We provide specialised taxation and accounting services for clients across Melbourne.
Fortunato Salce &
Principal & Associate
F Salce & Associates are public accountants providing specialised income tax, business advice, bookkeeping and superannuation tax advice to our professional clients, in a range of industries across Melbourne. Whether you're an individual or small to large scale business owner, we have the skill and experience to assist you in all aspects of your taxation.
We are committed to providing our clients with prompt, professional services and assistance.
2016/17 Federal Budget
The government handed down the 2016/17 Federal Budget on Tuesday 3rd May.
It included (among many changes) proposed personal income and company tax cuts from 1 July 2016, the extension of GST to all imports (irrespective of value) from 1 July 2017, an increase in the small business entity (‘SBE’) turnover threshold from 1 July 2016, and (as you may have heard) many, many superannuation changes.
Of course, they are all dependent on the Turnbull Government winning the election on 2 July and the legislation then surviving Parliament after that.
Editor: We'll keep you informed!
SMSFs and Collectables – last opportunity to comply!
From 1 July 2011, SMSF investments in collectables and personal-use assets have been subject to stricter rules than SMSF investments in other assets (such as shares and property).
Editor: Assets considered collectables and personal-use assets include things like artwork, jewellery, antiques, vehicles, boats and wine.
However, SMSFs that already had investments in such assets before 1 July 2011 were given five years to comply with these rules (i.e., until 30 June 2016).
Therefore, any SMSFs with such investments need to consider their situation carefully and take appropriate action (if necessary) before 1 July 2016.
Such action may include (for example):
u reviewing current leasing agreements (items can't be leased to or used by a related party, including business premises);
u making decisions about storage (items can't be stored or displayed in a private residence of a related party, and decisions about storage must be documented and the written record kept); and
u arranging insurance cover (items must be insured in the fund’s name).
In addition, if the trustees of the fund are considering disposing of these items, they can be transferred to a related party without a qualified independent valuation, but only if the transfer takes place before 1 July 2016 and the transaction is made on arm’s-length terms.
If these requirements are not met from 1 July 2016, penalties may apply.
ATO's continuing focus on trust property developers
In recent years, the ATO has focused on trusts developing and selling properties as part of their normal business.
When these developed properties are sold, some trusts incorrectly claim a 50% CGT discount.
The ATO will continue to target arrangements that display the following characteristics:
q clients have experience in either developing or selling property (or experience in the industry) and establish a new trust to acquire property for development and sale;
q circumstances surrounding the arrangement are inconsistent with the stated purpose of developing the property as a long term investment;
q the development is advertised as available to purchase before completion, or is sold soon after completion; and
q the trustee claims the 50% CGT discount on the sale of the property.
The ATO is encouraging taxpayers to review their circumstances with their tax agent/adviser.
Editor: The ATO has also advised that they may contact property developers directly to "help them meet their obligations during development and disposal of the property. However, we may contact your clients at any stage of a development, not just on the sale of the property."
If you get any such contact – let us know!
New Simpler BAS on the way
The ATO has been working on ways to deliver a simpler business activity statement (BAS) to simplify account set-up, record keeping, BAS preparation and lodgment for agents and their clients, and make it less costly.
To achieve this, several GST labels will be removed from the BAS, with small businesses only required to report:
u GST on sales (1A);
u GST on purchases (1B); and
u Total sales (G1).
They will begin user testing from 1 July 2016 and a simpler BAS should be the standard option for all small business from 1 July 2017.
ATO reminder about 30 June SuperStream deadline
With the 30 June 2016 deadline looming, the ATO strongly encourages small businesses to get on board with SuperStream as soon as possible.
SuperStream is the standardisation of how employers make super contributions on behalf of their employees, and involves employers sending all super payments and employee information electronically in a standard format.
Using it is mandatory.
Editor: Unless the employer and the SMSF are related parties . . .
Options for becoming 'SuperStream ready' include using:
n a payroll system that meets the SuperStream standard;
n a super fund’s online system; or
n a messaging portal or a super clearing house like the ATO’s Small Business Super Clearing House (SBSCH).
The SBSCH is a free, optional service for small business with 19 or fewer employees, as well as businesses with an annual aggregated turnover of $2 million or less.
