TaxWise Business News is published each quarter. The September, 2011 issue of TaxWise Business is now available from the main site.

This quarter’s issue includes the following articles:

• ATO Compliance Target Areas 2011-12
• Taxing Carbon
• Managing Tax Debts
• Proposed Not-for-profit Reforms
• Car Fringe Benefits Rules Changed
• Excess Super Contributions Tax
• CGT Small Business Conscessions Tool

Remember that you can subscribe to the Enewsletter version of TaxWise Business News to have it emailed to you each quarter. Simply head to the newsletter sign up page or enter your details into the Subscription Box on your right.

Did you know you can still access previous editions of all our newsletters in our newsletter archive? Check them out below.  

TaxWise Individual News

TaxWise Individual News is currently published bi-annually and emailed (or snail-mailed) out to all interested personal tax clients. You can download each issue in PDF format or click the links to read through individual articles online.  

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TaxWise Business News

TaxWise Business News is produced quarterly and emailed (or snail-mailed) out to interested clients. Visitors to our site can access individual articles online by using the links provided or download complete issues in PDF format.  

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Business Plus+ Newsletter

The aim of this newsletter is to give you some useful articles, tips and pointers that will make a difference to your business, irrespective of it’s size or ownership structure. Follow the links to browse through individual articles or download the latest edition in PDF format.  

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Tax Update Monthly

Our monthly Tax Update newsletter is written in an easy and relaxed style to keep you up-to-date with important tax changes. This particular newsletter is available exlusively to clients for download. Please log in for download links.  

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The September edition of our Tax Update newsletter is now available for download from the main site.

This issue includes information on:

• ATO Clamps Down on GST Fraud and Cash IncomeMeaning of ‘Cost Price’ of a Car for FBT Purposes
• ATO Data Matching: Flood and cyclone reconstruction levy
• Is an Investment Made by a Trustee Always on Capital Account?
• Government Committed to Superannuation Reforms
• ATO Warning About Illegally Accessing Super Early

This particular newsletter is available for download exclusively for clients and Facebook Fans (a username and password is required).

If you are not a client and would like a copy of the September Tax Update – or you do not know your login details – simply email Christie (christie @ lewistaxation.com.au) and I will be more than happy to forward a copy on to you.

The ATO will collect names and addresses of approximately 735,000 individuals who received the Australian Government Disaster Recovery Payment, and New Zealand citizens holding a special category visa who received an ex-gratia payment from Centrelink.

This latest data matching effort, called the Temporary Flood & Cyclone Reconstruction Levy Data Matching Project (what a mouthful that is!) will electronically match information with certain sections of ATO data holdings.

The program will allow the ATO to automatically exempt individuals from the Temporary flood and cyclone reconstruction levy and also identify non compliance with lodgment obligations under tax law.

The August edition of our Tax Update newsletter is now available for download from the main site.

This issue includes information on:

• ATO Focus on SMSFs
• Warning: Investing in Overseas Property
• New This Year to Family Tax
• Superannuation: Common Mistakes Made by Employers
• Car Depreciation Limit for 2011/12
• Reasonable Overtime Meal Allowance Amounts 2011/12

This particular newsletter is available for download exclusively for clients (a username and password is required).

If you are not a client and would like a copy of the August Tax Update – or you do not know your login details – simply email Christie (christie @ lewistaxation.com.au) and I will be more than happy to forward a copy on to you.

New tax thresholds were introduced at the start of the financial year for payroll tax in NSW. The annual payroll tax threshold is now $678,000 and the rate is currently 5.45%.

From 1 July 2011, the monthly threshold is:

Remember that your monthly payment is due just 7 days after the end of each month. Annual reconciliations are due 21st July.

I was at the NSW Office of State Revenue website earlier in the week and noticed they have an online payroll tax course to help employers unnderstand payroll tax. I must admit, I haven’t had time to check it out yet  but if you are registered for Payroll Tax (or think you might need to be), it could be worth a look at http://elearning.osr.nsw.gov.au/payrolltax/.

