Winter Edition CLIENT INFORMATION BULLETIN. Inside this issue:

Transcription

1 Winter Edition 2018 Inside this issue: 2018 Budget Overview Changes Affecting Business Taxpayers Superannuation Related Changes Changes Affecting Companies Single Touch Payroll 4 Superannuation Guarantee Amnesty Super Guarantee Payable on Holidays & Hours Super Housing Measures for SMSFs ATO Scrutinising Car Claims Employee Denied Deductions GST Withholding Measures now Law ATO Focus on Holiday Rentals Inactive ABNs will be Cancelled QBO Update 9 Client Portal Tips 9 Lodgement Obligations 10 Client News 10 Staff News 10 CLIENT INFORMATION BULLETIN Welcome to this bumper edition of the Kelly & Associates Newsletter! In this edition we provide an overview of the budget, followed by an outline of the changes affecting business taxpayers, superannuation and companies. In addition to these budget announcements we remind business clients about single touch payroll which will begin for substantial employers on 1 July. Further, the newsletter includes various superannuation related articles, ATO announcements and an update regarding QBO issues. We conclude the newsletter with some client and staff news. We are pleased to provide some additional resources that we hope are useful as we approach the new financial year. Our business clients will receive a single touch payroll checklist to help prepare for the new system. We have also included an individual client year-end checklist and, for our clients receiving this newsletter via , an electronic tax data organiser to assist with gathering and compiling tax information. Further, the client portal information sheet will help our new and existing users to navigate the portal. Finally, we wish you a happy end of financial year and we look forward to meeting with you in the new financial year! 2018 Budget Overview The Government handed down the 2018/19 Federal Budget on Tuesday 8th May Some of the important proposals include: The introduction of the 'Low and Middle Income Tax Offset', a temporary non-refundable tax offset of up to $530 p.a. to Australian resident low and middle income taxpayers for the 2019 to 2022 income years. This offset will apply in addition to the Low Income Tax Offset. Providing tax relief for individual taxpayers by progressively increasing some of the tax brackets (including an increase in the top threshold of the 32.5% personal income tax bracket from $87,000 to $90,000 from 1 July 2018), and eventually removing the 37% tax bracket entirely. The $20,000 immediate write-off for small business will be extended by a further 12 months to 30 June 2019 (i.e., for businesses with aggregated annual turnover less than $10 million). From 1 July 2019: - Increasing the maximum number of allowable members in an SMSF from four to six members; - Ensuring that unpaid present entitlements (or UPEs ) come within the scope of Division 7A; and - Denying deductions for expenses associated with holding vacant residential or commercial land.

2 Page 2 Budgetary Changes Affecting Business Taxpayers The various changes announced in the Federal Government Budget that will impact on our business taxpayers include: Extending the $20,000 immediate write-off for small business The Government will extend the $20,000 immediate write-off for small business by a further 12-months to 30 June 2019, for businesses with aggregated annual turnover less than $10 million. Small businesses will be able to immediately deduct purchases of eligible assets costing less than $20,000 first used or installed ready for use by 30 June Only a few assets are not eligible (such as horticultural plants and in-house software). Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool (the pool) and depreciated at 15% in the first income year and 30% each income year thereafter. The pool can also be immediately deducted if the balance is less than $20,000 over this period (including existing pools). Further to this, the current lock out laws for the simplified depreciation rules (preventing small businesses from re-entering the simplified depreciation regime for five years if they opt out) will continue to be suspended until 30 June Removing tax deductibility of payments where withholding obligations have been disregarded From 1 July 2019, businesses will no longer be able to claim a deduction for the following payments: Payments to their employees such as wages where they have not withheld any amount of PAYG from these payments (i.e., despite the fact the PAYG withholding requirements apply). Payments made by businesses to contractors where the contractor does not provide an ABN and the business does not withhold any amount of PAYG (despite the withholding requirements applying). Introduction of an economy-wide cash payment limit From 1 July 2019, the Government will introduce a limit of $10,000 for cash payments made to businesses for goods and services. Currently, large undocumented cash payments can be used to avoid tax or to launder money from criminal activity. This measure will require transactions over a threshold to be made through an electronic payment system or cheque. Transactions with financial institutions or consumer to consumer non-business transactions will not be affected.

