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TAX | NEWS | VIEWS & CLUES

Welcome to the November 2015 edition of the Spry Roughley Report.

An interesting collection of items this month, but perhaps a reminder is warranted about Fringe Benefits Tax (FBT) and Christmas parties. If you are using the 50/50 method of claiming deductions and paying FBT on entertainment, you cannot claim the "less than $300" per head minor benefit exemption from FBT. Should you be eligible for the minor benefit exemption, then no tax deduction can be claimed, but no FBT is payable.

In something of a retreat to the past, the Tax Office, following processing of tax returns, are now advising taxpayers with straight forward returns and with less than $180,000 taxable income, that their tax returns have been accepted as satisfactory. This is a pilot programme only to trial how this is received.

In a reminder to taxpayers becoming a resident or ceasing to be a resident in Australia for tax purposes, it is crucial to establish the change date and tax jurisdiction covering income and earnings. A new resident to Australia was taxed on what was purportedly income earned overseas before he believed he became a resident in Australia, as he did not take care to establish the facts of his situation. An unexpected surprise welcome to Australia!

The State Government has introduced a new law to protect small business (employing less than 20 people) from standard contracts that are 'unfair'. This applies to contracts of less than $300,000, or less than $1 million if the contract operates for more than 1 year. Ostensibly this seems directed at unconscionable or harsh contract terms and may help in those situations.

And finally for those seeking fitness as we approach a time of potential excess, a novated lease of an electric bicycle (e-bike) is a residual fringe benefit, however, that may be exempt where private use is restricted to travel to and from work; work related use; and the non-work use is minor, infrequent and irregular. I am sure someone will find this helpful!

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.

Warm regards,

Martin

Martin Roughley, Director
Spry Roughley Services Pty Limited


                       

          

Liability limited by a scheme approved under Professional Standards Legislation



Unbundling phone and internet expense claims for work purposes


Individuals can claim deductions for mobile, home phone and internet expenses that have been incurred for work purposes. However, correct apportionment for work use is a key issue. According to the ATO, as there are many different types of plans available, taxpayers need to determine their work use using a reasonable basis.

For example, phone and internet services are often bundled. When a taxpayer is claiming deductions for work-related use of one or more services, they need to apportion their costs based on their work use for each service. If other household members also use the services, the taxpayer needs to take into account that use in their calculations.

If the taxpayer has a bundled plan, the ATO says they can identify their work use for each service over a four-week representative period during the income year. This will allow the taxpayer to determine their pattern of work use, which can then be applied to the full year. Please contact our office for assistance.             

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Student loan debt recovery from overseas 

As part of the 2015 Federal Budget, the Government announced that Australians living and working overseas who have a Higher Education Loan Program (HELP) or Trade Support Loan (TSL) debt would soon be required to repay that debt in line with the obligations that apply for debtors who live and work in Australia.

The repayment obligations are expected to apply from 1 July 2017, based on income earned in the 2016–2017 financial year. The repayment obligations would only commence once the individual's income reached the minimum repayment threshold. People heading overseas for more than six months would be required to register with the ATO, while those already overseas would have until 1 July 2017 to register.

The Government is intending to facilitate reciprocal arrangements with foreign governments. That is, the Government intends to share details of individuals to allow foreign governments to identify if their citizens with student loan debts are living and working here in Australia. At this stage New Zealand and the UK have been flagged for reciprocal arrangements.

Individuals can make voluntary repayments at any time to reduce their HELP debts. Currently, if you make a voluntary HELP repayment of $500 or more, you get a 5% bonus. If your HELP debt balance is less than $500 and you make a voluntary repayment to pay out the debt, you also get a 5% bonus. Voluntary payments are in addition to compulsory repayments. Any voluntary repayments you make are not tax deductible.

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SMSF trustees warned to plan for cognitive decline 

The ATO has highlighted the issue of cognitive decline, noting that dementia is on the rise and that it is important for trustees of self managed super funds (SMSFs) to have plans to ensure that financial matters will be effectively managed, if and when trustees no longer have the capacity to manage their funds.

