NEWS FLASH. Possible Changes to Superannuation Tax Rates

Transcription

1 NEWS FLASH Possible Changes to Superannuation Tax Rates This morning s Australian Financial Review has indicated that a key recommendation of the Henry Review is that the contribution tax on concessional super contributions be doubled from 15 per cent to 30 per cent. Whilst keeping in mind that the official Henry Review and the Government's response have not yet been released, it is possible these changes could eventuate. If included in the May 11th budget, these changes would be effective from when the Henry Review is released on Sunday 2nd May - three days time. What should I do? If you are planning to make a tax-deductible superannuation contribution this financial year, it may be prudent to ensure you make it prior to the release of the Henry Review, either today or tomorrow. Contact Aitken Business Partners for more information.

2 CLIENT INFORMATION BULLETIN CONTENTS AUTUMN 2010 Superannuation funds and borrowing Declare your offshore income Personal services income Protecting your business partners Plan ahead now ATO installing new computer system AITKEN BUSINESS PARTNERS ONLINE Liability limited by a scheme approved under Professional Standards Legislation Fixed rate Bookkeeping Competitive rates Qualified Chartered Accountant Working directly with Aitken Business Partners Contact: Tony Rados tony@balancemybooks.com.au TIME TO GIVE YOUR BUSINESS A HEALTH CHECK? Now is a good time to assess the health of your business. For a fixed fee of $990 (inclusive of GST) we will check over your business. To ensure you are totally comfortable with our service, if you tell us that we have not been able to assist in finding a way to improve your business we will refund our fee. Call us now, or visit our website at DISCLAIMER: The contents of this publication are general in nature and we accept no responsibility for persons acting on information contained herein. Client Information Bulletin Autumn 2010 Page 1

3 Superannuation funds and borrowing With an amendment to the Superannuation Industry (Supervision) Act 1993 (Cwlth), superannuation funds are now able to borrow money. The rules regarding the circumstances of borrowing are specific and are an instalment warrant. This means the fund has the right (but not an obligation) to acquire the legal ownership of the asset through the payment of instalments. The borrowing must be of limited recourse the loan can only be secured against the asset being purchased. Given this amendment SMSFs are able to borrow money to buy a property if the purchase is structured correctly. There are no restrictions on who the lender may be which means that you may loan the superannuation fund the money directly. Gearing in superannuation funds is a complex area and you should contact us if you would like to discuss your options. Declare your offshore income On 13 November, two men from Sydney were sentenced to 18 months jail for charges arising from the Operation Wickenby tax evasion investigation. The men pleaded guilty to eight charges for their part in a Vanuatu-based moneylaundering scheme. In handing down her sentence, the judge said that but for the plea and past and future assistance, the sentence would have been imprisonment for three years. The scheme involved: Round-robins False invoices Sham loans International bank accounts Entities operating in New Zealand and Vanuatu. The Australian Taxation Office (ATO) has an offshore voluntary disclosure initiative that is available until 30 June It offers reduced penalties for taxpayers who have unreported income from offshore activities and want to come forward to set things right. In the example above, the unreported offshore income was found to be an intentionally fraudulent act, however in most cases the unreported offshore income may have arisen due to a change in country of residence, or the taxpayer being unsure of how to deal with offshore funds or bank accounts. The tax office initiative provides an important opportunity for taxpayers who have unreported offshore income. We strongly recommend clients who may be affected by this contact us to ensure the correct processes are followed. BUSINESS STATIONERY Design, customise and print your own business cards, letterhead and other stationery online with easy to use templates and quality design content. Visit our website to find out more, or go to: Client Information Bulletin Autumn 2010 Page 2

4 Personal services income A recent case involving Personal Services Income (Taneja and Commissioner of Taxation [2009]) highlights the importance of ensuring that you comply with the personal services income legislation. In this case the focus was on the results test. If, in a given income year, 75 per cent or more of your personal services income meets all three of the following conditions, you pass the results test for that year. Under the terms of your contract or agreement: Is the income paid to achieve a specified result or outcome? Do you have to provide any necessary tools or equipment to do the work?, and Are you liable for rectifying defects in the work? In this case, the taxpayer was paid an hourly rate for consulting services and provided their own plant and equipment. They argued that the results test was passed because the entity was liable for rectifying defects in the work. The Administrative Appeals tribunal held that, based on the facts, there was nothing to suggest that the taxpayer was being paid to produce a result and therefore the case failed the results test. Further matters were raised regarding the protection provided by Public Rulings as issued by the Australian Taxation Office and the ability to rely on those to argue your case. Fundamental to obtaining protection from Public Rulings is the concept of reasonable care. If you have failed to reach the right conclusion it is important you have taken reasonable care in arriving at your conclusion. The ATO can impose a 25 per cent Administrative Penalty on the basis that the taxpayer or tax agent failed to take reasonable care. In this case, the taxpayer was not required to pay the 25 per cent penalty because he had consulted a tax agent for advice and had been given incorrect advice. The Tribunal found that a failure to understand fully the effect of the law was not a failure to take reasonable care. If you are concerned about whether you may be affected by the Personal Services Income Legislation, please contact us. OFFICE SPACE FOR LEASE Bright modern office suite for lease Back to base security alarm Use of separate meeting room Mini kitchen 32sq metres $1,750 per month (plus GST) Contact Wayne Aitken Client Information Bulletin Autumn 2010 Page 3

