Archive for May, 2014

SuperStream requirement delayed

Tuesday, May 27th, 2014

According to Darin Tyson-Chan of SelfManagedSuper Magazine, the date for SMSFs to be able to receive contributions electronically from employers with 20 or more staff members under the new SuperStream rules has been pushed back.

Originally, SMSFs had to be SuperStream compliant by 1 July of this year, but the requirement now will not come into effect until 3 November.

At that date, SMSFs will have to have a bank account that can receive electronic payments and the ability to receive electronic contribution information.

You can read the full article by clicking here.

2014 Federal Budget – Outline of key announcements

Monday, May 19th, 2014

PERSONAL TAXATION

2% deficit levy for three years from 1 July 2014 on incomes over $180,000
The Treasurer announced the introduction of a Budget deficit levy (ie tax), which will apply for three years from 1 July 2014. This temporary levy will apply at 2% for incomes over $180,000 (ie 2% on taxable income in excess of $180,000).

EXAMPLE: An individual with a taxable income of $200,000 will pay 2% of $20,000, ie a levy of $400.

The new levy is expected to affect a relatively small number of people (around 400,000 taxpayers). When taking into account this new levy and the Medicare levy (which is already legislated to increase from 1.5% to 2% from 1 July 2014), the top marginal tax rate will be 49% from 1 July 2014 to 30 June 2017.

As a result of the new deficit levy, the government will also increase the FBT rate (see Business Taxation).

Medicare levy thresholds for families increased for 2013–2014
From 2013–2014, the Medicare levy low-income threshold for families will be increased to $34,367 (up from $33,693 for 2012–2013). The additional amount of threshold for each dependent child or student will also be increased to $3,156 for 2013–2014 (up from $3,094).

The low-income threshold for individuals will remain at $20,542 for 2013–2014 (unchanged from 2012–2013). Likewise, the low-income threshold for senior Australians will remain at $32,279 for 2013–2014 (unchanged from 2012–2013). This threshold applies to those entitled to the seniors and pensioners tax offset (SAPTO).

Several tax offsets to be abolished
The Treasurer announced that the following tax offsets will be abolished from 1 July 2014:

  • nearly all of the dependant tax offsets, including the dependent spouse tax offset, for all taxpayers; and
  • the mature age worker tax offset, which will effectively be replaced by new incentives to employ older works (see Other Changes).

WELFARE/PENSION MEASURES

Age Pension age to increase to 70 by 2035
The Treasurer confirmed his earlier announcement that the government will raise the eligibility age for the Age Pension to 70 years by 2035.

From 1 July 2025, the qualifying age will continue to rise by six months every two years from the qualifying age of 67 years (which will apply by that time) to gradually reach a qualifying age of 70 years by 1 July 2035. Individuals born before 1 July 1958 will not be affected by this measure.

Family Tax Benefit changes: two-year freeze on rates and other changes
The government will freeze the current Family Tax Benefit (FTB) payment rates for two years from 1 July 2014. Under this measure, indexation of the maximum and base rates of FTB Part A and the rate of FTB Part B will be paused until 1 July 2016.
The Treasurer also announced other changes to FTB, including a reduction in the FTB Part B primary earner income limit from $150,000 per annum to $100,000 per annum, with effect from 1 July 2015.

Freeze on eligibility thresholds for Australian Government payments
The government will freeze the eligibility thresholds for Australian Government payments for three years. This will apply to:

  • non-pension payments (Family Tax Benefit, Child Care Benefit, Child Care Rebate, Newstart Allowance, Parenting Payments and Youth Allowance) for three years from 1 July 2014; and
  • pension and related payments (Age Pension, Carer Payment, Disability Support Pension and the Veterans’ Service Pension) from 1 July 2017.

BUSINESS TAXATION

FBT tax rate impacted by deficit levy
The Treasurer said that in order to prevent high income earners from utilising fringe benefits to avoid the levy, the FBT rate will be increased from 47% to 49% from 1 April 2015 until 31 March 2017. The cash value of benefits received by employees of public benevolent institutions and health promotion charities, public and not-for-profit hospitals, public ambulance services and certain other tax-exempt entities will be protected by increasing the annual FBT caps. In addition, the fringe benefits rebate rate will be aligned with the FBT rate from 1 April 2015.

