Staff Updates

Lots of changes have happened in the previous 6 months and we are going to start with the obvious Coronavirus response. Our office is only open for limited hours with minimal staff, 10am until 4pm Monday, Wednesday and Friday until further notice. The majority of the time we will be working hard from home and are available easily via email. Our office phone will be answered by Tracey, and she can pass on phone messages to whomever you wish to speak to. We can arrange an appointment in the office if you do wish to meet face to face, however if you are unwell we ask that you please reschedule.

We are pleased to announce that Jessica Jalkanen has joined our team on a full time basis after being part time for many years.

Conversely, Allison Burman has returned from maternity leave on a part time basis, working Tuesday, Wednesday and Thursday. We would also like to congratulate her on her recent marriage and advise that she will be known as Allison Scholar going forwards.

For those who don’t know yet, we have welcomed a new receptionist, Claire Robertson-West, who began working with us in December.

Reduction in Minimum Pension Requirements

The Government is helping retirees to manage the impact of volatility in financial markets on their retirement savings by temporarily reducing superannuation minimum drawdown requirements. This will benefit retirees with account-based pensions and similar products by reducing the need to sell investment assets to fund minimum drawdown requirements. The reduction applies for the 2019-20 and 2020-21 income years. The new minimums are as follows:

Age	Minimum Reduced 2019-20	Minimum Reduced 2020-21
Under 65	4%	2%
65-74	5%	2.5%
75-79	6%	3%
80-84	7%	3.5%
85-89	9%	4.5%
90-94	11%	5.5%
95+	14%	7%

Economic Stimulus Package

The government announced a stimulus package in March 2020 to help boost the economy in this difficult time. There are many parts to the package but some of the more relevant ones are briefly explained below:

Tax free cash payments to pensioners
Welfare recipients and concession card holders will receive two payments of $750 which will be tax free and not count as income. The first payments will be made from 31st March 2020 onwards and the second from 13th July 2020.

Reduction in super pension minimum withdrawals
The minimum drawdown for superannuation pensions has been halved for 2020 and 2021. This is also what was done for the GFC in 2008.

Deeming rates reduced
Many people will receive an increase in their social security payments as the government has reduced the lower deeming rate (for financial investments up to $51,800 for single pensioners and $86,200 for couples) will be cut from 1% to 0.25%. The upper rate has also decreased from 3% to 2.25%. The extra money will begin being paid from 1st May 2020.

Early release of Superannuation for Financial Hardship
Eligible individuals will be able to access up to $10,000 of super in 2020 and $10,000 of super in 2021. You can apply for release from mid-April and are eligible if you satisfy one or more of the following criteria:

• You are unemployed; or
• You receive an job seeker payment, youth allowance, parenting payment, special benefit or farm household allowance; or
• On or after 1 January 2020 you were made redundant, or had your working hours reduced by 20% or more, or you are a sole trader and your business has been suspended or turnover reduced by 20% or more.

Individuals will not need to pay tax on this money released. If you are affected, you can apply online through the myGov website and your application will be handled by the ATO. There will be separate arrangements for SMSF but at this time the details have not been released.

Payments for employers to retain staff
SMEs with turnover under $50 million will receive a tax free payment from $20,000 up to $100,000, equal to the amount withheld from salary and wages. The payment will be made as a credit against activity statements lodged and will begin from 28th April.

Employers who have been adversely affected by the various virus containment attempts can apply for a Jobkeeper payment of $1,500 per employee to help the employer keep them employed. The employer must demonstrate a decline in turnover, provide information to the ATO on all eligible employees although the ATO will likely use the STP data to assess this, and ensure that each eligible employee receives at least $1,500 per fortnight before tax. Self-employed people will be able to access this as long as the turnover test is met.

Increase in instant asset write-off threshold
The instant asset write-off threshold will be increased from 12th March 2020 until 30th June 2020 to $150,000 and applies to new or second-hand assets installed during these dates. Businesses with annual turnover of less than $500 million are eligible.

Accelerated depreciation
Businesses will be allowed to deduct an additional 50% of an asset cost if purchased from 12th March 2020 until 30 June 2021. Businesses with a turnover of less than $500 million that are purchasing new depreciable assets are eligible. Second hand assets are not eligible purchases.

Tax Relief
The ATO is considering relief for certain tax obligations to eligible businesses, including payment deferrals for up to 4 months. If you need assistance in liaising with the ATO please contact our office.

Mental Health in a Remote Workforce

Remote working is a growing trend we have been seeing in the global workforce, even before staff were recently asked to work from home. It has substantial advantages such as increased productivity, cost savings, reduced absenteeism, better work-life balance and less stress associated with work.

Yet, while remote working can benefit both employer and employee, the situation can change when telecommuting is a necessity, not a choice. Extroverts may experience mental health difficulties as they are forced to go without the camaraderie of the office. In fact, they are the least likely to be productive at home. Even introverts may find extended periods of isolation challenging to their state of mind.

If organisations and leaders are genuinely interested in the wellbeing of their remote employees, they can start with positive messaging. This can be done through sending messages as often and appropriately as possible, scheduling informal chats, prioritise phone calls over emails, formal weekly meetings or daily “stand-ups”, make use of technology such as video conferencing, document sharing platforms and group chat to keep employees in the loop. To really be effective, communication needs to be followed up with real and meaningful actions.

Employers also need to both acknowledge any stress on the part of the employee and impart a sense of confidence about the future.

Telecommuting makes it harder to maintain boundaries with home life, something that can affect mental health so organisations can encourage remote employees to practice a few basic strategies. These include:

• Setting up a “home office” conducive to working effectively. It should be somewhere work can easily be packed away in the evenings or on the weekends.
• Sticking as closely as possible to normal work hours and routines, including getting dressed for work.
• Scheduling normal breaks throughout the day for coffee and lunch or, if possible, a short walk to help maintain mental health.
• Keeping in touch with a manager to continue to set and review goals; and importantly, to acknowledge and celebrate wins and successes.
• Using apps such as Todoist and Toggl to stay productive as well as mental health apps like Mindfulness or Headspace.

Superannuation Guarantee Amnesty

This long awaited bill has finally passed parliament, providing a one-off amnesty to encourage employers to self-correct superannuation guarantee non-compliance dating from 1st July 1992 to 31st March 2018. It will allow employers to claim tax deductions for payments of SG charge or contributions made during the above period, and remove the administrative component and penalty that is generally applied when non-compliance is correct. Employers will still have to pay the amount owing to their employees superannuation funds, but avoid the penalties involved.
The amnesty period starts from 24th May 2018 and will end 6 months from royal assent which has yet to be given.

We encourage all employers to check that you don’t owe outstanding superannuation for employees.

Why is it important to upgrade your SMSF Trust Deed?

The Trust Deed is one of the most important documents for a SMSF. It stipulates all the rules which govern the operation of your fund. Whilst legislation typically specifies what trustee ‘must not’ do, the governing rules of a fund specify what trustees are ‘allowed’ to do.
The superannuation legislative environment has evolved significantly with three major updates effecting the operations of SMSF’s in the last 15 to 20 years:

• 1999 – Conversion of ‘excluded funds’ to ‘SMSF’s, change in preservation and in-house asset rules
• 2007 – ‘Simpler Super’ reforms
• 2017 – ‘Sustainable Super’ reforms

It can be dangerous for an SMSF to have an old trust deed with irrelevant and invalid clauses. With the amount of changes to superannuation, it’s essential that your SMSF has a good quality trust deed which is reviewed regularly. Some of those changes reflect developments in best practice. Others reflect changes in the law.

Following is a list of key areas that older deeds may lack in and the reasons why we believe these deeds should be updated, especially in light of the recent 2017 Superannuation reforms.

