of Illegal Early Super Release

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Early Super ReleaseThe ATO has issued a warning to the public regarding illegal early release of super schemes, which are subject to severe penalties.

There are strict rules around when you can access your super so your current decisions do not jeopardise your quality of life in retirement. The ATO has reminded the public you may only access your super early if you have experienced severe financial hardship or you have reached the preservation age and have stopped working.

How these schemes work

The promoters of these schemes:

Encourage you to transfer or rollover your super from your existing super fund to an SMSF to access your super before you are legally entitled to
Target people under financial pressure or those who do not understand super laws
Claim you can access your super and put the money towards anything you want which is not true
Charge high fees and commissions, presenting the risk of losing some or all of your super to them
May request your identification documents which can result in identity theft
Penalties:

Penalties apply to promoters and individuals who illegally access their super early. If you illegally obtain your super early, it is included in your assessable income even if you return the super to the fund later. If you are an SMSF trustee, you may be fined up to $420,000 and liable for jail terms of up to five years. Civil and criminal penalties apply to promoters.

Is a House or Apartment a Better Investment?

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House or Apartment InvestmentProperty is a valuable addition to any investment portfolio. Deciding whether a house or apartment is a worthier investment depends on many factors. Keep in mind that timing is your best friend for buying any property due to the housing market’s volatility.

Consider the information below so you can make the right move for you in the property market.

Apartments

Apartments are not inferior investments to houses as they present many advantages that houses do not.

Apartments are usually more reasonable than houses as they lack land and costs like insurance, maintenance and upkeep are provided for by body corporate in a strata scheme
Apartments in inner-city areas that are accessible to tenants and provide higher rental yields, lending security to your investment.
You can build up a diversified property portfolio with greater efficiency with apartments as opposed to the more costly investment of houses

Houses

Houses also offer several advantages.

The value of land appreciates over time, making your investment worth it in the long run
Suburban houses are less costly but still have significant investment potential if the suburb is being developed or accessible by public transport
You may have complete autonomy and control of how your run your house as opposed to apartments which have to adhere to body corporate rules

 Contact us for more information.

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