Tax & Super Newsletter April 2015 - May 2015

In this issue:

Beware scam emails

ATO website update for Director Penalty Regime 

Work-related Expenses – ATO focus

Do not let yourself disappear – ATO’s (anti) fraud video

Superannuation guarantee rate

Super contribution caps

Are you paying super fund fees unnecessarily? 

Correcting arrangements involving private companies and shareholders and their associates 

If you work in the building and construction industry 

Do you own a rental property? 

Selling or closing down a business 

How much life insurance do I need? 

Benefits of working with a financial adviser 

ATO website update for Director Penalty Regime

Editor: The release of this fact sheet follows a number of recent cases involving directors being largely unsuccessful in arguing why penalties under the director penalty regime should not apply to them.

The ATO has issued a new fact sheet aimed at helping directors (and those that are about to become a director) understand their obligations under the Director Penalty Regime (‘DPR’) in respect of unpaid and unreported Pay As You Go (‘PAYG’) and Superannuation Guarantee Charge (‘SGC’) amounts.

As well as giving a brief background to the DPR, the fact sheet provides a guide for directors to follow and what the DPR means to them, including:

  • Directors will be personally liable for unpaid PAYG withholding or SGC amounts.
  • Director penalties can apply even if an individual is no longer a director of a company, or is a newly-appointed director.
  • The ATO is likely to issue a director penalty notice to collect company debts where the company hasn’t engaged to resolve outstanding obligations.
  • Payment is the only option to remit the penalty if the associated company liability was not reported within three months of the due date (e.g., if an SGC statement was required to be lodged by 28 August, but this had still not been done by 28 November).
  • The ATO recommends that address details with the ATO and ASIC are kept up to date to ensure any time-sensitive action can be taken by impacted directors.

The fact sheet also provides a Frequently Asked Questions section, and could be used as a handy reference to be provided to clients that are, or are thinking about becoming directors.

Ref: ATO website – Director penalty regime

 Work-related Expenses – ATO focus

The ATO continues to pay close attention to work-related expenses and is using extensive data analysis to identify areas requiring attention across all work-related expense claims, regardless of occupation.

However, it has indicated that specific attention will be paid to:

Overnight travel

  • There is no deduction for an amount received as a reasonable travel allowance (if it is not required to be included as assessable income).
  • Any amount claimed in excess of a reasonable travel allowance can be claimed only if the taxpayer spent the money and has records to prove it.

Transporting bulky goods and equipment

  • You need to use bulky tools to do your job.
  • Your employer expects you to transport this equipment.
  • There is no secure area to store the equipment at work.

Work-related use of computers, phones or other electronic devices

  • You need to demonstrate how you use the device for work.
  • Only claim the work-related portion.
  • Keep records and maintain a diary.

Ref: ATO website – Claiming work-related expenses?

Do not let yourself disappear – ATO’s (anti) fraud video

Identity thieves target individuals and businesses to steal information and commit refund fraud in their name. Tax agents can help reduce the risk of their clients becoming a victim by encouraging them to:

  • Protect important details such as their tax file number, date of birth, current address and driver’s licence number;
  • Store personal and/or business information in a secure place;
  • Change their passwords regularly; and
  • Ensure their computer has up-to-date security and anti-virus software.

The ATO has put out a video called “Don’t let yourself disappear” which shows what can happen when personal information gets in the wrong hands.

In it, while discussing identity fraud, one of the characters says, “Yeah, I saw an ad for a cleaning job.”

“Great pay, low hours. I thought awesome, extra cash. So I gave them all my details, and then I never heard back about the job.”

“Then at tax time my refund was taking forever so I called the Tax Office and they told me it had already been issued.”

“So the scammer stole my identity and my refund.”

“The Tax Office is helping me sort it out, but I should have thought twice about giving out my details.”

