Latest News

Details

Written by MWB Accountants

Industry fund fined for misleading SMSF advertising

Written by Staff Reporter

Monday, 06 January 2014

ASIC has penalised an industry super fund after it produced “potentially misleading advertisements” related to SMSFs.

Media Super Limited has paid a $10,200 penalty to comply with the ASIC infringement notice, according to an announcement from the corporate regulator.

Media Super published the ads as a factsheet in September 2012, ASIC stated. The factsheet titled ‘Self-managed super? You be the judge’, compared the costs and benefits of self-managed super funds with the Media Super fund.

It appeared on Media Super’s website and was sent to all fund members, according to ASIC.

“ASIC was concerned that the factsheet inaccurately represented the costs and benefits of the Media Super funds compared to self-managed super funds,” ASIC stated.

ASIC commissioner Greg Tanzer said ASIC is “serious about making sure investors can be confident and informed and that means cracking down on misleading or inaccurate advertising.”

Mr Tanzer also said that Media Super had acted quickly to remove the statements from its website once approached by ASIC, and had fully cooperated in responding to ASIC's concerns.

The payment of an infringement notice is not an admission of a contravention of the ASIC Act consumer protection provisions, ASIC stated in its announcement. ASIC can issue an infringement notice where it has reasonable grounds to believe a person has contravened certain consumer protection laws.

Important Tax Time 2013 changes

Bank account details
From 1 July 2013, all ATO individual income tax return refunds will need to be paid into our trust account and from there we will distribute the refund to our clients. This is a new requirement from the ATO.

Spouse information and need to complete income tests labels
This year, the private health insurance rebate, the Medicare levy surcharge and net medical expenses tax offset are all subject to income testing. We will ensure that we review the income and spouse details sections this year, to ensure that our clients receive their correct entitlement.

Net medical expense offset
The Government will phase out the net medical expenses tax offset (NMETO), with transitional arrangements for those currently claiming the offset. From 1 July 2013 those taxpayers who claimed the NMETO for the 2012-13 income year will continue to be eligible for the NMETO for the 2013-14 income year if they have eligible out of pocket medical expenses above the relevant thresholds.

Similarly, those who claim the NMETO in 2013-14 will continue to be eligible for the NMETO in 2014-15. The offset will continue to be available for taxpayers for out-of-pocket medical expenses relating to disability aids, attendant care or aged care until 1 July 2019.

Carry back losses

Law has now passed through Parliament to allow corporate tax entities to carry back tax losses so they can claim a refund against tax previously paid.

A one-year loss carry back will apply in 2012-13, where tax losses incurred in that year can be carried back and offset against tax paid in 2011-12.

For 2013-14 and later years, tax losses can be carried back and offset against tax paid up to two years earlier.

Loss carry back is:

• available to companies and entities taxed like companies who elect to carry back losses
• applied to revenue losses incurred but not transferred.

The loss carry back tax offset is the lessor of:

• $1 million multiplied by the corporate tax rate (30%) = $300,000
• the sum of the loss carry back tax components for the middle year and the earliest year
• the company's franking account balance.

Labels to claim the loss carry back tax offset can be found on:

• Company tax return 2013 (NAT 0656-6.2013)
• Losses schedule 2013 (NAT 3425-6.2013)
• Consolidated groups losses schedule 2013 (NAT 7888-6.2013).

If you have already lodged a return, you will be able to amend it and claim the loss carry back tax offset if your clients meet the relevant requirements. Interest on overpayment will be paid where applicable.

For more information, refer to Improving access to company losses and Company loss carry- back.
 

The top tax changes you need to know about in 2012
July 9, 2012 

Just as the new financial year brings a heap of legal changes entrepreneurs need to read up on, the tax system is also set for a refresh. Here are the most important tax changes you need to know about in 2012-13.

The end of the flood levy

You may remember the huge debate last year over the Federal Government’s flood levy, which was introduced to help the Commonwealth pay for the damages caused by the Queensland floods. From July 2012, the levy will no longer apply.

Brand new tax brackets – including carbon tax assistance

As part of the government’s introduction of the carbon tax, there’ll be some dramatic changes to the income tax rates – including the adjustment of the tax-free threshold to $18,200 from the current level of $6,000. That means you’ll be able to earn up to $20,542 before any tax is payable at all. These changes are crucial for employers. Next year, your staff will have less tax withheld from their pay, so you’ll need to make the necessary changes to ensure they’re being paid correctly.

