A recent Federal Court ruling involving a Queensland businessman has prompted the crackdown for access to capital gains tax (CGT) concessions. The decision adds a ‘direct functional relevance’ test to classing an asset as an active asset. The case involves David Eichmann, owner of a building, bricklaying and paving business through the Eichmann Family Trust […]
Bushfires and SMSF-owned Assets
With the destruction of properties caused by the bushfires, SMSFs may be wondering what to do with their affected properties. The options depend on three factors: whether the property is rented to a related party has an LRBA or not is fully destroyed or just damaged. The majority of superannuation funds that own a farm […]
Bushfire Relief for Taxpayers
With drought, bushfires and flooding, it has been a terrible start to 2020 for a lot of Australian businesses. The Australian Taxation Office (ATO) has extended its tax assistance package for people impacted by the bushfires in NSW, Queensland, South Australia and Victoria. The approximately three and a half million businesses, individuals, and self-managed superannuation […]
Superannuation Guarantee Contributions: Jockeys as employees for SG purposes
Under the Superannuation Guarantee (Administration) Act 1992, employers are required to provide superannuation guarantee (SG) contributions for their employees, subject to limited exemptions. Employers who don’t pay the minimum amount of SG for their employees into the correct fund by the due date may have to pay the super guarantee charge (SGC). While this law […]
Reforming of Individual Tax Residency Rules
The Government has recently released the Board of Taxation’s proposed new individual tax residency rules. The report was given to the Treasurer back in March 2019, but the Board’s preferred proposal has just been released. The current rules were seen to be outdated and complex given the global nature of workplaces nowadays. Additionally, the current […]
A GST fraud case of a property flipper
Between 2005 and 2011, Ms Simone Semmens, a former TV presenter, purchased, developed and sold ten luxury properties in Toorak, Portsea and Caulfield North. Ms Semmens carried out extensive work on the properties, developing and subdividing them before selling them for a profit. She sold these properties for more than $20 million and made a total […]
Total Super Balance and the LRBA Add Back
Sometime in June 2017, the Government expressed its intention to revise the Total Superannuation Balance provisions when an SMSF had a limited recourse borrowing arrangement (LRBA). The intention of the Government was to apportion a share of the fund’s outstanding loan balance to every affected member and make the loan balance count towards their Total […]
Entertainment Expenses during Christmas Season
It’s Christmas season once again and businesses are busy throwing parties. One night of a Christmas party consists of several entertainment expenses and these expenses may be subject to fringe benefits tax (FBT), unless an exemption applies. Expenses incurred in holding a Christmas party or other events for employees are not generally deductible if the […]
Employee or independent contractor: Reality TV Workers Compensation Case
Channel 7 reality TV show House Rules has lost a recent case regarding whether a contestant was an employee or a contractor. House Rules contestants had to sign a contract. Part of the contract states that the contestants had to acknowledge that their participation in the program is not employment, does not create an employer/employee […]
New NALI rules affect all SMSFs and accountants
The Australian Taxation Office (ATO) recently released draft law companion ruling (LCR) 2019/D3 on non-arm’s length income. It clarifies further that, in certain cases, financial services professionals providing services to their own SMSFs can cause the entirety of the fund’s income to attract the top marginal rate of tax. Originally, NALI was called “special income” […]
Disclosure of Business Tax Debts
Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019, was recently passed by the Senate. Part of the legislation was about disclosure of business tax debts. Schedule 5 to the Bill allows taxation officers to disclose the business tax debt information of a taxpayer to credit reporting bureaus in certain situations. […]
Limiting Deductions for Vacant Land
The Senate recently passed the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019. It contains several important measures, and one of these is an amendment to Income Tax Assessment Act 1997, which sets a limit on tax deductions for losses or outgoings incurred that relate to holding vacant land. […]
Company Tax Losses
The ‘business continuity test’ introduced by the Treasury Laws Amendment (2017 Enterprise Incentives No. 1) Act 2019 retains the existing ‘same business test’ and introduces the ‘similar business test’. Under the similar business test, companies and listed widely held trusts will be able to utilise tax losses made from carrying on a business against income […]
Single Touch Payroll Data Usage
The Australian Taxation Office (ATO) is proposing a letter campaign for employers that have previously not met their superannuation guarantee obligations to remind them of their obligations. The letter will go to 2,500 employers who the ATO have identified as having paid some or all of their SG payments late during 2018-19 and another 4,000 […]
Commercial Debt Forgiveness
Employers failing to pay proper Superannuation Guarantee (SG) isn’t new. One example is Bunnings, a large company which recently made an admission that it failed to pay the correct SG for almost a decade simply because of a payroll error. The 2011 change in Bunnings’ enterprise agreement introduced requirements for super to be calculated on […]
