Tax cuts on the way soon

Tax cuts on the way soon, but it's only the tip of the iceberg

Feared tax reform failed to eventuate when Labor lost this month's election, and money minds now turn to tax cuts. Some will arrive in July but much bigger cuts are also in the pipeline.

The Morrison Government's surprise election victory sparked a sigh of relief last week from investors and retirees across Australia, and public attention now turns to tax cuts.

In just over a month, more than 10 million workers will be eligible to receive up to $1080 of tax rebates when they file their annual tax return.

It's the first stage of the Morrison Government's massive income tax reduction program, and there have been calls for it to bring forward future stages by several years.

Labor's election policies to change capital gains tax, negative gearing and franking credit refunds are now a memory. However, it and minor parties can still block future tax announcements in the Senate.

In the meantime, the only tax news is good news.

H&R Block director of tax communications Mark Chapman said the only significant tax-related election proposal remaining was the tax cuts.

"All those things Labor was proposing are off the table now," he said. "Everything stays as it was, and for the segment of people who were going to lose their franking credits there's a lot of relief.

"There aren't going to be any unpleasant changes coming to the tax system any time soon.

"As we head toward the end of financial year the election takes a back seat and people need to get ready to lodge their tax return, get receipts together, talk to their accountant and get ready for July 1 as they do every year."

BetaShares chief economist David Bassanese said this year's tax cuts alone were unlikely to be enough to spur a sluggish economy, and the next round of planned tax cuts in three years was "too long to wait".

The Coalition's long-term tax plan removes the 37 per cent tax bracket completely and all taxpayers earning between $45,000 and $200,000 will be on the 30 per cent tax rate. Stage two - in July 2022 - lifts the top threshold of the 32.5 per cent tax bracket from $90,000 to $120,000, while the final stage in 2024 flattens tax brackets further - delivering higher income earners thousands of extra dollars each year.

"It would be helpful if the newly elected Morrison Government seriously considered a bring forward of additional tax cuts that have been promised to take effect over the next few years," Mr Bassanese said.

"The sooner the better, it seems to me. If they are planning on sending legislation to parliament soon, why not amend it and bring in some other tax cuts now? It can be justified due to the weakening growth outlook."

Budget surpluses and rising income from a higher-than-forecast iron ore price could help pay for the cuts, he said.

WHAT YOU'LL GET FROM JULY 

• If you earn below $37,000 you'll receive up to $255.

 

• If you earn between $37,001 and $47,999 you receive between $255 and $1080.

 

• People earning between $48,000 and $90,000 get the full $1080 tax cut

 

• Tax relief then gradually reduces to zero for people earning above $126,000.

 

(Tax cuts will be paid through people's annual tax refunds)

How to avoid the common EOFY mistakes

The ATO is targeting five common mistakes this EOFY - here's how to avoid them



The tax office says it will be focused on addressing "common issues" with small-business tax returns this year and will be paying close attention to expense claims as end of financial year (EOFY) approaches.

Less than two months out from the end of the 2018-19 financial year, accounting professionals are advising businesses to start getting their affairs in order.

The Australian Taxation Office (ATO) has provided SmartCompany with a list of five common errors they'll be on the lookout for this year. 

  1. Claiming of private expenses in the business.
  2. Failing to properly attribute personal and business use.
  3. Misunderstanding how tax applies for different and often complex business structures.
  4. Omitting income, including coupon sales.
  5. Not providing the necessary records for substantiating expense claims.
 

"This tax time the ATO will be focused on supporting small businesses to get it right through a range of services and tools available to them," an ATO spokesperson said in a statement.

"We will also be focusing on addressing common issues we see when small business lodge their returns, and reinforcing our message around recordkeeping and claiming of expenses."

The ATO says it has three golden rules for businesses claiming expenses.

These include:

1.    Ensuring money has been spent on your business and not for personal use;

2.    Where there is a mix of business and personal use, only claim the business portion; and

3.    Ensure adequate records are provided to substantiate expense claims.

Clarke McEwan offers an EOFY tax planning so speak to us by 1 June to allow enough time to get organised.


