JULY / AUG / SEPT 2014

SuperStream starting 1 July for many employers

Under 'SuperStream', employers will need to be able to make super contributions on behalf of their employees by submitting data and payments electronically.

Equally, all superannuation funds, including SMSFs, will need to be able to receive contributions electronically.

Employers with 20 or more employees
From 1 July 2014*, these employers should start using the SuperStream standard to send contribution data and payments electronically.

Note(*):  The ATO is being flexible on the start date, provided the employer is doing their best to implement SuperStream, and has a firm plan to do so no later than 30 June 2015.

Employers with 19 or fewer employees
From 1 July 2015*, these employers will also be required to send contributions data and payments electronically.  However, some may choose to implement SuperStream sooner.

Note(*):  The ATO is also being flexible on this start date, provided the employer has a firm plan to do so no later than 30 June 2016.

Employers have two options for meeting SuperStream; either:
(a)     using software that conforms to SuperStream; or
(b)     using a service provider that can meet SuperStream on their behalf.

The ATO recommends that employers start investigating their options now, and has provided information and a list of providers on its website.

Editor:  If you need any assistance with SuperStream please contact our office, and we'll be glad to get you started and walk you through the process.

ATO's new Business Viability Assessment Tool

The ATO has designed and launched a new online tool to help businesses and tax agents determine whether a business is viable.

Once the tax agent or taxpayer has answered a series of questions, they will be provided with a report that will contain an overall viability assessment of their business based on the information they have provided, consisting of:

  • a summary of key financials and business performance; and
  • charts that provide a visual summary of the trends of key financial results generated by the business.

Editor:  If, for any reason, you would like to discuss the above tool, please contact our office.

ATO Div. 7A benchmark
interest rate

The benchmark interest rate for 2014/15, for the purposes of the deemed dividend provisions of Div.7A, can now be calculated as 5.95% (down from 6.20% for 2013/14).

ATO warning on 2013/14
work-related deductions

This tax time the ATO says that, in relation to work-related expenses, it will not be limiting its attention to certain occupations.

Instead, particular attention will be paid to work-related expense claims relating to:

  • overnight travel;
  • transporting bulky tools and equipment; and
  • the work-related proportion of use for computers, phones or other electronic devices.
2014/15 Luxury car tax (LCT) limit

The LCT threshold for the 2014/15 financial year is $61,884 (increasing the previous year's LCT threshold of $60,316 by an indexation factor of 1.026).

IGT – ATO debt collection

With uncollected taxes blowing out to  $17.7 billion in 2012/13 (over 60% owed by small businesses), the Inspector General of Taxation (IGT) has stepped into the fray and announced that he is going to review the ATO's approach to debt collection.

The ATO has stated that more recent increases are a result of economic conditions and its assistance to viable businesses to stay afloat, but the IGT is concerned that it is a persistent source of taxpayer complaint.

Other aspects of the ATO’s debt management, including its use of third party debt collectors, have also been questioned.

GIC and SIC rates for the 2014 September quarter

The ATO has released the 2014 September quarter rates for the General Interest Charge (GIC) and the Shortfall Interest Charge (SIC) as follows:

GIC annual rate  9.69%
GIC daily rate  0.02654794%
SIC annual rate 5.69%
SIC daily rate 0.01558904%
Some important tax changes from 1st July

Medicare Levy
The Medicare levy rises from 1.5% to 2%.

2% Deficit Levy
The new "Deficit Levy" (tax on high income earners) applies to taxable income in excess of $180,000.
Tax rates for the 2014/15 income year are as follows:

Taxable Income
Taxable Payable
0 – 18,200 Nil
18,201 – 37,000 Nil + 19% of excess over $18,200
37,001 – 80,000 $3,572 + 32.5% of excess over $37,000
80,001 – 180,000 $17,547 + 37% of excess over $80,000
180,001+ $54,547 + 47% of excess over $180,000

 The above rates do not include the Medicare levy of 2%.
The compulsory employer paid super contribution rises from 9.25% to 9.5%.

Superannuation contribution caps
The general concessional contributions cap rises from $25,000 to $30,000.  For individuals aged 49 or over on 30 June 2014, the concessional contributions cap is $35,000.

The non-concessional cap is increased from $150,000 to $180,000.  That means the 3-year bring forward rule increases from $450,000 to $540,000.
PAYG instalments threshold increases from 1 July 2014
The  ATO has announced changes to the pay as you go (PAYG) instalments entry and exit thresholds.