3 Page 3 Superannuation Related Changes from the Budget Important changes to the area of superannuation announced in the 2018/19 Federal Budget include: Exemption from the work test for voluntary contributions From 1 July 2019, the Government will introduce an exemption from the work test for voluntary contributions to superannuation, for people aged with superannuation balances below $300,000, in the first year that they do not meet the work test requirements. Under current law, the work test restricts the ability to make voluntary superannuation contributions for those aged to individuals who self-report as working a minimum of 40 hours in any 30 day period in the financial year. The work test exemption will give recent retirees additional flexibility to get their financial affairs in order in the transition to retirement. Three-yearly audit cycle for some SMSFs From 1 July 2019, the Government will change the annual audit requirement to a three-yearly requirement for SMSFs with a history of good record-keeping and compliance. This measure will reduce red tape for SMSF trustees that have a history of three consecutive years of clear audit reports and that have lodged the fund s annual returns in a timely manner. Preventing inadvertent concessional cap breaches by certain employees From 1 July 2018, the Government will allow individuals whose income exceeds $263,157, and who have multiple employers, to nominate that their wages from certain employers are not subject to the superannuation guarantee (SG). The measure will allow eligible individuals to avoid unintentionally breaching the $25,000 annual concessional contributions cap as a result of multiple compulsory SG contributions. Employees who use this measure could negotiate to receive additional income, which is taxed at marginal tax rates. Capping passive fees, banning exit fees and reuniting small and inactive superannuation accounts From 1 July 2019, the Government will introduce a 3% annual cap on passive fees charged by superannuation funds on accounts with balances below $6,000 and will ban exit fees on all superannuation accounts. The Government will also strengthen the ATO-led consolidation regime by requiring the transfer of all inactive superannuation accounts where the balances are below $6,000 to the ATO. The ATO will expand its data matching processes to proactively reunite these inactive superannuation accounts with the member s active account, where possible. Changes to insurance in superannuation The Government will change the insurance arrangements for certain superannuation members. Insurance within superannuation will move from a default framework to an opt-in basis for: members with low balances of less than $6,000; members under the age of 25 years; and members whose accounts have not received a contribution in 13 months and are inactive. The changes will take effect on 1 July 2019 affected superannuants will have a period of 14 months to decide whether they will opt-in to their existing cover or allow it to switch off.

4 Page 4 Changes Affecting Companies Announced in the Budget The Government will further implement the following changes affecting companies: Reforms to combat illegal phoenixing The Government will reform the corporations and tax laws and provide the regulators with additional tools to assist them to deter and disrupt illegal phoenix activity. The package includes reforms to: extend the Director Penalty Regime to GST, luxury car tax and wine equalisation tax, making directors personally liable for the company s debts; expand the ATO s power to retain refunds where there are outstanding tax lodgements; introduce new phoenix offences to target those who conduct or facilitate illegal phoenixing; prevent directors improperly backdating resignations to avoid liability or prosecution; limit the ability of directors to resign when this would leave the company with no directors; and restrict the ability of related creditors to vote on the appointment, removal or replacement of an external administrator. Single Touch Payroll Update Single Touch Payroll (STP) is a new reporting framework requiring employers to provide payroll and superannuation information to the Australian Taxation Office (ATO) as and when employees are paid. The framework represents a significant change for business, both in the way that employers report and the level of detail being shared with the ATO and we remind businesses of the importance of checking their current HR practices and procedures. Once an employer starts reporting, employees will be able to access payroll and superannuation information via ATO online services. Employees should also be aware there may be changes to the way employers issue payment summaries. The start date for substantial employers with 20 or more employees is 1 July 2018 and employers with 19 or less employees will be included from 1 July All employers are required to count the number of employees on their payroll on 1 April 2018 to find out if they are a substantial employer (note that this can be done after 1 April, but they need to count the employees who were on their payroll on 1 April). They must count each employee (not the full time equivalent), including fulltime, part-time and casual employees, as well as those employees based overseas or absent or on leave (paid or unpaid). Employers that are part of a company group must include the total number of employees employed by all member companies of the wholly-owned group.

