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Welcome to the
 February 2020 edition of the Spry Roughley Report.

With so much going on in global health, politics, trade, and the environment, risk and strategy seem to be the topics that we keep coming back to with our clients.

We have written about risk management before however it is becoming clearer that businesses which have a robust risk identification, assessment, and response framework are feeling more in control with even the worst possible foreseeable situation than those businesses without. 

The Coronavirus outbreak and the associated uncertainty is playing havoc with global share markets and impacting on the supply chains of Australian businesses. We are seeing local businesses respond by reviewing and correcting supply chain weaknesses as well as seeking strategic opportunities to supply new markets where demand is high and supply is low. Planning for a significant spread of the virus in Australia should be actioned now, including leveraging available technology for use by employees placed into quarantine but who are otherwise fit for work. I note that many businesses on the Microsoft 365 Office platform will already have the Teams app available for use across the business to enable continued staff engagement and collaboration despite physical separation. This may be a simple but effective solution to this problem if needed.

Finally, we are holding our first seminar for the year on 11th March, on the Topic Business Valuation: What your business is worth? and, What you can do to change it? Having recently helped numerous clients with business valuations we are keen to share the knowledge about what makes a business valuable and why good strategic planning and risk management are some of the most effective tools to increase business value multiples and profits. If you are keen to find out more, contact Jennifer at our office to reserve your place or get further information.

Read on below for the usual collection of tax and other economic updates.

  • ATO backs down from controversial time limit ruling – The ATO has recently withdrawn Draft Miscellaneous Taxation Ruling MT 2018/D1, on the time limit for claiming input tax credits and fuel tax credits.
  • ATO extends bushfire assistance: lodgments deferred – The ATO has announced an extension of the tax assistance package for people impacted by the 2019–2020 bushfires in New South Wales, Victoria, Queensland, South Australia and Tasmania.
  • Better consumer protection: new ASIC powers – The government has proposed new enforcement and supervision powers for ASIC to restore consumer confidence in the financial system. These new powers include enhanced licensing, banning, warrant and phone tap powers.
  • Expansion of Tax Avoidance Taskforce activity– The ATO has expanded the activities of its Tax Avoidance Taskforce, originally conceived in 2016 to ensure that multinational enterprises, large public and private business pay the right amount of tax, to include top 500 private groups, high wealth private groups, and medium and emerging private groups.
  • No-cost strategies to increase your super – Strategies to increase your super include finding lost super, consolidating super accounts, and making sure you're in a quality fund.
  • SMSF sole purpose test and fractional investments – To be eligible for superannuation fund tax concessions, SMSFs are required to be maintained for the sole purpose of providing retirement benefits to members (the sole purpose test). However, a recent Full Federal Court decision will provide some flexibility to trustees on certain investments.
  • $10,000 cash payment limit: the facts – The proposed $10,000 economy-wide cash payment limit will make it a criminal offence for certain entities to make or accept cash payments of $10,000 or more. The government has now released information about when the limit would not apply for personal or private transactions.

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,

Fergus

Fergus Roughley, Director
Spry Roughley Services Pty Limited


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ATO backs down from controversial time limit ruling

In 2018, the ATO issued a controversial draft ruling which took a very strict stance on the four-year time limit for claiming input tax credits and fuel tax credits. The ruling had been used by the ATO to deny input tax credits and fuel tax credits where the Commissioner of Taxation made a decision outside the four-year period on an objection or amendment request, even where the objection or request was made within the period. However, a recent observation by a judge ruling on a related matter has put the ATO's strict stance in doubt and as a result the ruling (Draft Miscellaneous Taxation Ruling MT 2018/D1) has been withdrawn.

Where the Commissioner makes a decision on an objection or requests for amendment in relation to input tax credits and/or fuel tax credits outside the four-year period but the initial objection or amendment request was lodged within the time limit, the taxpayer will no longer be automatically denied the credits in situations where the decision is in the taxpayer's favour.
As a result, any taxpayer that the draft ruling has affected is encouraged to contact the ATO.

Learn more about this...


ATO extends bushfire assistance: lodgments deferred 

On 20 January 2020 the ATO announced an extension of the tax assistance package for people impacted by the 2019–2020 bushfires in New South Wales, Victoria, Queensland, South Australia and Tasmania.

Commissioner of Taxation Mr Chris Jordan said the 3.5 million businesses, individuals and self managed super funds (SMSFs) in the impacted local government areas will have until 28 May 2020 to lodge and pay BAS and income tax returns. This additional time is on top of the two-month extension previously granted.

Additionally, the ATO said it will fast-track any refunds that are due to taxpayers in the impacted regions. For example, businesses expecting a refund as a result of GST credits due to large purchases to replace stock are encouraged to lodge their activity statements at the first opportunity. The ATO will also remit any interest and penalties applied to tax debts since the commencement of the bushfires.