• Flexible Pensions – Many older SMSF deeds have inflexible pension payment provisions which do not contain appropriate powers that permit SMSF trustees to pay newer forms of pensions that comply with superannuation law
• Reversionary Beneficiary Pensions – Old deeds may not allow for reversionary beneficiary pensions to be paid on a member’s death.
• Transition to retirement pensions – Transition to Retirement Pensions (TTR) are a subset of Account Based Pensions and can be commenced once a member reaches preservation age.
• Death Benefit Payments & Binding Death Benefit Nominations – A major reason to update your SMSF trust deed is to better manage your benefits when you die. When this happens, the trustee of your fund must pay your death benefits to either your estate or a dependent (as defined under SIS)
• Member Benefit Guardians & Estate Planning – Another estate planning measure, which a new deed will allow you to implement, is the appointment of a death benefit guardian
• Commutation Authorities – Under the new Superannuation Reform legislation, trustees must be able to comply with the new forms of commutation authorities and have the power to pay the various taxes
• Limited Recourse Borrowing Arrangements – Many old SMSF deeds contain clauses which prohibit SMSF’s from borrowing or at best general clauses which allow it as long as it’s consistent with the superannuation law
• Other Operational Mechanisms – There are a several operational mechanisms which old deeds may not be able to cater for. Generally most new deeds will provide for Segregation, Contribution/Income reversing, Contribution splitting etc.

If you think your Trust Deed needs updating, please contact our office for assistance.

Staff Updates

Our long term receptionist Nadia is no longer with us as she has moved to QLD to be closer to her sons and granddaughters.  We wish her all the best for the future and enjoy the much warmer weather. Thank you for the 5 and half years you were with us! 

Please welcome our new receptionist Arlene who started at the end of August with us and we hope you enjoy working at our firm and you are here for a long time to come.

Our senior accountant Allison Burman had a beautiful baby boy Liam on the 29th July and mum and bub are doing very well.

Congratulations also to another one of our accountants Holly Barnes who travelled down to the Mornington Peninsula in mid-September to compete in the Australian National Amateur Dressage Championships. Holly and her horse Bella finished up as overall champion at Advanced level.

Default tax return

If you have an overdue tax return lodgement the ATO may issue a default tax assessment. This is usually only issued after they have contacted you in regards to your overdue tax obligations. A default assessment is an assessment of what the ATO deems your net assessable amount due based on your taxable income. The income that they use is generally what has been reported to them from your employer and other income sources. Other ways in which the ATO calculates your default assessment includes previously lodged returns, income from financial institutions, salary/wages reported from your employer, GDP (gross domestic product) growth rate, and annual tax statistics. The default assessment will not incorporate any deductions that you may be eligible for, other than those currently reported to the ATO. There is also an administrative penalty of 75% of the tax-related liability that gets applied to each default assessment issued. This penalty can also been increased to 95% for those taxpayers whom have a pattern of non-compliance. On top of this penalty, the ATO can also apply another penalty for failing to lodge on time.

What should you do if you receive a default assessment?

If you have received a default assessment warning letter, it is imperative that you lodge all overdue tax obligations prior to the date advised in the warning letter. You should seek tax advice to ensure that your tax affairs are tended to in a timely manner to help reduce any penalties and fines imposed.

If you do not manage to lodge your returns before the ATO issues a default assessment, the only way to reverse that is to lodge an objection form with the ATO.   You have two years from the date of the assessment to lodge that objection.

Cryptocurrency and tax

The term cryptocurrency is used to describe a digital asset in which encryption techniques are used to regulate the generation of additional units and verify transactions on a blockchain. Cryptocurrency generally operates independently of a central bank, central authority or government.

If a self-managed super fund (SMSF) is transacting with cryptocurrency SMSF trustees and members need to be aware of the tax consequences relating to digital currency. These vary depending on the nature of your circumstances & anyone involved in acquiring or disposing of cryptocurrency needs to keep records in relation to their cryptocurrency transactions. Essentially the date of each transaction, the value of the cryptocurrency in Australian dollars at the time of the transaction, the purpose of the transaction and the details of the other party involved.

Software such as Coin Tracking can help to track your trades and generate capital gains reports. If you hold any digital currency as an investment, you’ll be taxed on the capital gains you make when you sell it for fiat or another crypto. However, if you hold your cryptocurrency for more than a year before selling or trading it, you may be entitled to a 50% CGT discount. Even if the market value of your cryptocurrency changes, you won’t make a capital gain or loss until you actually dispose of your holdings. If there is a capital loss, capital loss can be used to reduce capital gains made in the same financial year or a future year, including investments outside of cryptocurrency.

Any profits you make mining bitcoin or any other cryptocurrency will form part of your assessable income. If you trade crypto for profit, you’ll need to include those profits as part of your assessable income for tax purposes. If your business pays for goods and services using cryptocurrency, or receives payments for goods and services in cryptocurrency, these transactions are subject to GST and if you operate a crypto exchange service, income tax applies to the profits you make and your transactions will be subject to GST. There are situations you may be eligible for the personal use asset exemption and Cryptocurrency transactions are exempt from CGT.

If you lose your private key or your crypto holdings are stolen, you may be able to claim a capital loss.

Instant Asset write-off increased and extended

The threshold has increased to $30,000, and has been extended to 30 June 2020.

The instant asset write-off now also includes businesses with a turnover from $10 million to less than $50 million.  These businesses can claim a deduction of up to $30,000 for the business portion of each asset (new or second hand), purchased and first used or installed ready for use from 7:30pm (AEDT) on 2 April 2019 until 30 June 2020.

Businesses with a turnover of up to $10 million can also claim a deduction for each asset purchased and first used or installed ready for use, up to the following thresholds:

• $30,000 from 7:30pm (AEDT) on 2 April 2019 until 30 June 2020
• $25,000 from 29 January 2019 until before 7:30pm (AEDT) on 2 April 2019
• $20,000 before 29 January 2019

Taxable payments Annual Report

There are several industries that are required to complete a TPAR when lodging their tax return.  If your business is currently in the building and construction industry, cleaning industry or courier industry, you must report payments that you make to contractors for those services.  This is to ensure that the contractors themselves report their income properly to the ATO when they prepare their own income tax returns.

From 1^st July 2019, the reporting requirements have been expanded to include road freight, information technology, security, investigation and surveillance services.

Businesses in these industries will need to collect details of payments made to contractors from 1^st July 2019 until 30^th June 2020, and provide the TPAR to the ATO by 28^th August 2020. 

You will need to provide the contractors ABN, name, address, the gross amount you paid them for the financial year including GST and how much GST is included in the amount you paid them.  Only report the amount you actually paid to the contracts, don’t include invoices that you have received but not yet paid.

When does an SMSF need an Actuarial Certificate?

An SMSF can have two types of accounts within the fund: an accumulation account (for contributions and/or rollovers) and pension account(s) (used to pay the member a regular income stream or lump sum). The tax treatment for each account is different and sometimes there’s a need for an actuarial certificate to determine the tax implications.

An actuarial certificate will determine the percentage of income that will be exempt from tax for a SMSF.

An actuarial certificate is required in the following circumstances:

• A two member SMSF where one member is drawing a pension and one member is in accumulation.
• A single member SMSF where the member is drawing a pension and making contributions throughout the year (eg. Transitioning to retirement).
• A two member SMSF where both members are drawing a pension and one member makes a single large contribution and starts a new pension with the amount.
• A two member SMSF where one member passes away and the death benefit (either a lump sum or pension) is started several months later.
• The SMSF is paying a defined benefit pension.

When is it not needed:

• The most common situation where an actuarial certificate is not needed is when all members of the SMSF are in pension mode all year.
• When all members of the SMSF are in accumulation mode all year.
• When assets of the fund have been segregated (ie different bank accounts and investments).
• When the SMSF has a taxable loss as there would be zero tax anyway.

