Simpler BAS

From 1 July 2017, small businesses will have less GST information to report on their Business Activity Statement (BAS).

As a result of feedback and concerns from small businesses, tax professionals, industry associations and software providers, the ATO has reduced the amount of GST information required for small business to report on their BAS to simplify GST bookkeeping and reporting requirements.

If your business is registered for GST, and you have an annual GST turnover of less than $10 million, you are eligible for simpler BAS.

From 1 July 2017, you only need to report on:

  • Total sales
  • GST on sales
  • GST on purchases

The ATO no longer require the following information:

  • Export sales
  • GST-free sales
  • Capital purchases
  • Non-capital purchases

You still need to keep records, such as invoices, as proof of any claims you make in your BAS lodgements.

You can find out more information on the ATO website or by giving us a call on 03 6231 3448.

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Big Brother (aka the ATO) is watching….

There has been a massive jump in the sophistication of the ATO’s information systems and data sharing capabilities this year, which means that those avoiding tax, fudging expenses and cash operators are no longer able to escape undetected.  

Data analysis and information sharing within government departments is now broadly available, with the ATO able to isolate data and target people more accurately.

Many of our clients’ are often surprised at just how much the ATO know about them, and how much information is held.  Tax returns are pre-filled with some information from the ATO – dividends and interest payments and ABN income, for example – and tax payers need to be aware that a lot of data is already being reported to the ATO through different channels.

In recent years, the ATO would target particular occupations for work-related expenses, focusing on teachers one year, nurses the next.  Now, their audit case selection has become far more comprehensive and they are looking at average claims.  Where a claim is abnormal in relation to the industry average, the ATO will seek clarification and further information as to why the claim is irregular.  The number of audits have not increased substantially, but the targeting has become a lot more efficient which leads to a higher likelihood of there being an error or issue.

The bottom line is if you’re doing the right thing, you have nothing to worry about.  If businesses or taxpayers are cheating the system and not paying their share, the increased sophistication of the ATO now means that these people will be caught and prosecuted, leading to penalties and interest charged on the unpaid tax.

If you’re ever unsure about whether something is claimable or not, it’s always better to ask the question.  Give us a call on 03 6231 3448 to discuss.

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Is tap-and-go technology promoting financial illiteracy?

This week, the ABC have completed some research into the “tap-and-go generation” and found that from a survey of 1100 high school students many are confused about credit cards and how they work.  There appears to be a worrying trend of financial illiteracy amongst students which appears tap-and-go technology may be contributing to.  

Read more

Welcome to our new client portal service

We have talked about our client portal service previously, but now it has been up and running since 1 July 2017 we are pleased to say it has been even more successful than we initially thought.  The feedback that we are getting from you has been overwhelmingly positive, especially with regard to how easy it is to use and how quick the process is.

Still not convinced?  Check out our new flyer and see how the portal can make your life easier.

Read more

Bunnings and the massive tradie tax fraud

Bunnings Warehouse has unwittingly found itself in the centre of a massive tradie tax fraud, with Bunnings’ ABN being used in more than 40% of all ABNs quoted in the Northern Territory.   According to the Black Economy Taskforce, these figures give Bunnings the dubious honour of having one of the most quoted ABNs in the entire country.

So, what does this mean?

By quoting Bunnings’ ABN on invoices or receipts, the money is unable to be traced back to the independent contractor or supplier which allows them to then dodge paying tax on the transaction, in turn making it pretty much impossible for the ATO to check to see that tax has been paid correctly.  This fraudulent activity is potentially costing taxpayers hundreds of millions of dollars in missed revenue.

This scam casts doubt over the current ABN system and whether it is actually working.  Last year, 180,000 ABNs were issued to people on tourist visas who are not allowed to have an ABN and at least 3.5 million ABNs across the country have never lodged a tax statement or tax return.  There seems to be room for improvement when it comes to governance of the issuing of ABNs to make sure they are something that is valued, not something that is automatically issued.

 

Client Portal

If you have already been in to see us to get your tax return done this financial year, chances are that you may have been asked to sign up to our new Client Portal.  We wanted to provide you with a bit more information regarding the Portal, as well as answer some common questions that we have been asked.

First of all, what exactly is the Client Portal?  Well, it is a cloud based software module that allows you to efficiently and securely download, sign-off and upload data files and reports online at any time.  It allows a much more streamlined process that reduces the need for paper, as well as reliance on postal services.

It has an in-built authenticated digital signing function which means that you are not required to print off copies of your paperwork to sign and return to us, or wait for the hard copies to arrive via post which drastically reduces the turnaround time.  The authenticated digital function is combined with 128-bit encryption which keeps your personal information safe and secure.

There are several safety features that ensure that the documents provided via the portal need to be read before they can be signed and, once date-and-time stamped, the document becomes “read only” and is unable to be renamed, overwritten or deleted.

What do I need to do to set up my Client Portal access?
Once we set you up from our end, you will receive an email invitation with a link to join the Client Portal.  Your username is assigned by the Client Portal but you will be able to choose your own password.  You will receive a confirmation once you have successfully registered.

