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Regulatory Roundup – June 2018

Small business concessions under the spotlight
The CGT concessions for small business are important for qualifying businesses in that they can defer, reduce or remove liability to CGT.

The government announced last year that it intended to tighten the eligibility factors for the CGT concessions that are generally available to small businesses, and it has just initiated the formal review of the concessions.

Chaired by Dr Mark Pizzacalla from the Board of Taxation, the review is being conducted independently and is “self-initiated”. Dubbed a “consultation guide”, the Board of Taxation says it will draw on previous work it has undertaken into small business tax, other similar work undertaken by Treasury, as well as international experiences. (Get a copy of the guide here.)

In addition, a reference group of small business, professional and academic stakeholders have also generously volunteered their time and expertise to assist Dr Pizzacalla with his review. The results of the consultation process should be available by the end of October this year. […]

Asset Valuations and the Contribution Caps

SMSF asset valuations and the contribution caps

Asset valuations and the contribution caps are both contentious issues, with many SMSFs failing to regularly update their asset valuations and some auditors turning a blind eye. And SMSF auditors who do the wrong thing in relation to valuations may also find themselves facing action by ASIC.

The new contribution caps require that assets of the fund, as at 30 June 2017, must be properly valued to determine the fund’s total asset value.

If assets are overvalued this may tip a member over their cap, and if the ATO considers the assets have been deliberately undervalued to keep a member under the cap, then it has the power to take a range of penalty actions.

Generally speaking, assets do not need to be valued by a qualified independent valuer except as indicated below — however this does not mean the trustees cannot just determine any value they like. It must reflect a fair market value of the asset at the time of the valuation, and documentation as to how the valuation was determined should be kept by the fund, so it can provide this to its auditor as well as to the ATO should it seek proof of how valuations were determined. […]

Company directors

Company directors: Do you REALLY know your responsibilities?

As though business owners and principals don’t already have enough on their minds, discussion about the ups and downs of the business environment is being heard around the barbecue again — just to add to the list of excuses for not sleeping well at night.

Company directors especially need to keep in mind that the Corporations Act holds directors personally liable for many of the legal and financial obligations expected from a company (see the relevant section of the law here).

As anyone running a business knows, commercial decisions must be made, and many times these decisions involve some degree of risk. While the distinction between entrepreneurial freedom and delinquent corporate behaviour will be clear cut for most company directors, there are nevertheless circumstances where these lines can blur, resulting in sometimes substantial (and sometimes unexpected) personal exposure. […]

Regulatory Roundup – May 2018

Taxing digital products and low value goods to change
When the GST Act and Regulations were drafted in 1999, e-commerce was in its infancy – it was not fully envisaged that people would prefer to shop from the comfort of their computer, and now even their mobile devices, rather than visiting a bricks and mortar shop. Over the years however, Australian internet sales have grown rapidly and are now in excess of $20 billion a year.

This has caused dismay from Australian businesses that have increasingly complained about an unequal playing field, since Australian consumers are often able to avoid incurring GST on their internet purchases from non-resident businesses. Online video-on-demand provider Netflix is a prime example where a subscription to its services is not subject to GST under existing laws.

In response to these concerns, the government has introduced amendments that extend GST to supplies of digital products, certain services and low value goods imported by consumers.

As a result of these amendments, Australian consumers will soon find themselves paying 10% more for many online purchases. In addition, many overseas suppliers will be required to register and pay GST, though in some cases the GST liability may be shifted to an electronic distribution platform or goods forwarder. To ease the administrative burden, the ATO will permit some foreign businesses affected by the amendments to hold a limited GST registration. […]

Single Touch Payroll

Is your business prepared for Single Touch Payroll?

Single Touch Payroll is a government initiative to streamline business reporting obligations, which is due to become compulsory from 1 July 2018. When a business pays its employees, the payroll information will be sent to the ATO via the business’s payroll software.

Reporting under the Single Touch Payroll (STP) system removes the requirement to issue payment summaries, provide annual reports and tax file number declarations to the ATO. During the first year of its introduction, the ATO says employers will not be liable for a penalty for a late STP report. […]

Crackdown on “other” work related expenses, and inquiry into tax deductibility

It seems that the ATO will be taking a dim view (or dimmer, this year) of the abuse of work related expense claims for individual taxpayers. The total value of such claims rose to a record $21.2 billion in 2017, and reports contend that the ATO is concerned about over-claiming and even outright fraud.

ATO advice for taxpayers, before including claims for work related expenses at the label for “other” work related expenses for 2018 tax time, should consider making sure they can show:

they spent the money themselves and were not reimbursed
the expense was directly related to earning their income
they have a record to prove it.

The push on work related expenses (WREs) comes on the back of the release by the government of a House of Representative Economics Committee’s report on its inquiry into tax deductibility. […]

Regulatory Roundup – April 2018

 

 

Require specific ATO advice on your SMSF? There’s a form for that

The ATO says it can provide tailored technical assistance for SMSF trustees in some circumstances, orally or in writing, depending on the nature and complexity of their query.

For example, you may need to seek tailored technical assistance if:

you are not able to find the ATO’s view of how the law applies to a particular technical issue
you’re not certain how the ATO view of the law applies to your circumstances
you are seeking greater certainty (protection) than the ATO’s published products provide.

If the contentious issue at hand is about how the Superannuation Industry (Supervision) Act 1993 and Superannuation Industry (Supervision) Regulations 1994 apply to a specific transaction or arrangement for an existing SMSF, you can apply to the ATO for advice to deal with that specific issue. […]

Capital works deductions for rental property

 

 

Rental property investors can claim capital works deductions for construction costs for a rental property, however there are limits imposed in relation to the dates such works were completed. The deductions are only available on residential properties if these were built after 17 July 1985. Generally, up to 15 September 1987 the rate is 4% a year (over 25 years) and after then is 2.5% (but over 40 years).

Residential property investors seeking capital works deductions need to remember that you can only make a claim for periods when the rental property was used for income producing purposes, not when used for private purposes.

Subsequent purchasers of a property can claim for the balance of the period, because unlike a depreciating asset there is no balancing adjustment on disposal of the property, unless the building is destroyed. The balance of any claim is passed on, on the same basis, to any later owners. […]

Regulatory Roundup – March 2018

Small business CGT concession eligibility to tighten
The government announced last year that it intended to tighten the eligibility factors for the CGT concessions that are generally available to small businesses. The CGT concessions are important for qualifying businesses in that they can defer, reduce or remove liability to CGT.

Specifically, the proposed amendments (which have been released in exposure draft form) will limit the current CGT concessions to assets that are used by a small business or ownership interests in a small business. […]

Regulatory Roundup – February 2018

 

 

 

Community complaints prompt Inspector-General of Taxation to review PAYG instalments

The Inspector-General of Taxation, Ali Noroozi, has just released his review into aspects of the pay-as-you-go (PAYG) instalments system that have come to be viewed as less-than-helpful by many participants and associated stakeholders.

The IGT’s review into the PAYG instalments system was conducted largely in response to feedback drawn from the IGT’s complaint handling service since May 2015. It says it has taken this amount of time to get sufficient complaint investigation data on which to act, but that it is the first such review undertaken in direct response to taxpayer complaints.

Subsequent IGT consultation also drew on input from tax practitioners, their representative bodies and also individual taxpayers who had experienced directly the aspects of the PAYG instalment system that were of concern.

[…]