When preparing the accounts for an SMSF, we need to make the decision whether to commence a new pension from contributions made, or to leave them in accumulation and get an actuarial certificate.

When pension members make a large contribution to the SMSF we will generally commence a new pension with this amount. The difficulty we face is when members make several contributions during the year with the intention that the amounts will be treated as a single contribution amount. In practice we would need to turn each deposit into a new pension.

If you intend on making large contributions into your SMSF, we strongly suggest that you seek advice to ensure that you do not breach the contribution caps and that the best outcome can be achieved for your fund.

Staff Updates

We are very happy to welcome Roshini Suraweera back from Maternity leave on July 2^nd for 3 days per week working Tuesdays, Wednesdays & Thursdays. Roshini can be reached via her email address: roshini@veritassolutions.com.au .

Allison Burman will be leaving us later this month to have her baby and will return sometime in the New Year, she will be missed by all. This serves as a reminder that any email queries that you would usually direct to Allison can be sent to admin@veritassolutions.com.au and they will be passed onto the most appropriate person.

ATO targets for 2019

For the 2018/2019 personal income tax returns, the ATO has indicated that they are paying close attention to work related deductions, in particular, if you are claiming more than $2,000 to $5,000 in any one area. If you have legitimate claims in this area, it is important that you make sure each claim is backed up with receipts or written evidence. The importance of accurate record keeping is high with these deductions.

The type of records that you will need to keep is written evidence for any claims over $300. If it is under $300, then you still need to be able to show how you calculated the claim; however, you won’t need written evidence to support it. If the claim is over $300 the evidence must be provided for the whole amount claimed and not just the amount over $300. This $300 amount does not include car and meal allowances, award transport payments allowances, or travel allowances. These are subject to their own rules.

The ATO has also indicated that they will be paying close attention to rental properties and Airbnb’s in personal tax returns. They now have the ability to check rental income and expenses through real estate agents, so it is very important to make sure your claims are accurate and are supported with written evidence. They will be taking particular care when evaluating the income earned on each property, especially in circumstances when no income has been included for the property.

If you have any concerns regarding these issues in respect to your personal taxes, or you would like further information, please don’t hesitate to contact our office.

How your Dividends are taxed

Recent research shows that 36% of the adult Australian population own investments listed on the stock market, some investing as individuals and some through Self-Managed Super Funds. The most common way for companies to pay returns to shareholders is by way of a cash dividend.

Significantly, whether you hold shares in a private company or a public listed one, the rules about how you are taxed on any dividends you receive as a shareholder are the same.

Dividends are paid out of profit, which have already been subject to Australian company tax which is currently 30% (or 27.5% for small companies). Recognising that it would be unfair if shareholders were taxed again on the same profits, shareholders receive a rebate for the tax paid by the company on profits distributed as dividends.

These dividends are described as being ‘franked’. Franked dividends have a franking credit attached to them which represents the amount of tax the company has already paid. Franking credits are also known as imputation credits.

The shareholder who receives a dividend is entitled to receive a credit for any tax the company has paid. If the shareholder’s top tax rate is less than 30% (or 27.5% where the paying company is a small company), the ATO will refund the difference.

Superannuation Funds pay tax at 15% on their earnings whilst in the accumulation phase, so most super funds will receive refunds of franking credits every year.

Dividend reinvestment plans

This is where the shareholders are given the opportunity to reinvest their dividends in additional shares in the paying company. If you reinvest a dividend in this way, your income tax liability on the dividend is calculated in exactly the same way as if you’d received a cash dividend. That means you may have an income tax liability – and no cash to settle it with because the cash was all reinvested. That needs to be borne in mind when you consider whether a dividend reinvestment plan is right for you.

Bonus shares

In some cases, companies will issue bonus shares to shareholders. These are not generally assessable as dividends unless the shareholder is given the choice between a cash dividend and a bonus issue in the form of a dividend reinvestment plan.

Instead, the bonus shares are taken to have been acquired for CGT purposes at the same time as the original shares to which they relate. This means that the existing cost base is apportioned over both the old shares and the bonus shares, leading to an overall reduction in the cost base of the original parcel of shares.

Motor vehicle deductions for 2019

The Australian Taxation Office has determined that the rate for work-related car expenses for the income year 1 July 2018 to 30 June 2019 is 68 cents per kilometre. This is an increase from 66 cents per kilometre from previous years.

Cents per kilometre method:

Your claim is based on a set rate for each work-related kilometre you travel and is limited to 5,000 kilometres. While there is no written evidence required, you must be able to reasonably show how you came up with the number of work-related kilometres. The ATO can ask how you calculated your claim and how the use of your car was work related.

Log book Method:

If you travel more than 5,000 kilometres per financial year for work, and intend to claim car expenses, the ATO requires you to keep a logbook to support that claim.

Using the logbook method, your tax deduction claim is based on your car’s “business use percentage”. To work out your business use percentage, you need to keep a logbook for your car for a typical consecutive 12-week period.

Your logbook must include every trip you take – not just your business-related trips.
The logbook must include the following details:

• date for each journey
• start and finish odometer readings for each journey
• total number of kilometres for each journey
• reason for each journey
• start and finish dates for the logbook period
• start and finish odometer readings for the logbook period

Keep receipts for all expenses related to your car, including:

• petrol
• registration
• insurance
• servicing
• interest on loan costs
• other running costs

As with all tax deductions, you must have spent the money and haven’t been reimbursed by your employer, the claim must be directly related to earning your income and you need to be able to prove that the expense was incurred.

Making Downsizer Contributions

If you are over 65, you can make non-concessional (after-tax) contributions of up to $300,000 from the proceeds of selling your home. You can make a ‘downsizer’ contribution even if you’re otherwise unable to contribute because of your age, work, or the amount you have in super.

How does it work?

If you are over the age of 65 and exchange contracts for the sale of your primary residence on or after 1 July 2018, you could be eligible to make after-tax contributions of up to $300,000.00 from the proceeds of selling your home. If you have a partner, you are able to take advantage of this by making a combined total of up to $600,000 to super.

Who is eligible?

• You must be 65 years or older at the time you make the downsizer contribution.
• Your contributions must come from the proceeds of the sale of your home (exchange must be on or after 1 July 2018).
• You must not have previously made a downsizer contribution to your super from the sale of another home.
• You or your partner must own your home for 10 years or more prior to the sale.
• Your home must be in Australia and cannot be a caravan, houseboat or other mobile home.
• The capital gain or loss must be either exempt or partially exempt from capital gains tax under the main residence exemption.
• You must make your downsizer contribution within 90 days of receiving the proceeds of sale (usually the settlement date).

Things to consider:

Age Pension: Downsizer contributions are added to your super balance, which means they are included in the assets and income tests used to determine eligibility for the age pension and Department of Veteran Affairs benefit. The family home is not counted in these tests, so making downsizer contributions could mean you miss out on the age pension. Please note that your super balance (including downsizer contributions) is also used to determine eligibility for residential aged care and home care services.

Transfer Balance Cap: You have a limit of $1.6 million on the amount of savings you can move from super into an income stream. If your total superannuation balance is more than $1.6 million, then any downsizer contribution you make must stay in your accumulation account. Earnings in accumulation in super are taxed at 15%, whereas they are not taxed in a retirement income stream.

Who can benefit?

• If you are an older member who wants to boost your income in retirement by unlocking capital in your family home.
• If you are a self-funded retiree who would like to put more into super and has a level of income and assets that means you’re not eligible for the age pension or the other government benefit.
• You are an older member with a total superannuation balance over $1.6 million and want to take advantage of the 15% tax on earnings offered by super. This can help you put more into your super and pay less tax than you would outside super.

How to make the contribution:

If you decide to make a downsizer contribution, you will need to complete the ATO form available ‘here‘ . By submitting the form, you are confirming that you have met all the eligibility criteria, as outlined above. Remember, all downsizer contributions must be made within 90 days of receiving your sale proceeds.