Here are the tax brackets for the 2011-12 year, followed by the new tax brackets, which will take effect from the 2012-13 year:

2011-12:

$0 - $6,000 = Nil

$6,001 - $37,000 = 15c for every $1 over $6,000

$37,001 - $80,000 = $4,650 plus 30c for every $1 over $37,000

$80,001 - $180,000 = $17,550 plus 37c for every $1 over $80,000

$180,001 and over = $54,550 plus 45c for every $1 over $180,000

2012-13:

$0 - $18,201 = Nil

$18,201 - $37,000 = 19c for each $1 over $18,200

$37,001 - $80,000 = $3,572 plus 32.5c for every $1 over $37,000

$80,001 - $180,000 = $17,547 plus 37c for every $1 over $80,000

$180,001 and over = $54,547 plus 45c for each $1 over $180,000

At the same time, the maximum value of the low-income tax offset reduces from $1,500 to $445, and after that, will be reduced by 1.5 cents in every dollar over $37,000. Previously, that number was at $30,000 and from 2015, that figure will be reduced to just $300.

The pensioner tax offset will merge with the new senior Australians tax offset. Meanwhile, there have also been some changes to the Medicare levy and Medicare levy surcharge thresholds.

From July 1, the Medicare levy surcharge thresholds will be changed, while the low-income thresholds will be changed as well. The full details of those changes are available on the Australian Tax Office’s website.

Carbon tax assistance – individuals

This is a huge area of tax change, so we’ll break it down into two categories – individuals, and then businesses. Most of the assistance is taken care of with the adjusted tax brackets, and they’ll mostly help lower-income earners.  But there will be some changes to the way pensions and the Family Tax benefits are handed out.

For instance, pensioner payments have already started arriving, equating to $250 for singles and $380 for couples. After July, pensioners will start receiving supplements worth a 1.7% increase in the maximum pension rate.

Family Tax Benefit A recipients will receive up to $110 extra per child, while those receiving Family Tax Benefit B will get up to $59.  Single parents will receive up to $234, as well.

Carbon tax assistance – business

While there are only 500 companies that will be directly affected by the carbon tax, the indirect effects will come in higher electricity prices, and other costs that will be passed along supply chains.

There are few regulatory issues required of SMEs, then. Some manufacturing businesses will be obliged to report their energy use under the National Greenhouse and Energy Reporting Act – manufacturing businesses should contact the ATO to determine if they’re in this category.

However, there are plenty of assistance programs businesses can tap into. Businesses that use up to $20,000 in electricity every year or have up to 10 employees can get a 50% rebate, and manufacturers will be able to access the $800 million Clean Technology Investment Program.

There’s also the Solar Credits scheme, which small businesses can use, and SMEs in Sydney and Perth which sign up to the CitySwitch Green Office program can get a rebate of $1,000.

But according to Andrew Douglas, principal at M+K Lawyers, looking for assistance isn’t the only thing you should be doing.

“Reducing your exposure; and businesses aren’t doing that. They’re not concentrating on their supply chain, they’re trying to pass through the carbon tax price but every major retailer is rejecting it, so right now it’s a real problem.  The other issue is that people aren’t doing an assessment of the true cost.”

Instant asset write-off

Perhaps the instant write-off for assets under $6,500 is the biggest assistance businesses will receive for the carbon tax.

From July this year, any SME with under $2 million in turnover will be able to write off any asset worth less than $6,500 immediately. Right now, the threshold is just $1,500.

Changes to the private health rebate

The government will start testing the private health insurance rebate and the Medicare levy surcharge against income, in three different thresholds. High income earners will receive less of the private health insurance rebate, and the surcharge may increase.

The thresholds are a bit complex, but here’s the table straight from the ATO.

Research and development tax scheme

From July 1, businesses will be able to register for and claim the new research and development tax incentive. The incentive has two key components.

Firstly, a 45% refundable tax offset for research and development entities with turnover less than $20 million per year, and secondly, a 40% non-refundable tax offset for any other companies with turnover above that amount. Unused offset amounts may be carried forward in some circumstances.