Reduction in R&D offset rates
The rates of the refundable and non-refundable research and development (R&D) tax offsets will be reduced by 1.5 percentage points with effect from 1 July 2014. This means that the refundable offset will be reduced to 43.5% and the non-refundable offset will be reduced to 38.5%.

Employee share scheme reform on hold
Many had expected the Treasurer to announce long-awaited changes to simplify the application of the employee share scheme rules. However, the Budget was silent on this.

The rules, which have operated since 1 July 2009, have been repeatedly criticised as being too complex, in need of simplification and a disincentive for companies to offer their employees share plans. While it is understood that the government is essentially receptive to the need for change, the Budget did not provide any welcome news in this area.

SUPERANNUATION

Option to withdraw excess non-concessional contributions
The government will give individuals the option of withdrawing excess non-concessional contributions made from 1 July 2013 and any associated earnings, with those earnings to be taxed at the individual’s marginal tax rate. (Non-concessional contributions notably include non-deductible personal contributions made from a member’s after-tax income.)
Currently, superannuation contributions that exceed the non-concessional contributions cap are taxed punitively at 46.5%. The proposed new measure will bring the tax treatment of excess non-concessional contributions in line with that for excess concessional contributions, for which taxpayers already have a withdrawal option.

Superannuation guarantee rate will rise to 9.5% on 1 July 2014
Instead of pausing the superannuation guarantee rate at 9.25% (as previously announced), the government will now allow the rate to rise to 9.5% on 1 July 2014 and will leave it at this level until 30 June 2018. As such, employers are required to increase their superannuation contributions on behalf of employees to 9.5% of ordinary time earnings from 1 July 2014.
The percentage will then increase by 0.5% each year until it reaches 12% from 2022–2023, a year later than previously proposed.

OTHER CHANGES

New incentive for employers to hire Australians aged 50 years or over
The Treasurer has announced that employers will be able to receive up to $10,000 in government assistance if they hire a job-seeker aged 50 years or over. This program will replace the Seniors Employment Incentive Payment.

Under the program, eligible employers will receive an initial $3,000 if they hire a full-time mature-age job seeker who was previously unemployed for six months and they employ that person for at least six months. The employer will then be eligible to receive further payments as the employee meets certain further service periods.

Fuel excise to rise (except for aviation fuels) – indexation to be re-established
The government will secure funding for additional road infrastructure projects by re-introducing biannual indexation by the CPI of excise and excise-equivalent customs duty for all fuels except aviation fuels. This will commence from 1 August 2014.
The diesel fuel rebate is unchanged, meaning it will continue to apply to excise, including the excise increase.

New assistance for small businesses
The government will establish:

  • the “Small Business and Family Enterprise Ombudsman” to act as a one-stop shop and a single entry point as a means for small businesses to find out about government services and programs; and
  • a unit in the Department of Finance to provide specialist advice on contracts and to ensure small businesses are not disadvantaged as part of Commonwealth departments’ tendering and procurement processes.
Freeze on eligibility thresholds for Australian Government payments

Value of goods taken from private stock

Monday, May 19th, 2014

The ATO has updated the amounts that the Tax Commissioner will accept for 2013–2014 as estimates of the value of goods taken from trading stock for private use by taxpayers in certain specified industries. For example, for a restaurant/café (licensed), the Commissioner will accept $4,400 (excluding GST) for each adult or child over 16 years of age. You can find the resource by clicking here.  The ATO intends to adjust the values annually.

TIP: If you take an item of trading stock for your private use, you must account for it as if you had sold it and include the value of the item in your assessable income. If you want to, you can keep records of the actual value of goods you take from your trading stock for your own private use and report that amount.

The ATO says it recognises that greater or lower values may be appropriate in particular cases. The ATO says that where taxpayers are able to justify a lower value for goods taken from stock than that determined by the Commissioner, the lower amount should be used. The ATO says that where the value of goods ex-stock would be significantly greater, the actual amount should be used.

Superannuation guarantee obligations attracting ATO scrutiny

Monday, May 19th, 2014

This year, the ATO is targeting the management advice and consulting, hairdressing and beauty, and clothing retail industries to ensure they meet their superannuation guarantee obligations. According to ATO Assistant Commissioner Emma Haines, these industries have been identified as being at risk of not meeting their obligations.