Staff Updates

It is with great pleasure that we advise that on 26^th January 2019, Roshini Suraweera gave birth to a healthy baby girl.  Selena and Roshini are both home and doing very well.

There must be something in the water, because Allison Burman is due to have her first child in August 2019.  She will be going on maternity leave from mid-July, so after then any email queries that you would usually direct to Allison can be sent to admin@veritassolutions.com.au and they will be passed onto the most appropriate person.

Minimum Pension Reminder

As the end of financial year is fast approaching, now is the time for a quick reminder for our SMSF trustees about the importance of withdrawing the minimum pension amount from your superannuation fund prior to Friday 28th June 2019. You will find each member’s minimum pension withdrawal requirements in the covering letter that was included with your 2018 financial statements. If you have any questions in regards to your minimum pension requirements, please call our office to discuss with one of our accountants.

STP for All Employers from 1 July 2019

In previous newsletters we have explained about Single Touch Payroll (STP) and the effect it will have on your business. The legislation has been passed through Parliament, so STP reporting will be compulsory for all employers, including small businesses, from 1 July 2019.

The ATO understands that the move to real-time reporting will be a big change for many, particularly for micro employers with 1 to 4 employees who currently do not use payroll software. They wish to reassure you that you will not be forced to purchase software. The ATO is currently working with software providers to develop low and no-cost solutions including payroll solutions, portals and mobile apps. They have published a list at ato.gov.au/stpsolutions which details the current available solutions. If you are a small employer, it is important that you investigate and implement which is the best approach for you.

The ATO have proposed a flexible approach to implementing STP, with reassurance that they understand you may need more time to get the processes right. There will be no penalties for mistakes or missed or late reports for the first year, and any small business who requests additional time will be granted a deferral. Micro employers will be offered the alternative to report quarterly for the first two years through a tax or BAS agent. 

If you have any questions or concerns, you can contact our office or the ATO at 13 28 61 or visit the website for more information ato.gov.au/stp.

Common SMSF Contraventions

The ATO have released figures that out of 8,215 SMSFs lodged for the 2018 financial year so far, there have been 16,909 regulatory contraventions.  50% of these are made up of 3 basic violations – loans to members, in-house assets and failing to keep SMSF assets separate to personal assets. 

The other most common contraventions include related-party loans, investing in related-party assets, failing the sole purpose test and other administrative errors.  Poor record keeping also rated a mention as people attempted to access the low tax rate via their SMSF without keeping proper documentation.

The main drivers of the contraventions tend to be financial stress and the ease with which trustees can access SMSF assets as well as poor record-keeping and the inability to substantiate transactions.

In the 2017-18 financial year so far, there have been 257 trustees disqualified, and 180 other enforcement actions such as notices of non-compliance, enforceable undertakings and directions to rectify.  So far this financial year, 75 trustees have been disqualified.

If you are unsure if you are allowed to invest in certain assets, withdraw money or otherwise deal with your SMSF please check with our accountants or financial advisers before you take action to get the correct advice.  It is much easier to sort out if breaches are avoided altogether.

Financial Health Check

With the end of financial year fast approaching, now is a good time to start thinking about tax planning ideas to minimise your tax liability. There are many different strategies available, dependant on your personal situation. Some strategies may include setting up more tax effective business structures, for example, a company or trust; negative gearing your rental property; or salary sacrificing. These are of course more complex strategies, but they are worth discussing with your accountant, particularly if you are a higher income earner.

One of the more immediate tax strategies you can use is to bring forward any tax deductions that you may have prior to 30 June. Maximising your tax deductions can help to reduce your taxable income and in turn, the amount of tax you need to pay.

Some examples of deductions you may be able to bring forward include:

• Paying rental expenses (including repairs and maintenance)
• Giving gifts and donations to registered charitable organisations
• Paying subscriptions to professional journals
• Paying memberships to professional associations
• Prepaying for business travel, seminars and conferences
• Prepaying insurance premiums or rent on business premises
• Purchasing office supplies and stationery
• Business owners can pay employee’s super contributions into a complying super fund before 30 June
• If you intend to claim work related Motor Vehicle expenses, remember to prepare a log book to document your private and business kilometres travelled for a continuous 12 week period as well as your motor vehicle expenses
• Higher income earners could get private health insurance if they don’t already have it, to avoid the Medicare Levy Surcharge.

All of these ideas require spending money sooner rather than later in order to save money. If your cash flow prevents this or they are not relevant to your circumstances, it is still a good idea to plan and make sure you have all of your necessary tax documents together sooner rather than later. Not only will you then maximise your deductions on your tax, but you will also have your documents prepared in a timely manner so that you don’t get hit with late lodgement fees, and if you do have a tax liability, you have time to budget for it.

Staff Updates

Roshini Suraweera will be leaving us later this month to have her baby and will return later in the year.

We welcome Shammi Wickramasinghe to the team who will take Roshini’s place when she goes on maternity leave. Roshini has been training Shammi for the past month and will continue to do so till she is ready to go.

MYOB AccountRight Desktop to be discontinued

If you are currently using a desktop version of MYOB AccountRight Classic to manage your affairs, please note that beyond 30 September 2019, the product will no longer be updated to be compliant with current tax laws.

For those that want up-to-date compliance and support beyond this date, you will be required to upgrade to a MYOB cloud-based product.  MYOB are currently in the process of informing subscribers, so if you fall into this category, be prepared to receive information on how to upgrade.

Proposed Superannuation Guarantee Amnesty

Under current law, failure to contribute the minimum 9.5% of an employee’s ordinary time’s earnings (OTE) to the employee’s superannuation fund by the required time can result in a liability to pay the Superannuation Guarantee charge, penalties and, where applicable the General Interest Charge (GIC).

The proposed Amnesty provides employers with an opportunity to rectify past SG non-compliance without penalty for a 12-month period. Under the proposal, an employer that has an SG shortfall amount that qualifies for the Amnesty within any period from 1 July 1992 up to 31 March 2018 is provided with the following:

• the ability to claim tax deductions in respect of SG charge payments made and contributions that offset the SG charge to the extent that the charge relates to the SG shortfall
• the administrative component to the SG charge will not apply ($20 per employee to which the SG shortfall applies per impacted quarter)
• part 7 penalties will not apply.

Employers will still be required to pay all employee entitlements, which include the unpaid SG amounts and the nominal interest (calculated at 10% per annum) owed to employees as well as any associated GIC.

To be eligible for the proposed amnesty, you will need to satisfy all of the following:

• voluntarily disclosed amounts of SG shortfall or late payments that have not been previously disclosed for any period from 1 July 1992 up to 31 March 2018.
• made the voluntary disclosure within the proposed 12-month amnesty period (between  24 May 2018 and 23 May 2019)
• The ATO has not previously advised the employer that it is examining, or intends to examine, the employer’s compliance with respect to SG charge payments for that quarter.

However, the proposed Amnesty still has to be passed as law before it will have actual effect. Moreover, there are still a number of serious modifications required to be made in order to make the Amnesty an appropriate basis for employers to come forward with legal certainty.

Consequences of non-lodgement

If you earn more than $18,200, you are required to lodge a tax return. There are some cases you may even be required to lodge, if you earn less than that. Generally, you need to lodge a tax return every year.

If your annual income is below the Tax free threshold, and you didn’t pay any tax, you may not need to lodge a tax return. It is important to advise ATO that you don’t need to lodge a tax return by submitting a non-lodgment advice to ensure they don’t list you as having outstanding tax returns.

Penalties of lodging a late tax return

ATO can issue a Failure to Lodge (FTL) penalty if your tax return isn’t lodged by the due date. This fine is calculated at the rate of one penalty unit for each period of 28 days or part thereof that the return is overdue, up to a maximum of five penalty units. The penalty is normally applied automatically but is not normally applied to returns with either a nil result or which generate a refund.