The NSW Government is also introducing the Jobs Action Plan from 1 July as an incentive for businesses to employ more workers (as opposed to the big, fat dis-incentive payroll tax offers you ). If your business employs staff in positions that are new jobs, you may be eligible to receive a payroll tax rebate.

For more information on the new scheme and to find out if you’re eligible for the Jobs Action Plan, visit the Rebate Scheme (Jobs Action Plan) page at NSW OSR.

The July edition of our Tax Update newsletter is now available for download from the main site.

This issue includes information on:

• Occupations in the spotlight for the 2011 income year
• Tax laws amended to allow income ‘streaming’ by trusts
• Flood levy exemption declaration
• Deductions for study and job seeking expenses
• ATO warning: Unpaid directors fees
• ATO focus on unpaid present entitlements owed to companies
• Deductions for TPD insurance 

This particular newsletter is available for download exclusively for clients (a username and password is required).

If you are not a client and would like a copy of the July Tax Update – or you do not know your login details – simply email Christie (christie @ lewistaxation.com.au).

The June edition of our Tax Update newsletter is now available for download from the main site.

This issue includes information on:

• Budget 2011
• ATO Focus on Employer Super Contributions
• Compliance Project: Government Stimulus Payments
• FBT Car Parking Thresholds
• CGT Improvement Thresholds

With tax time just around the corner, I’ve also prepared an Individual Tax Return Checklist (lots of hints on deductions) and a Year End Checklist for Business. These can both be download from the same area of the site.  

This particular newsletter is available for download exclusively for clients (a username and password is required).

If you are not a client and would like a copy of the April Tax Update – or you do not know your login details – simply email Christie (christie @ lewistaxation.com.au).

On Friday, the ATO released  ’100 People,’ a  representation of all the individual taxpayers in Australia as though they were just one hundred people.  

The numbers are drawn on information from Taxation statistics 2008-09, which is summary of tax returns, and other tax data for that financial year.

Transcript Highlights

Twelve point three million people sent their tax returns to us in the 2009 income year. Below we represent the millions of tax returns we received as 100 people.

We received 52 from males and 48 from females.

We received tax returns from five different generations:

• 6 from generation Z
• 21 from generation Y
• 33 from generation X
• 30 from baby boomers
• 10 from seniors.

People lodged their tax returns in different ways:

• 71 through a tax agent
• 19 using e-tax
• 10 by paper.

 After we assessed the tax returns:

• 84 people received a refund
• 12 people owed tax
• 4 balanced perfectly.

Ten people received the government superannuation co-contribution.

Eight people operated a business in their own name

• 2 made a loss
• 6 made a profit.

Below we show the proportion of all net tax paid when we ranked our 100 people by their taxable incomes.

• People with the top three taxable incomes paid 31% of all net tax.
• The next six paid 18% of all net tax.
• The next 31 paid 41% of all net tax.
• The next 35 paid 10% of all net tax.
• The last 25 didn’t pay any tax.

The above is copied from the presentation at the ATO website. ’100 People’ can be viewed in it’s entirety at www.ato.gov.au/100people

“The aim of the ’100 People’ concept is to provide an easy to understand and entertaining insight into taxation system statistics,”  Tax Commissioner, Mr D’Ascenzo said.

“This new concept gives people a better understanding of our country’s tax system. It’s a good way for people to get a greater appreciation of how our community is represented in our tax system and also allows people to see how their personal circumstances fit in with everyone else’s.

“’100 People’ shows, for instance, which states and territories taxpayers live in, their broad occupational groupings, which generations they belong to, how many have car salary packaging, who pays the majority of the income tax and how many people make tax-deductible gifts.

“I encourage the community to take advantage of this innovative and informative resource.”

IMHO, I think the concept of making plain the Tax Stats for the general public is a great idea. I look forward to more like this! What do you think?

The May edition of our Tax Update newsletter is now available for download from the main site.

This issue includes information on:

• Flood Levy Passed
• Personal Services – Data Matching Program
• ATO Withdraws 2009 Cash Sales Benchmarks
• Supply of Land Development Not a Going Concern
• FBT: Benchmark Interest Rate
• FBT: Cents per Kilometre Basis

This particular newsletter is available for download exclusively for clients (a username and password is required).