Do I need to let you know when I have signed a document?
No, you don’t.  The Client Portal generates automatic email notifications when files are uploaded, sent or digitally signed.

Do I need to print the documents out to sign them?
This is possibly our favourite bit as it saves you so much time – you don’t need to print out the documents!  The Client Portal uses authenticated digital signing which removes the need for a physical signature.

If you have any questions regarding the Client Portal, please give us a call on 03 6231 3448 to discuss.  We can walk you through the registration process if you are having any issues getting your access up and running.  Rest assured that you do not have to register for Client Portal access and, once registered, you can always opt-out of receiving your documents electronically.   

 

Deductions you can claim

Tax time is now well and truly under way and one of the questions that we often get is “what exactly can I claim?”  We all know that we are entitled to claim deductions for some expenses which are mainly related to earning our income, but here are some things that you need to know when it comes to claiming a deduction.

To claim a deduction:

  • you must have spent the money yourself and were not reimbursed for it
  • it must be directly related to earning your income
  • you must have a record to prove it

If the expense was for both work and private purposes, you can only claim a deduction for the work-related portion.

Some of the common deductions include:

  • Vehicle and travel expenses

You can claim vehicle and travel expenses directly connected with your work, but generally you can’t claim for normal trips between home and work.  You need to keep records of your travel expenses.

  • Clothing, laundry and dry-cleaning expenses

You can claim a deduction for the cost of buying and cleaning occupation-specific clothing, protective clothing and unique, distinctive uniforms.  You may need to have written evidence that you purchased the clothing, as well as the cleaning costs.

If you received an allowance from your employer for clothing, uniforms, laundry or dry-cleaning this needs to be included in your tax return.

  • Gifts and donations

You can only claim a tax deduction for gifts or donations to organisations that have the status of deductible gift recipients (DGRs).

  • Home office expenses

You may be entitled to claim deductions for home expenses including a computer, phone or other electronic devices you are required to use for work purposes, as well as a deduction for running costs.

  • Interest, dividend and other investment income deductions

You can claim a deduction for expenses incurred in earning interest, dividend or other investment income

  • Self-education expenses

You may be able to claim a deduction for self-education expenses if your study is work-related or if you receive a taxable bonded scholarship.

  • Tools, equipment and other assets

If you buy tools, equipment or other assets to help earn your income, you can claim a deduction for some or all of the cost.  If the tools are used for both work and private purposes the claim with need to be apportioned.

If you are unsure of the legitimacy of a claim, it’s always in your best interest to get advice from your tax adviser.

If you would like to make an appointment to get your 2016/17 tax return completed, give us a call on 03 6231 3448. 

Key taxation changes for 2017/18 and beyond

A number of taxation changes took effect from 1 July 2017 and onward.  Read on to see how you may be affected.

Extension of accelerated depreciation rules
Effective date: 1 July 2017

Small businesses have been granted a 12 month extension in claiming an immediate tax deduction for assets up to $20,000 purchased for use within the business.  An immediate deduction may be claimed if the asset was purchased between 7:30pm on 12 May 2015 and 30 June 2018.

This arrangement was due to finish on 30 June 2017 with the cost threshold for immediate deductions reverting back to $1,000 on 1 July 2017.  The deduction can be claimed for each asset with a purchase price of less than $20,000, whether new or second-hand.

Foreign resident capital gains withholding payment
Effective date: 1 July 2017

When a foreign resident disposes of certain taxable Australian property, the purchaser is required to withhold an amount from the purchase price and pay that amount to the ATO.  The changes to withholding tax payment (for disposals that occur after the date of commencement) include:

  • an increase in withholding tax rate to 12.5% of purchase price (previously 10%), and
  • a reduction in the threshold above which withholding applies, to $750,000 (previously $2 million).

These amendments apply to acquisitions of property that occur on or after 1 July 2017.

DASP changes
Effective date: 1 July 2017

A new Departing Australia Superannuation Payment (DASP) tax rate of 65% (previously 38%) will apply to working holiday makers who arrived on certain visa classes (417 and 462).  The new tax rate will only apply to both the taxed and untaxed components of the superannuation benefits being paid, where the DASP application is processed on or after 1 July 2017.  Tax-free components will be paid tax-free.  This increased tax rate does not apply to temporary residents or working holiday makers who arrived on other visa classes, or where the DASP application was processed before 1 July 2017.

Tax changes for certain working holiday makers
Effective date: 1 January 2017

Since 1 January 2017, working holiday makers have paid 19% tax on taxable income up to $37,000.  Income above $37,000 is subject to the ordinary marginal income tax rates.  The 2017/18 income year will be the first full financial year in which the increased tax rate will apply.  Working holiday makers include individuals who hold a Subclass 417 (Working Holiday) visa, a Subclass 462 (Work and Holiday) visa or certain bridging visas.

Increase in Medicare Levy income thresholds
Effective date: 1 July 2016

The Medicare Levy income thresholds for the 2016/17 income year have been indexed.  These income thresholds determine the point at which an individual is liable to pay the Medicare Levy.