If you have several outstanding returns, the ATO may issue one or more default assessments.  This is an estimated assessment of your income based on data held by ATO. These estimates are rarely correct and often show a higher tax liability as they don’t take deductions into account. However, you are able to appeal a default assessment.

Will I get prosecuted if I don’t lodge a tax return?

Even though it’s not common, ATO can prosecute for failing to lodge tax returns. Currently, the maximum penalty which can be applied on prosecution is $8500 or imprisonment for up to 12 months.

What should I do if I haven’t lodged my tax returns?

If you have one or more outstanding tax returns, ATO will catch up with you. It’s always a good idea to get your tax returns up to date ASAP.  We can help you minimise the risk by lodging a late tax return on your behalf.

Early Lodgement of Nil Activity Statements

The ATO generally issue activity statements by the end of the month, allowing 21 days for you to complete and lodge your monthly activity statement by the due date or 28 days to complete and lodge your quarterly activity statement by the due date.

Activity statements can be generated early in the following cases:

• if you are going to be absent from your place of business before the end of the reporting period and the business will not be trading during that period;
• you are a short term visitor, for example, an entertainer or sports person and will be leaving the country before generation of the activity statement;
• your entity is under some form of administration;
• your business has ceased; or
• you will be travelling (either within Australia or overseas) and therefore will not be able to obtain your activity statement if generated under normal bulk process

(Note: if you are a quarterly client who has elected to report and pay monthly, you are not eligible for early generation of activity statements.)

Activity statements can be generated for up to six months in advance for either six monthly or two quarterly activity statements.  We can liaise with the ATO on your behalf to assist in lodging nil activity statements early if required.

Tips to Protect Yourself from Scammers

With an increasing number of scammers targeting taxpayers, the ATO is urging people to be aware and vigilant. Reportedly over $800,000 was lost during November with an increase in phone calls, emails and text messages with one elderly person losing more than $236,000 in total.

• The ATO has confirmed that they will not:
• use aggressive or rude behaviour, or threaten you with arrest, jail or deportation;
• request payment of a debt via iTunes, pre-paid visa cards, cryptocurrency or direct credit to a bank account with a BSB that isn’t either 092-009 or 093-003;
• request a fee in order to release a refund owed to you; or
• send you an email or SMS asking you to click on a link to provide login, personal or financial information, or to download a file or open an attachment.

To protect yourself from scammers:

1. Know your tax affairs– you can log into myGov to check your tax affairs at any time, or you can contact your tax agent or the ATO.
2. Guard your personal and financial information – be careful when clicking on links, downloading files or opening attachments. Only give your personal information to people you trust, and try not to share it on social media.
3. If you are unsure about whether a call, text message or email is genuine, don’t reply. Call the ATO on 1800 008 540.
4. Know legitimate ways to make payments – scammers may use threatening tactics to trick their victims into paying false debts in pre-paid gift cards or by sending money to non-ATO bank accounts.
5. Talk to your family and friends about scams– if you or someone you know has fallen victim to a tax related scam, call the ATO as soon as you can.

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.

$20,000 instant asset write-off extended

On 12^th 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.

Can your Company access the 27.5% tax rate?

On 23^rd 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.

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.

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.

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.

2018-19 Personal Income Tax Changes

From 1 July 2018, the 32.5% income tax bracket ceiling increases from $87,000 to $90,000.  All other thresholds remain the same.  By 2024, the Government plans to have removed the 32.5% tax bracket complete.

The Government has introduced a new Low and Middle Income Tax Offset of up to $530 from 1 July 2018 which will be refunded to individuals when they submit their 2019 income tax returns.  It is calculated as follows:

Income	Offset
Up to $37,000	$200
$37,001 to $48,000	$200 plus 3c for each dollar over $37,000
$48,001 to $90,000	$530
$90,001 to $125,333	$530 less 1.5 cents for each dollar over $90,000

The minimum HECS-HELP repayment threshold has been changed.  From 1 July 2018, those earning between $51,957 and $57,729 will have a minimum repayment of 2%, with payments increasing up to 8% as taxable income increases.

The concessional contributions of $25,000 remains the same, as does the non-concessional contributions cap of $100,000.

For further information on any changes, please contact our office.

Change to SMSF auditing procedures

We wish to ensure all of our SMSF Trustees are aware that we have decided to engage an external SMSF auditor to enable us to focus on SMSF strategy, as well as providing the financial statements faster and providing better service to our clients.

As such, there may be a few extra documents which we request from you for the 2018 financial year.  If it has been several years since you got your rental property valued, please arrange a new valuation as soon as possible.  If you manage your own permanent file (or SMSF register), please ensure your trust deeds and amendments are signed, that your ATO member application and trustee declaration forms are signed and easily accessible.  SMSF Trustees must also have a fund investment strategy in place and minutes showing that you have reviewed it regularly (at least annually) and revised the strategy if required.

If you have any questions or concerns please don’t hesitate to contact our office.

Holiday Travel

If you are one of our SMSF clients and you’re heading away on holidays for more than 2 weeks, please call or email our office to let us know.

We are working on the 2018 -2019 SMSF accounts and if we know that you will be away for a certain amount of time during the year, it will be easier to plan around your leave if we have advance notice.

Common Tax Time Mistakes

The ATO has recently released the top 5 mistakes that people make when lodging their individual tax returns.  These are:

• Leaving out some income – from a temporary/short-term job or from Airbnb or Uber which the ATO now data match
• Not keeping receipts or records for your expenses
• Claiming deductions for personal expenses like home to work travel, personal phone calls or normal clothing
• Claiming personal expenses for rental property you are using yourself, or interest on loans for personal assets
• Claiming deductions for items that you never paid for – there is no such thing as a “standard deduction”

If you are unsure about whether you can claim a deduction or should report some extra income, please call our office and speak to one of our accountants.

Event Based Reporting for SMSFs

From 1 July 2018, all SMSFs are required to report specific events to the ATO via a new report called the Transfer Balance Account Report (TBAR).

If all members of the fund have less than $1million then this report can be lodged with the annual tax return, otherwise these must be lodged within 28 days after the end of the quarter in which the event occurred.

Events that must be reported include details of any new pensions commenced, any commutations of pensions, any personal injury contributions and some limited recourse borrowing arrangements.  SMSFs do not need to report pension payments, investment earnings or losses, when a pension ceases because it has a zero balance or the death of a member.

Veritas Wealth Solutions has already submitted the required reports advising the ATO of the opening balance of all pensions at 1 July 2017 and we will be working hard to ensure that we assist the Trustees of all full service clients to comply with the new reporting requirements.

If you are not a full service client and you require any assistance in fulfilling your reporting obligations, please contact our office.

Register your business name by October 31

By 31st October 2018 all businesses will need to register all trading names as a business name with ASIC in order to continue operating with it. ABN Lookup will only display business names registered with ASIC from this date.

Most businesses will need to apply for a registered business name with the Australian Securities & Investments Commission (ASIC).

You can carry on a business in your own name without registering a business name if you don’t change or add anything to your name. For example, John Smith doesn’t have to register a name to trade as J Smith or John Smith, but he does to trade as John Smith Landscaping.

To apply for a registered business name you will need to have applied for or have an ABN.

2018 Tax Time

Now that the 2018 financial year has come to a close it’s time to start thinking about lodging your tax returns. Our firm not only specialises in Self-Managed Super Funds, but we also prepare personal tax returns, business returns, unit/family trusts, and can lodge Business Activity Statement’s. We have found that for most of our SMSF clients, it is simpler and less complex for you if we prepare your personal tax returns at the same time that we prepare your SMSF accounts. If you would like us to prepare any of your returns, or would like a quote for our services, please contact the office on 02 6162 1522. We are more than happy to help with any of your tax requirements and can provide you with personalised tax advice when requested.

