October 2018

Hello and welcome to our October 2018 newsletter.  In this quarter’s issue, we have provided articles on the following topics:

Staff Updates

It is with regret that we advise that Allison Reid, our Associate Planner, has decided to broaden her horizons and has left our employment. We wish her well in her future endeavours.  Any queries that you would have directed to her can be sent to Tracey O’Brien at tracey@veritassolutions.com.au  or Jodie Dickson at Jodie@veritassolutions.com.au .

Jodie & Tracey will work together to ensure we still provide the same level of customer service.

We are excited to announce that Roshini Suraweera is expecting her first baby, due in late January 2019.

More exciting news, Allison Burman is engaged to be married to a lovely man and they are off to Europe for the whole of October.

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$20,000 instant asset write-off extended

On 12th September 2018, the Senate finally passed legislation to extend the threshold for the $20,000 instant asset write-off for a further 12 months to 30 June 2019.  The extension was announced in the May 2018 budget, however with the delay in legislating the change, small business owners were left open to significant uncertainty whether the measure would apply.

  • You must apply all the simplified depreciation rules to claim the instant deduction.  The requirements are as follows:
  • Run a small business with turnover of less than $10million
  • Write off eligible assets that cost less than $20,000 each
  • Pool most other depreciating assets that cost $20,000 or more
  • Write off the small business pool balance if it is less than $20,000 at the end of the income year
  • Only claim a deduction for the portion of the asset used for business or other taxable uses.

If you would like any assistance in determining if this applies to you, please contact our office.

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Can your company access the 27.5% tax rate?

On 23rd August 2018, Parliament passed legislation confirming which companies are eligible for the lower company tax rate.   Company turnover must be less than $25 million in 2017-18 and less than $50 million going forwards.  From 2017-2018 financial year, a ‘bright line’ test will determine eligibility.  Under this test, a Company that receives more than 80% of its assessable income in passive forms will not be eligible for the lower tax rate.

Examples of passive income include:

  • Corporate distributions/dividends and their franking credits
  • Interest income from other investments (not from banks)
  • Royalties (including licence fee income)
  • Rent
  • Net capital gains

This becomes more complicated when the Company is a beneficiary of a Trust, as the Company is taken to have received a certain percentage of the total income of the Trust.  Therefore the Trust must calculate the passive and non-passive assessable income it has earned so the Company can assess whether it is eligible to access the lower tax rate.  This is the case, even if the Trust decides to stream only business income to the Company.

Expenses must be apportioned against the income received in order to calculate the assessable passive income and the assessable income from other sources.

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Keeping your ABN up to date

Did you know that it is your responsibility to make sure that your ABN details are kept up to date? Any changes made to your ABN, including your contact details and address, must be updated with the Australian Business Register (ABR) within 28 days of the change. This is a service that we can provide for you. If you know of any changes to your ABN, please contact the office so that we can update the ABR on your behalf. Likewise, if you are unsure if your details are up to date, we can check with the ABR to see what details you have registered with them.

If your business has been sold, closed down, or is no longer operating in Australia or making supplies connected with Australia, it is important that you cancel your ABN. When you cancel your ABN, the following registrations will also be cancelled: goods and services tax (GST), luxury car tax (LCT), wine equalisation tax (WET) and fuel tax credits (FTC). Before you cancel your ABN, you need to make sure you have met any lodgement, reporting and payment obligations with any government agencies you deal with. If you would like some further advice as to whether or not you should be cancelling your ABN, please contact the office and we can discuss your particular needs.

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Excess franking credit refunds

The refund of excess franking credits has been available since 2000. Many SMSF trustees and individuals have become accustomed to receiving a large deposit into their bank account at the end of each financial year. If Labor’s proposed changes to dividend imputation become law, the refund will be a thing of the past and trustees and individuals may need to rethink their investment and tax planning strategies.

Franking credits will still be beneficial for superannuation funds and individuals that have taxable income as the franking will reduce their tax liability. However, funds, especially those paying a pension, or individuals who have little or no tax payable and currently receive a refund will be the ones that lose out the most.

A flaw in the policy proposal is that the burden of the extra tax will affect only certain groups of investors or Super funds. Most large industry and retail funds will generate enough income from contributions and investment earnings to use their franking credits and pass on the benefit to those members. This creates the unfair situation where two investors with the same investments, one in an SMSF and one in an industry or retail fund, will be treated differently.

What can SMSFs do to reduce the impact?

Given the possibility that Labor will be in power by this time next year, SMSF trustees and their advisers are already contemplating strategies to limit the effect of the potential change. These strategies include:

  • Changing the investment mix to include investments that don’t provide a franking credit such as property trusts, overseas investments, and companies that pay unfranked dividends.
  • Many high net worth super fund members currently receive a pension simply to reduce the tax liability of their SMSF and not because they need the income. In future, this strategy may simply increase the amount of franking credits that are lost, and members may leave their superannuation in accumulation.
  • Children who are making taxable superannuation contributions may join their parents’ SMSF. The taxable income of the fund will rise and use up some of the excess franking credits.

If any of these strategies are relevant to you, or you would like further information, please contact one of our advisers, Jodie or Ken.

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Scam alert!

The ATO has reported a new phone scam where a scammer calls up and pretends they are from the ATO.  They advise that you have an outstanding debt and that you will go to jail if you do not pay it.  The poor victim provided his tax agent’s phone number to the caller, who then dialled in another scammer who pretended to be the tax agent for a 3 way conversation.   The “tax agent” confirms the debt, so the victim withdraws the money and pays it in the manner requested – a bitcoin machine, iTunes cards etc.  They may leave you a voicemail if you don’t answer, do not call them back.

The ATO provides the following indicators to identify a scammer:

  • They will tell you a complaint has been made against you and you are committing tax fraud or claim that you have to pay a debt that you know nothing about.
  • They may threaten immediate arrest or court if you don’t call them back or pay straight away.
  • They won’t provide explanations or allow you to ask questions about the debt and often get aggressive or abusive.
  • They will ask you to pay using unusual methods of payment that the ATO does not use such as iTunes, Bitcoin cryptocurrency, store gift cards or pre-paid visa cards.
  • They may offer a tax refund but you have to provide a personal credit card number for the funds to be deposited into. They don’t deposit money but instead steal funds from these cards without the knowledge of the cardholder. The ATO does not issue refunds to credit cards.

Know the status of your tax affairs. If you are aware of the details of debts owed, refunds due and lodgments outstanding, you are less likely to fall victim to a scam.  If in doubt, call our office first and we can check it online.

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