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Welcome to the
 February 2019 edition of the Spry Roughley Report.

We are well into 2019 and what a lot of interesting developments. Politics is distracting; the Law pursues the wrong-doers with significant societal consequences; business is getting on with business, yet underlying all this are some very interesting developments.

Looking back, 2018 was a good year – perhaps the best year in human history?

By any world measure we are all much better off. Significantly more people around the world have accessed electricity and clean water; infant mortality has dramatically declined over the past 50 years, and our life expectancy has increased by 10 years over that period; World poverty has significantly declined by a factor of 4 since the early 1980's. If you would like to know more, an interesting reference is Factfulness, by Dr Hans Rosling.

A further observation is that the much-hyped income disparity conversation is not as extreme as often portrayed – the more significant fact is that it is easier and more common now that people move up the socio-economic ladder than ever before, even whilst at the extreme the very few really wealthy do get relatively more so. Things are generally pretty good!

What we might find unsettling however is that everything around us is constantly changing. We see these changes impacting on our business, our strategic thinking, and our personal situations. Shaun drew attention to this in our previous newsletter when discussing the importance of strategic planning. 

A significant further change now being considered is the treatment of private company loans to shareholders and associates, and unpaid present entitlements to trust distributions – broadly referred to as Division 7A loans and undrawn UPE's owing to a company. This is the subject of a Treasury discussion paper around proposed changes, to be effective from 1 July 2019 – this coming July! The short summary is that all Division 7A loan terms will be 10 years; the interest rate is moving to the small business overdraft rate – currently 8.28% (which is increased from the present 5.2%); minimum loan repayments will be equal payments of principal over the loan term; and interest will be calculated on the opening loan balance at 1 July each year. These measures will also apply to previously exempt 1997 loans from 1 July 2021. This is a BIG change for those affected! Further, there will no longer be any protection for loans from a company with no "distributable surplus".

Keeping pace with tax changes is a bit daunting so I thought you might appreciate a summary of the top tax changes in 2018/2019 - Checklist of Top Tax Changes in 2018-19.

As we get closer to the Federal election expect even more changes. Already the Government has indicated they will introduce legislation to increase the instant asset write-off to $25,000 and extended that to 30 June 2020. Hopefully the reality of the needs of business and community will be forefront of mind in these changes and we see sensible proposals. I think we have had enough of "thought bubble" distractions.

The following detailed matters this month are also very interesting so read on …

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.

Warm regards,

Martin

Martin Roughley, Director
Spry Roughley Services Pty Limited



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Tax clinic trial to reduce tax regulatory burden

To help reduce the regulatory burden on businesses, including the tax burden, the government has allocated $1 million to set up 10 tax clinics across Australia under a trial program based on the Curtin University Tax Clinic.

Each clinic will receive up to $100,000 for 12 months to support unrepresented individual or small business taxpayers by providing general taxation advice and helping them with their tax obligations and reporting requirements. The clinics, through identifying issues and building greater understanding of the tax system in operation, are also designed to improve the interactions that small businesses and individual taxpayers have with the ATO.

The clinics will cover advice, representation, education and advocacy, and will offer students training in the profession the opportunity to work with taxpayers, under the direct supervision of qualified tax professionals.

Learn more about this...


New "work test" exemption for recent retirees

The Federal Government has created a new opportunity for some recent retirees to make additional superannuation contributions. From 1 July 2019, a 12-month exemption from the "work test" for newly retired individuals aged between 65 and 74 years with a total superannuation balance below $300,000 means many older Australians will now have an extra year to boost their superannuation savings.

The work test requires that a person is "gainfully employed" for at least 40 hours in any 30-day consecutive period during the financial year in which the contributions are made.

The contributions rules are complex, but with the right planning and advice you can maximise your contributions into superannuation at the right time.

You should also consider other measures that may be available to you, such as "downsizer" contributions (certain contributions of proceeds from the sale of your home) and "catch-up" concessional contributions (accessing unused concessional cap space from prior years).

Learn more about this...