Staff Updates

We are very pleased to welcome Roshini Suraweera to our team of accountants.  Roshini is a qualified member of CPA Australia and is available to contact by email at roshini@veritassolutions.com.au from Monday to Friday.

Ken Wild will be on leave for seven weeks from Tuesday 29^th May 2018 and returning to the office on Monday 16^th July 2018.  Any enquiries including administration or financial advice during that period will be looked after by our qualified and capable staff.  This includes Veritas business owner and Certified Financial Planner Jodie Dickson and supporting staff Allison Reid (Associate Adviser) and Tracey O’Brien (Client Services Manager).

Single Touch Payroll

STP is the next step in simplifying your payroll reporting.

The ATO stipulated that mandatory STP reporting commence for businesses with 20 or more employees on 1 July 2018.

All businesses with 19 or less employees can decide to report via STP from 1 July, 2018. However ATO proposed that it will be mandatory for employers with 19 or less employees to commence reporting from 1 July 2019 subject to legislation being passed in parliament.

STP will lead to transparency in payroll reporting and level the ground to ensure that all employees are meeting their employer taxation obligations. Auto reporting, Activity statement compliance efficiencies and validated new hire data are some exciting advantages of STP.

Main changes for employers and the payroll process due to STP reporting are;

• You’ll be reporting payroll and super information to the ATO every pay run. This is no longer an end of year process.
• Employer may not need to provide employees with payment summaries at the end of a financial year and employees can access that information through myGov account.
• There will be some changes to how superannuation is reported to the ATO, but no change to the way superannuation is paid.

Furthermore, your payroll cycle and payment due dates for PAYG withholding and superannuation contributions will not change. Employers can continue to pay employees weekly, fortnightly or monthly.

You need to count the number of employees on your payroll on 1 April 2018 and if you have 20 or more, you will need to update your software when it is ready and start Single Touch Payroll reporting from 1 July 2018. Software providers such as MYOB, XERO and ELMO Cloud are working directly with the ATO to ensure that their clients are ready to go when it becomes mandatory on 1^st July 2018.

SMSF minimum pension reminder 2018

A quick reminder for our SMSF trustees about the importance of withdrawing the minimum pension amount from your superannuation fund before Saturday 30th June 2018.  You can find each member’s minimum pension withdrawal amounts for 2018 in the covering letter we included with your 2017 financial statements.  If you have any questions to do with your minimum pension requirements please call our office to discuss with one of our accountants.

Working Holiday Makers

Any employer can hire a working holiday maker, especially if they need labour for a short period of time.  Most people believe that working holiday makers are all fruit pickers or farm labourers, but the majority of them work in pubs, clubs and in retail.

In order to employ a working holiday maker in Australia, you must register with the ATO as a Working Holiday Maker Employer before you make your first payment to them.  Penalties apply if you fail to register.

You will need to identify the person as a working holiday maker by checking their visa.  They will hold either a Working Holiday visa (417) or a Work and Holiday visa (462), which you must verify online using the Visa Entitlement Verification Online service.

Working holiday makers can’t claim the tax-free threshold and they must provide you with their tax file number.  If they don’t provide you with a TFN you must withhold tax at the highest rate.  You must withhold tax at 15% from the first dollar they earn up to $37,000 regardless of their residency status.  Other tax rates apply beyond that amount.  Working holiday makers are also entitled to superannuation if they earn above the usual thresholds.

If you would like further information, please contact our office.

Are foreign residents eligible for a CGT discount on Australian Property?

Up until the 8^th May 2012, foreign residents were eligible to a 50% CGT discount on the sale of an Australian property. If the property was purchased after 8^th May 2012, the discount is not available to foreign and temporary resident individuals (including beneficiaries of trusts and partners in a partnership).

If the property was purchased prior to 8^th May 2012, but the CGT event didn’t occur until after this date, the CGT discount is apportioned to the percentage of time the property was owned prior to the 8^th May 2012; or if you had a period of Australian residency after that date. Any CGT events that occur prior to 8^th May 2012 are not affected.

The 2017 budget also introduced the following changes to the main residency exemption whereby it denies foreign and temporary tax residents access to the CGT main residence exemption from 7:30pm (AEST) on 9^th May 2017. This change has been grandfathered until 30^th June 2019, and if the CGT event occurs after this date, the individual is able to pro rata the main residence exemption.

Invoice Payments

When paying invoices via EFT please be sure to use the invoice number as a reference description.  Also please check the account number and BSB matches the details on our invoice.

Scam Alert!

A new email is doing the rounds, pretending to be from the Australian Taxation Office (ATO).  An example is below.  This is not a legitimate request from the ATO.  If you receive an email like this, do not click on the links, do not provide any personal details and delete it immediately.

Staff Updates

We are very pleased to welcome Holly Barnes to our team of accountants.  Holly comes to us with 12 months experience, after graduating from University of Canberra in June 2016.  She is available to contact by email at holly@veritassolutions.com.au from Monday to Wednesday.

We are also excited to advise that Tracey O’Brien has changed teams in our office.  She will no longer be working on accounts and tax but instead, will use her considerable experience with our clients to assist the financial planning team in the administration assistant role.

Watch this space for the introduction to our new accountant in next quarter’s newsletter.

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Income Tax Lodgement extension for SMSFs

This week the ATO has announced that lodgement due date for self-managed superannuation funds for the 2016-17 financial year will be extended to 30^th June 2018 in light of the new complicated super reforms.  As 30^th June 2018 is a Saturday, the SMSFs can lodge their returns up to Monday 2^nd July 2018 without penalty

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Taxable Payments Annual Report

Currently, if your business is in the building and construction industry, you must report payments that you make to contractors if you pay them for building and construction services and you have an ABN.  This is to ensure that the contractors themselves report their income properly to the ATO when they prepare their own income tax returns.

This existing reporting requirement is presently only applied to the building and construction industry, but that is about to change.

Effective from 1^st July 2018, this reporting requirement will be applied to businesses in the cleaning and courier industries as well.  

Courier services include activities where items or goods are collected from and delivered to any place in Australia, using all methods (car, truck, motorcycle, pushbike, on foot etc).  It does not include bus and taxi services, transport of blood or freight transport.

Cleaning services include businesses that undertake any of the following activities on a building, residence, structure, place, surface, transport/vehicle, machinery or equipment and for events:

• Interior and exterior cleaning (except sand blasting or steam cleaning)
• Carpet cleaning
• Chimney clearing and gutter cleaning
• Road sweeping and street cleaning
• Swimming pool cleaning; and
• Park and park facilities cleaning

Businesses in these industries will need to collect details of payments made to contractors from 1 July 2018 and then report to the ATO in their first annual report for the year 1 July 2018 to 30 June 2019 which will be due 28^th August 2019.  You will need to provide the contractors ABN, name, address, the gross amount you paid them for the financial year including GST, and how much GST is included in the gross amount you paid.  You must report the amounts that you actually paid to the contractors (eg don’t include invoices you haven’t paid them for yet).

If you are in these industries, then you will need to put systems in place to ensure correct collection of information.

Transparency of Tax Debts reporting

The ATO will begin reporting tax debts to credit reporting agencies under specific circumstances as soon as new legislation receives Royal Assent.

The measure is designed to support informed decision-making in the business community by making unpaid tax debts visible so credit providers and business can properly assess the credit worthiness of a business.  It is also designed to reduce unfair advantage of business that do not pay their tax on time and encourage those businesses to engage with the ATO to manage their debts.

