Welcome to the February 2016 edition of the Spry Roughley Report.
As we get into the 2016 year, talk of tax reform and elections is overshadowing many working developments in the pipe-line.
For those with farming interests the farm management deposits (FMD) scheme is being modified to allow up to $800,000 of FMDs to be held and to allow one to release deposits of less than 12 months duration if experiencing severe drought. I guess good news to help with bad news!
Legislation is also in Parliament to introduce a tax withholding on property sales to foreigners, where the value exceeds $2,000,000. This is designed to ensure the foreign owners of domestic property, which is subject to capital gains tax, pay their dues. They will receive a tax offset against their ultimate tax liability for any tax withheld. This will be similar to other non-resident withholding taxes as apply to some dividends, interest and royalties, however this will involve more non-business taxpayers who may be purchasing property from non-residents. This is to commence from 1st July 2016 however an election may disrupt these plans… Watch this space.
More interesting cases are emerging on what constitutes a share trading business, as opposed to share investment. In essence, one needs to be very systematic and business-like in application of the share trading approach and activities as it is not the fact of trading in shares that is the key; it is the fact of carrying on a business of share trading that is the distinguishing feature. As we in business understand, a few trades or side transactions do not a business make.
The 2016 land tax thresholds have been released. The threshold for beginning to pay land tax is based on the unimproved land value, and that is now $482,000 (up from $432,000 as applied in 2015). The land tax rate remained steady at 1.6% for property value up to the premium threshold level of $2,947,000 (up from $2,641,000) at the same premium rate of 2% on the excess value. Remember to register all your property holdings so you are not caught short at some future date. We also note that some clients forget to notify associated land owners for grouping purposes and that can be a costly oversight when it is discovered, often years later.
In other tax 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.
Martin Roughley, Director
Spry Roughley Services Pty Limited
Liability limited by a scheme approved under Professional Standards Legislation
The Government is looking to cut red tape for employers by simplifying tax and superannuation reporting obligations through its initiative called Single Touch Payroll (STP). "Employers currently manually report Pay As You Go (PAYG) withholdings to the ATO," the Assistant Treasurer Kelly O'Dwyer said. "Under the new STP this information will be automatically reported to the ATO through Standard Business Reporting (SBR) software."
The ATO will be conducting a pilot in the first half of 2017 focusing on small businesses. From 1 July 2017, all businesses will be able to commence STP reporting, with the option to make voluntary payments. In addition, the ATO will transition employers with 20 or more employees to STP. From 1 July 2018, employers with 20 or more employees will be required to use STP enabled software for reporting to the ATO. The Government will make a decision on timing for rolling out STP reporting for employers with less than 20 employees after the pilot is completed.
To assist small businesses with a turnover of less than $2 million, the Government will offer a $100 non-refundable tax offset for SBR-enabled software. This offset is proposed to apply from 1 July 2017 and for software purchases or subscriptions made in the 2017–2018 financial year only.
Although there are benefits to streamline reporting, some commentators have highlighted cashflow concerns relating to making more frequent payments. Real time pay day reporting also gives the ATO an earlier intervention signal to contact struggling businesses. If you have any questions, please contact our office.
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Simplified GST accounting methods are available for small food retailers if they meet certain eligibility conditions. Many small food retailers buy and sell products that are taxable as well as products that are GST-free. Accurately identifying and recording GST-free sales separately from those that are taxable can be difficult, which makes accounting for GST complicated. However, there are five simplified GST accounting methods to choose from to help businesses meet their GST obligations. These include the Business norms method, Stock purchases method, Snapshot method, Sales percentage method, and the Purchases Snapshot method.
Business needs change and it may be prudent to take a look at whether there are advantages with adopting a SAM. Do you need help deciding which method would be best for your small food business? Please contact the office for assistance or further information.
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The ATO has issued a notice announcing that it will be acquiring details of real property transactions for the period 20 September 1985 to 30 June 2017 from various state revenue offices and tenancy boards. In relation to rental properties, the ATO is seeking details of rent paid and contact details of landlords. In relation to property transfers, the ATO is seeking details of the transfers, including details of the transferors and transferees and any state land tax and/or stamp duty concessions sought.
The information will be matched to the ATO's data holdings. The ATO said an objective of the data matching program is to ensure taxpayers are correctly meeting their taxation obligations. The ATO expects that around 31 million records for each year will be obtained. Based on current data holdings, the ATO said records relating to approximately 11.3 million individuals are expected to be matched.
The data matching program goes all the way back to the start of the capital gains tax (CGT) regime in September 1985. Some commentators suggest this could be the ATO looking for CGT revenue on previously undeclared capital gains or incorrectly claimed CGT concessions. Note also that the ATO intends to carry on its data matching program from 2017. It will no longer announce details of its program as law changes will make it mandatory by then for revenue authorities and other entities to report real property transactions to the ATO.
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A Bill has been introduced in Parliament that proposes to amend the tax law to change the capital gains tax treatment of the sale and purchase of businesses involving certain earnout rights (ie rights to future payments linked to the performance of an asset or assets after sale). As a result of these amendments, capital gains and losses arising in respect of look-through earnout rights will be disregarded. Instead, payments received or paid under the earnout arrangements will affect the capital proceeds and cost base of the underlying asset or assets to which the earnout arrangement relates.
Clarifying the CGT treatment of earnout rights has been a long time coming – it was first announced on 12 May 2010 as part of the 2010–2011 Budget. The amendments contained in the Bill are proposed to apply from 24 April 2015. However, note there will be protections for taxpayers who have undertaken other actions in reasonable anticipation of announcements made about the amendments in the 2010–2011 Budget.
The ATO has released details of its administrative treatment pending the formal enactment of the legislation. Please contact our office for further information.
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