5 Protecting your business partners For many small to medium business owners, the implications of a recently deceased, critically injured or disabled business partner are obvious: Grief stricken clients and staff Loss of profitability / revenue Increased workload Cost of replacing partner Disjointed services But many business owners overlook the complexities that arise in maintaining control of the business and funding the settlement with the co-owners family or estate in a fair and efficient manner. In most business structures, the shareholding of the deceased is immediately transferred to the family, with no plan or strategy for the remaining business owners to buy out the family. Effectively, your business partners spouse is now your business partner! How well equipped is the family of your business partner in making intelligent business decisions that may affect all stakeholders during a time of grief and distress? Without an adequate buy / sell agreement and shareholder protection insurance in place, the deceased business partner s family has a real say in the decisions a business makes regardless of their skill, knowledge or technical competence. Shareholder Protection insurance provides immediate funds for the buyout of a deceased / disabled / critically ill person s share of their business, so that they can maintain control of the business and the future of all stakeholders. Insurance also allows the family / estate of the exiting co-owner to realise a fair and equitable value for their share of the business with minimum difficulty and angst. This is typically done through a buy / sell arrangement, whereby the trigger event (death or serious illness) releases the insurance funds to the departing shareholder (or their family) and the business ownership is transferred to the surviving shareholder(s). Shareholder Protection insurance can take several months to deliver due to the complexities of business valuations, and the legal and tax implications. It is a highly technical area and requires the culmination of specialist solicitor, insurance adviser and accountant input to structure the arrangement to provide optimal tax-effective results reflective of the true business valuation. David Brown, Senior Insurance Adviser of Stanford Brown has over 22 years experience in researching and establishing effective Shareholder Protection insurance arrangements. Each strategy needs to be carefully tailored to the specific business and the needs of its owners and families. Contact our office to discuss protecting your business from the death, disablement or critical illness of your business partner. Buy / Sell agreements can be established from $1,500 plus gst. Client Information Bulletin Autumn 2010 Page 4

6 Plan Ahead Now 2010 is the start of a new decade and is an appropriate time to pause and consider what you need to do financially for personal and business reasons. Some things to consider include: When did you last update your will? Do you need to put in place a testamentary trust if you have dependants who may be in rocky relationships? Do you have a valid power of attorney and medical power of attorney? When did you last review your retirement goals how much super do you need in retirement? How will you accumulate the super to achieve a satisfactory lifestyle when retired? Do you have adequate insurance cover on your home, contents and income? Would you benefit from setting a budget annually? What is your preferred financial situation ten years from now: o Own your home? o $1m in super? o Both? Where is your business heading what will it look like in five to ten years? Who will acquire it from you? Does the business have sufficient internal funding and working capital or will you need to borrow to achieve its potential? How best do you do this? We can work with you to ensure your goals are met over the next ten years. BALANCED FINANCIAL PLANNING STANFORD BROWN Balanced Financial Planning Stanford Brown, a member of Genesys Wealth Advisers, is able to offer strategic financial advice together with a wide range of allied financial products. Contact Hamish Harvey on (02) ATO installing new computer system Over the Australia Day long weekend the ATO converted to a new tax processing system. This has resulted in delays in processing activity statements and income tax returns. The ATO aims to clear the backlog by the end of April. However the result may be that your PAYG instalment rate may be based on the prior year s income tax return. If this is the case and you feel you would be paying too much or too little, contact us and we can assist in varying your instalment amount. If you are waiting for your refund please be patient as we have no control over when it will be processed. Would you like to be taken off our mailing list? This bulletin has been ed to you as we believe you will find it of interest. If you would like to be removed from the mailing list please visit our Website: Client Information Bulletin Autumn 2010 Page 5