1. There are 3 criteria that must apply before a debt will be reported:The business must have an ABNThe business must have a tax debt of which at least $10,000 is overdue by more than 90 daysThe business has not engaged with the ATO about the debt, either by arranging a payment plan or disputing the debt
2. Businesses will be notified 21 days before the tax debt is reported for the first time, in order to provide the opportunity for them to take action to prevent it being reported.   Once the tax debt is reported, the ATO will provide regular updates to the credit reporting agencies on the remaining balance.
3. The easiest way to avoid being reported is to pay all tax debts on time.  Alternatively, contact the ATO to set up a payment plan.

What Happens if My SMSF is Deemed to be Non-compliant?

When an SMSF is found to be non-compliant there are a number of penalties that can be imposed, none of which are good news for the super fund or the trustees.

Firstly, the fund will be taxed at the highest marginal rate of 45% as opposed to the standard 15%; as well as the entire fund income being classified as taxable, even if it is in pension phase. The ATO can then charge interest on the tax payable, which can, in some cases, be greater than the original 45% tax charged to the super fund. Excess contributions can also be taxed at a massive 93%.

Secondly, you can be disqualified, suspended or removed as a trustee. This process means that you will no longer be able to be a trustee of a SMSF. On top of this, the assets of the SMSF may be frozen until the non-compliance is revoked.

Lastly, there may be civil or criminal penalties through the courts, depending on the seriousness of the issue.

Here at Veritas Wealth Solutions, we try to ensure that all of our clients remain compliant; however, it does mean that we need your help by providing the appropriate documentation in a timely manner. As a trustee of an SMSF, it is your responsibility to make sure your annual return is lodged to the ATO before the due date, as well as operating the fund in accordance with your trust deed and the superannuation regulations.

If you have any concerns about whether or not your super fund is at risk of becoming non-compliant, please make an appointment to discuss your situation with our qualified staff.

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What documents should you keep for tax purposes?

In order to prepare an accurate tax return and support the claims you make, you need to keep careful records. The records you need to keep depend on your personal circumstances. If you are not sure, it is better to keep too many records than not enough.

• You should keep enough documentation:
• To provide written evidence of your income and expenses;
• To ensure that you are able to claim all of your entitlements;
• In case the ATO requires you to prove the information in your tax return; and
• To minimise the cost of managing your tax affairs.

Types of records you should keep:

• Income received – Example: payment summary, interest income, dividend statements, statements from managed funds, government benefits & pensions, and rental property income;
• Expenses related to income received – Example: car – kilometres travelled or log book, receipts for other travel, uniform & dry cleaning receipts, invoices for self-education and rental properties expenses;
• Contracts for the purchase and sale of an asset – shares and real estate – Example: contract notes, corporate actions, purchase & sale documents, holding statements, tax statements, dividend reinvestment statements;
• Receipts for donations

We recommend that you keep a copy of your documents, either electronically or paper, for at least 5 years from the date you lodge your tax return.

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New Year: smart saving tips

The New Year is the perfect time to think about what you want to achieve in the next 12 months and beyond.  It’s also a great opportunity to think about whether your circumstances have changed, or will be changing, and how this might impact your financial situation.  You are more likely to achieve your goals, whether they be financial or personal, if you have a plan.  As the saying goes, fail to plan – plan to fail.

Sorting out your finances doesn’t have to be complicated, as even small savings can add up over the year.

Here are some tips to help you get started.

Write down your financial goals and current spending

Make a note of where you’d like your finances to be this time next year. Now jot down your income and expenses for the last month. How much is left over? Are your goals realistic? It’s only by taking a close look at your current financial situation that you can begin to take control of it.

Most banks can show you how you spend your money. Make use of this feature to see where you spend each month to help you work out where you can make cuts to meet your goals.

Make a list of your lifestyle wants and needs

If you want to save or invest more money this new financial year, you may need to consider whether there is anything that you’re willing to sacrifice to get ahead. Do you really need to update your smartphone again? Do you have to buy a coffee everyday? It all adds up.

Build a budget

To get the most from your money, build a budget and stick to it. However finding the right balance is key. If you make your budget too restrictive you’ll likely break it. Alternatively, if you make it too light you might miss out on some financial benefits. And don’t worry if you’re not a fan of spreadsheets; there are a range of digital tools to help you organise your finances. Look at moneysmart.gov.au for a range of budget planners, calculators and apps available.

Track your spending

Once you have a budget, it’s important you stick to it. That means tracking your expenses. A great way to do this is to use a digital money tracker such as the TrackMySpend app from moneysmart.gov.au.

Review your regular expense plans

Review your plans and regular outgoings to ensure you’re getting the best possible value for your money. There are a range of websites that provide direct comparisons of different suppliers offering mobile phone, internet, pay TV and utilities plans.

Sort out your super and consider the caps

If you haven’t sorted out your super yet, now is a good time to do it. If you have multiple super accounts, finding and consolidating them in the one account could help you cut down on fees and grow your money faster with compound interest.

Before consolidating your super you must consider a few important points, such as weighing up benefits and insurance options, comparing the fees and checking potential tax and preservation implications. In addition, if you intend to claim a tax deduction for certain personal contributions, ensure your ‘Notice of intent to claim a deduction for personal contributions’ is made and is acknowledged by the existing fund before combining.

To boost your balance, consider setting up additional regular contributions. Depending on your income, you may even qualify for government co-contributions.

Before you decide to invest more in super, you need to be aware that restrictions and caps apply to different contribution types. Penalties may apply if you exceed the relevant cap or contribute to super when you were not eligible to contribute. You also need to consider that amounts contributed to super generally can’t be accessed until you reach your preservation age and retire or meet another condition of release. Therefore, unless you’re saving for your retirement, you’ll need to consider other options.

Review your insurance cover

Make sure you are getting the best deal with your current general insurance policies such as House and Contents and car insurance.  Update your home and contents cover if you have made changes to your home or purchased new items.  Review regularly the home value covered, building prices can go up significantly year on year and you want to make sure the cover will not leave you grossly underinsured.  It is easy to get quotes online or over the phone to check if your policy is cost competitive for the features you need.

For personal insurance, it is important to make sure the cover you have is adequate for your current situation.  This should be reviewed every few years or if a major life event has occurred, for example, marriage, a new child or increase in debt obligations.  The majority of Australian’s are underinsured for temporary or permanent disability and death.  Considering the average family debt is now over 200% of household income that puts most Australian families into significant distress if something unexpected occurs (hence the need also to build an emergency fund!).

Pay off debt

If you’re paying off multiple debts with a range of interest rates, you should consider the appropriateness of prioritising paying down the debt with the highest interest (while continuing to meet your repayment obligations in relation to your other debts). Alternatively, you may be able to combine your debts with a debt consolidation loan. If you can continue to make the same level of repayments, this may significantly reduce the amount of total interest payable and help you pay off your debt sooner, however you must be disciplined in your repayments.  Often consolidation, due to longer loan terms, can be more expensive over the long run if you continue to pay minimum repayments.

For those with large credit card debts and find them difficult to manage, cut them up, pay them off.  There are alternatives to using credit cards, Visa/Mastercard debit cards most banks offer on transaction accounts, prepaid Visa/Mastercard gift cards and newer payment providers such as Apple Pay, Google Pay and PayPal which you can set up using your own funds.

Start building an emergency fund

Having approximately three months of living costs put into a high interest savings account that is not easily accessible is a great buffer to have when something nasty strikes.  Building an emergency fund should be on everyone’s money goals list.  It provides peace of mind knowing you don’t have to borrow funds or incur additional stress during a time that may already be difficult.

Review your investments

Review your investments regularly. Check that your asset allocation and level of risk are appropriate for your age and plans. A financial adviser can help you understand and manage your portfolio more effectively.

Continue your financial education

Improving your financial knowledge is something we should all do and understanding the financial world will empower you to make better decisions for you and your family.