#clarkemcewan #taxplanning #2019tax #2019taxplanning

 

Amazon Alexa launches HIPAA-compliant medical skills

 

Alexa is moving into healthcare. Following a trial of Amazon's smart speakers in patients' rooms at Cedars-Sinai, the company this morning announced an invite-only program allowing select developers to create and launch HIPAA-compliant healthcare skills for Alexa. The skills allow consumers to ask the virtual assistant for help with things like booking an appointment, accessing hospital post-discharge instructions, checking on the status of a prescription delivery and more.

Amazon says the program will only allow select covered entities and business associates subject to HIPAA (the U.S. Health Insurance Portability and Accountability Act of 1996) to create these skills. Amazon itself provides the HIPAA-eligible environment for skill building, while the developers themselves are required to comply with the applicable laws.

This is a significant step for Amazon, as it means voice app developers who follow HIPAA guidelines can now create skills for Alexa.

This is an area Amazon has focused on for some time. According a report from last year by CNBC, Amazon was building out a healthcare team with Alexa in order to make the voice assistant useful in the healthcare industry. This included working through the complex HIPAA regulations that would be required to do so.

In addition, Amazon itself is venturing into healthcare alongside Berkshire Hathaway and JP Morgan Chase, which have together teamed up to take on rising healthcare costs for employees. Amazon last year acquired online pharmacy PillPack for less than $1 billion. And the company's AWS unit is expanding its HIPAA-compliant capabilities. This included the launch of Amazon Comprehend Medical, a machine learning tool that gathers information from things like doctors' notes and patient health records.

Today, Amazon Alexa is providing its "HIPAA eligible environment" to voice app developers on an invite-only basis in the U.S., but says it expects to enable more developers to access this capability in the future.

Developers accepted into the program will be able to use the Alexa Skills Kit, which now supports skills that are able to transmit and receive protected health information.

This expansion to healthcare is likely to raise questions - as well it should. While it's one thing to allow Alexa to turn on your lights or play some music, allowing our smart speakers and their voice assistants access to medical information is a much further leap. Consumers will need to understand how Amazon is securing their data before they feel comfortable using health and medical skills.

Amazon tells us its applies several layers of security to all skill data, including encryption, access controls and securely storing data in the Amazon cloud. HIPAA, meanwhile, includes other specific requirements, like identifying protected health information (PHI) and controlling and auditing access to PHI.

Amazon today is launching six skills that demonstrate the potential of healthcare-related skills. These come from healthcare providers, payors, pharmacy benefit managers and digital health coaching companies.

One skill from Cigna, for example, allows eligible employees to manage their health improvement goals and earn wellness incentives; another from Livongo lets members ask Alexa for their last blood sugar reading; parents and caregivers can give their care teams updates at Boston Hospital's ERAS (Enhanced Recovery After Surgery) program.

And others, from Express Scripts, Atrium Health and Swedish Health Connect, offer updates on prescription delivery or allow for appointment making.

The healthcare skill publishers are excited about the ability to reach their customers through voice technology.

"Boston Children's Hospital has long believed that voice technology has the potential to substantially improve the healthcare experience for both consumers and clinicians. We began this journey with one of the first Amazon Alexa skills from a hospital four years ago and are thrilled to participate in the initial launch of Amazon Alexa's HIPAA-eligible service for developers," said John Brownstein, chief innovation officer, Boston Children's Hospital, in a statement.

"With our new Express Scripts skill, we are trying to make it easier for people to make better-informed health care decisions. In particular, we believe voice technology, like Alexa, can make it easy for people to stay on the right path by tracking the status of their mail-order prescription, helping us further solve the costly and unhealthy problem of medication non-adherence," said Mark Bini, vice president of Innovation and Member Experience, Express Scripts.