Editor: If you’re worried you won’t be able to use SuperStream as you don’t operate electronically, there is a SuperStream option to suit every business, including using third parties to pay your super using SuperStream on your behalf.
If you have any questions, let us know and we'll help you out.
ATO warns about iTunes scammers
The ATO is reminding the public to be alert to scammers impersonating the ATO demanding iTunes gift cards as a form of tax debt payment
Of the 8692 phone scam reports the ATO received in April 2016 in relation to the fake ATO tax debt scam, 58 reports mentioned the scammer demanding payment by iTunes (and apparently 26 people unfortunately payed $174,830 to fraudsters!)
Importantly, the scammers don’t need the actual physical card; they just need the gift card number, which they get victims to read over the phone.
The ATO states: “We will never request the payment of a tax debt via gift or pre-paid cards such as iTunes and Visa cards. Nor will we ask for direct credit to be paid to a personal bank account.
“And if the person calling you is rude and aggressive, threatening police or legal action if you don’t do something immediately – it’s not the ATO".
Impending blowout from the leaked 'Panama Papers'
Editor: Clients may have recently heard something about an unknown source who has leaked 11.5 million documents from the Panamanian law firm of Mossack Fonseca.
Basically, the documents illustrate how many wealthy individuals hide their money from tax authorities.
Under a plan devised by the Commissioner of Taxation, Chris Jordan, 35 countries have agreed to mount the most ambitious international investigation in history to hunt down tax evaders identified in the Panama Papers leak.
About 800 Australians are listed in the files of Panama law firm Mossack Fonseca, from which confidential correspondence was leaked, and 80 of those are identified in the Australian Crime Commission's (ACC's) database for serious and organised crime.
The ATO says that it has now linked over 120 of them to an associate offshore service provider located in Hong Kong.
Deputy Commissioner, Michael Cranston, said that “The information we have includes a large number of taxpayers who haven’t previously come forward, including high wealth individuals, and we are already taking action on those cases”.
The documents from Mossack Fonseca have been exposed in a global media project led by the International Consortium of Investigative Journalists (ICIJ).
The ICIJ plans to release the names of all of the 240,000 offshore entities set up by Mossack Fonseca, along with directors and shareholders, next month.
Gold Coast businesses under the ATO's microscope
As part of an ongoing, Australia-wide program, the ATO has advised that it will be visiting restaurants, cafés and take-aways, along with hair salons and nail bars, on the Gold Coast.
Assistant Commissioner Matthew Bambrick said “In all, we’ll be visiting around 250 businesses in the Gold Coast to talk about a range of topics, including business registration, record-keeping, superannuation and lodgment."
“Where taxpayers are unwilling to work with us or continue to cause us concern, we will undertake further investigation. In Sydney and Melbourne, for example, we have now moved to auditing businesses that didn’t want to work with us.”
ATO – SuperStream deadline rapidly approaching
With the SuperStream deadline of 30 June rapidly approaching, ATO Deputy Commissioner James O’Halloran says now is the time for employers who are not yet using SuperStream to cross it off their to-do list.
SuperStream is the new way employers must pay super. It means paying super and sending employee information electronically.
More than 60% of all Australia’s small businesses are now using SuperStream.
“Employers who are using SuperStream have reduced the time they spend on super by an average of around 70%, each cycle,” says Mr O’Halloran.
“We are encouraging the remaining employers who have not yet adopted SuperStream to do so before 28 April."
“By taking action now employers will have a chance to test their SuperStream solution and ensure things are running smoothly and eliminate any stress around the 30 June deadline”, says Mr O’Halloran.
ATO's 'High risk industries' for super guarantee
Each year, the ATO identifies industries that they believe are at risk of not meeting their super guarantee obligations for eligible employees.
This year they are looking at these industries:
u car retailers; and
u computer system designers.
Letters will be sent to clients in these industries advising of planned audits from July 2016.
Lifestyle assets and CGT
The ATO has advised that it has identified some instances where lifestyle assets, such as artworks and collectables, are not being properly accounted for.
They said that they want to help taxpayers with these kinds of assets comply and be aware they may be subject to CGT on disposal.