If you are not a client and would like a copy of the April Tax Update – or you do not know your login details – simply email Christie (christie @ lewistaxation.com.au).

TaxWise Business News is published each quarter. The Febraury, 2011 issue of TaxWise Business is now available from the main site.

This issue includes the following articles:

 It’s a New Year – time to get your tax affairs in order

 ATO and Government assistance for flood-affected taxpayers

 The flood levy – how it will affect you

 Online shopping – what all the fuss is about

More trouble for trusts – Colonial First State Investments

ATO – firmer action on debt collection.

Remember that you can subscribe to the Enewsletter version of TaxWise Business News to have it emailed to you each quarter. Simply head to the newsletter sign up page or enter your details into the Subscription Box on your right.

The Australian Taxation Office has released a Taxation Ruling – Division 7A Loans: Trust Entitlements.  The ruling expresses the Commissioner of Taxation’s opinion on the circumstances in which a private company with a “present entitlement to an amount from an associated trust”, makes a loan to that trust in circumstances where funds representing that present entitlement remain intermingled with funds of the trust.  

Division 7A is a provision of the Income Tax Act which involves companies and non-company tax payers.  In very broad terms, it creates a loan between a company and an associated tax payer whenever the company does any of the following with the associated tax payer: 

• loans money;
• advances money;
• provides credit to or any other form of financial accommodation; or
• makes a payment on their behalf.

Where a Division 7A loan arises, then it will become a “deemed automatic dividend” to the associated tax payer, unless a seven year unsecured or 25 year secured loan agreement is  put in place before the relevant income tax return is lodged.

If you currently conduct business via a trust structure, this ruling may affect you. 

At the end of the year, you may distribute profits to a company, but do not actually give the company the physical cash.  This specific scenario is identified in the Taxation Office ruling and will be treated as a Division 7A loan which will result in an “automatic deemed dividend” being paid by the company to the associated tax payer, ie the Trust. 

This applies for trust distribution to companies made after 16 December 2009.  You can avoid the treatment of the distribution as a dividend if you implement a new Division 7A loan agreement each financial year – but this may lead to other problems.

If you are operating your business through a trust, this is a complex matter and will have major implications regarding your trust 2010 and future income tax returns, and possibly your current business structure.  If you are operating through a trust, we recommend you contact your accountant for reviews of the matters as it affects your particular circumstances at your earliest opportunity.

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The Tax Office is continuing its efforts to catch out businesses pocketing cash off the books. A year ago now, I posted that the data matching program had expanded to cover RTA records among other things. Now the  program has extend its reach again with the introduction of two new initiatives.

1.  The program now includes data from banks that identify credit card and EFTPOS sales made by Australian businesses, and
2.  data from the sale of plasterboard in NSW to plasterboard installers.

The information obtained is compared with taxpayer information and the ATO’s small business benchmarks to identify the naughty businesses which have not reported all their income.

Some businesses identified at risk of potentially under reporting their income may be contacted by the ATO and asked to consider making a voluntary disclosure of any under reported amounts. In other cases the data obtained will also be used to support default assessments of a business’s tax liabilities, which could mean the business is then liable for penalties as well as any unpaid tax.

To find out more about the ATO’s data matching program, speak with your tax agent or head on over to the Tax Office website at www.ato.gov.au. 

Just a reminder that new payment summary reporting obligations have been introduced as a result of the recent income test reforms.

An employer who makes Reportable Employer Superannuation Contributions (RESC) on behalf of an employee is required to disclose the total amount on the employee’s payment summary for the year. This commenced 1 July 2009 so it will affect Payment Summaries issued this year. 

Common examples of contributions that qualify as RESCs include:

• salary sacrificed contributions (made under a salary sacrifice agreement in excess of the 9% Super Guarantee) 
• contributions under employment contract or obligation (again, these would be contributions in excess of the 9% SG made as part of an agreement to the renumeration package).

Contributions not required to be disclosed on the payment summary include your usual 9% Super Guarantee (SG) contributions and contributions under an industrial award.