She says extra effort is being made to help businesses get their superannuation guarantee payments correct before audit activity focusing on these industries starts in July 2014. Assistant Commissioner Haines notes that contractors may also be eligible for superannuation contributions, even if they have an ABN.

TIP: Employers are entitled to a tax deduction for contributions made to a complying superannuation fund or a retirement savings account (RSA) for the purpose of providing superannuation benefits for their employees. The contributions are only deductible for the year in which they are made.

To maximise the deductions available, employers should ensure that the contributions are paid to their employees’ superannuation funds or RSAs before 30 June.

Small Business Superannuation Clearing House

Monday, May 19th, 2014

The government has announced that the ATO has taken over responsibility for the Small Business Superannuation Clearing House. This clearing house is a free online superannuation payments service that helps small businesses with 19 or fewer employees to meet their superannuation guarantee obligations.

The Small Business Superannuation Clearing House was previously managed by Medicare. The government says there are now 58,000 employers registered with the clearing house. It says it is also encouraging the other 700,000 businesses that are potentially eligible to use the clearing house to sign up

Protection from announced but un-enacted tax changes

Monday, May 19th, 2014

Treasury has released draft legislation that seeks to implement the government’s announcement that it would legislate to protect taxpayers in relation to previously announced but un-enacted tax amendments. The government had previously stated on 6 November 2013 that “there will be legislated protection for any taxpayer who has self-assessed with announced changes that the government will not proceed with”.

The draft proposes to amend the tax law to introduce a protection provision to ensure that tax outcomes are preserved in relation to income tax assessments in specified circumstances. This protection operates primarily by placing a statutory bar on the Commissioner amending an income tax assessment to the extent that it reflects a taxpayer’s anticipation of the impact of a prior announcement that was then later scrapped (and that meets other conditions set out in the legislation).

ATO targeting online sellers

Monday, May 19th, 2014

The ATO has announced a data-matching program targeting eBay online sellers. Broadly, the ATO is looking at and testing correct tax reporting by taxpayers and identifying areas that require improved educational and compliance strategies in order to encourage voluntary compliance by individuals. The ATO says it will gather data from eBay Australia & New Zealand Pty Ltd relating to registrants who sold goods and services of a total value of $10,000 or more in either or both of the financial years 2011–2012 and 2012–2013. It is expected that records relating to between 15,000 and 25,000 individuals per financial year will be matched.

TIP: The ATO says it will contact individuals and businesses that it identifies as being at risk of running part of their business “off the books” or in other ways that result in them not reporting all their income. It says individuals will be given the opportunity to respond to the information it collects before any administrative action is taken.

Plan now for next year’s increase in Non-Concessional Contribution Cap

Friday, May 9th, 2014

As we come close to the end of the year planning becomes more and more important.  One area that is changing is the contribution caps next year.  It is important when planning on withdrawal and re-contribution strategies, or large contributions to Superannuation, to take note of triggering the three year bring forward rule this year or next year.

David Barrett, Head of MASTech, Macquarie’s Technical Advisory service,  discusses this issue in depth in the article which you can find by clicking here.

If you have lump sums outside Superannuation or would like to minimise tax when distributing Superannuation to non-dependants, please do not hesitate to contact us and we can assist you further.

Tax amnesty for overseas tax dodgers – Project ‘DO IT’

Monday, May 5th, 2014

The ATO has announced an amnesty for taxpayers with offshore assets or income to voluntarily come clean by 19 December 2014. The ATO says that its Project ‘DO IT’ (i.e., ‘disclose offshore  income  today’)  provides  a  last  chance opportunity for those who haven’t declared their overseas assets and income to come back into the system.

Under Project DO IT, taxpayers:

  • are encouraged to disclose omitted income or over-claimed deductions relating to their offshore activities;
  • will not be investigated or referred for criminal investigation by the ATO; and
  • will generally only be assessed for the last four years.

However, until the taxpayer comes forward, the ATO said its normal compliance activities will continue and, if the taxpayer is detected first, they will not be able to benefit from the amnesty.