ATO issuing excess super contributions determinations 

The ATO has begun issuing determinations to people who exceeded their concessional superannuation contributions cap for the 2017–2018 financial year. These determinations will also trigger amended income tax assessments and additional tax liabilities. Individuals can elect for the ATO to withdraw their excess contributions from their super fund to pay any additional personal tax liability.

Concessional contributions include all employer contributions, such as the 9.5% superannuation guarantee and salary sacrifice contributions, and personal contributions for which a deduction has been claimed.

You have 60 days from receiving an ECC determination to elect to release up to 85% of your excess concessional contributions from your super fund to pay your amended tax bill. Otherwise, you will need to fund the payment using non-superannuation money.

Learn more about this...


Reviewing the tax treatment of granny flats 

The Federal Government has asked the Board of Taxation to undertake a review of the tax treatment of "granny flat" arrangements, recommending potential changes that take into account the interactions between tax laws and the social security rules. This request for review is in response to the 2017 Australian Law Reform Commission's report Elder abuse: a national legal response.

Currently, homeowners may have to pay capital gains tax (CGT) where there is a formal agreement, for example, for an older parent to live with their child, either in the same dwelling or a separate granny flat. This may deter families from establishing a formal and legally enforceable agreement, leaving no protection of the rights of the older person if there is a breakdown in the informal agreement.

Learn more about this...


Resolving tax disputes: government to help small businesses 

The Federal Government intends to make it easier, cheaper and quicker for small businesses to resolve tax disputes with the ATO. It will establish a Small Business Concierge Service within the Australian Small Business and Family Enterprise Ombudsman's office to provide support and advice about the Administrative Appeals Tribunal (AAT) process to small businesses before they make an application. The government will also create a dedicated Small Business Taxation Division within the AAT.

Learn more about this...


Small business tax offset: avoiding errors when claiming 

The ATO has provided new tips for avoiding common errors when reporting net small business income and claiming the small business income tax offset for unincorporated small businesses. These include tips on reporting amounts in the right sections of your tax return, providing all of the relevant information, and using net income (not gross income) in your calculations.

The offset (up to $1,000) is worked out by the ATO on the proportion of income tax payable on an individual's taxable income that is net small business income. For 2018–2019 and 2019–2020 the rate of offset is 8%.

Not sure if you're making the most of the tax offset for your small business? We can help – contact us today to find out more.

Learn more about this...


Home office running expenses and electronic device expenses 

The ATO has released an updated version of Practice Statement PS LA 2001/6, its guidance on calculating and substantiating home office running expenses and electronic device expenses that are claimed as tax deductions.

The basic principles have been amended to emphasise that you must actually incur the expenses you claim, and that there must be a real connection between your use of a home office or device and your income-producing work. On the other hand, the requirement that your income-producing use must be substantial – not merely incidental – has been removed.

There is new information on what type of evidence you need to be keep, and the cents per hour rate you can claim for eligible home office running expenses has increased from from 45 cents to 52 cents per hour, effective from 1 July 2018.

Learn more about this...


Genuine redundancy payments: alignment with Age Pension age 

The Federal Government has announced that it will amend the law to extend the concessional tax treatment for genuine redundancy payments and early retirement scheme payments to align with the Age Pension qualifying age.

Currently, an individual must be aged below 65 at the time their employment is terminated to qualify for a tax-free component on a genuine redundancy payment or an early retirement scheme payment.

Genuine redundancy payments are made when a job is abolished, and early retirement scheme payments are made when a person retires early, or resigns, as part of a scheme put in place by an employer.

Where an individual is under age 65 and meets the requirements of the Income Tax Assessment Act 1997, they receive tax-free a base amount of $10,399 (for 2018–2019), plus $5,200 for each whole year of service.

The government says it will amend the law to align genuine redundancy and early retirement scheme payments with the Age Pension qualifying age from 1 July 2019.

Learn more about this...


GST on property developments involving government 

The ATO says it is reviewing arrangements involving property developers acquiring land from government entities, specifically where the developer provides development works to the government entity as payment for the land.

The ATO is concerned that some developers and government entities are not reporting the value of their supplies under these arrangements in a consistent manner, resulting in GST being underpaid.

Learn more about this...

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  • 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