5 Page 5 Single Touch Payroll Update (cont d) However, employers don't have to include the following in the headcount: any employees who ceased work before 1 April; casual employees who did not work in March; independent contractors; staff provided by a third-party labour hire organisation; company directors or office holders; or religious practitioners. Note that, although directors, office holders and religious practitioners are not included in the headcount, if the employer starts reporting through STP, the payment information of these individuals will need to be reported (because the payments are subject to withholding and are currently reported in the Individual non-business payment summary). Employers don't need to send the ATO the headcount information, but they may want to keep a copy for their own records. Once an employer becomes a substantial employer, they will need to continue reporting through STP even if their employee numbers drop to 19 or less (unless they apply for and are granted an exemption). We have provided a checklist for our business clients to help prepare for Single Touch Payroll and ask that you contact us as soon as possible if you require further assistance. Superannuation Guarantee Amnesty Introduced The Government has introduced legislation to complement the superannuation guarantee ('SG') integrity package already before Parliament by introducing a one off, twelve month amnesty for historical underpayment of SG. The Bill provides incentives for employers to come forward and "do the right thing by their employees" by paying any unpaid superannuation in full, as well as the high rate of nominal interest (but without the penalties for late payment that are normally paid to the Government by such employers). Employers that do not take advantage of the amnesty will face higher penalties when they are subsequently caught in general, a minimum 50% on top of the SG Charge they owe. In addition, throughout the amnesty period the ATO will still continue its usual enforcement activity against employers for those historical obligations they don't own up to voluntarily. Please ensure that you are correctly complying with superannuation guarantee obligations, particularly in light of new Single Touch Payroll reporting requirements. The amnesty will run for twelve months from 24 May 2018.

6 Page 6 Super Guarantee Payable on Public Holidays and Additional Hours! The Federal Court has held that superannuation guarantee contributions were payable with respect to the additional hours and public holidays component of annualised salaries paid by BlueScope Steel, on the basis that these particular components formed part of ordinary time earnings ( OTE ). Under an enterprise agreement, primarily due to the specific working environment, the employees in question were required to be available (at short notice) 365 days per year and 24 hours per day, including a requirement to work additional hours and public holidays. As such, the employees were paid an annualised salary, which was made up of a base rate, as well as a component which absorbed all additional payments, such as penalty rates, allowances, public holiday loadings and pay-outs, and payment for additional hours worked outside the normal rostered hours. However, when paying superannuation, adjustments were made to the annualised salary, so that the additional hours and public holiday components were not included by BlueScope Steel as OTE for superannuation guarantee purposes. Decision The Federal Court did not agree with the employer s adjustments, instead finding that, under the circumstances, the additional hours and public holidays formed part of an employee s ordinary hours of work and, therefore, were considered OTE for superannuation guarantee purposes. This remained the case whether or not the employee actually worked the additional hours or the public holidays. That is, the ordinary conditions of the employee s work required them to be available outside their rostered shifts and on public holidays (on short notice) and, as this was factored into their annual salary, they were considered ordinary hours for these particular employees. What the Super Housing Measures mean for SMSFs The ATO has reminded members of SMSFs that they will be able to use their voluntary super contributions to assist with buying their first home, or to make a contribution into their super from the proceeds of the sale of their main residence (under changes passed by Parliament in December 2017). The First Home Super Saver Scheme The First Home Super Saver (FHSS) Scheme allows SMSF members to save faster for a first home by using the concessional tax treatment available within super. From 1 July 2018, SMSF members can apply to release certain voluntary concessional and non-concessional contributions made from 1 July 2017, along with associated earnings to help buy their first home. There are various conditions that need to be met in order to take advantage of this measure contact our office if you would like to know more.

