Servicing Greater Sydney, Parramatta

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

A very happy day for Spry Roughley on 1st November – we marked 30 years of helping keep clients in business.

Some of you may know we established our practice on 1st November 1989. We pursued our vision of quality service, a full service offering, and organic growth to now rank in the top 100 firms in Australia. We are excited about our achievements in over 30 years of practice.

Always based in Parramatta, the heart of Western Sydney, and focussed on significant and developing businesses, we have managed a number of client start-ups and worked with them to grow and prosper; managed generational succession such that we now have clients on the third generation of family participation; still retain a number of clients who have shared the journey for the whole 30 years to date, and we continue to link with new business based clients who are seeking a better service offering.

Our clients tell us our focus on their real needs and our deep understanding of their situation is the key to our continuing success. Our work is always interesting and we share wonderful relationships with our clients so it is always a pleasure to come to work!

As the founder of the firm I am very proud of the achievements of our team, the past and present employees that help build and strengthen the firm; our successful development and regeneration so necessary for all businesses to prosper, and the depth of our relationships we enjoy with all our clients. I feel we are truly blessed that we have such great clients who appreciate our assistance and understand our deep interest in their success. I feel we have the culture and momentum at Spry Roughley that can see us continue for another 30 years and more, caring for our clients and helping them continue to achieve their goals.

Shaun and I attended our international group meeting in Mumbai this last week. The conference theme was "Accounting; counting what matters". This brought together a number of presentations around the impact of business on people and planet – very topical as we know from what we read everywhere. Ethics in business certainly goes beyond the profit! A very successful conference and another opportunity to visit India – a truly fascinating country with many challenges as it seeks to continue its development in a competitive world, and a great opportunity to reconnect with our fellow members from around the world who are always willing to help clients of fellow members with that crucial local knowledge.

On tax matters: 

  • The interesting clarification from the Tax Office confirming the fringe benefits tax exemption for certain taxi travel has caught some by surprise, in that it does not include transport in a vehicle not licensed as a "taxi". Uber doesn't get the exemption!
  • The Government is restricting tax deductions for costs incurred that relate to vacant land. Whilst this does not relate to companies or superannuation funds and some managed or public unit trusts, it will catch individual and family trustee owners. The main exemption is if the land is used by the owner for carrying on a business, or where the land is used in primary production.
  • Self-managed superannuation funds (SMSF's) are reminded that non arms-length basis income can be taxed at the highest personal tax rates. One must be sure that any related party transactions are always at true market value.
  • Also on superannuation, the law now requires the inclusion of the balance of any limited recourse borrowing arrangement when calculating the Total Superannuation Balance of a fund member. This may restrict the availability for members to make non-concessional contributions when their calculated total superannuation balance nears the $1.6million cap.

In other news ……..

  • Getting the benefit of your business tax losses – If you're a sole trader or individual partner, you may be able to use your business tax loss to offset other assessable income you earn personally.
  • Downsizer super contributions: getting it right – "Downsizer" contributions let you contribute some of the proceeds from the sale of your home into superannuation, but there are several important eligibility requirements.
  • Health insurance and your tax: uncovered– If you don't hold private hospital cover or are thinking about dropping it, you could be hit with an extra tax surcharge of up to 1.5% or cost yourself extra premiums in future.
  • Small business CGT concessions: when do I qualify? – CGT concessions allow you to reduce or eliminate the capital gain from the sale of a business asset, whether it's held directly by your business entity or in another related structure.
  • Unpaid super: important amnesty update for employers – The government is getting tough on unpaid compulsory super guarantee contributions, but fortunately for businesses it has recently announced a revised "grace period" to rectify past non-compliance.
  • Selling shares: how does tax apply? – Each time you sell a parcel of shares, you trigger a "CGT event" and you must work out whether you've made a capital gain or capital loss on that parcel.
  • ATO to scrutinise every return for Tax Time 2019 – The ATO has announced that it will scrutinise every tax return lodged during Tax Time 2019 as part of its ongoing focus on "closing tax gaps".
  • Beware of insurance changes in superannuation – Since July this year, super funds have been required to cancel insurance on accounts that have not received contributions for 16 months unless you elect to continue the cover. Inactive super accounts with balances of under $6,000 will be automatically consolidated with your other accounts or transferred to the ATO.

In addition, you'll find a Due Diligence Checklist to help with various considerations when acquiring a business.

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          

 

       

Solving today's issues & seeing tomorrow's opportunities

Liability limited by a scheme approved under Professional Standards Legislation


Getting the benefit of your business tax losses

When you're starting a new business venture, it may take some time before the business becomes profitable. And there may be other situations where an established business operates at a loss in a particular year. So, what does this mean tax-wise? When your deductions in an income year are greater than your assessable income, you have a "tax loss". You generally can't receive a refund for a tax loss, but you can use it in other ways.

If you're a sole trader or individual partner, you may be able to use your business tax loss to offset other assessable income you earn personally. This includes salary and wages from employment and income from personal investments.

But watch out: if the loss is "non-commercial", you can't use it immediately to offset your other income. Instead, you must defer it.

Learn more about this...


Downsizer super contributions: getting it right 

"Downsizer" contributions let you contribute some of the proceeds from the sale of your home into superannuation – but there are several important eligibility requirements.

Are you thinking about selling the family home in order to raise funds for retirement? Under the "downsizer" contribution scheme, individuals aged 65 years and over who sell their home may contribute sale proceeds of up to $300,000 per member as a "downsizer" superannuation contribution (which means up to $600,000 for a couple).