In addition, bosses will need to provide details of RESCs made for employees as part of the yearly withholding report sen to the ATO by 14 August each year.

The RESC concept is one of the biggest changes to the income test reforms since RESCs will be included in income tests for means-testing a wide range of tax-related concessions and obligations (certain tax offsets and deductions, the Medicare Levy surcharge).

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The Tax Office is reminding businesses that while staff Christmas parties can attract fringe benefits tax (FBT) there may be exemptions available depending on the venue and cost per employee.

There are two main exemptions to FBT that could apply to Christmas parties – exempt property benefits and exempt minor benefits.

Exempt property benefits:

• Christmas party costs include things like food and drinks served for employees as part of a Christmas party
• the cost to provide these goods is exempt from FBT if they are provided on a working day on business premises and consumed by current employees of that business.

If the property benefits exemption doesn’t apply because the party is held at a restaurant or separate venue, the costs may be considered minor benefits and FBT exempt.

Exempt minor benefits:

• cost per employee must be less than $300
• the exemption also applies to associates of employees such as spouses and children, provided the cost is less than $300 per associate
• gifts are also considered separately from the Christmas party so, provided the cost of a gift and the party are each less than $300, then both would be exempt from FBT.

Tax-exempt organisations have different provisions around providing entertainment to employees which means in most cases the costs of Christmas parties will attract FBT, though gifts may still be exempt as a minor benefit.

More information

The Tax Office has developed a fact sheet Fringe benefits tax and Christmas parties to help explain the FBT implications of your Christmas celebrations.

The Fringe benefits and Christmas parties fact sheet, along with more information on FBT, is available from the Tax Office website: http://www.ato.gov.au/businesses/pathway.asp?pc=001/003/027

A federal government plan to means test the rebate for private health insurance has been defeated in the Senate.

Labor wanted to means test the popular 30 per cent rebate for individuals earning more than $75,000 a year and couples earning more than $150,000 a year. Its legislation would also have hit the wealthy with a higher Medicare levy surcharge if they opted out of private cover.

The suite of bills laying out the changes was voted down in the Senate on Wednesday 9 September, 37 votes to 25.

Separated parents could find themselves in danger of not paying the right amount of support for their kids if they don’t submit their tax returns on time.

Child support assessments are calculated using both parents’ income details, along with the age of their children and the level of care each parent provides.

This means it’s important for separated parents who earnt more than $18,808 during the 2008-09 financial year lodge their tax returns shortly after they receive their payment summaries.

Child Support Agency (CSA) National Enforcement Services Manager, Bill Volkers, said he understands people might put off doing their tax returns, but if a child support case is involved it is essential to promptly lodge tax returns to ensure assessments are accurate and fair. It is a legal requirement for most people to lodge their tax returns by the end of October.

“If your current child support assessment is based on an estimate of income, it is particularly important to promptly lodge your tax return to help ensure we are using the most accurate income for your assessment,” Mr Volkers said.

“Where a parent does not lodge a tax return, the CSA may have to use a default income rate if we are unable to obtain a customer’s income information another way.

“If an assessment is not accurate because the appropriate income details are not available, then a parent may have to make additional payments or pay back child support already received.

“Nobody wants the hassle of having to find money to pay, or pay back, child support later on down the line because the CSA didn’t have enough information available for an accurate child support assessment.

“All kids with separated parents deserve to have the appropriate amount of financial support, and this is more likely to occur if both separated parents promptly lodge their tax return.”

Parents preparing their own tax return can lodge online for free using e-tax, the Australian Tax Office’s secure and easy to use software. Alternatively, to lodge via paper, Tax Pack 2009 is available from most newsagents and ATO Shopfronts.

If parents have questions about how their income is taken into account for their child support assessments, they can contact the CSA on 131 272.

The Tax Office sure are fond of online calculators. The latest addition to the ATO’s online toolbox is the Education Tax Refund Calulator.

The Education Tax Refund (ETR) is available to you whether or not you are required to lodge a full tax return – it’s a refundable tax rebate.  