Ref: ATO website – Don’t let yourself disappear

Superannuation guarantee rate

Previous editions of TaxWise have noted the change in the superannuation guarantee rate amounts. The rates have been included again as, if you are an employee, you should make sure your employer is contributing the right amount into your superannuation account:

Year

Superannuation guarantee rate percentage

From 1 July 2013

9.25%

From 1 July 2014

9.5%

From 1 July 2015

9.5%

From 1 July 2016

9.5%

From 1 July 2017

9.5%

From 1 July 2018

9.5%

From 1 July 2019

9.5%

From 1 July 2020

9.5%

From 1 July 2021

10%

From 1 July 2022

10.5%

From 1 July 2023

11%

From 1 July 2024

11.5%

From 1 July 2025

12%

Note! Check you are getting the right amount of super being paid into your super fund. Super contribution caps With the super guarantee rate having changed, it is worth remembering what the contributions caps are as well.The concessional contributions general cap includes:

  • Employer contributions (including contributions made under a salary sacrifice arrangement);
  • Personal contribution claimed as a tax deduction by a self-employed person.

The non-concessional contributions cap includes personal contributions for which you do not claim an income tax deduction. Both of these are noted in the table below.

Income yearConcessional contributions general capNon-concessional contributions cap
2014-15$30,000**$180,000
2015-16$30,000$180,000

**If you are 49 years old or over on 30 June 2014, the concessional contributions cap is temporarily increased for the 2014-15 income year to $35,000. This cap is not indexed and will cease to apply when the indexed cap that otherwise applies reaches $35,000.

Changes to superannuation excess concessional contribution cap

From the 1 July 2013, if you exceed your concessional contributions cap, the excess amount will be included in your assessable income and taxed at your marginal rate. An interest charge also applies.

You can choose to release out of your super fund up to 85% of the excess contribution made if you complete an election form. If you do elect to release an amount, the ATO will issue your super fund with an ‘excess concessional contributions release authority’. Your super fund must pay the amount to be released to the ATO (as well as return the release authority statement) within 7 days.

The released amount must be paid directly to the ATO and is to be treated as a non-assessable, non-exempt benefit payment to the member.

To do!

It is worth checking your super fund account to ensure no excess contributions have gone in, or if they have, considering whether you want to withdraw them. Talk to your tax agent if you are unsure whether the right amount of super has been paid into your account.

Amendment to taxing excess super contributions

Following on from the above, the Tax and Superannuation Laws Amendment (2014 Measures No 7) Bill 2014 amends some provisions that relate to the taxation of excess super contributions to:

  • Provide individuals with an option to be taxed on the earnings associated with their excess superannuation non-concessional contribution at their marginal tax rate;
  • Ensure that individuals whose superannuation benefits are involuntarily transferred from one superannuation plan to another plan are not disadvantaged through the transfer; and
  • Remove the need for a roll-over benefit statement to be provided to an individual whose superannuation benefits are involuntarily transferred, and allow taxation officers to record or disclose personal information in certain circumstances.

If you are concerned you have made excess contributions to your super fund, speak to your tax agent about whether you are likely to be affected by any of these recent changes.

The Bill received Royal Assent on 19 March 2015

Are you paying super fund fees unnecessarily?

The ATO noted in a recent media release that Australians with multiple superannuation accounts could be paying thousands of dollars in unnecessary fees every year. According to new figures released by the ATO, 45% of working Australians have more than one superannuation account.

The ATO is encouraging taxpayers with multiple accounts to consider consolidating their superannuation into one preferred account. Australian Prudential and Regulation Authority (APRA) figures show the median figure for fees and charges paid by Australians for a low cost superannuation account is %532 per year.

To do!

Do you have multiple super fund accounts and are wasting money on unnecessarily paying fees in all the funds? If so, it is time to combine all your super into one account. Your tax agent can help you do this.

Correcting arrangements involving private companies and shareholders and their associates

Recently, the ATO published on its website information about what to do if a private company has, for example, made a loan to a shareholder that is ‘deemed dividend’ for tax purposes. A taxpayer can take corrective action by, for example, putting the right loan documentation in place, to ensure that the amount is not captured by the ‘deemed dividend’ rules (colloquially known as “Division 7A”).

Your tax agent will be able to assist you if you have any concerns about loans or other arrangements you may have in place with a private company, so it is always best to consult your tax professional for help with these sorts of things.

Note!

If you have a loan from a private company, check with your tax advisor to see if you need to take any corrective action.