If a business has a standard income year starting from July 2011, you can start to register and claim the incentive from next month.

But to do so, you need to first establish that you’re an eligible entity, that you meet the requirements of the R&D incentive and that you’ve registered your R&D activities with AusIndustry.

You’ll need to justify your R&D activity under the new incentive, and you’ll need to identify which activities are “core”, or “supporting” activities. You can check out the definition of both of those here, but essentially, core activity is an activity whose outcome cannot be known or determined in advance on the basis of current knowledge.

The business records you keep must be sufficient to verify the amount of money you spend on R&D, and you’ll need to satisfy a few tests as well.

In short, there’s a lot to get in order. To get all the details about how you can access the R&D incentive, you should head over to the AusIndustry site, which will give you all the details.

Changes to employee termination payments

There will be a few changes made to employment termination payments next month. From July 1, the offset is limited so it only applies where it takes up the person’s total annual taxable income to no more than $180,000.

Any amount above this will be taxed at marginal rates. Any existing arrangements will remain in place for genuine redundancies, or for compensation due to death or an employment-related dispute.

Tourist charges

The movement charges will change next month. The passenger movement charge will increase to $55 – although it won’t be indexed –and there’ll be an increase in visa label charges from $60 to $70.

Entrepreneurs’ tax offset

Last year, the government announced the entrepreneurs’ tax offset would be scrapped in order to help fund the $5,000 deduction for any vehicle purchase – that will take effect from next month.

The offset provided businesses an offset equal to 25% of the income tax payable on business income. While the move is a disappointing one for small business, it was only available for entrepreneurs earning less than $75,000 a year.

On the upside, businesses will now be able to access an immediate $5,000 deduction for all vehicle purchases from next month.

The loss carry-back

The loss carry-back scheme is one of the most anticipated tax changes by SMEs – one of few.

At the moment, businesses can only carry losses forward to offset future income and profits. They can’t carry their current loss back and offset it against past profits.

But under the new scheme, businesses will be able to claim losses of up to $1 million against tax paid in the past two years.

To be eligible, a business needs to have made a profit and then a loss from July 1, 2012. So while that provides some relief for SMEs, it doesn’t mean anything for businesses that have made a loss in the past few years.

Of course, there are a few caveats – businesses structured as partnerships, sole traders and trusts are ineligible.

Living away from home allowance

The government will be making a few changes to the Living Away From Home allowance come July.

Access to the concession for temporary residents will be limited to those people who maintain a residence for their own use in Australia, but are required to live away from work. These workers are known as “fly-in, fly-out”.

Also, employees will be required to justify their spending on accommodation and food beyond the statutory amount, and a year limit will be placed on how long an employee can receive the benefit at any one work location.

These changes will affect anyone signing an agreement after May 8, 2012, and from July 1, 2014 for any contracts before that time.

Building industry reporting

If you’re a business or entrepreneur operating in the building or construction industries, then you’ll need to start reporting on every payment made to contractors in the New Year.

As for who needs to report – any business primarily operating in the building and construction industries, including businesses making payments to contractors. If more than half of your business activity relates to building and construction, then you need to start reporting.

The details you need to report for each contractor include:

-        ABN

-        Name

-        Address

-        Gross amount paid in the financial year

-        Total GST included in the gross amount paid

You’ll also need to report worksheets and other records, including payment details for work done in relation to any sort of building or structure. That includes construction, demolition, design, destruction, erection, improvements, maintenance and repair.

Contractors who pay other contractors may need to fill in all this information as well.

Businesses will need to make this report by July 21 each year, but don’t fear – the first report isn’t due until July 2013.

Fuel changes

There will be some key changes to fuel tax credits from July 2012. The following rate changes will be affected:

-        Liquid fuels, including diesel, petrol or fuel oil used in some off-road activities

-        The introduction of a carbon charge

-        Heavy vehicles travelling on a public road

-        Gaseous fuels

-        And some blended liquid fuels

When calculating fuel tax credits, you’ll need to use the rate applied when you acquired the fuel.

For more details on fuel tax credits for fuel acquired from July, you’ll need to check out this table here.

Mining tax

It’s been gone over plenty of times before, but it bears repeating: from July 1, the government will impose a 30% levy on the “super profits” of the country’s biggest coal and iron ore miners.