A complete list of the impacted areas is available at www.ato.gov.au/individuals/dealing-with-disasters. If you have been affected by the bushfires in a postcode not currently in the list, you can use the ATO Emergency Support Infoline to ask for tailored help: phone 1800 806 218.

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Better protection for consumers: new ASIC powers 

In response to the recommendations of the Banking and Financial Services Royal Commission and the ASIC Enforcement Review Taskforce Report, the government has proposed new enforcement and supervision powers for ASIC to restore consumer confidence in the financial system, particularly in relation to financial advice. These new powers include enhanced licensing, banning, warrant and phone tap powers, all designed to ensure that avoidable financial disasters uncovered during the Royal Commission are not repeated again.

While the Banking and Financial Services Royal Commission seems long ago in the minds of many, the people who have been financially affected by dubious practitioners will no doubt carry the scar of mistrust for life. This is precisely why the government has introduced new laws which will give ASIC new enforcement and supervision powers in relation to the financial services sector: to weed out the "bad apples" and restore consumer confidence.

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Expansion of Tax Avoidance Taskforce activity 

The ATO has recently expanded its Tax Avoidance Taskforce activity to include top 500 private groups, high wealth private groups, and medium and emerging private groups.

The Tax Avoidance Taskforce was originally conceived in 2016 to ensure that multinational enterprises, large public and private business pay the right amount of tax. The Taskforce's main role is to investigate what the ATO considers aggressive tax avoidance arrangements, including profit shifting.

As a part of the expansion, the ATO now has three "programs" for private groups under the Taskforce's umbrella: top 500 private groups, high wealth private groups, and medium and emerging private groups. The expansion that will perhaps affect the most taxpayers will be the program covering medium and emerging private groups. This program includes private groups linked to Australian resident individuals who, together with their associates, control wealth between $5 million and $50 million, and businesses with an annual turnover of more than $10 million that are not public or foreign owned and are not linked to a high wealth private group. The ATO estimates this will cover around 97% of the total private group population.

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No-cost strategies to increase your super 

With all the pandemonium of the new year, your super is probably the last thing on your mind. However, this is precisely the right time to think about implementing some strategies to increase your super for the coming year.

Currently, 5.8 million people in Australia have two or more super accounts. Every year the ATO runs a postcode "lost super" campaign to help raise community awareness. As a consequence of the 2018 campaign, more than 66,000 people consolidated over 105,000 accounts worth over $860 million. For the latest campaign, the ATO has created tables of lost and unclaimed super per state and postcode that anyone can access.

Finding and consolidating your lost super with your active account means you'll pay fewer management fees and other costs, saving you in the long term.

Another easy way to grow your super is to make sure the super fund that you're putting your money into is performing well. Recently, the regulator of super funds, the Australian Prudential Regulation Authority (APRA), released "heatmaps" that provide like-for-like comparisons of MySuper products across three key areas: investment performance, fees and costs, and sustainability of member outcomes. While the ultimate purpose of the heatmap is to have trustees with areas of underperformance take action to address it, they can also be an invaluable resource in choosing the right super fund.

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SMSF sole purpose test and fractional investments 

To be eligible for superannuation fund tax concessions, self managed super funds (SMSFs) must be maintained for the sole purpose of providing retirement benefits to members. This is known as the sole purpose test. Failing the test could expose trustees to civil and criminal penalties in addition to the SMSF losing concessional tax treatment.

Previously, it was thought that any benefit provided directly or indirectly to members or related parties of an SMSF from an investment would contravene the sole purpose test. However, a recent Full Federal Court decision will provide some flexibility to trustees on certain investments. The Court decided that an SMSF investment in a fund to acquire a fraction interest in a property to be leased at market rent to the member's daughter did not breach the sole purpose test.

While the Full Court found the SMSF had not breached the sole purpose test, it ultimately ruled against the trustee, finding that the investment was an in-house asset and breached the 5% limit. Crucially, the ATO warned it may still apply compliance resources to scrutinise whether an SMSF investment in fractional property investments contravenes other legal requirements.

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$10,000 cash payment limit: the facts 

The proposed $10,000 economy-wide cash payment limit has understandably elicited some confusion. While the proposal is not yet law, once enacted it will be a criminal offence for certain entities to make or accept cash payments of $10,000 or more. This is intended to combat the use of cash in black economy activities.

Chief among the questions is to what extent personal transactions will be included in the limit. The government has now released information outlining the circumstances in which the limit would not apply in relation to personal or private transactions.

Among other categories, payments relating to personal or private transactions (excluding transactions involving real property) would not be subject to the limit. Cash gifts to family members (as long as they are not donations to regulated entities such as charities) and inheritances are likely to be exempt. In other words, it is unlikely you will be prosecuted if you give your family members a lavish cash wedding gift or help your kids with a house deposit that happens to be over $10,000.

However, if you occasionally sell private assets (eg a used car) you may need to be careful and take reasonable steps to ascertain whether the other party is acting in the course of an enterprise.

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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