Moneysmart.gov.au has excellent resources available for all phases of life and are trying to improve the financial literacy of our children by providing excellent teaching resources.  The more we can help children understand the basis of finances, the better prepared they will be when they become independent adults.

Get financial advice – how we can help

Financial advice is about far more than just making money. It’s about creating new opportunities to help you achieve whatever you desire in life.  Our financial planners can help you work out what’s important to you and help you develop a plan that aligns your financial decisions to your lifestyle goals.  Whilst there are many things you can do yourself, receiving advice from a professional can help you stay on track and assist with the more technical complexities involved in financial planning.  We believe in having long term partnerships with our clients to help them navigate the financial ups and downs of life and have expertise in assisting clients with money management, growing wealth (including superannuation), retirement planning, taxation and estate administration services.

Please contact our office on 02 6162 1522 to make an appointment to discuss how we can help you with your financial goals.

Gift Vouchers Now Available @ Veritas – Help your children and friends reach their financial goals

Gift vouchers are now available from Veritas Wealth Solutions for an initial consultation session (usually 60 – 90 minutes) with Certified Financial Planner Ken Wild (a cost of $220).  An initial consultation will help your children and friends plan for their future in setting financial goals and developing plans on how to achieve them.

Please contact our office if you would like to organise a voucher.

Disruption and the future of Energy

The following link is something we found could be of interest to all.

Staff Updates

It is with regret that we advise that Rose Geary, our financial planning assistant, has decided to pursue other opportunities and has left our employment.  We wish her well in her new career direction.  Any queries that you would have directed to her can be sent to Allison Reid at allison.reid@veritassolutions.com.au.

Monica Morabito has also decided to leave our team in order to focus on her family.  She will remain with us until the end of October.  After then, any questions you may have can be directed to Allison Burman at allison@veritassolutions.com.au.

Watch this space next quarter to be introduced to our new team members.

Simple Fund 360

As many of our SMSF clients know, we have been converting our accounts processing from desktop to cloud software using the same provider.  The new software has lots of new features which we will begin using to provide you the best service available.

If you haven’t been sent a bank data authority email as yet, be prepared to receive an email or letter (it’s definitely legitimate!) with some forms attached which we would like you to sign.  The forms allow your bank to directly transfer the transaction history to the cloud software, which will allow us to speed up the process of preparing your end of year accounts.

These forms do not allow us to transact on the accounts, we simply get a list of what has gone in and out – like a standard bank statement but in electronic form.  If you have any questions though, please don’t hesitate to contact our office for further information.

Scam Alert!

If you get a phone call from a person from Microsoft who tells you there is something wrong with your computer, do not give them any personal information and do not give them access to your computer.  Microsoft will never call you to advise you have an issue, they would expect you to call them.  If the call is legitimate, they will provide a reference and when you call the main line, you can speak to anyone about it using the reference they give you.  Most likely, the scammers will hang up when you insist on a reference number.

Another common scam involves callers who identify themselves as working for the ATO or Centrelink and advising you have a debt that can only be cleared with a ‘release fee’ or a ‘fine’ that can only be paid using iTunes gift cards.  These phone calls sound legitimate but be sceptical!  Ask for a reference number so you can call the main ATO or Centrelink phone number and call them back.  These are also not legitimate.  You will never be asked by the ATO or Centrelink to pay a debt using gift cards.  There are also scammers pretending to be from Telstra advising they are trying to catch a hacker who will try to get you to buy iTunes gift cards.

The final warning for this quarter, are unknown numbers who call you and ask is this “your name”.  When you say “yes” they record your voice and use it to agree to contracts over the phone such as contracts with Telstra for a new phone.  As the voice print they use to say “yes” is your voice, it is very difficult to prove that you were not the individual who entered the contract.  When answering calls from unknown numbers, if they ask if it is you, reply with “it is, who is this?”.  Try not to say yes to them.

Important Macquarie Cash Management Updates

Adviser Initiated Payments

Are you having trouble using online banking and need to organise a payment from your cash management account?  We now have the ability to initiate a payment on your behalf.  This may be handy if you are having trouble with internet access or do not like to use online banking.

How does it work?

Our office can setup a Bpay or an Electronic Funds Transfer (also known as Pay Anyone) payment on your behalf.  When the payment information is submitted, your mobile phone will receive a SMS with the details of the transaction and the code needed to approve the transaction.  You would then call our office and verbally tell us the code and we then authorise the payment.  You will receive an email and SMS confirmation of the payment.  The authorisation code cannot be sent via email or SMS.  We must talk to the individual that is sent the code.

We can set up future and recurring payments too if you need them.

What information do we need?

First and foremost, Macquarie Bank need your mobile number and email address to be up to date on their system.  You can call Macquarie on 1800 806 310 to check your details and update them if necessary.  This can take up to 48 hours to update on their system.

Once that information is up to date our office would need the following details from you to setup the payment transaction:

• Amount to be paid
• Bpay or Account details to where the payment is going – Account name, BSB, Account Number or Biller Code & Bpay Reference number

Note:  we do not have authority to transact on your super fund cash accounts.  This feature only allows our office to setup the payment and approve it with your permission.

Nominate a linked bank account for large fund transfers

Macquarie have a daily limit of $20,000 per day for electronic fund transfers.  This limit can be increased by calling Macquarie when the need arises.  However for regular large payments we would recommend you add a Nominated linked bank account.  Once linked to your Macquarie CMA, there is no daily limit for electronic banking transfers to your nominated account.  To add a nominated account you can do this over the phone by calling Macquarie on 1800 806 310.

Two factor authentication starting from 3^rd October

Macquarie Bank have implemented two factor authentication to verify your internet banking transactions.  This will start on the 3^rd October for older bank accounts, new accounts opened more recently (e.g. within the last 18 months) will already have this in place.

How does this work?

When you request a payment transfer, to confirm your identity, the bank will send a secure code to your registered mobile number before you can make a transaction.

What you need to do?

You will need to make you have registered for two-factor authentication (2FA).  Follow this link https://www.macquarie.com/cmaregister to find out more on how to do this.  The step by step user guide available here is also worth reading as it provides good detail on how to best use the Macquarie online banking system.

Super Reforms – Concessional Contribution Changes from 1 July 2017

From 1 July the concessional cap has been reduced to $25,000 per annum.  Concessional contributions are made up of Employer contributions (minimum rate is currently at 9.5% of salary), salary sacrifice (if available) or personal contributions claimed as a tax deduction.

Defined Benefit funds – Major change to what is included as a concessional contribution

For public service employees who are members of a defined benefit fund such as the CSS, PSS or Military Super, the amount of super that is allocated to your concessional cap is more complicated from 1 July.   It now includes notional taxed contributions plus productivity payments and any salary sacrifice/personal deductable contribution amounts you have made.

CSS, PSS & Military super all offer estimators to work out your new concessional cap amount.  Unfortunately for CSS & PSS, this estimator appears to be only available behind a member online services login and there is no access to the general public, making it difficult for financial advisers to assist their clients.  We encourage all clients who are in the accumulation phase of their life to login and check their concessional cap estimate, particularly if you are making additional salary sacrifice/personal deductible contributions.  You will need to check that you will not go over the newly reduced $25,000 cap.

The Commonwealth Superannuation Corporation who manages these funds has put out some excellent fact sheets.  These are available on each scheme’s website under “Super Changes”.

https://css.gov.au/super-changes/

https://pss.gov.au/super-changes/

https://militarysuper.gov.au/super-changes/

Travel Deduction Changes for Residential Rental Property

From 1 July 2017, travel costs for individual investors inspecting, maintaining or collecting rent for residential rental properties will no longer be deductible.  Travel costs will also not be recognised in the cost base of the property for CGT purposes.

This is an integrity measure to address concerns residential investment property owners are not correctly apportioning travel deductions or are claiming travel costs that are for private travel purposes.