7 ATO Scrutinising Car Claims this Tax Time Page 7 What the Super Housing Measures mean for SMSFs (cont d) The downsizing measure SMSF members who are 65 or over and exchange a contract for sale of their main residence on or after 1 July 2018 may be eligible to make a downsizer contribution of up to $300,000 into their super. This downsizer contribution won t count towards their contributions caps or total super balance test in the year it s made. However, it will count towards the transfer balance cap and be taken into account for determining eligibility for the age pension. SMSFs must ensure the member's contribution has satisfied all relevant conditions and completed the downsizer contribution form before accepting a downsizing contribution. The ATO has announced that it will be closely examining claims for workrelated car expenses this tax time as part of a broader focus on work related expenses. Assistant Commissioner Kath Anderson said: We are particularly concerned about taxpayers claiming for things they are not entitled to, like private trips, trips they didn t make, and car expenses that their employer paid for or reimbursed. This is no doubt because over 3.75 million people made a work-related car expense claim in 2016/17 (totalling around $8.8 billion), and, each year, around 870,000 people claim the maximum amount under the cents-perkilometre method. Ms Anderson said that the ATO s ability to identify claims that are unusual has improved due to enhancements in technology and data analytics: Our models are especially useful in identifying people claiming things like home to work travel or trips not required as part of your job... simply travelling from home to work is not enough to qualify, no matter how far you live from your workplace. Ms Anderson said there are three golden rules for taxpayers to remember to get it right. One you have to have spent the money yourself and can t have been reimbursed, two the claim must be directly related to earning your income, and three you need a record to prove it. False Logbook Case Study A traffic supervisor claimed over $11,000 for work related car expenses, and provided a logbook to substantiate his claim. However, upon investigation the ATO discovered that the logbook wasn t printed until the following year the taxpayer admitted the logbook was fraudulent and it was ruled invalid. Even though the logbook was invalid, the taxpayer was able to provide other evidence to show that he had travelled at least 5,000 kilometres for work-related purposes, so the ATO used the cents per kilometre method to calculate the taxpayer s deduction (but his claim was reduced from over $11,000 to under $4,000).

8 Page 8 Employee Denied Deductions for Work-Related Expenses An employee photographer has been denied deductions for travel expenses (when travelling with his family), and other purported work related expenses. The AAT held that the travel expenses were primarily incurred for the purposes of a family trip or holiday and were therefore non-deductible, as they were private and domestic in nature. Also, in relation to the taxpayer's reliance on bank statements in the absence of invoices and receipts, the AAT observed that evidence of the mere transfer of funds, be it by way of bank transfer or by any other means, is not sufficiently informative of the actual character of an expense", so the other disputed expenses could not be claimed as allowable deductions. GST Withholding Measures now Law Legislation has been passed to clamp down on GST evasion in the property development sector. From 1 July 2018, purchasers of new residential premises and new residential subdivisions will generally be required to withhold the GST on the purchase price at settlement and pay it directly to the ATO. Property developers will also need to give written notification to purchasers regarding whether or not they need to withhold. The new obligations are primarily aimed at ending the practice of some developers collecting GST on new properties before dissolving their business prior to remitting such tax to the ATO. Continued ATO Focus on Holiday Home Rentals The ATO has recently advised that they are setting their sights on the large number of mistakes, errors and false claims made by rental property owners who use their own property for personal holidays. While it confirms that the private use of holiday homes by friends and family is entirely legitimate, the ATO states that such use reduces a taxpayer s ability to earn income from the property, and therefore impacts on (i.e., reduces) the amount of claimable deductions. As a result, the ATO has reminded holiday home owners that: They can only claim deductions for a holiday home with respect to periods it is genuinely available for rent. They cannot place unreasonable conditions on prospective tenants/ renters, set rental rates above market value, or fail to advertise a holiday home in a manner that targets people who would be interested in it and still claim that the property was genuinely available for rent. Where a property is rented to friends or relatives at mates rates, they can only claim deductions for expenses up to the amount of the income received. Property owners whose claims are disproportionate to the income received can expect greater scrutiny from the ATO.