If you’re a small business, the effects won’t come in tax changes, but rather in the industrial changes that may result in the larger companies being taxed more – costs may be passed along the supply chain.

Superannuation changes

There will be plenty of changes made to superannuation this July.

The Government has deferred the start date of maintaining a cap at $50,000 for individuals aged over 50 years with balances below $500,000. So that means for everyone, the concessional contribution cap will drop to $25,000.

The government will also provide a low income superannuation contribution for individuals earning up to $37,000, so they’ll effectively be refunded the 15% contributions tax.

It will also reduce the super co-contribution by 50%, to just 50c per $1 contribution, effectively reducing the top benefit from $1,000 to $500.

There will also be some changes for high-wealth individuals. People with income greater than $300,000 will have contributions reduced from 30% to 15%

And some others

There are a couple of changes coming to the Dependent Spouse Offset. While the offset was restricted last year, the eligibility will also restrict even further to dependent spouses born before July 1952.

And just one more – last year, the High Court ruled the ATO could not hold GST refunds for any period of time in order to investigate whether the refund is legitimate.

But with new laws coming in next month, the Tax Commissioner may be able to hold onto refunds for investigation with individuals and businesses given a right of appeal.

MEMBER 157 writes:

"I regularly read Members Feedback and whilst I share some of the frustrations about dealing with the ATO, I would like to state that many of our recent dealings with the ATO have actually been efficiently handled and have resulted in valuable assistance provided by the ATO officers involved. The nature of these calls has varied from technical legislative interpretation, including guidance on relevant rulings and IDs, BAS/IAS lodgment issues, SGC payment arrangements and electronic lodgment/Digital certificate problems.

In the majority of cases our queries and problems have been successfully resolved. Admittedly, we have had to invest more time on some issues than others, but in most cases, we have found the ATO officers to be polite, helpful and, dare I say it, understanding of our client's situations. Whilst we still have the odd difficult case in our dealings with the ATO, it appears that many of the ATO officers do seem to be very helpful."

MEMBER 158 writes:

"One of the biggest time wasters in our office is countering and correcting advice provided to taxpayers from ATO call centres. I understand that in many instances that clients do not give the full story and as a result flawed or misguided advice is the result but given the government is imposing higher standards of accountability for Tax Agents via the Tax Practitioners Board should we not be asking that the ATO be held to higher standards in the provision of advice? If an ATO officer fails to collect all relevant information in relation to an enquiry and/or fails to give accurate or correct advice then the ATO needs to be held to account for that malpractice just as we are liable to be held account. Or does the government only want to protect the consumer from Tax Agents and not its own departments?"

MEMBER 159 writes:

"Quietly sitting at my desk consulting my increasingly used crystal ball to determine the net profits all my trust clients have made this year so that the appropriate trust distribution minute can be determined, forwarded & executed before 31 August - this being the deadline the ATO in its infinite graciousness has grudgingly allowed to we poor tax agents. The ATO has again sadly shown its ignorance of how the real business world works - the idea of having all your trust clients lined up like little ducks to complete their tax work to determine distributable net profits before 31 August each year just flies in the face of reason. This is especially so given that many trusts are investment trusts who invest in other public investment trusts whose year-end taxation statements are not even received yet!

Incidentally we did finally receive our client's delayed 2011 individual income tax assessment which was held up due to the ATO perceived & communicated belief that our client was involved in possible tax fraud or identity theft. There was, of course, no explanation of the delay nor much less any skerrick or hint of an apology concerning the ATO's mistaken written contention of wrong-doing by our client. The editor's note in last week's Feedback is both telling and chilling in its statement that ultimately the management (if you can call it that) of the ATO is in the hands of the Commissioner and his senior staff. Our professional bodies can liaise as much as they want with the ATO but the Commissioner reserves the right to ignore them at his leisure is the real message."

