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TAX | NEWS | VIEWS & CLUES

Welcome to the December 2018/January 2019 edition of the Spry Roughley Report.

As we approach the end of 2018 there feels to be more uncertainty in the air. In Australia, we have upcoming NSW State and Federal elections and all that encompasses for the economy and taxation; the housing market is down; and there are signs of a slowing economy. Overseas, there are continuing tensions between the US and China over trade; the "Yellow vest" demonstrations in France over the rising cost of living; and Brexit is proving to be a political & economic quagmire.

The question that then comes to mind is "What can I do about it?" and "How do I respond if X happens?".

Now is an excellent time to consider your plans for 2019 and the range of options available to you and your business. Maybe it is time to reconsider contingency plans, especially if you are directly impacted by the possible international surprises that may be awaiting us. The domestic situation is possibly more predictable, but again, agility will be your friend I think. Strange times indeed, but potentially very disruptive for some businesses.

It is probably also a good time to take a look ahead and to be prepared for what you can foresee - tweak and adjust your plans as needed.

  • Have you reviewed your business fundamentals – product/service range, pricing, profitability, customer service levels, and cost control?
  • Have you prepared or updated your budget & cashflow projections and looked at the needs of the business?
  • Are you having performance reviews with your employees?
  • Have you spoken with your bank and kept them up to date?
  • Have you adjusted your income tax payments in line with your actual profitability in 2018/19?

As one client remarked to me recently, "in this environment, you have to play to win!".

I also find this time of year is great for reflection. Are you having conversations with your family about the future, particularly if you are in a family business? You might ask yourself:

  • Why am I in business?
  • How am I investing in my business and myself?
  • Is succession an issue? When is the right time to start?
  • Are our wills and estate plans up to date?
  • Did I remember to buy my loved ones a present?

In other news:

As usual, please do not hesitate to call us on (02) 9891 6100 should you wish to discuss how any of the points raised in the report specifically affect you, or click here to send us an email.

Finally, our best wishes for a Merry Christmas and a Happy, Safe and Prosperous New Year in 2019.

Warm regards,

Shaun

Shaun Madders, Director
Spry Roughley Services Pty Limited



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Work-related tax deductions down for 2018


The ATO has reported a decline in the overall value of work-related deductions for tax time 2018. In his opening statement to Senate Estimates on 24 October 2018, Commissioner Chris Jordan said taxpayers appear to be taking extra care when claiming work-related expenses in their 2017–2018 income tax returns. This follows recent ATO awareness and education efforts to close the income tax gap for individuals.

Learn more about this...


ATO identifies 26,000 incorrect rental property travel expense claims 

The ATO has identified 26,000 taxpayers who have claimed deductions during tax time 2018 for travel to their investment residential rental properties, despite recent changes to tax laws.

From 1 July 2017, investors cannot claim travel expenses relating to inspecting, maintaining or collecting rent for a residential rental property as deductions, subject to certain exceptions. An exclusion does apply for this restriction if the expenditure is necessary for the income-producing purposes of carrying on a business (for example, a rental property business), or if the costs are incurred by an "excluded entity".

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Small business corporate tax rates Bill is now law 

The company tax rate for base rate entities will now reduce from 27.5% to 26% in 2020–2021, and then to 25% for 2021–2022 and later income years. This means eligible corporate taxpayers will pay 25% in 2021–2022, rather than from 2026–2027. 

The new law also increases the small business income tax offset rate to 13% of the basic income tax liability that relates to small business income for 2020–2021. The offset rate will then increase to 16% for 2021–2022 and later income years.

The maximum available amount of the small business tax offset does not change – it will stay capped at $1,000 per person, per year.

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GST reporting: common errors and how to correct them 

Some businesses are making simple mistakes reporting their GST. The ATO reminds taxpayers that avoid the following common GST reporting errors:

  • transposition and calculation errors – these mistakes often happen when manually entering amounts, so it's important to double-check all figures and calculations before submitting your BAS;
  • no tax invoice – you must keep tax invoices to be able to claim GST credits on business-related purchases;
  • transaction classifications – it's important to check what GST applies for each transaction; for example, transactions involving food may be GST applicable; and
  • errors in accounting systems – a system with one coding error can classify several transactions incorrectly.

Learn more about this...