From 1 July 2014, PAYG instalment thresholds have increased, which means that some taxpayers no longer need to pay instalments.

The entry and exit thresholds for:

  • business or investment income will increase from $2,000 to $4,000;
  • adjusted balance of assessment will increase from $500 to $1,000; and
  • notional tax will increase from $250 to $500.

There will no longer be a requirement for entities registered for GST to remain in the PAYG instalment system, if they have a zero instalment rate.

The ATO says that if taxpayers no longer meet the entry rules, they will be automatically exited from the PAYG instalments system.  It will send a letter to notify tax agents of a client’s automatic withdrawal.

If they want to continue to pay instalments towards their end of year tax liability, they can voluntarily re-enter the PAYG instalment system.

ATO "data mining" program targets offshore tax evaders

The ATO has announced that it is "mining data" to identify individuals with undisclosed offshore income and assets.

The new information would be used to encourage people to disclose under Project DO IT, the ATO’s offshore disclosure initiative.

The ATO will significantly increase its compliance focus by examining data including:

  • information from overseas tax authorities on Australians with offshore investments and bank accounts;
  • information from Australian and foreign banks on fund flows, interest and account balances; and
  • information from informants about offshore accounts, and money transfers to and from offshore bank accounts.

Deputy Commissioner Michael Cranston said “Most people getting in touch with us are reporting accounts in Switzerland, Israel, Lichtenstein, the Netherlands, South Africa and Hong Kong, so we’ll obviously be looking closely at flow of funds to those countries."

Now phone scammers target taxpayers with threats

Taxpayers are being warned to be on the lookout for a malicious scam that attempts to intimidate them into paying a fake tax debt over the phone.

“This scam is particularly concerning because it threatens taxpayers with legal action or arrest if they do not immediately hand over money, and their personal financial details, over the phone,” said ATO Chief Technology Officer, Todd Heather.

If people receive a call from the ATO and are concerned about providing their personal information over the phone, they should ask for the caller’s name and phone them back through the ATO’s switchboard on 13 28 69.

SMSFs and overseas seminars

The   ATO says that it is  keeping an eye on promoters who advertise questionable SMSF conferences in overseas destinations.

The promotions target SMSF trustees citing they can claim a deduction for the full cost of the travel, accommodation and meals component incurred when attending these seminars or workshops.

The conferences appear to contain minimal training related to SMSF activities and the ATO is likely to target any such expenses claimed by SMSFs.

Get a second (investment) opinion

The ATO is encouraging anyone unsure about a tax investment they have been offered to seek a second opinion from an independent and trusted tax professional, so as not to be fooled by legitimate-looking tax avoidance schemes.

Deputy Commissioner Tim Dyce says illegal schemes are usually designed to appear legitimate, even to experienced investors, but there are tell-tale signs you can look out for.  In particular, he advises people to watch out for unusual financing arrangements such as round-robin financing and non-recourse loans.

In one case, promoters offered a ‘mortgage management plan’ promising to assist investors in repaying their home loan sooner.

The scheme involved using the equity in their home to get additional loans to claim investment deductions equivalent to home loan interest payments.

Be wary of promoters that:

  • offer zero-risk guarantees for their product;
  • refer you to a particular adviser or expert. They may seek to persuade you by claiming the adviser has specific knowledge about the arrangement and the promised tax benefits; and
  • ask you to maintain secrecy to protect the arrangement from rival firms and discourage you from obtaining independent advice.
Small business online dispute resolution service
The Minister for Small Business has announced that small businesses in a dispute are set to benefit from the launch of Dispute Support, a new online dispute resolution information and referral tool.

"Small businesses have told us it can be difficult to find alternative dispute resolution services and to work out which one is most suited to their needs."

Dispute Support is a simple to use online tool to help small businesses identify the most appropriate low cost dispute resolution service for their dispute.

It also provides information on understanding and managing disputes, and tips to help avoid disputes in the future.  It is available on the Australian Small Business Commissioner’s website.

New ATO initiatives for small businesses

Editor:  In a recent speech, the Commissioner of Taxation, Chris Jordan, announced some new initiatives for small business.  The following are excerpts from his speech.

Red Tape
The Commissioner stated that the ATO was trying to reduce the amount of red tape because it understands "that meeting your obligations takes you away from your real business, and what you are good at."