They said that it's important taxpayers are aware that:
l items purchased for more than $500 on or after 20 September 1985 are subject to CGT, even if they are kept mainly for the personal use or enjoyment of your client;
l special CGT rules apply to items that form part of a deceased estate; and
l the date of purchase/auction needs to be accounted for, not the settlement date.
The ATO is currently working with insurance companies to identify owners of these sorts of assets.
Editor: Clients who may be affected should contact our office.
New rules for selling property over $2 million
From 1 July 2016, new rules will apply to sales of taxable Australian property (e.g., real estate) with a market value of $2 million or above.
A 10% non-final withholding tax may be applied to all contracts to sell such property entered into on or after 1 July 2016.
Australian resident vendors selling such property will need to obtain a clearance certificate from the ATO prior to settlement to avoid the 10% non-final withholding tax.
Editor: This new 10% withholding tax was really only intended to apply to non-residents selling Australian property.
However, it equally applies to Australian resident vendors and forces them to obtain a clearance certificate from the ATO to, in fact, prove that they are Australian residents.
Generally speaking, clients will be affected for sales of residential and commercial properties, or companies or trusts that hold such properties.
Contractor payments data matching program
The ATO has advised that it is continuing its Contractor payments data-matching program.
It will acquire data from businesses that it visits as part of its employer obligations compliance program during the 2016/17, 2017/18 and 2018/19 financial years.
The data collected from businesses is used to identify contractors that may not be meeting their taxation obligations through:
n not registering correctly with the ATO;
n non-lodgment of returns;
n failing to report payments received; and
n not paying amounts of tax due to the ATO.
This is an ongoing data matching program and has been conducted for more than five years.
ATO reminder – What's new for small business?
Editor: The ATO has issued a timely reminder before the end of the financial year on the changes announced in last year's Budget.
Instant asset write-off – simpler depreciation rules
Small businesses can immediately deduct the business portion of most (new or secondhand) assets if they cost less than $20,000 and were purchased between 7:30pm on 12 May 2015 and 30 June 2017.
From 1 July 2017, the threshold will return to $1,000.
Accelerated depreciation for primary producers
From 12 May 2015, primary producers can immediately deduct the costs of:
l fencing – previously deducted over a period up to 30 years; and
l water facilities – previously deducted over three years.
They can also deduct the cost of fodder storage assets over three years, instead of 50 years.
Deductions for professional expenses for start-ups
From 1 July 2015, small businesses are entitled to certain deductions when starting up a small business.
The range of deductible start-up costs includes professional, legal and accounting advice, and government fees and charges.
Small business restructure roll-over
From 1 July 2016, small businesses will be able to change the legal structure of their business without incurring any income tax liability when assets are transferred by one entity to another.
This roll-over basically applies to:
l CGT assets;
l trading stock; and
l depreciating assets used, or held ready for use, in the course of carrying on a business.
FBT changes for work-related devices
From 1 April 2016, small businesses will not incur an FBT liability if they provide their employees with multiple work-related portable electronic devices that have similar functions.
These include devices that are primarily used for work, such as laptops, tablets, calculators, GPS navigation receivers and mobile phones.
Small business income tax offset
From the 2015/16 income year, an individual is entitled to a tax offset on the tax payable on the portion of their income that is from:
l net small business income from sole trading activities; and/or
l their share of net small business income from a partnership or trust.
The income tax offset can reduce the tax payable that relates to the individual’s small business income by 5% (up to $1,000) each year.
The ATO will work out the offset based on the total net small business income reported in a client's income tax return.
Company tax cut for small businesses
For income years commencing on or after 1 July 2015, the small business company tax rate has been reduced from 30% to 28.5%.
The maximum franking credit that can be allocated to a frankable distribution is unchanged at 30%, even if a small business is eligible for the 28.5% tax rate.
Editor: If you need to discuss any of the above please contact our office – preferably before 30 June.
ATO sounds warning to super funds with 'collectables'
The ATO is warning trustees of SMSFs who hold investments in collectables* or personal-use assets*, acquired before 1 July 2011, that time is running out for those items to be transferred out of the fund under the old rules.
