WHAT S NEW FOR BUSINESS IN 2013?... 1 Introduction... 3 1. New rules allow companies to offset current year losses against prior year profits... 4 Introduction... 4 1.1 Which entities are eligible for the NEW loss carry back rules?... 5 1.2 What conditions must be satisfied before a company can carry-back a tax loss?... 5 1.3 How is a company s loss carry-back amount treated for tax purposes?... 7 1.4 How do companies calculate the loss carry-back tax offset?... 8 1.5 Common questions associated with the loss carry-back concessions... 11 2. NTAA guide to the NEW SMSF auditor registration requirements... 14 2.1 When must existing SMSF auditors apply to ASIC to register as an approved SMSF auditor?... 15 2.2 What requirements must existing SMSF auditors satisfy to register as an approved SMSF auditor?... 15 2.3 Summary table of relevant requirements... 18 2.4 What requirements must an approved SMSF auditor satisfy on an on-going basis?... 19 3. ATO announces NEW audit assault on company share restructures... 20 3.1 Dividend access shares... 20 3.2 Other issues to consider prior to issuing a DAS... 27 4. NEW ATO Ruling highlights tax jolt with distributions from a unit trust... 29 4.1 Overview of CGT event E4... 29 4.2 What is the issue raised by ID 2012/63?... 32 4.3 Strategies for preventing or deferring CGT Event E4... 34 5. NEW laws require rethink on lease versus hire purchase... 37 5.1 How is a HP treated for GST purposes?... 37 5.2 How is a HP treated for tax purposes?... 42 5.3 Is a HP now the preferred form of finance?... 43 National Tax & Accountants Association Ltd: May July 2013 i
6. RECENT decisions highlights problems with superannuation guarantee and contractors... 48 6.1 Employee v independent contractor the background... 49 6.2 The AAT confirms purported independent contractor is a common law employee in General Aviation... 51 6.3 Recent cases cast doubt on use of entities to avoid engaging an employee... 55 7. Other GST developments in the 2013 year... 59 7.1 NEW GST Ruling provides relief for businesses and the tax invoice requirements... 59 7.2 RECENT decisions provide guidance on commercial residential premises for GST purposes... 63 7.3 ATO successfully recovers unpaid GST of another entity from taxpayer s... 70 8. RECENT case highlights perils with super support for corporate trustee directors... 73 Introduction... 73 8.1 Recent decision creates minefield for claiming director superannuation support... 74 8.2 What is the position with superannuation support for directors of corporate trustees?... 76 9. NEW reporting rules for businesses in the building and construction industry... 77 Introduction... 77 9.1 When do the new reporting rules apply?... 78 9.2 When will a purchaser be carrying on a business primarily in the BCI?... 78 9.3 What payments are not required to be reported?... 81 9.4 How are payments reported to the ATO?... 82 10. AAT decision highlights tax pitfalls with accruing business expenses... 84 Introduction... 84 10.1 AAT confirms tax sting for companies accruing various expenses... 84 10.2 When can commissions, salary and wages be accrued and claimed in the same income year?... 85 10.3 When can staff bonuses/directors fees be accrued?... 86 10.4 When will the salary and wage income be derived from the employee s perspective?... 89 ii National Tax & Accountants Association Ltd: May July 2013
A HANDS-ON GUIDE TO TRUSTS IN 2013... 91 1. Problems when trust income is defined to equal taxable income... 94 1.1 Relevance of trust income... 94 1.2 Dealing with notional amounts... 95 2. Can trust income include capital gains, franking credits, revaluations, etc?... 97 2.1 Including capital gains in trust income... 97 2.2 Including other amounts in trust income... 98 3. Should trustees amend their existing trust deeds?... 101 3.1 Amending the definition of income to include gross capital gains... 101 3.2 Trust derives franked dividends... 103 3.3 Amending the deed to insert a streaming clause... 103 4. Can trustees make a verbal distribution of trust income?... 104 4.1 Setting aside trust income for the 2013 year... 104 5. What rules apply when a trustee streams franked dividends?... 107 5.1 The franked dividend streaming rules... 107 6. What rules apply when a trustee streams capital gains?... 110 6.1 The capital gain streaming rules... 110 7. Completing the Annual Trustee Payment Report... 113 7.1 Annual trustee payment report... 114 YEAR-END TAX PLANNING FOR BUSINESS CLIENTS... 119 Introduction... 121 1. Year-end tax planning strategies for NEW businesses... 122 1.1 Maximising depreciation claims for small businesses in the year assets are purchased save $ 000s!... 122 1.2 Tips and traps for SBEs claiming the instant write-off for assets costing less than $6,500... 124 1.3 Tips and traps for SBEs claiming the new up-front depreciation deduction for motor vehicle acquisitions... 126 1.4 Checklist Applying the new depreciation concessions for the 2013 income year... 128 1.5 Paying franked dividends to shareholders of family companies without any franking credits!... 129 National Tax & Accountants Association Ltd: May July 2013 iii
1.6 Claiming deductions for the capital costs of establishing a business structure... 132 1.7 Checklist Snapshot of year-end tax planning strategies for new businesses... 134 2. Year-end tax planning strategies for ongoing businesses... 135 2.1 NTAA guide to maximising deductions for SBE and non-sbe taxpayers for the 2013 income year... 135 2.2 Maximising cashless deductions for all small business taxpayers for the 2013 income year... 139 2.3 Massive cash flow advantages associated with sale and leaseback arrangements... 142 2.4 Checklist Snapshot of year-end tax planning strategies for ongoing businesses... 145 3. Tax planning opportunities for businesses that are closing down... 146 3.1 Making tax effective termination payments to company directors under the NEW rules... 146 3.2 Tips and traps associated with forgiving debts as part of winding up a family business... 150 3.3 Using the small business CGT concessions for capital gains associated with closing down a business... 153 3.4 Checklist Snapshot of year-end tax planning strategies for businesses that are closing down... 154 WHICH BUSINESSES ARE ON THE ATO S AUDIT HIT LIST FOR 2013?... 155 Introduction... 157 1. ATO starts a NEW audit campaign targeting Division 7A... 158 1.1 ATO identifies audit trap with shareholders repaying old loans by entering into new loans... 159 1.2 ATO set to put the audit microscope on UPEs between a trust and bucket company... 162 2. ATO puts audit blowtorch on PSI rules... 165 2.1 Background the operation of the PSI rules... 165 2.2 ATO identifies common errors with the PSI rules... 166 2.3 Recent decision confirms problems with taxpayers applying the unrelated clients test Cameron... 167 2.4 New ATO guidance on the business premises test mistakes will be costly!... 172 iv National Tax & Accountants Association Ltd: May July 2013
BENCHMARKING THE NEW ELEPHANT IN THE ROOM... 175 1. AAT cases confirm ATO audit adjustments using industry benchmarking... 178 1.1 Spotlight on unrecorded and unreported cash transactions - Siddiqi... 178 1.2 Taxi operator s inadequate records lead to income adjustment using ATO benchmark figures - Baini... 179 1.3 Tax audits uncover significant industry benchmark disparities!... 181 2. The NTAA guide to the do's and don'ts when your client is subject to a cash economy audit... 186 3. Obligation of registered agent where client operating outside of industry benchmarks... 191 Notes... 193 National Tax & Accountants Association Ltd: May July 2013 v