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.
P r a c t i c e U p d a t e
Pre-retirees: Avoid 'too good to be true' tax schemes
The ATO has launched a new project called 'Super Scheme Smart', an initiative aimed at educating individuals about the potential pitfalls of 'retirement planning schemes', to keep them safe from risking their retirement nest egg.
According to the ATO, individuals most at risk are those approaching retirement, including anyone aged 50 or over, looking to put significant amounts of money into retirement, particularly SMSF trustees, self-funded retirees, small business owners, company directors, and individuals involved in property investment.
While retirement planning schemes can vary, there are some common features that people should be aware of.
Usually these schemes:
u are artificially contrived and complex, usually connected with a SMSF;
u involve a lot of paper shuffling;
u are designed to leave the taxpayer with minimal or zero tax, or even a tax refund; and/or
u aim to give a present day tax benefit by adopting the arrangement.
Individuals caught using an illegal scheme identified by the ATO may incur severe penalties under tax laws, which includes risking the loss of their retirement nest egg and also their rights as a trustee to manage and operate a SMSF:
"Retirement planning makes good sense provided it is carried out within the tax and superannuation laws. Make sure you are receiving ethical professional advice when undertaking retirement planning, and if in doubt, seek a second opinion from an independent, trusted and reputable expert".
For more information about the specific schemes, they can visit their website at www.ato.gov.au/superschemesmart.
ATO assistance with the pending $500,000 lifetime super cap
In the 2016/2017 Federal Budget, it was announced that, from 7:30pm (AEST) on 3 May 2016, there will be a lifetime cap of $500,000 on non-concessional (i.e., non-deductible) superannuation contributions.
This new lifetime cap is proposed to take into account all non-concessional contributions an individual has made on or after 1 July 2007.
Therefore, taxpayers currently planning to make non-concessional contributions may need to check their historical non-concessional contributions, back to 1 July 2007. Fortunately, the ATO has stated that, where individuals and funds have met their lodgement obligations, the ATO will be able to calculate and report these amounts for the period from 1 July 2007 to 30 June 2015.
Editor: If you are considering making such contributions but are unsure of your past non-concessional contributions, let us know, as we can expedite getting the ATO to make these calculations.
Deductibility of gifts provided to clients
The ATO has confirmed that a taxpayer carrying on business is generally entitled to a deduction for expenses incurred on a gift made to a former or current client, if the gift is characterised as being made for the purpose of producing future assessable income.
However, the expense may not always be deductible (e.g., if the gift constitutes the provision of entertainment that is not deductible).
The ATO’s recent determination also highlights that a deduction will be denied where expenditure on gifts is more accurately described as being 'private' in nature (for example, where a gift is provided to a relative outside a business’ usual practice of providing client gifts).
Deductibility of airport lounge memberships
The ATO has also confirmed that the cost to a business taxpayer of a yearly airport lounge membership (e.g., Qantas Club, Virgin Lounge) that will be used by its employees is ordinarily deductible, and should not give rise to any FBT liability for the employer (even if the majority of (or indeed only) use of the airport lounge membership is for private purposes).
Phoenix Taskforce swoops on dodgy businesses
The ATO’s stance against phoenix activity has continued with multiple search warrants issued, and many business and residential sites accessed without notice across Victoria and Queensland, as part of a criminal investigation into unpaid superannuation, employee withholding, GST, and income tax.
Editor: 'Phoenix activity' refers to a business that shuts down whilst still owing creditors, employees and the ATO lots of money, and then starts up again perhaps somewhere else or under a new name.
Deputy Commissioner Michael Cranston said “By showing up unannounced we’re able to access records that we might otherwise never have seen. This information is then used to take further compliance action, and shared among our partner agencies to better inform our strategies targeting the 50 highest-risk phoenix operators.”
What employees of these companies should be looking out for
Mr Cranston stated that there are a number of signs that a business someone is working for may be involved in phoenix behaviour:
“Employees may be pressured to take leave or have their employment status changed from permanent to casual. They may also notice that there are frequent changes in the identity of the company that is paying their wages, or that their superannuation entitlements are not paid."
Employees who suspect that a company they are dealing with is exhibiting any of these signs should get in touch with the ATO by reporting it online or by calling 1800 060 062. Editor: Or contact us!
ATO exposes dodgy deductions
With over eight million Australians claiming work-related expenses each year, the ATO is reminding people to make sure they get their deductions right this tax time.
Assistant Commissioner Graham Whyte said that, in 2014/15, the ATO conducted around 450,000 reviews and audits of individual taxpayers, leading to revenue adjustments of over $1.1 billion in income tax.
“Every tax return is scrutinised using increasingly sophisticated tools and data analytics developed (by) the ATO. This means we can identify and review income tax returns that may omit information or contain unreasonable deductions," Mr Whyte said.