MEMBER 160 writes:

"I agree with the many other practitioners who are completely frustrated by the ATO, the systems and enormous waste of hours we spend trying to deal with this bureaucracy:

1) Lodged simple I return with PAYG Payment Summary and rental property. No large deductions or anything out of the ordinary with the rental. Received ATO letter advising that the return is to 'be reviewed as it has been identified as containing some information we want to further investigate'. Processing will be delayed for a MINIMUM of 12 weeks 'whilst we conduct our investigations'. The letters then go on about fraudulent activities, 'many instances of penalty' etc. The client was rightfully completely shocked and horrified when they received the letter. Telephone call(s), as there have been many, provided no response from the ATO. They read out from a prepared response card and refuse to provide any information as to why, what or when accept to advise that we should call back after the 12 weeks' time -some 3 months later - to make further enquiry, at which time I expect we will get a standard response that the matter will be looked into within our service standard 30 day time frame!! By the way should the ATO contact us they require us to provide information instantly or within 7 days!! I fully understand the need to maintain integrity of the tax system and the requirement for ATO review/audit etc, but they need to provide more information and the 12 week minimum time frame is disgrace. Imagine if we advised the ATO that we needed 3 months minimum to reply to their requests!

2) The new POI procedures are a nightmare. Who was the bright spark at the Tax Practitioners Board who suggested that all registration numbers become public, thereby starting the problems in the first place? Maybe a new system whereby we have a different unique number to make ATO enquiries... I know, more bureaucracy. Also have come across many ATO staff who do not know the procedures for POI as we commonly advise them that we do not have any ATO correspondence issued within the last 2 years with a unique ID number (anything like this usually goes directly to the client or is in our filing system) which usually results in us having to explain to the ATO that there are other forms of acceptable POI and read off the ATO guide sheet.

3) ATO staff NEVER EVER return telephone calls, even after promising to you over the telephone that they will return the call! I think in 20+ years of practice I could count on one hand how many times I have received a returned telephone call! Just basic poor service from people who don't seem to give a dam.

4) ATO debt collection outsource agencies, ringing us to request clients pay their debts when the information is usually incorrect or out of date. They have no client details or cannot provide to me satisfactory POI so I refuse to continue with the calls.

It seems that the whole system and bureaucracy is a mess and the previous good relationship with practitioners is declining very fast. It also appears that the ATO has no idea of these shortcomings or the rapid decline in confidence that it is facing.

Arrrr, the life of a tax agent."

THE TAX INSTITUTE'S TAX COUNSEL TAMERA LANG ADVISES:

We have raised tax agents' dissatisfaction with the lack of information about pre-assessment reviews and the associated minimum 12 week delay with the ATO at senior levels. The ATO has informed us that they will be writing to affected tax agents to inform them why their client/s' tax returns have been subject to a pre-assessment review, and what (if any) additional substantiation is required. We understand that any phone calls from affected agents will be directed to compliance officers that are better able to address agent concerns. The Tax Institute is continuing to pass on our members' concerns to the ATO, and work with the ATO to ensure that pre-assessment reviews proceed swiftly and efficiently.

Government stimulus payments under microscope

The Tax Office said it will focus on businesses that have received government stimulus payments under the Home Insulation Program and Building Education Revolution.

The Tax Office will compare the payment information against business income tax returns and activity statements where applicable to ensure the businesses have reported the appropriate amounts.

The Tax Office said it will send 5,000 advisory letters to businesses as a reminder to report the stimulus payments received in their income tax returns and activity statements. Further, the Tax Office advises tax professionals whose clients have already lodged their income tax returns or activity statements without the inclusion of the stimulus payments to amend their returns as soon as possible for reduced penalties.

Not-for-profit tax concessions consultation underway

The Assistant Treasurer has released a consultation paper which contains further details of the Government’s 2011-12 Budget announcement to better target not-for-profit (NFP) tax concessions for unrelated commercial entities. “By better targeting tax concessions in the NFP sector, the Government is encouraging charities to direct profits generated by unrelated commercial activities back to their charity’s altruistic purposes,” Mr Shorten said.

However, Mr Shorten said the reforms will not affect the use of tax concessions that support a charity’s related commercial activities. The reforms will also not affect NFP entities carrying on small-scale or low-risk activities such as lamington drive fundraisers, school fetes and leasing out of church halls, or the principle of mutuality and, therefore, the tax treatment of clubs. Public consultation closes on 8 July 2011.

Holiday travel claimed as deductible expense: ATO warning

The Tax Office has issued Taxpayer Alert TA 2011/3 warning taxpayers of arrangements involving holiday travel claimed as a work-related, investment or self-education expense.