Penalty Remissions
Employers failing to pay proper Superannuation Guarantee (SG) isn’t new. One example is Bunnings, a large company which recently made an admission that it failed to pay the correct SG for almost a decade simply because of a payroll error. The 2011 change in Bunnings’ enterprise agreement introduced requirements for super to […]
SMSF Breaches
With the ATO making clear its stand on administrative penalties, directors of SMSF should be cautious about their actions involving the fund to avoid breach of obligations under the Superannuation Industry Act. Take a look at a recent case involving the Alisar Superannuation Fund. The Fund has a corporate Trustee. The Trustee company, in addition […]
Corporate residency of foreign incorporated companies
To ensure modern commercial board practices and international tax integrity rules are being followed, the Treasurer asked the Board of Taxation to conduct a review of the operation of Australia’s corporate tax residency rules. The terms of reference set out by the Treasurer are for the Board to consider whether the existing rules: minimise commercial […]
Personal Services Income
Personal services income or the PSI rule has been a hot topic as the Federal Court recently handed down its ruling on two cases relating to PSI rules, one of which is Fortunatow v Commissioner of Taxation. In Fortunatow v Commissioner of Taxation, Peter Fortunatow, the taxpayer, failed to pass the “unrelated clients test” in […]
SMSF Investment Strategies and Diversification
Around 17,000 trustees of SMSFs with more than 90% of their funds in one asset have received a letter from the Australian Taxation Office (ATO) regarding a possible administrative penalty for failing to meet certain requirements. The letter states: “Our records indicate that your self-managed super fund (SMSF) investment strategy may hold 90% or more […]
Black Economy Continued
Despite the success of its enforcement against the Black Economy, the Australian Taxation Office (ATO) believes the economic impact is 3% of GDP or around $50 billion dollars. Thus, with more funding, the taxation office continues with its efforts to protect honest businesses from the Black Economy. This time, it has a more targeted approach. […]
Client Acceptance and Retention
Whether to accept new clients or retain existing clients is a crucial decision for every audit firm to make. Thus, it is important for an audit firm to evaluate whether a client meets standards of integrity before accepting the job. This process should be properly documented. There are several things to take into consideration in […]
Restricting the Use of Cash and Outrageous Tax Claims
A draft legislation on restricting cash use was recently introduced by the Government. This was response to the Final report of the Black Economy taskforce’s recommendation to introduce a cash payment limit in Australia. As a matter of fact, other countries have already introduced cash limits. For instance, France instituted a €1000 ($1600) cash limit […]
GST Liability for Directors
Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 holds four measures that were originally announced in the 2018-19 budget. Prohibit creditor-defeating dispositions of company property and penalise those who engage in such transactions and allow liquidators and ASIC to recover the property. Prevent directors from improperly backdating resignations or ceasing to be a director when […]
Tax Relief So Working Australians Keep More of Their Money
The Federal Government’s Treasury Laws Amendment (Tax Relief So Working Australians Keep More Of Their Money) Bill 2019 was passed on 04 July 2019. Working Australians will benefit from this bill which increases the base and maximum amounts of the low- and middle-income tax offset for the 2018-19, 2019-20, 2020-21 and 2021-22 income years. From […]
Deceased Estates and the Commissioner’s Discretion – PCG 2019/5
Acquiring a deceased estate will require you to understand many aspects related to complying with relevant tax laws. PCG 2019/5 covers the Commissioner’s discretion to extend the two-year period to dispose of dwellings acquired from a deceased estate. Section 118-195 disregards capital gains and capital losses made from certain CGT events that happen in relation […]
Running a Joint Venture Building Project in an SMSF
In a case involving a joint venture agreement for a housing development, a former builder has been ordered to pay damages to an SMSF. The District Court of South Australia cited breach of fiduciary duties as basis of its decision. The case of Polley & Anor v Zollo & Ors [2019] SADC 76 involves Neil […]
Removing Tax Deductibility of Non-compliant Payments
In the past, an employer was generally entitled to a deduction for the payment of salary and wages. Likewise, a company could deduct directors’ fees paid to directors, while an entity was able to deduct a payment to a religious practitioner in certain circumstances. A labour hire business could deduct payments it made to individuals […]
Superannuation Liability: Independent Contractors or Employees
The employer is responsible for superannuation guarantee (SG payments) of employees. However, distinguishing between an employee and a contractor is a common confusion when it comes to superannuation liability of employers. Do you consider someone an employee or a contractor? One recent case decision offers an insight to this matter. Racing Queensland Board v Commissioner […]
What is a Reversionary Pension?