Amazon launched a site for its new healthcare skills, which offers a sign-up form for those who want to get "updates." The form, however, also includes a place to describe the healthcare skill use cases you have in mind - meaning Amazon is using this to vet the next round of developers to invite to the program.

Tax cuts new financial year cut-off



Australia's tax agency says it can retrospectively deliver tax cuts if the coalition's proposal doesn't pass through parliament before the end of the financial year.

But it remains to be seen if the tax cuts will pass parliament, with key crossbench senators still to pledge their support for the plan.

Government senator Zed Seselja is urging Labor to support the changes in order to give them a seamless course through parliament, avoiding the need for the crossbench votes.

Shadow treasurer Chris Bowen says Prime Minister Scott Morrison is already breaking election promises, after pledging Australians tax relief this financial year.

"If the Australian people have to wait another year for the tax cuts, I think it's an indictment on his government and the character of the prime minister," he told reporters in Sydney on Tuesday.

Greens leader Richard Di Natale says the minor party won't support the income tax cuts.

The party held onto all of its six Senate seats up for re-election, taking the Green's total to nine.

"We had millions of Australians voting for parties like the Greens in the Senate to hold this government to account, and we'll do that," he told ABC radio.

"We're not going to support tax cuts to people on half a million dollars … if any support is going to be given it needs to be targeted at people on low incomes."

The Australian Tax Office says it can retrospectively amend tax assessments to provide cuts if the laws pass after June.

The agency could also make administrative changes to provide tax cuts.

"If the Labor party agrees to support the coalition tax cuts as announced, then we would be able to update the tax withholding schedules, to allow the tax cuts to be reflected in people's take home pay," the ATO says on its website.

Treasurer Josh Frydenberg will meet with Treasury officials and the Australian Securities and Investments Commission in Canberra on Tuesday, before heading to Sydney to catch up with Mr Morrison.

He's expected to meet with Reserve Bank of Australia Governor Philip Lowe and the Australian Prudential Regulation Authority on Wednesday.

The meetings come as Dr Lowe prepares to deliver a major speech on the outlook for the Australian economy and interest rates in Brisbane on Tuesday.

A Labor Government on Tax & Super



Tax on investment property

In general, taxpayers are able to deduct from their assessable income any expenses they incur generating or producing that income. An investment is negatively geared when the cost of owning the asset is more than the return. Negative gearing is not limited to property but can apply to other assets such as shares. In 2016-17, Australians claimed $47.5 billion in rental deductions against gross rental income of around $44.1 billion.

 

A number of capital gains tax (CGT) exemptions potentially apply to investment property. For Australian resident individuals, a 50% CGT discount applies to net capital gains made on investments held for longer than 12 months.

 

In addition, a taxpayer's main residence is exempt from CGT. As part of this exemption, a taxpayer can be absent from their main residence for up to 6 years and still claim the property as their main residence (assuming they do not treat any other property as their main residence). So, the property can be used as an investment property for 6 years but then sold as the taxpayer's main residence.

 

Labor's plan seeks to:

·       Limit negative gearing to new housing from 1 January 2020. All investments made prior to this date will not be affected by the changes and will be fully grandfathered. The ALP states that the grandfathering element of the policy applies to property and assets purchased prior to the start date of the policy. "This means, for example, that if you own a property prior to 1 January 2020, you are able to negatively gear it after that date. The changes to the CGT discount will not apply to superannuation funds or to the 50 per cent active asset reduction concession that applies to small businesses."

·       Halve the capital gains tax discount for all assets purchased after 1 January 2020. This will reduce the CGT discount for assets held longer than 12 months from 50% to 25%. Once again, all investments made prior to the 1 January 2020 will be fully grandfathered.

 

There is no policy statement from the ALP on the main residence exemption.  The Morrison Government had introduced legislation to remove access to the main residence CGT exemption for non-resident taxpayers, but this Bill stalled in the Senate. Chris Bowen told the Australian Financial Review that it will be up to the ALP to work through outstanding tax measures and "iron out any unintended consequences" including the impact on expats and retrospectivity.  