These contributions don't count towards your non-concessional contributions cap and can be made even if your total superannuation balance exceeds $1.6 million. You're also exempt from the "work test" that usually applies to voluntary contributions by members aged 65 and over.

Learn more about this...


Health insurance and your tax: uncovered 

If you don't hold private hospital cover – or are thinking about dropping it – make sure you understand the financial consequences. You could be hit with an extra tax surcharge of up to 1.5% or cost yourself extra premiums in future. 

Levies, surcharges and loadings – the terminology around health insurance and tax can be bewildering! But if you don't hold private hospital cover, you need to understand how this may affect your tax.

The Medicare levy surcharge (MLS) is a tax penalty you must pay if you earn above a certain amount and don't take out a sufficient level of private hospital cover for you and all of your dependants. It's designed to give you a financial incentive to insure privately. The MLS is applied by the ATO at tax time and included in your assessment.

Learn more about this...


Small business CGT concessions: when do I qualify? 

CGT concessions allow you to reduce – or in some cases, completely eliminate – the capital gain from the sale of a business asset, whether it's held directly by your business entity or in another related structure.

What's more, the concessions also allow you to make extra super contributions – sometimes up to $1,515,000 – in connection with the sale of business assets. This is an attractive opportunity for many small business owners heading for retirement, especially given the restrictive annual contributions caps that usually apply.

There are various concessions available, each with their own eligibility rules. There are two basic conditions you must meet before you can access any of the concessions. The first requirement tests whether your business is "small" enough to qualify. There are two alternative tests: a turnover test and a net assets test. The second major requirement is that the capital gain must arise from the sale (or other CGT event) of an "active" asset.

Learn more about this...


Unpaid super: important amnesty update for employers 

The launch of Single Touch Payroll (STP) will dramatically improve the ATO's ability to monitor employers' compliance with compulsory super laws moving forward. This electronic reporting standard is now mandatory for all Australian businesses and gives the ATO fast access to income and superannuation information for all employees.

The government is getting tough on unpaid compulsory super guarantee (SG) contributions, but fortunately for businesses it has recently announced a revised "grace period" to rectify past non-compliance. All businesses should review their super compliance to consider what action they may need to take.

The timing of your disclosure is important. The proposed new amnesty will cover both previous disclosures made since 24 May 2018 (under the old amnesty scheme that the government failed to officially implement) and, importantly, disclosures made up until six months after the proposed legislation passes parliament.

 

Learn more about this...


Selling shares: how does tax apply? 

Whether you own just a few listed shares or have an extensive portfolio, understanding how capital gains tax (CGT) applies when you sell your shares can help you plan your trades effectively. If you trade shares on a scale that amounts to a business of share trading, talk to your tax adviser about the different tax regime that applies.

Each time you sell a parcel of shares, you trigger a "CGT event" and you must work out whether you've made a capital gain on that parcel (where the proceeds you receive exceed the cost base) or capital loss (where the cost base exceeds the proceeds). You also trigger a CGT event if you give the shares away as a gift – perhaps to a family member. For tax purposes, you're deemed to have disposed of the shares at their full market value.

All of your capital gains for the income year are tallied and reduced by any capital losses. This includes your gains and losses from all of your assets that year, not just shares. If you have an overall "net capital gain", this is included in your assessable income and taxed at your marginal tax rate. If you have a "net capital

loss", you can't offset this against ordinary income like salary or rental income. Instead, a net capital loss can be carried forward to future years to apply against future capital gains.

 

Learn more about this...


ATO to scrutinise every return for tax time 2019 

The ATO has announced that it will scrutinise every tax return lodged during Tax Time 2019 as part of its ongoing focus on "closing tax gaps".

Assistant Commissioner, Karen Foat, said taxpayers who have done the wrong thing may be subject to an audit, even if the over-claim of deductions is minor. Third party data indicating under reported income, and deductions that appear high compared to people with a similar job and income level, tend to raise concerns, Ms Foat said.

If you're subject to an audit, it's not always doom and gloom. In some cases, you may get a higher deduction if the ATO discovers that you haven't claimed something you're entitled to. For example, you may be entitled to a deduction for depreciation on a laptop or other technology used for work but had incorrectly calculated the claim or omitted it altogether.

In the event of an audit and you're found to have over-claimed, the ATO may apply penalties depending on your behaviour. If you're found to have over-claimed based on a genuine mistake, for example, if you've claimed the costs which are private and domestic in nature that are sometimes used for work or study (eg sports backpack or headphones), the ATO may choose not to apply penalties.

 

Learn more about this...


Beware of insurance changes in superannuation 

Since July this year, super funds have been required to cancel insurance on accounts that have not received any contributions for at least 16 months unless the member elects to continue the cover. In addition, inactive super accounts with balances of under $6,000 will either be automatically consolidated by the ATO with other accounts you may hold or transferred to the ATO. If your super is transferred to the ATO, any insurance will also be cancelled.

This applies to life insurance, total and permanent disability (TPD) insurance and income protection (IP) insurance that you may have with your super fund.

Another change coming to super funds in the not too distant future of 1 April 2020 is opt-in insurance for members under 25 years old and those with account balances of less than $6,000. From that date, members under 25 who start to hold a new choice or MySuper product will need to explicitly opt-in to insurance. Currently, the onus is on the member to opt out of insurance if they do not want it.

 

Learn more about this...


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Spry Roughley Chartered Accountants

Phone
(+612) 9891 6100

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(+612) 9635 4782

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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