The Commissioner said he was concerned that some people are getting involved in arrangements to deliberately claim inflated deductions which they are not entitled to, particularly in relation to overseas travel. The Tax Office says taxpayers need to objectively apportion their expenses to the extent they are connected to their income-earning activities and are not private or domestic in nature.

SMSF investment in collectables and personal use assets

The Assistant Treasurer has released exposure draft SIS Regulations setting out the proposed rules for self-managed superannuation fund (SMSF) investment in collectables and personal use assets. The draft Regulations complement the measures contained in Tax Laws Amendment (2011 Measures No 2) Bill 2011).

The draft Regulations seek to prevent SMSF trustees from gaining any current-day benefit from an investment in collectables and personal use assets and ensure that such investments are made for genuine retirement income purposes. When finalised, the regulations will commence on 1 July 2011. However, an existing investment in a section 62A item that is held by an SMSF on 30 June 2011 will not be subject to the regulations until 1 July 2016. Public consultation closed on 14 June 2011.

SMSF supervisory levy increased

The Superannuation (Self-Managed Superannuation Funds) Supervisory Levy Imposition Amendment Regulations 2011 (No 1) were registered to increase the amount of levy payable by SMSFs from $150 to $180.

The amendment seeks to offset the cost of implementation of Government reforms to the SMSF sector and was previously announced as a part of the 2011-12 Budget proposals.

The Regulations apply to the 2010-11 and subsequent income years.

Cases

Private pilot’s licence costs not deductible for solicitor

The AAT has held that a solicitor who hoped to take on aviation matters for local clients was not entitled to a deduction for expenses he incurred in converting his New Zealand private pilot’s licence to an Australian one.

The Tribunal was of the view there was not sufficient nexus between the outgoings claimed and gaining assessable income: AAT Case [2011] AATA 318, Re The Taxpayer and FCT.

Recovery of GST refund: Commissioner’s claim not out of time

A taxpayer has been unsuccessful before the AAT in arguing that the Commissioner’s claim to recover an amount of GST refunded was ineffective on the basis that the claim was made outside of the 4-year time limit.

The Tribunal held that s 105-50 in Sch 1 to the TAA did not apply to the circumstances of this case as the amount in question was not an “unpaid net amount”: AAT Case [2011] AATA 296, Re Wynnum Holdings No 1 Pty Ltd and FCT.

Taxable supply: importer liable for GST as goods connected with Australia

A taxpayer who imported goods into Australia to supply to Australian customers has been unsuccessful before the AAT in arguing that it did not make a supply connected with Australia: AAT Case [2011] AATA 281, Re Clothing Importer and FCT.

SMSF non-complying status affirmed

The AAT has affirmed the Commissioner’s decision that an SMSF be treated as a noncomplying super fund. The SMSF was created in April 2002 and its members included a husband, wife and their son. The Tribunal noted the son had a “drug addiction and took almost all of the money from the fund and spent it or gave it away”. Although acknowledging the tragic circumstances, the AAT found it did not warrant exercising a discretion to treat the fund as a complying fund: AAT Case [2011] AATA 302, Re Triway Superannuation Fund and FCT.

Rulings

GST and tax invoice requirements

Draft GST Ruling GSTR 2011/D1 contains the Commissioner’s preliminary views on the minimum information requirements for a tax invoice and the circumstances when a document can be deemed a tax invoice even when it does not meet all the requirements.

It also sets outs the application of the low value threshold for transactions for which a tax invoice is not required. The Draft Ruling replaces GSTR 2000/17; however, the ATO says the Draft maintains the same outcomes as GSTR 2000/17.

Value of goods taken from stock for private use: 2010-11

Taxation Determination TD 2011/11 provides an update of the amounts the Commissioner will accept for 2010-11 as estimates of the value of goods taken from trading stock for private use by taxpayers in certain specified industries.

CGT improvement threshold for 2011

Taxation Determination TD 2011/13 states that the CGT improvement threshold for the 2011-12 income year (under s 108-85 of the ITAA 1997) is $130,418 (up from $126,619 that applied for the 2010-11 year).

FBT car parking threshold for 2011

Taxation Determination TD 2011/14 specifies for the purposes of s 39A of the FBTAA, that the car parking threshold for the FBT year that commenced on 1 April 2011 is $7.71 (up from $7.46 that applied in the previous year).