 

Dividend imputation and the impact on self-funded retirees

One of the more controversial measures announced by the ALP is the reforms to the dividend imputation credit system to remove refundable franking credits from shares. The measure, as announced, would apply to individuals and superannuation funds, and exclude Australian Government pension and allowance recipients, and tax-exempt bodies such as charities and universities. SMSFs with at least one pensioner or allowance recipient before 28 March 2018 will also be exempt from the changes. The policy is intended to apply from 1 July 2019.

 

How does the system currently work?

A dividend is a shareholder's share of a company's earnings (profits). When a dividend is paid from an Australian company's after-tax profits, these are known as franked dividends and include a franking credit (imputation credit), which represents the amount of tax already paid by the company on the underlying profits that are being paid out in the form of a dividend.

 

An Australian resident shareholder pays tax on dividends they receive (as dividends are treated as income). If the dividend received is a franked dividend, the shareholder includes the franking credits in their income (i.e., a gross-up occurs) but they can then use the franking credit attached to the dividend to reduce their tax liability. If the credit exceeds their tax liability for the year then they receive a cash refund for the excess amount.

 

For example, an SMSF owns shares in a company. The company pays the SMSF a fully franked dividend of $7,000. The dividend statement says there is a franking credit of $3,000. The $3,000 represents the tax the company has already paid on its profits. This means the profit, before company tax was subtracted, would have been $10,000 ($7,000 + $3,000). The SMSF must declare $10,000 worth of income, and will receive the $3,000 as an offset.

 

The dividend imputation system was introduced in 1987 by the Hawke/Keating Government to remove the investment bias against shares which taxed interest income once but dividend income twice (once at the company level on profits and the second time at the taxpayer level on income). In 2001, the Howard Government amended the rules to enable franking credits to be paid as a cash refund where the taxpayer paid less tax than the company tax rate. In the absence of refundability, the taxpayer pays tax up to the company tax rate and any surplus franking credit is wasted.

 

The sensitivity of the issue

The sensitivity of this issue is how the dividend imputation system interacts with the way superannuation is taxed. Currently, income an SMSF earns from assets held to support retirement phase income streams (i.e., a pension), such as dividends from shares, is tax-free. That is, a self-funded retiree in some circumstances pays no tax on the income they earn from dividends. If they pay no tax, then any franking credits are paid as a cash refund. 

 

If the ALP policy comes to fruition, these self-funded retirees lose this cash payment unless they are also Australian Government pension and allowance recipients. The policy effectively unwinds the Howard reforms and returns the imputation system to its original Hawke/Keating design.

 

Who will be impacted by the change?

Based on information from Treasury, 85% of the value of franking credit refunds go to individuals with a taxable income below $87,000. That is, 97% of taxpayers receiving refunds have a taxable income below $87,000. And, more than half of those receiving a franking credit refund have a taxable income below the tax-free threshold of $18,200. Around 40% of SMSFs receive a franking credit refund.

 

Around 1.1 million individuals received a franking credit refund in 2014-15 with more than half of these over the age of 65. And, more than two thirds of refunds to SMSFs are to those whose fund balance per member is greater than $1 million. However, this figure is likely to be diminished by the 1 July 2017 reforms that imposed a $1.6m cap on retirement phase superannuation accounts and tax earnings on accumulation accounts.

 

The Parliamentary Budget Office has also outlined what behavioural changes they expect to see in the market as a result of making franking credits non-refundable. These include:

 

·       Individuals - shifting from shares to alternative investment arrangements (including to investments within superannuation), and couples shifting the ownership of shares from the lower income earner to the higher income earner such that the higher income earner can utilise the franking credits as a non-refundable tax offset.

·       Superannuation funds - rolling assets from a fund with negative net tax to a fund with positive net tax, changing funds' asset portfolio allocations, or changing the membership structure of the fund, in order to maximise the utilisation of franking credits.

·       Companies - changing the amount of dividends distributed (and profits withheld) or the level of dividend franking due to the decrease in the value of franking credits for some shareholders.