 

Identity theft and your business

If you run a business, it’s important that you know what information you need to protect and keep secure.  Some of the common ways that identity thieves can take your business details are by:

  1. Breaking into your business and stealing your physical records
  2. Taking photos of your business or employee details
  3. Stealing your passwords, account logins and AUSkey information
  4. Gaining access to your data through legitimate means, such as being an employee

Once they have your business information, thieves can then trick your customers or staff into providing additional information or money and set up fraudulent bank accounts in your name.

There is help available if you find yourself in trouble due to a tax scammer or thief accessing your data.  The ATO will work with you alongside IDCare to reduce any harm that you or your customers may experience.

It is imperative that you contact the ATO Client Identity Support Centre on 1800 567 033 immediately if you find that your TFN, AUSkey, myGov credentials or any other security information has been stolen or used by an unauthorised person.

Changes to the ATO debt reporting process and how it may affect you

The Federal Government has announced that from 1 July 2017 the Australian Taxation Office (ATO) will be given the power to disclose to a credit reporting bureau (CRB) the tax debt information of businesses where those debts have been outstanding for more than 90 days and where the taxpayer has not effectively engaged with the ATO in managing their debts.  The Government announced this change in its Mid-Year Economic & Fiscal Outlook 2016-17.

This power may have significant consequences and all business taxpayers should be aware of the potential ramifications should they fail to effectively manage their ATO tax debts.

The ATO has approximately $19 billion in outstanding or overdue tax owing, with almost $13 billion relating to small to medium enterprises with a turnover of less than $2 million.

Up until now, there have been privacy provisions in place to restrict the ATO from disclosing a taxpayer’s tax debt to any third party.  The introduction of these new powers is arguably an attempt to strengthen the debt recovery muscle of the ATO, as the exercise of these powers is likely to put commercial pressure on recalcitrant taxpayers.

The Federal Government’s rationale for the proposed new powers is to:

  1. reduce any unfair advantage which may currently exist for businesses that do not pay their tax on time;
  2. provide information to credit providers and other businesses to allow them to assess the risk of extending credit or terms of trade to taxpayers with unpaid tax debts; and
  3. provide taxpayers with a strong incentive to engage with the ATO to address outstanding tax issues.

When will the ATO report a tax debt?

The ATO will have a discretion whether or not to disclose an unpaid tax debt to a CRB.  It is not obliged to disclose that information.  The ATO has indicated that it understands that taxpayers will have cash flow issues from time to time, and has acknowledged that it will not report unpaid tax debts that are genuinely in dispute or where the taxpayer has entered into, and complies with, a payment arrangement.

Further, the ATO has indicated that it will only use its powers if a business taxpayer has failed to properly engage in relation to the process.  While the ATO is yet to confirm the specific grounds, it suggests that tax debts will only be reported where:

  • the taxpayer has an ABN;
  • the debt is over $10,000;
  • the debt has been unpaid for 90 days;
  • the debt is not in dispute;
  • the taxpayer has not entered into an effective payment plan; and
  • the taxpayer has not effectively engaged with the ATO.

The taxpayer will be notified

Before the ATO discloses information to a CRB, it will notify the taxpayer of its intention to do so.  The period of notice is unclear at this stage.  It is likely that they will be required to give the taxpayer “reasonable” notice and it is important that clients remain engaged with the ATO.

How will this affect businesses?

The reality is that the moment the ATO reports a client’s unpaid tax debt to a CRB, this default or black mark will be recorded on the taxpayer’s credit file, and will remain there for five years.  Historically, it has been difficult to remove such black marks from such credit files.  Usually, this would only be removed if it can be shown that it was wrong and should not have been recorded on the file.  That may take many months to establish.  In addition, even if the unpaid tax debt is later paid, the default will remain on the credit file for 5 years.

How to avoid the problem

The ATO suggests that business taxpayers should engage early to address any outstanding tax issues and take the following steps:

  • ensure all accounting data entries are up-to-date;
  • make sure all BAS & IAS are lodged by due dates;
  • if a business has an overdue debt with the ATO, contact the ATO immediately to discuss a payment plan;
  • if a tax debt is in dispute, endeavour to communicate with the ATO to resolve the dispute; and
  • if a tax debt is not dispute, engage with the ATO to enter into a payment arrangement.

A warning to small business owners and directors

Should the ATO report an unpaid tax debt to a CRB, that is likely to have a significant negative impact on the reputation of that small to medium enterprise and its directors, which may prove fatal.  It will almost certainly impact on the ability to obtain goods on credit from suppliers and may result in financiers’ withdrawing their support.

It is likely to make it very difficult for defaulting businesses to access funding from banks or other lenders.  Even if financiers agree to lend money to businesses in these circumstances, it is likely that it will do so at higher interest rates.

This new regime is likely to cause many businesses to go broke, which may well be appropriate in particular cases.  This will often have personal consequences to small business owners and directors.