Editor (*): Basically, collectables and personal use assets are things like artworks, jewellery, vehicles, boats and wine. Investments in such items must be made for genuine retirement purposes, not to provide any present-day benefit.
From 1 July 2011, investments in collectables and personal-use assets must have a qualified independent valuation if they are transferred to a related party.
However, items acquired before 1 July 2011 can be transferred to a related party, without a qualified independent valuation, provided the transfer takes place before 1 July 2016, and the transaction is made on an arm’s length basis.
Editor: Again, if any client wishes to take advantage of this window, they should contact us very soon.
Government set to re-think the backpacker tax
Editor: Basically, the 'backpacker tax', as announced, would see backpackers who work in the agricultural industry during harvest time being taxed at 32.5% from their first dollar of income.
Last month, the National Farmers Federation issued a media release slamming the tax and its negative effect on the agricultural industry, which relies heavily on backpackers.
It pleaded for a more reasonable tax of about 19%.
The Deputy Prime Minister and the Assistant Agriculture and Water Resources Minister have announced a review into taxation arrangements for the Working Holiday Maker visa program.
The review’s scope will cover taxation and superannuation arrangements under the program.
The review is intended to ensure the right measures are in place to support the two key growth sectors of agriculture and tourism.
“We know about 40,000 backpackers work in agriculture for a few months each year, the majority in horticulture at seasonal peaks,” Deputy Prime Minister Barnaby Joyce said.
“The clear aim is to make sure we have a balanced and equitable approach to the tax status for workers here on visas – we do not want to risk a slide into black market employment in agriculture and tourism,” Assistant Minister Anne Ruston said.
ATO releases latest business benchmarks
The ATO says that the 2013/14 data is now available for the 'Small business benchmarks'.
The ATO uses these benchmarks as a guide on industry trends to identify businesses that may be avoiding their tax obligations by not reporting some or all of their income.
The ATO says that using the Small business benchmarks can assist with building taxpayers' businesses.
They say that taxpayers should compare their details against similar businesses in their industry and see how competitive they are or where improvements can be made.
Editor: We can help you find the benchmarks for your industry (if any).
GIC and SIC rates for June quarter
The ATO has published the 2016 June quarter rates for the General Interest Charge (GIC) and the Shortfall Interest Charge (SIC):
GIC annual rate
GIC daily rate
SIC annual rate
SIC daily rate
DHS specified benefits and entitlements data matching
The ATO has advised that it will collect information from the Department of Human Services (DHS) for the following benefits and entitlements:
n family tax benefits – part B;
n paid parental leave scheme;
n carers' allowance; and
n Medicare entitlement statements.
This data will be compared with claims made in income tax returns for the invalid and invalid carer tax offset, and for exemptions from paying the Medicare levy and surcharge.
The program will enable the ATO to detect those who are NOT genuinely entitled to claim these offsets and exemptions. Due to a number of legislative changes in recent years, some people continue to claim these offsets and exemptions incorrectly.
The ATO says that it has been undertaking this data matching program for more than five years and intends to continue conducting it for a further three years.
Buyers to withhold tax for ATO when buying certain properties
Editor: Parliament recently passed legislation amending the taxation law to impose withholding obligations on the purchasers of certain Australian assets – generally property purchased from a non-resident. However, the changes will affect most purchases of property in Australia!
The amendments impose a 10% withholding obligation on purchasers of 'Taxable Australian Real Property' (generally, this means an interest in Australian land) from certain foreign residents, as well as certain 'indirect Australian real property interests' (such as shares in companies that own a lot of land) and options to acquire such assets.
The amendments will generally apply where the contract to purchase an applicable asset is signed on or after 1 July 2016.
Where the land, or the interest in the land, is worth $2 million or more, the new law requires the purchaser to withhold 10% of the purchase price and send it to the ATO unless the vendor has obtained a 'clearance certificate' from the ATO and provided it to the purchaser prior to settlement.
This obligation arises regardless of whether the vendor is a foreign resident or not.
On 1 August 2016, Harvey enters into a contract to purchase a residential property in an affluent Sydney suburb for $2.5 million, with settlement proposed to occur on 1 October 2016. He does not know whether the vendor is a foreign resident.