 

The most significant behavioural change is expected to be from SMSF trustees: "The assumed behavioural response for SMSFs in 2019-20 is equivalent to these funds, in aggregate, moving around a quarter of the value of their listed Australian shares into APRA-regulated funds that are in a net tax-paying position."

 

The alternative, of course, is for SMSFs to change their composition of Australian shares to reduce their holding. The Parliamentary Budget Office also notes that one potential outcome is that SMSFs will increase the number of taxpaying members. "For instance, a couple with an SMSF in the pension phase could invite two additional working-aged children into their fund, allowing them to use their excess franking credits to offset the contributions and earnings tax payable on the assets owned by their children."

 

More information

·       ALP - Ending cash refunds for excess imputation

·       Treasury – FOI 2292 Refundability of franking credits

 

Minimum 30% tax on discretionary trust distributions

There are around more than 690,500 discretionary trusts, also known as family trusts, in Australia. Discretionary trusts are popular as the trustee has the discretion on how to pay the income or capital of the trust to the beneficiaries – beneficiaries do not have an interest in the trust. Income can be apportioned by the trust to the beneficiaries on a discretionary basis, for example, to beneficiaries on a lower income tax bracket. As a result, discretionary trusts are often used to protect assets within family groups, manage succession, and to distribute income tax effectively within that group. 

 

From 1 July 1979, laws were introduced to ensure that distributions to minors were taxed at the top marginal tax rate to prevent trusts distributing funds to children at minimum tax rates.

 

The proposed reforms

The ALP reforms address the ability for distributions to be channelled to beneficiaries in low income tax brackets. Instead, a new standard minimum rate of tax for discretionary trust distributions to mature beneficiaries (aged over 18) of 30% will apply.

  



Tax cuts, incentives for business investment and spending on health and welfare: tonight's Federal Budget was crafted with Australia's May election in mind. Read on for CPA Australia's verdict on Budget 2019.

A stronger economy and a secure future were the promise of Federal Treasurer Josh Frydenberg in announcing a A$7.1 billion surplus, tax cuts and extra funding for infrastructure and services to regional Australia in the 2019/20 budget.

Frydenberg stressed several times that expenditure would be achieved without increasing taxes, while announcing lower taxes for 10 million people and three million small businesses.

The Treasurer delivered the first budget surplus in 12 years and announced investments in education that he said would invest in the jobs of tomorrow.

With a Federal election looming in May, pollsters are tipping that the government will be unseated by Bill Shorten's Australian Labor Party, in which case many budget announcements will not be implemented.

Labor has said, however, that it will support one-off cash payments and tax cuts for low and middle-income earners but, if elected, will deliver its own major economic statement in the second half of the year.

CPA Australia head of external affairs Paul Drum FCPA said the budget made a strong election pitch but "their biggest test is whether they can get re-elected in the coming months to enable them to deliver on these budget commitments."

The budget assumes real growth in gross domestic product (GDP) of 2.75 per cent in the 2019/20 and 2020/21, unemployment at 5 per cent over the same period and the consumer price index (inflation) at 2.25 per cent in 2019/20.

CPA Australia head of external affairs Paul Drum FCPA said the budget made a strong election pitch but "their biggest test is whether they can get re-elected in the coming months to enable them to deliver on these budget commitments."

The budget assumes real growth in gross domestic product (GDP) of 2.75 per cent in the 2019/20 and 2020/21, unemployment at 5 per cent over the same period and the consumer price index (inflation) at 2.25 per cent in 2019/20.

WINNERS

Wage and salary earners 

The Treasurer announced A$158 billion in personal income tax cuts through more than doubling the low and middle-income tax offset from 2018/19.  This will benefit more than 10 million people earning up to A$126,000 a year.

From July 2024, Frydenberg says the government will cut the 32.5 per cent marginal tax rate to 30 per cent, applying to all taxpayers earning between A$45,000 and A$200,000.  He says the top 5 per cent of taxpayers will pay one third of all income tax collected.