If you’re eligible, you can claim back certain education costs of up to $375 for each primary school child and up to $750 for each secondary school student.

This is the first year the ETR has been in effect and so there is still some confusion among taxpayers we’re seeing over what is and is not a claimable expense. For a listing of the types of items that are eligible and those that are not, you might like to take a look at over Education Tax Refund page.

Take it for a spin and tell us what you think (I haven’t used it myself). Try the ATO Education Tax Refund Calulator.

At tax time it pays to be extra cautious when handing over your tax details or entering into any tax related schemes. Dodgy tax schemes and scams are becoming more sophisticated and can come back to bite you.

Promoters of dodgy investment schemes take advantage of tax time by promising investors high returns or generous tax breaks.

If you invest in a dodgy investment scheme, you could be left with more than you bargained for – like a tax bill, long after your money and the promoter are gone.

It pays to investigate before you invest to prevent losing your hard-earned money and having to pay back any missing tax, interest or penalties.

Before you commit to any investment, get independent advice to make sure the investment is legitimate, including any claimed tax benefits.

The Assistant Treasurer, Senator Nick Sherry, has today released the Inspector-General of Taxation’s (IGT) report on the Review of the Tax Office’s administration of public binding advice.

Public binding advice is a type of Australian Taxation Office (ATO) ruling, which is published and which sets out in a binding manner the ATO’s position on how it will apply the tax law.

Even if public binding advice is later proven to be incorrect, taxpayers are protected from any tax, penalties or interest charges if they relied on the initial binding advice.

The IGT Review was initiated following changes to the law in 2006 aimed at making the ATO’s advice legally binding for a wider range of topics and subsequent concerns that the full benefits of greater certainty may not have been realised.

“Australia has a unique tax system with both public and private rulings – these work together to provide important community and business certainty,” said the Assistant Treasurer.

Today’s IGT’s report makes four key recommendations to give further and full effect to the widened public binding system. All but one recommendation has been accepted by the ATO.

“I am very pleased with the Inspector-General’s Report and also very pleased that the ATO has accepted most of its recommendations,” the Assistant Treasurer said.

“The ATO devotes considerable attention to the preparation of its guidance products to ensure taxpayers are not misled when following its advice.”

“Providing certainty to taxpayers in our system is a high priority and I firmly believe the work of the Inspector-General and the ATO will further enhance our tax administration.”

Key IGT recommendations the ATO has agreed to were that:

• further publicly available guidance should be provided to ATO staff on the full powers of the ATO to issue public binding advice on any matter involved in the application of the tax law, including on particular specified areas such as safe harbours;
• systems should be established to allow more immediate communication from the ATO to the wider community of any changes to practice statements; and
• the ATO seek independent legal advice on the meaning of “general administrative practice”.

The full report, which also contains the ATO response to all recommendations, is available at http://www.igt.gov.au/content/reports/public_binding_advice/default.asp.

The Assistant Treasurer, Senator Nick Sherry, is warning Australians of a suspected door-to-door scam by people claiming to be consultants from the Tax Office.

The bogus consultants ask people to sign up to a supposed Government program promising financial incentives, including a reduction in taxes.

“The offer is a fraud – the Tax Office does not participate in these types of unsolicited activities,” said the Assistant Treasurer.

“These people are breaking the law, so I am warning people to stay on guard and don’t get duped.”

“When making home visits for any Tax Office or Government initiative, tax officers will always make prior appointments and will show official Tax Office identification on arrival.”

“Under no circumstances should anyone give personal information including credit card, banking or super fund details to these people.”

“Anyone who has given personal information to an illegitimate source should immediately report it to their credit card provider, bank or super fund.”

The Assistant Treasurer said the Tax Office is working closely with a number of other Government agencies to detect these scams to help protect the integrity of the tax system.

“Unfortunately, at tax time, there is often an increase in people trying to take advantage of honest taxpayers through all kinds of scams,” said the Assistant Treasurer.

Anyone concerned about the legitimacy of the call or identity of a tax officer, should call the Tax Office on 13 28 61 and report any suspicious activities.

Anyone approached about accessing or investing in super should contact the Tax Office.