Despite many requests from Harvey’s lawyer, the vendor refuses to obtain a clearance certificate from the ATO to give to Harvey.
As Harvey is acquiring Australian land with a market value greater than $2 million and he has not received a clearance certificate from the vendor by the time settlement occurs, Harvey will be required to withhold and pay to the ATO $250,000, whether or not the vendor is an Australian resident.
GST implications when employer pays for a super fund's expense
An employer cannot claim an input tax credit where it pays an expense on behalf of a superannuation fund, as the supply is not made to the employer; but to the super fund.
However, if the fund is registered for GST, then it may be entitled to claim an input tax credit (or a reduced input tax credit if the requirements in Division 70 of the GST Act are otherwise satisfied).
For example, assume a super fund engages a legal firm to provide advice about its activities, but the employer connected with the super fund pays the legal fees associated with this advice.
Because the supply of the advice was made by the legal firm to the super fund, the employer is not entitled to an input tax credit (i.e., the employer has not 'acquired anything', even though it made the payment).
However, depending on the circumstances and whether the super fund is registered for GST, it may be entitled to a full or reduced input tax credit.
Editor: The rules relating to GST are more complicated for super funds than for other entities, so please phone our office if you would like discuss this important issue.
Taxpayer not a 'share trader' despite substantial share trades
Editor: In a recent case, a taxpayer undertook significant trades on the stock exchange and made losses, but was still found to be a 'share investor', rather than a share trader, meaning she could not deduct her losses against her other income (i.e., her losses were 'capital losses' that can only be offset against capital gains).
The taxpayer (who otherwise worked as a child care educator and earned approximately $40,000 in wages) started trading shares in July 2010, utilising her (and her husband’s) savings of approximately $60,000 and a margin loan of initially $40,000.
During the 2011 income year, she made:
q 71 purchases to a value of $379,630; and
q 37 sales to a value of $215,019.
She made a loss on her share transactions during the 2011 income year to the order of $20,000, and she was seeking to claim that as a deduction.
The Senior Member of the AAT considered the following factors in deciding that the taxpayer was not a share trader.
Factors in favour:
u the turnover was substantial, particularly having regard to her wages; and
u the taxpayer maintained a home office for the purpose of undertaking the share transactions.
n the share transactions were not regularly and systematically carried out throughout the 2011 income year – the bulk of the transactions took place in the first 6 months of the 2011 income year, with only 10 transactions of approximately $70,000 in the second half of the financial year.
n the activities were very basic and lacked sophistication to constitute a share trading business;
n there was no demonstrated pattern of trading, although it was accepted there was a business plan even before she later produced written evidence of this; and
n she had no skills or experience or prior interest in shares.
Inactive Trusts – ABNs to be cancelled
The ATO has advised that they will begin cancelling the ABNs of approximately 220,000 trusts, where there is evidence those trusts are no longer carrying on an enterprise.
Trust ABNs will be cancelled from February, where information available indicates that, for the last two years, the trust has not lodged BASs and/or trust income tax returns.
The ATO will send a letter if an ABN has been cancelled, including the reason for the cancellation, and a phone number to ring to get the ABN reinstated immediately if the recipient does not agree with the decision.
Editor: If you receive such a letter and think the trust should still be entitled to an ABN, let us know and we'll try and sort it out for you. Please also let us know if there are any outstanding BASs or returns you need us to lodge!
ATO announces two important data matching protocols
The ATO has just announced that it is starting a new "asset" data matching protocol, and extending another CGT and rental protocol that has been running successfully for the last ten years.
Data matching on insurance taken out on certain assets owned by "wealthier" taxpayers
The ATO has advised that it is working with insurance providers to identify policy owners on a wide range of asset classes.
n enthusiast motor vehicles;
n fine art; and
n thoroughbred horses.
It said that this will provide them with a more accurate estimate of taxpayers' wealth.
Editor: And therefore income. Taxpayers who have used untaxed monies to acquire such assets might be well advised to get on the front foot and disclose it to the ATO, rather than waiting for a call from the taxman.
They advise that they expect to receive 100,000 records where the different asset classes meet certain threshold amounts.