You can literally rest in peace if you have a superannuation interest when you die. Per regulation 6.21 of the Superannuation Industry (Supervision) Regulations 1994 (SISR), your superannuation provider is required to cash your superannuation interests to your beneficiaries or to your legal personal representative as soon as practicable. The payment of your superannuation interests […]
Similar Business Test
Can a tax loss for an income year be carried forward and deducted from assessable income in future income years? Previously, this is possible if the company passes either the continuity of ownership test (COT) or the same business test. On 7 December 2015, the Government announced a number of measures aimed to incentivise and […]
Cryptocurrency and Data Matching
Cryptocurrency is one of the many ways people make money nowadays. It can be bought or sold on an exchange platform using conventional money. Some popular digital currencies like Bitcoin can be bought or sold for cash through special ATMs. Cryptocurrencies operate independently of central banks, central authorities or government. Cryptocurrency exchange platforms are generally […]
Protecting Your Superannuation Package
You’ve worked hard for your superannuation savings, so it’s quite understandable that you get frustrated when it erodes due to fees and insurance premiums. Good news is there’s something that can be done to protect your super. Earlier this year, the government passed Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018. The new legislation […]
Binding Death Benefit Nomination
A binding death benefit nomination is a legally binding nomination that grants a person the chance to advise the trustee who is to receive his superannuation benefit in the event of death. For a nomination to be binding, it should be valid. One sign of validity is only ‘dependants’ can be nominated. To further understand […]
What Property Owners Need to Know about Rental Property Deductions
The Australian Taxation Office (ATO) reminds property investors to be extra careful when making rental deduction claims. In the 2017–18 financial year, more than 2.2 million Australians claimed over $47 billon in deductions. Finding out about several dodgy claims, the ATO is now doubling audit numbers on rental deductions. Assistant Commissioner Gavin Siebert says that […]
TR 2019/1: New Tax Ruling on Corporate Tax Rate
With the new tax ruling, there is more clarity when it comes to determining if a company can access the lower corporate tax rate. The Australian Taxation Office (ATO) has released TR 2019/1, taking the place of the previous draft TR 2017/D7. It sets out the Commissioner’s view on when a company carries on a […]
Liberal vs Labor: Polices for 2019 Federal Election
With the next Federal election close by, it is important that you start evaluating the parties’ proposed policies that will affect your clients’ businesses. The federal budget has been rescheduled to Tuesday 2 April – from its usual 2nd Tuesday in May and it is expected that Parliament will be dissolved on 15 April. With […]
Cybersecurity for Accounting Firms
Nowadays, there is a rampant threat to cybersecurity across all industries. But cyber threats are becoming more prevalent in finance as hackers find it easiest to make money by executing a well-planned financial crime online. Thus, accounting firms should take cybersecurity seriously. A cybersecurity breach can have harmful effects on your clients. It can lead […]
What You Need to Know about Entertainment Expenses
Company Christmas parties are over, but the work of employers doesn’t end. With a long list of entertainment expenses incurred during the Christmas season, businesses should start the year right by looking at the Fringe benefits tax (FBT), Goods and Services Tax (GST) and Income Tax Rules surrounding entertainment and gifts they have provided. Entertainment […]
Airbnb, Uber and the ATO
Of course, everyone knows Uber and Airbnb. These marketplaces provide a convenient way of booking transportation and accommodation. On top of that, these companies have provided many Australians the opportunity to earn income. With income comes the responsibility to pay taxes. Unfortunately, there are still some who do not declare the income they earn from […]
Are You Prepared to Report Event-based Transfer Balance Account Information?
When it comes to retirement pension accounts, people can’t just transfer any amount they wish into retirement phase. There is a cap or limit to the amount that can be transferred, which is known as the Transfer Balance Cap. When someone starts or stops a retirement pension, the Transfer Balance Account (TBA) increases or decreases. […]
How to avoid litigation as an SMSF Auditor
A couple of key cases this year have led to major settlements against the auditors of SMSFs for failing to let the trustees know of dodgy investments. In both instances, the trustees of the SMSF invested with a trusted friend or adviser, who also owned a percentage of the firm preparing the financial statements of […]
GST on Imports: What You Need to Know When Shopping Imported Goods
A lot of online stores are not from Australia, and many of their products cost less than $1,000. So whether it’s a gadget or a set of new clothes, from 1 July 2017 onwards, shoppers generally have to pay a little bit more for what they buy online from overseas retailers. On 26 June 2017, […]
What You Need to Know about the Black Economy
Have you ever encountered engaging the services of someone who accepts cash wages “off the books”? That’s part of the growing Black Economy in Australia. The black economy refers to businesses or individuals who operate outside the tax and regulatory system or do not appropriately report their tax obligations. Also known as the shadow economy, […]
Does the punishment fit the crime?
While the administrative penalty regime has reduced the number of short-term loans to members, the penalties can be harsh where there are a large number of smaller transactions. When the administration penalty regime commenced I never expected a client of mine would receive an administrative penalty notice totalling $616,200 for a $90,000 loan to a […]
The Consequences of Payroll Error
The awards system in Australia is very complex, and a spate of recent cases has illustrated the importance of having detailed documentation around employment contracts and timesheets as well as good quality payroll software. Poor payroll systems can result in significant underpayments of both wages and superannuation guarantee (SG). Single touch payroll commenced on 1 […]