The ATO also set out some case studies, which provide a fascinating insight into the ATO's methods, including:
q A medical professional who made a claim for attending a conference in America, and provided an invoice for the expense, but when the ATO checked, it found that the taxpayer was still in Australia at the time of the conference (the claims were disallowed and the taxpayer received a substantial penalty); and
q A taxpayer who claimed deductions for car expenses, but the ATO found they had recorded kilometres in their log book on days where there was no record of the car travelling on the toll roads, and further inquiries identified that the taxpayer was out of the country. Their claims were also disallowed.
P r a c t i c e U p d a t e
Update on the government's superannuation program
Editor: Now that the government has been re-elected, it seems they are committed to proceeding with their superannuation policy, including the controversial measure to impose a 'lifetime cap' of $500,000 on the amount of non-concessional (i.e., undeducted) contributions that can be made into superannuation (calculated from all contributions made since 1 July 2007).
The Treasurer Scott Morrison has also indicated that transitional relief provisions will be introduced in relation to the lifetime non-concessional contributions cap of $500,000.
It is proposed that transitional provisions will allow for non-concessional contributions to be made under the rules and limits that existed prior to Budget Night where a superannuation fund has entered into a contract before 3 May 2016 to acquire an asset, and the contract settles after 3 May 2016.
Furthermore, there will be transitional relief for self-managed superannuation funds (SMSFs) that had a Limited Recourse Borrowing Arrangement in place before 3 May 2016, and additional non-concessional contributions are to be made up to 31 January 2017 (so that the borrowing will comply with the ATO's new guidelines).
Editor: There have also been reports that the government may also allow 'carve-outs' for extraordinary 'life events' (e.g., divorce).
The government is apparently going to release draft legislation for their superannuation changes some time in August 2016.
Tax time is prime time for scams
The ATO is reminding Australians to be on the lookout for tax-related scams during tax time, as scammers are particularly active because of the large number of people lodging their tax returns.
Assistant Commissioner Graham Whyte said that, while most people were able to identify scams, it is important to remain alert during tax time.
For example, although the ATO makes thousands of outbound calls to taxpayers a week, there are some key differences between a legitimate call from the ATO and a call from a potential scammer:
“We would never cold call you about a debt; we would never threaten jail or arrest, and our staff certainly wouldn’t behave in an aggressive manner. If you’re not sure, hang up and call us back on 1800 008 540”.
ATO also warns against identity theft
The ATO is also reminding Australians to protect themselves against identify theft this tax time. Highly organised crime networks use a range of methods to steal personal information in order to commit refund fraud.
The ATO recommends following a few easy steps for taxpayers to protect themselves against identity theft:
u Put a padlock on their letterbox;
u Shred documents containing personal details (especially their tax file number (TFN)) before throwing them away;
u Use legitimate and up-to-date antivirus, firewall and anti-spyware software; and
u Make sure passwords are strong, using a combination of letters, numbers and symbols, don't share them with anyone, and ensure they are changed regularly.
The ATO also says that taxpayers should report the loss or theft of their TFN without delay, if they can’t find their TFN, and/or think their TFN has been stolen or misused.
The 'sharing economy' in the ATO's sights
The ATO is concerned that those earning money from the 'sharing economy' may not realise they have to declare these amounts on their tax return.
In the sharing economy, buyers and sellers are connected through a facilitator who usually operates an app or website.
Assistant Commissioner Graham Whyte said:
“If you earn money from doing odd jobs or providing a service like task sharing, transporting passengers through things like ride-sourcing, or renting out a room or house, you need to declare it because it counts as assessable income. If you are running a business through the sharing economy you also need to declare this income.
“It’s a bit different if the goods you provide or the activity you complete through a sharing economy website or platform is done as a hobby or recreational activity. The amount you are paid may not be assessable income."
Editor: We can help you with this distinction.
Mr Whyte said ATO technology was keeping up with the sharing economy, and, thanks to their data collection and data matching activities, the ATO would know if taxpayers have left out a significant amount of income.
In addition, some taxpayers may need to register for, and pay, GST (especially those earning an income from carrying on an enterprise of ride-sourcing services, regardless of how much money they earn).
Latest ATO benchmarks released
The ATO has released the latest benchmarks for small business based on the data from 2014 income tax returns and business activity statements, covering over 1.3 million small businesses.
Assistant Commissioner Matthew Bambrick said that, if a small business is inside the benchmark range for their industry and the ATO hasn't received any extra information that may cause concern, they can be confident that they probably won't hear from the ATO.
Mr Bambrick said the benchmarks were also a helpful guide for small businesses to see how they stack up against others in their industry.
"For example, one business told us how their accountant used the tailored benchmarks to work out that their expense to turnover ratio was higher than other businesses with a similar turnover. Using this information the business adjusted some of their inputs and how they were pricing their products. These changes resulted in an overall improvement in their performance."
While the benchmarks are a helpful guide for small business, Mr Bambrick said it was also one of a number of tools the ATO uses to ensure a level playing field.