Property sales and rental income
The ATO has also advised that it is continuing its ongoing "Real property transactions 1985–2017 data matching program protocol".
It is undertaking this program to basically ensure that taxpayers are correctly meeting taxation obligations in relation to their dealings with real property, i.e., CGT on property sales and income tax on rental income.
For the period 20 September 1985 to 30 June 2017, data will be obtained from all State and Territory Revenue authorities, as well as many Finance departments, and Land and Residential Tenancies authorities.
The ATO will obtain the data on:
q landlords, properties, rental income, etc., from the rental bond authorities; and
q taxpayer details on property valuations, sales, purchases, etc., from the revenue and land titles authorities.
Number of records
It said that, based on current data holdings, it is estimated these records will identify approximately 11.3 million unique individuals.
Tax help for people affected by recent bushfires
The ATO has advised that, for people affected by the recent Victorian and Western Australian bushfires, refunds will be fast-tracked and they will have additional time to lodge income tax returns and activity statements.
No need to apply
The Tax Commissioner said taxpayers do not need to apply for a deferral or a faster refund.
“If your business or residential address is in one of the identified affected postcodes it will happen automatically. You can visit our website to see the new lodgment dates and check if your region is included. Further postcodes may be added as needed, so check our website for more information,” Commissioner of Taxation, Mr Jordan, said.
Warning to employers to withhold tax from some car allowances
The ATO has reminded taxpayers that, in relation to claiming car expenses, the one-third of actual expenses method and 12% of original value method were abolished from 1 July 2015.
The cents per kilometre method now uses a standard rate of 66 cents per kilometre for all cars, rather than a rate based on a car's engine size.
Employers should be aware that the ATO set the approved pay as you go (PAYG) withholding rate for cents per kilometre car allowances at 66 cents per kilometre from 1 July 2015.
Employers should withhold tax from any amount above 66 cents for all future payments of a car allowance, as failure to do so may result in the employee having a tax liability when they lodge their tax return.
Employees, who from 1 July 2015 have been paid a car allowance at a rate higher than the new approved amount, should consider whether they need to increase their withholding to avoid any tax liability at the end of the year.
Editor: If this applies to your business, please contact our office if you need help with the calculations.
Taxpayer misses out on small business CGT concession
A taxpayer's claim that a related trust was entitled to the small business 15-year exemption* was rejected because a loan from his trust had to be included in the net value of his CGT assets.
Note (*): One of the requirements to get this concession is to satisfy the "maximum net asset value test" (MNAVT), whereby the net value of CGT assets of a taxpayer (and their connected entities and affiliates) must not exceed $6 million.
It was agreed between the ATO and the taxpayer that the total net value of the taxpayer's other assets in 2008 was $5.93 million.
The parties disagreed, however, as to whether an amount of $1.14 million shown as a loan in the 2008 balance sheet of the taxpayer's trust should be included as an asset – the taxpayer claimed that he was "statute-barred" from recovering the loan by the Limitation of Actions Act 1936 (SA).
If it was an asset, then the net value of the total assets for the purposes of the small business exemption exceeded $6 million, and the taxpayers were not entitled to CGT relief.
The Federal Court held that any action by the trust against the taxpayer to recover the pre‑1998 loan would be an action to recover "trust property", and the Limitation of Actions Act does not prescribe any limitation period in respect of claims of that kind.
Therefore, "the contention that the pre‑1998 loan was statute‑barred and did not have to be brought into account in the calculation of the MNAVT must be rejected".
March quarter GIC and SIC rates
The ATO has published the 2016 March quarter rates for the General Interest Charge (GIC) and the Shortfall Interest Charge (SIC):
GIC annual rate
GIC daily rate
SIC annual rate
SIC daily rate
Extra time for foreign investors to register agricultural land
The ATO has advised that foreigners who own land in Australia now have until 29 February 2016 to come forward and register their agricultural land holdings.
All foreign individuals, companies and trustees are required to notify the ATO if they:
n have an existing interest in agricultural land;
n have a new interest in agricultural land; and/or
n no longer have an interest in agricultural land.
If agricultural land is purchased or the ownership of land is changed on or after 1 February 2016, the ATO must be notified within 30 days.