Government announces super refinements 

The Government has announced it will amend the super tax laws to address some minor but important issues, as part of the ongoing super reforms. The changes include:

  • deferring the start date for the comprehensive income product for retirement (CIPR) framework;
  • adjusting the definition of "life expectancy period" to account for leap years in calculations, and amending the pension transfer balance cap rules to provide credits and debits when these products are paid off in instalments;
  • adjusting the transfer balance cap valuation rules for defined benefit pensions to deal with certain pensions that are permanently reduced after an initial higher payment;
  • correcting a valuation error under the transfer balance cap rules for market-linked pensions where a pension is commuted and rolled over, or involved in a successor fund transfer;
  • making changes to ensure that death benefit rollovers involving insurance proceeds remain tax-free for dependants.

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CGT on grant of easement or licence 

Taxation Determination TD 2018/15, issued on 31 October 2018, considers the capital gains tax (CGT) consequences of granting an easement, profit à prendre or licence over an asset.

In the ATO's view, CGT event D1 (creating contractual or other rights) rather than CGT event A1 (disposing of an asset) happens when any of the following rights are granted over an asset:

  • an easement, other than one arising by operation of the law;
  • a right to enter and remove a product or part of the soil from a taxpayer's land (a profit à prendre); or
  • a licence (which does not confer the exclusive right to possess the land).

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First Home Super Saver scheme and downsizer super contributions: ATO guidance 

November 2018, the ATO issued a Super Guidance Note to provide people with general information about how the First Home Super Saver (FHSS) scheme works. The guidance note explains who is eligible to use the scheme, the kind of contributions that can be made and then released from super for buying a first home, how to apply to the ATO for a FHSS determination, and the requirement to purchase a house.

The ATO also issued guidance on the recently enacted downsizer superannuation contribution measures, which allow people aged over 65 to contribute the proceeds from selling certain property into their super.

Learn more about this...


ATO scam alert: fake demands for tax payments 

Although tax time 2018 is over, the ATO has warned taxpayers and their agents to remain on high alert for tax scams. Scammers are growing increasingly sophisticated and hope to exploit vulnerable people, often using aggressive tactics to swindle people out of their money or personal information. 

Be wary if anyone contacts you demanding payment of a tax debt that you didn't know about. The ATO will never ask you to make a payment into an ATM or using gift or pre-paid cards such as iTunes and Visa cards, and will never you to deposit funds into a personal bank account.

Scammers have been known to impersonate tax agents as well as ATO staff. If you have any doubts about the legitimacy of a phone call or other communication, you can call the ATO directly (toll free) on 1800 888 540.

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Government to establish $2 billion fund for small business lending 

The Government has announced that it will establish a $2 billion Australian Business Securitisation Fund and an Australian Business Growth Fund to provide longer-term equity funding for small businesses.

Treasurer Josh Frydenberg has said some small businesses currently find it difficult to obtain finance on competitive terms unless it is secured against real estate. To overcome this, the proposed Australian Business Securitisation Fund will invest up to $2 billion in the securitisation market, providing additional funding to smaller banks and non-bank lenders to on-lend to small businesses on more competitive terms.

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ATO information-sharing: super assets in family law proceedings 

Superannuation is often the most significant asset in a separated couple's property pool, particularly for low-income households with few assets. Parties to family law proceedings are already legally required to disclose all of their assets to the court, including superannuation, but in practice parties may forget, or deliberately withhold, information about their super assets.

The Government has announced an electronic information-sharing mechanism to be established between the ATO and the Family Law Courts to allow superannuation assets held by relevant parties during family law proceedings to be identified swiftly and more accurately from 2020. This measure was included as part of a broader financial support package for women announced on in November.

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Spry Roughley Chartered Accountants

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(+612) 9891 6100

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(+612) 9635 4782

  • Our firm is built on being attentive to and extensively knowledgeable about our clients so we can work with them to help them to both achieve their goals and protect them from risk. We are forward looking in our advice and always aim to be practical and right.
    - Martin Roughley, Managing Director
  • In business, there is so much going on and you don’t always have all the answers. That’s when you need to know who to call. Our clients call us.
    - Shaun Madders, Director
  • Going beyond the compliance and routine is what we do. By maintaining open and frank communication we are able to provide valuable insights and assist in driving the changes required to help our clients achieve their goals.
    - Fergus Roughley, Director