Cents per km deduction rate for motor vehicle expenses
The ATO has determined that the rate at which work-related motor vehicle expense deductions may be calculated using the cents per kilometre method is 66 cents per kilometre for the income year commencing 1 July 2016.
Overtime Meal Allowance Amounts
The reasonable amount for overtime meal allowance expenses for 2016/17, where an allowance is paid under an award, order, determination, industrial agreement or a Commonwealth, State or Territory law, is $29.40 per meal.
Div.7A benchmark interest rate
The benchmark interest rate for 2016/17, for the purposes of the deemed dividend provisions of Div.7A, is 5.40% (down from 5.45% for 2015/16).
CGT: 2016/17 Improvement threshold
The CGT improvement threshold is $145,401 for the 2016/17 income year, up from $143,392 for 2015/16.
ATO focuses on rental property owners
With Tax Time 2016 just around the corner, the ATO has stated it will be paying close attention to excessive interest expense claims, and incorrect apportionment of rental income and expenses between owners.
The ATO is also looking at holiday homes that are not genuinely available for rent, and incorrect claims for newly purchased rental properties.
An ATO spokesperson said that their ability to identify incorrect rental property claims is becoming more sophisticated due to enhancements in technology and the extensive use of data.
Holiday home not genuinely available for rent
John has a newly purchased rental property that had not returned any rental income.
He told the ATO that the property was occasionally advertised on community noticeboards and websites.
John was unable to prove there was a genuine arrangement in which he actively sought tenants, or had taken sufficient steps to genuinely advertise the property for rent.
A rental loss of almost $60,000 was disallowed and penalties were applied.
Rental property owner Sarah reported high rental interest claims and was required to provide bank statements as evidence to the ATO.
The statements showed borrowings well in excess of the purchase price of the rental property.
The interest charges relating to the private part of the loan were disallowed.
Sarah was required to pay more than $15,000 back to the ATO.
Incorrect claims for a newly purchased rental property and false claims
Nancy recently purchased a rental property and had her tax return amended by the ATO to remove deductions for repairs, capital works and incorrectly apportioned borrowing expenses.
Nancy had inappropriately claimed a deduction for repairs to defects present in the newly purchased property, and the capital works and borrowing expenses should have been spread over several years.
She also provided false receipts for property management fees undertaken by a family member.
Nancy was required to pay more than $57,000 back to the ATO as well as over $10,000 in penalties for making a false statement in her tax return.
Apportioning expenses between joint owners of a property
A rental property claim was investigated by the ATO where the rental expenses had not been apportioned correctly. The property was jointly owned by a couple but the higher income earner claimed the larger proportion of the expenses.
The expenses were adjusted to reflect the ownership interest and the higher earner had to pay back more than $8,000 in tax.
GIC and SIC rates for the 2016 September quarter
The ATO has published the 2016 September 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
Car depreciation limit for 2016/17
The car limit is $57,581 for the 2016/17 (up from $57,466 for the previous year). This amount provides a limit on depreciation and GST input tax credit claims.
Goods taken from stock for private use: 2015/16
The ATO has provided an update of the amounts it will accept for 2015/16 as estimates of the value of goods taken from trading stock for private use by taxpayers in certain specified industries.
The amounts (which exclude GST) are:
Type of Business
Adult/Child over 16 years
Child 4–16 years
Takeaway food shop
Mixed business (includes milk bar, general store, and convenience store)
The ATO recognises that greater or lesser values may be appropriate in particular cases. It says it will adjust the values annually.
ATO's deadline for non-arm's length LRBAs extended
The ATO is allowing SMSF trustees additional time until 31 January 2017 to ensure that any limited recourse borrowing arrangements (LRBAs) that their fund has are on terms consistent with an arm’s length dealing, or alternatively are brought to an end.
Editor: The ATO had previously advised SMSF trustees they only had until 30 June 2016 to review the LRBAs in their fund.
As part of this extension, the ATO has advised that it will provide further information and illustrative examples, to assist SMSF trustees and advisers to make decisions about relevant arrangements, by 30 September 2016.
Tax implications for the sharing economy
The ATO is reminding taxpayers who earn income through the sharing economy that they have tax obligations they should consider.
Examples of sharing economy services include:
n ride-sourcing – providing taxi travel services to transport passengers for a fare;
n renting out a room or a whole house or unit on a short term basis;
n renting out parking spaces; or
n providing personal services, such as web or trade services, or completing odd jobs, errands, deliveries, etc.
As is usual under the GST and income tax law, the nature of the goods or services they provide and the extent of their activities will determine what they need to do for tax purposes.
SuperStream deadline extended!
With only days to go until the 30 June SuperStream deadline, the ATO noted that, while many small businesses had implemented the required changes, "some small businesses may need extra time and help to become SuperStream compliant".
The ATO has announced that for small businesses that are not yet SuperStream ready, it will provide a further extension to 28 October 2016.
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.