9 Page 9 Inactive ABNs will be Cancelled by the ATO The ATO has recently advised that, in an effort to maintain accurate data, the Australian Business Register (or ABR ) periodically checks its records for Australian Business Numbers ( ABNs ) and automatically cancels those that appear inactive. Ultimately, a taxpayer s ABN may be cancelled if they: have told the ATO they stopped their business activity; declared no business income in the last two years; or have not lodged a BAS or an income tax return in more than two years. To avoid cancellation, the ATO has reminded taxpayers that they need to bring their lodgments up to date, and have reminded sole traders that, regardless of their income, they need to lodge the individual tax return with the supplementary section, as well as the business and professional items schedule. QBO Update The end of the financial year is quickly approaching and it is a good time to remind our QBO users about:- Direct bank feeds that provide a faster and more reliable connection to your bank. Please make sure you update connections before migration deadlines to keep your bank accounts syncing in QBO. Supported banks include ANZ, CBA, NAB, St George, Bendigo Bank, Bank SA, Bank of Queensland, Bank of Melbourne and Macquarie. New Single Touch Payroll reporting that will be ready in QBO for the 1 July start date for substantial employers. The program will require employers to provide authorisation to report information to the ATO each pay day. Single Touch Payroll should be a seamless process in QBO. Regular QBO training and update sessions held at our office that provide a range of flexible and often free training options to help you benefit from the program. Please contact us if you need any QBO assistance or you would like to discuss further training. Client Portal Tips Our online client portal allows you to view, digitally sign and return documents at the click of a button. The portal improves security and the way we exchange information with our clients. Your accountant may discuss activation with you during the year, if you are not already using the portal. We have attached an updated client portal information sheet to help you to navigate the portal. It is also available on our website via the client portal web page. The information sheet will be beneficial to new and existing portal users.

10 Page 10 Lodgement Obligations Date Description 14 July 2018 PAYG summaries distributed to all employees 21st each mth 2018/19 Monthly IAS lodgement due All lodgements 28 July 2018 Superannuation guarantee contributions to be paid 28 July 2018 Quarterly IAS/BAS lodgement due paper 14 August 2018 PAYG summaries to be lodged with ATO 25 August 2018 Quarterly IAS/BAS lodgement due electronically 28 August 2018 Taxable payments annual report (Building & Construction) 15 May 2019 Final lodgement date of 17/18 individual tax returns Client News Congratulations to the Centra Hotel for being crowned the 3AW 2017 Pub of the Year! The Centra Hotel on Yarra St in Geelong provides beautiful rustic Italian food that is sourced locally and presented simply. The result is delicious and yummy food! The beer and wine list is extensive and the Centra Hotel has a terrific atmosphere for groups and parties. Congratulations once again Cam O Keefe and the team at the Centra Hotel! Staff News We are pleased to announce that Rachel Abbott has been appointed to an administration assistant role. Rachel has extensive experience in office administration with law firms in Geelong and Melbourne. We believe she will be a valuable long term addition to our admin team. Welcome Rachel! Congratulations to Abigail for reaching ten years service at Kelly & Associates. How time flies when you are having fun! Well done to Abigail on flying through ten years of service with us! Our best wishes to Belinda Wallace as she embarks on an exciting family adventure around Australia. Belinda will be on long service leave from Monday 9th July and returning on Monday 8th October, 2018.