If you work in the building and construction industry

The ATO has published the following information about the taxable payments reporting obligations of persons in the building and construction industry:

  • Taxable payments reporting – building and construction industry

https://www.ato.gov.au/general/other-languages/in-detail/information-in-other-languages/taxable-payments-reporting—building-and-construction-industry/

  • Do you work as a contractor in the building and construction industry?

https://www.ato.gov.au/General/Other-languages/In-detail/Information-in-other-languages/Do-you-work-as-a-contractor-in-the-building-and-construction-industry/

Do you own a rental property?

The ATO has advised that is has redeveloped the letters it is sending to agents and taxpayers regarding reviews of rental legal and/or borrowing expense claims to make the letter clearer. In feedback, the ATO was asked to provide information on the specific area of the expense claims it is reviewing. The re-drafted letters now identify:

  • Return label and amounts in question;
  • The proposed adjustments;
  • What to do in the event of a disagreement; and
  • Where to find relevant information on ato.gov.au about what can be claimed, including QR reader codes to scan for smart phones or tablets.

To do!

You should see your tax advisor if you have a rental property and receive one of these letters.

Selling or closing down a business

If you are selling or closing down a business, there are some important tax obligations for the business that you should attend to, such as:

  • Ensuring all outstanding Activity Statements and returns (income tax, FBT) have been lodged;
  • Put in all requests for any refunds owed to your business;
  • Cancel any PAYG withholding registrations for the business, and
  • Cancel the business’ ABN (which should also result in the cancellation of other registrations such as GST).

More information can be found on the ATO’s website.

How much life insurance do I need?

Imagine what your family’s life would be like if you or your partner died or became seriously ill and couldn’t work.

  • Would they be able to survive financially?
  • Can they pay the mortgage and bring up your kids?
  • Could they keep up with the mortgage or would they have to sell the home?
  • Is there enough cash in the bank to pay for a funeral?
  • How would they pay for groceries, bills, home, car and school expenses?
  • If your at-home partner died, do you earn enough to employ a nanny or housekeeper?
  • Could your spouse and/or children survive on a government benefit? Would you want them to?

Insurance can provide the money that you or your family need in critical times.  It may not take away the pain of losing a job or a loved one, but it will ease the added pain of financial problems.  There is no exact answer to how much insurance you need.  Life insurance is just one part of a larger financial plan.  How much life insurance you have depends on the specific financial needs and circumstances of your family at a particular moment in time and the amount you need will change as your you move through various life stages.

Generally speaking young families will have lots of potential to earn income, a fair amount of debt, and limited capital.  They will have more of a need to fund unforseen events through insurance than a slightly older family with less debts, capital in the bank and children who have already left home.

Broadly speaking the amount of insurance required is a function of how much cash your family will need if they could not benefit from your income, and how much capital you have available in superannuation, shares, savings and existing insurance policies.  The difference between what you have and what you would like is the amount of insurance cover you should get.

A professional adviser can help you decide what insurance cover will suit your needs. It is often a trade-off between what you would ideally like and what you can afford.

Courtesy of our friends at WB Financial.

Benefits of working with a financial adviser

Anyone engaging the services of someone to help them with their financial affairs will invariably feel exposed, insecure, anxious or skeptical. It is not unusual to experience these feelings. But there are good reasons for retaining the services of a quality financial adviser.

Not everyone has the expertise or the inclination to manage their own investments. The investment landscape is complex and most Australians need good advice otherwise they could end up paying more fees and taxes than they should and miss out on benefits that they are entitled to.  Research conducted by Andrew Inwood from CoreData about attitudes to financial advisers, indicates that people with a financial planner are happier. He says that people who partner with a financial planner are much more likely to understand and be in control of their future than people who don’t have a plan.

Partnering with a quality adviser can give you access to review and improve all aspects of your financial circumstances.  Ideally your adviser should be able to give you advice on cash flow management, debt management, superannuation and retirement planning and insurance.  It is far more than just investment advice.

Courtesy of our friends at WB Financial.

Disclaimer: All information provided in this publication is of a general nature only and is not personal financial or investment advice. It does not take into account your particular objectives and circumstances. No person should act on the basis of this information without first obtaining and following the advice of a suitably qualified professional advisor. To the fullest extent permitted by law, no person involved in producing, distributing or providing the information in this publication will be liable in any way for any loss or damage suffered by any person through the use of or access to this information.


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