He said that the ATO has to:

  • provide more personalised, accessible and reliable services;
  • think about the effects their activities have on cash flow, and the everyday running of small business; and
  • work harder to ensure its information and advice is timely, streamlined, personalised, accurate and consistent.

New initiatives
To that end the ATO has introduced:

  • Small Business Fix-it Squads which are rapid-design groups made up of small business operators and intermediaries, and representatives from federal, state and local government, all working together to examine problems and solutions from the perspective of small business.
  • A new business-friendly approach to managing small business debt.
He said that his message remains, "if you run a small business and you get into trouble, pick up the phone or go online and let us know, so we can work with you to find a solution that suits your circumstances." 
  • A new Small business newsroom on their website which is a move away from multiple newsletters, giving taxpayers a one-stop online shop where they get tax and superannuation news and alerts.
As well as receiving the latest news, they will be able to watch short video clips, add tax dates to their own calendars to create reminders and share articles with each other.
ATO warns property developers to declare income

Editor:  The ATO has issued a media release warning property developers against using trusts to return the proceeds from property developments as capital gains instead of income.

Deputy Commissioner Tim Dyce said, “A growing number of property developers are using trusts to suggest a development is a capital asset to generate rental income, and claim the 50% capital gains discount.

Furthermore, he said that the ATO has begun auditing property developers who are carrying out activities which seem to be in conflict with their claim that they are undertaking a capital investment.

Some pointers to that are:

  • finance arrangements indicate the property is to be sold within a certain timeframe;
  • communication with local councils indicate sales plans; or
  • real estate agents are engaged early in the process for off-the-plan sales.

In addition, the property is often sold soon after completion of the development, where the underlying property may have been held for as little as 13 months.

He suggested that taxpayers in these situations should consider self-amending to correct their tax return, as penalties of up to 75% of the tax avoided can apply.

SMSFs and succession planning

In a recent speech, an ATO Deputy Commissioner emphasised how important it was for trustees of SMSFs to have a plan in place for the succession and control of the SMSF on the death or incapacity of members who are trustees (or directors of the corporate trustee).

He said that other documentation such as wills, enduring powers of attorney (EPoA), binding death benefit nominations and reversionary pension documents should be checked to ensure they are consistent and in agreement with the members’ goals.

In some cases, surviving member/s of the fund may not wish to continue as trustee/s (or director/s of the corporate trustee).

An exit strategy, that can enable the surviving members to enjoy the benefits of the fund without having to remain trustees, is to appoint an approved trustee licensed by APRA (that is, become a small APRA fund).

Editor:  If you would like to discuss any of this please contact our office.

Ignorance of the law is no excuse

In a recent case, a taxpayer decided to transfer shares he owned and had inherited, into a joint account he held with his wife without first asking his accountant/tax agent.

His accountant subsequently correctly advised him that he had triggered a capital gain of $19,415.

He appealed the ATO's decision to tax him to the AAT and argued that he just wanted to transfer his shares into joint names with himself and his wife who, in this case, was "entitled in equity to half of them anyway."

However, in deciding against the taxpayer the AAT said". . . partners to a marriage or marriage-like relationship who hold the assumption that his or her assets are 'our' assets, would be well advised to continue with that assumption, without taking the step of formalising any joint ownership arrangements, as there will be a taxing point if they do, if the transferred assets have increased in value."

SMSFs and trauma insurance

From 1 July 2014, an SMSF can generally only provide an insured benefit for a member that is consistent with one of the following conditions of release of a member's superannuation benefits:

  • death;
  • terminal medical condition;
  • permanent incapacity (causing the member to permanently cease working); or
  • temporary incapacity (causing the member to temporarily cease working).
Trauma insurance is not consistent with any of these conditions of release.

Trauma insurance typically pays out a lump sum where an insured person is diagnosed with one of the critical illnesses, or injuries, defined in the policy, such as cancer, stroke, coronary bypass and heart attack.

Therefore, from 1 July 2014, an SMSF that takes out a new trauma insurance benefit in relation to a member will generally be in breach of the new regulation.   The new regulation does not apply to insured benefits for members who joined a fund before 1 July 2014, and were covered by that benefit before 1 July 2014.
CPI – June 2014 quarter

The CPI indexation factor for the June 2014 quarter is 105.9 (an increase of 0.5 from the December 2013 quarter of 105.4).

This indexation factor is now basically only used (in a taxation context) for FBT purposes in relation to remote area housing.

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

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