"SMSFs are in reality usually managed by one trustee and require a high level of financial decision-making. While many trustees remain perfectly capable of effectively managing their financial affairs well past retirement age, there is a risk that some with diminished capacity to effectively manage their fund may nevertheless continue to do so. Most don't have a plan for what to do if they get to this point", said Kasey Macfarlane, ATO Assistant Commissioner, SMSF Segment, Superannuation.

In this regard, Ms Macfarlane said, it was essential that trustees "agree in advance about decision points and exit decisions, to have a will and appoint an enduring guardian and power of attorney".

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Tax debt release application refused 

The Administrative Appeals Tribunal (AAT) has refused a couple's application to be released from their tax debts after finding the couple (the taxpayers) would not suffer serious hardship if they were required to satisfy the liability. The tax debt the taxpayers sought to have released amounted to some $25,000. The taxpayers argued they should be released from the tax debts because their financial position was due to "serious family difficulties and problems", which had distracted them from their tax affairs.

Although the AAT was sympathetic towards to the taxpayers, it concluded they had not discharged the onus of proving that they would suffer serious hardship if they were required to pay the relevant tax debts. The AAT reached this conclusion after calculating the taypayers' fortnightly income and expenses. In this regard, the AAT noted the taxpayers were making more than the required minimum mortgage repayments and could draw down on their home loan.

Even if it were a case of serious hardship, the AAT said, it would not exercise the discretion to waive the debt. Among other things, the AAT noted that one of the taxpayers was a beneficiary in the estate of her mother and stood to receive approximately $200,000.

Serious hardship exists when payment of a tax debt would leave you unable to provide for basic living necessities for yourself and dependants. The Tax Commissioner has the discretion to release you from eligible tax debts; however, even if the Commissioner is satisfied that serious hardship would result from payment of the tax debt, he is not obliged to exercise the discretion in your favour.

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Retiring partner's individual interest in net income of partnership 

According to a recent ATO Taxation Determination, where a retiring partner receives an amount representing his or her individual interest in the partnership net income, that amount is assessable under section 92 of the Income Tax Assessment Act 1936. This is the case even if the partner retires before the end of the income year or the payment is received in a subsequent income year. Furthermore, the way the payment is labelled or described will not change the ATO's conclusion that the receipt represents the partner's share of partnership net income and needs to be brought to account under section 92.

The ATO notes that a partner's individual interest in the net income of a partnership is essentially a question of fact in each case, to be determined by reference to the partnership agreement, the partnership's accounting records and any other relevant documents. The ATO notes that its approach in the Determination is a departure from several private rulings, in which it took such receipts into account under the capital gains tax (CGT) rules. The ATO says that an amount representing an individual interest in partnership net income may also represent capital proceeds from a CGT event; however, any capital gain that would otherwise arise is reduced to the extent that it is assessable under other provisions.

The Taxation Determination applies to assessments made after 3 June 2015. The ATO says it will not seek to disturb favourable assessments made before that date.

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ATO targeting ride-sourcing drivers and eBay online sellers 

The ATO has announced that it will acquiring details of ride-sourcing drivers from ride-sourcing facilitators. The data will be matched electronically with ATO data holdings to identify people. The ATO said the aim of the data-match is to identify taxpayers that can be provided with tailored information to help them meet their tax obligations, or to ensure their compliance with the tax law. The ATO estimated that records relating to between 10,000 and 15,000 individuals will be matched.

The ATO has affirmed that people who provide ride-sourcing services are providing "taxi travel" under the GST law. The ATO has previously advised that it expects all drivers involved in providing ride-sourcing services to be registered for goods and services tax (GST). Please contact our office for information and assistance.

The ATO is also acquiring online selling data from eBay relating to registrants who sold goods and services to a value of $10,000 or more during the period 1 July 2014 to 30 June 2015. The data requested includes information that will enable the ATO to match online selling accounts to taxpayers, including names, addresses and contact information, as well as information on the number and value of transactions processed for each online selling account. It is estimated that records relating to between 15,000 and 25,000 individuals will be matched.

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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