The ATO has started issuing excess concessional contributions (ECC) determinations for the 2017–2018 financial year. Superannuation fund members will receive these ECC determinations if they have made super contributions above the concessional cap amount for 2017–2018.
TIP: “Concessional” contributions are taxed at the reduced rate of 15% in your super fund, but there’s a limit to how much you can contribute at this rate ($25,000 for 2017–2018).
Fund members may also receive an amended income tax return assessment together with the ECC determination, and may need to pay additional amounts to the ATO. This is because any super contributions you make over the concessional cap need to be included in your assessable income for the financial year, and an interest charge applies.
ATO set to issue excess super contribution determinations
Monday, November 12th, 2018Tax on compensation received for inappropriate advice
Monday, November 12th, 2018On the heels of the banking and financial services Royal Commission, the ATO has published information about how tax applies for people who receive compensation from a financial institution that provided inappropriate advice and/or did not provide advice it should have. This can include compensation for the loss of an investment, or a refund of fees or interest.
Capital gains tax comes into play, and the compensation amount may count as part of your assessable income if it’s a refund of adviser fees that you’ve already claimed as a tax deduction.
TIP: Contact us if you’ve received compensation from your bank or adviser and need to know more.
Residential rental property travel expenses: ATO guidance
Monday, November 12th, 2018Since 1 July 2017, people, self managed super funds (SMSFs), “private” trusts and partnerships have not been permitted to claim non-business travel costs connected to residential rental properties as tax deductible. These costs also cannot form part of the cost base or reduced cost base of a capital gains tax (CGT) asset.
The ATO has released new guidance about this, including details about the legal meanings of “residential premises” and “carrying on a business”.
TIP: Not sure if you can deduct the costs of maintaining your investment rental property?
Talk to us today to work it out.
Bringing forward small business tax cuts by five years
Monday, November 12th, 2018The Prime Minister has announced that the Government will bring forward its planned tax cuts for small business by five years. The Labor Party has also indicated it supports bringing forward the tax cuts.
This means businesses with a turnover below $50 million will pay a tax rate of 25% in 2021–2022, rather than from 2026–2027 as currently legislated.
Corporate tax rates and small business tax offset changes
The Bill to accelerate the reduced tax rates for base rate entities has passed through Parliament and will soon become law. Under the new law, the corporate tax rate will reduce from 27.5% to 26% in 2020–2021, before being cut to 25% for 2021–2022 and later income years.
The new law also increases the small business income tax offset rate to 13% for 2020–2021. The offset will then increase to 16% for 2021–2022 and later income years.
TIP: A “base rate entity” is a company that receives less than 80% of its taxable income from “passive” sources such as dividends, franking credits, interest, royalties and rent.
Black economy: electronic sales suppression tools now banned
Monday, November 12th, 2018Activities involving electronic sales suppression tools (ESSTs) and that relate to people or businesses with Australian tax obligations are now legally banned under recent changes to the law.
ESSTs come in many forms, such as:
• an external device connected to a point of sale (POS) system;
• additional software installed into otherwise-compliant software; or
• a feature or modification, like a script or code, that’s part of a POS system or software.
These tools generally misrepresent or hide income by deleting or changing electronic transaction information, and falsifying sales or POS records.
TIP: The ATO recognises some businesses may have bought POS software without knowing it contains suppression functions. There is a grace period to self-report without penalty. If you think you may be affected, contact us to find out more.
People and businesses may face penalties of up to $1 million if they produce, supply, possess or use an ESST or knowingly assist others to do so.
ATO expects 200,000 to miss out on refunds by failing to lodge
Monday, November 12th, 2018The ATO expects that 200,000 people could miss out on a tax refund this year because they haven’t lodged a tax return.
Assistant Commissioner Kath Anderson has said that many salary and wage earners end up with a tax refund, but some are missing out because they fail to lodge on time.
Taxpayers had until 31 October to either lodge their own return, or ensure they are on an agent’s books, Ms Anderson said. Failing to lodge by the deadline can attract a penalty of $210 for every 28 days that the return is overdue, up to a maximum of $1,050.
TIP: Have you run out of time to sort out your tax return this year? We’re here to help – get in touch to talk about your options.
Australian Small Business White Paper: tax reform a key
Monday, November 12th, 2018After more than 18 months of extensive research and consultation, the Institute of Public Accountants (IPA) and the IPA Deakin SME Research Centre have released the second edition of the Australian Small Business White Paper.
“Numerous policy recommendations have been adopted from the first edition which was launched in 2015. However, we recognise that the state of our economy is reliant on the productivity, growth and prosperity of the small business sector, so this work must be ongoing”, said IPA CEO Professor Andrew Conway.
The Paper covers a range of topics, including productivity, regulation and workplace relations, and makes several tax reform recommendations relevant to small businesses and personal income tax.
Transfer balance cap: ATO highlights admin issues
Monday, November 12th, 2018On 30 August 2018, ATO Assistant Commissioner Superannuation Tara McLachlan gave a speech on “Administration issues under the transfer balance cap” at the Tax Institute Sixth National Superannuation Conference.
TIP: The superannuation transfer balance cap is a limit on the total amount of super that you can transfer into retirement phase. The current cap is $1.6 million.
Ms McLachlan highlighted several issues regarding common superannuation events that will need to be reported to the ATO (such as the start of new pensions that began to be in retirement phase on or after 1 July 2017), multiple transfer balance events, excess transfer balance determinations and more.
The ATO as SMSF regulator: observations
Tuesday, October 2nd, 2018In the opening address to the Chartered Accountants Australia and New Zealand National SMSF Conference in Melbourne on 18 September 2018, James O’Halloran, ATO Deputy Commissioner, Superannuation, shared some observations and advice from the ATO’s perspective as regulator for the SMSF sector. He spoke about matters including the crucial role of fund trustees, the ATO’s activities to address behaviour that seeks to take advantage of SMSFs, what sort of SMSF events attract close ATO scrutiny, and issues relating to the use of multiple SMSFs to manipulate tax outcomes.
Cyptocurrency and tax: updated guidelines
Tuesday, October 2nd, 2018The ATO says that for taxpayers carrying on businesses that involve transacting with cryptocurrency, the trading stock rules apply, rather than the capital gains tax (CGT) rules.
The ATO’s guidelines on the tax treatment of cryptocurrencies have recently been updated, following feedback from community consultation earlier this year.
The ATO received about 800 pieces of individual feedback and submissions, and has now provided additional guidance on the practical issues of exchanging one cryptocurrency for another, and the related recordkeeping requirements.