Business

The instant asset write-off will be extended to June 2020 and increased from A$25,000 to A$30,000. The write-off allows small business with a turnover of less than A$10 million to claim an immediate deduction for a purchase below that amount but will be expanded to businesses with turnover of up to A$50 million, or another 22,000 businesses. 

Businesses will also be able to claim the deduction every time they make a purchase under the cap.

The write-off remains an annual deduction. CPA Australia has called for the write-off to be made permanent rather than extended budget to budget, to give business owners greater certainty when planning.

The government will defer to July 2020 the start date of the proposed amendment to Division 7A of the Tax Act, to allow further consultation. 

CPA Australia has argued  the Treasury-proposed changes to how business owners can make loans from private companies will discourage investment. 

Building and transport industries

The government announced increased investment in infrastructure spending, to improve rail links and address road black spots, with the Treasurer naming several projects in major state capital cities and also rural and regional Australia.

The budget includes increasing the Urban Congestion Fund to A$4 billion from A $1 billion, to cut travel times in Australia's rapidly-growing cities.

A A$500 million Commuter Car Park Fund would improve access to public transport hubs.

He promised A$2.2 billion for roads, A$1 billion to improve freight routes and access to ports and A$100 million for regional airports.

Education

A A$525 million skills package would create 80,000 new apprenticeships in industries with skills shortages and double to A$8,000 the incentive payments to employers per apprenticeship
placement. 

There were also announcements to create new training hubs, give new apprentices a A$2,000 incentive payment, and invest in science, technology and research.

Rural areas

The budget papers commit to major spending in regional and rural areas to expand water infrastructure, provide drought relief and upgrade regional airports. 

Older Australians 

Frydenberg announced A$725 million for aged care, with 10,000 new home care packages and capital works focused on regional Australia.  Single pensioners will get a A$75 one-off cash payment for their energy bills, while couple pensioners will get A$125. The ALP is expected to support the measure.

Health sector

Australians suffering from cancer, heart disease, epilepsy and who live in rural areas are likely to benefit from several major investments in assistance programs and medication. The budget also contains A$461 million for youth mental health and suicide prevention.

Superannuation industry and older Australians

People approaching retirement will be able to boost their superannuation balances, with those aged 65 and 66 years able to make voluntary contributions without satisfying the work test, from July 1 2020. Currently, people aged 65 and older must work a minimum 40 hours over a 30-day period.  Frydenberg said the measure will align the work test with the eligibility age for the Age Pension, due to rise to 67 years from July 1, 2023. About 55,000 people will benefit from the reform.

People aged 65 and 66 will also be able to access the "bring forward arrangements" to make three years' worth of non-concessional contributions (capped at A$100,000) to their super in a single year. This currently stops at 65 years.  The age limit for spouse contributions will be increased from 69 years to 74 years.

CPA Australia's Paul Drum said that a fairer and more flexible solution would be to introduce lifetime caps and "revisit" abolishing the work test.

LOSERS

Business

There were few measures for corporate Australia, although many of the largest companies would benefit from spending in infrastructure, either as providers or users of improved services.

Regulatory burden on business

Business will pay more fees to regulators, through the industry funding model for the Australian Securities and Investments Commission (ASIC) and higher levies to the Australian Prudential Regulation Authority (APRA).  As part of a response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, there will be extra funding to ASIC of A$38.5 million in 2019/20 and A$118 million in 2020/21, possibly funded by extra fees to business.  APRA will get A$16.9 million and A$19 million over the same period. 

The budget allocates the Australian Taxation Office an extra A$1 billion over four years to expand its Tax Avoidance Taskforce.  Frydenberg announced the Australian Financial Complaints Authority will receive additional funding to establish a historical redress scheme for financial complaints dating back to 1 January 2008.

CPA Australia welcomed additional funding for APRA, ASIC and the Federal Court given the findings of the royal commission.

"But unfortunately, the significant cost increases that the ASIC user pays funding model places on our members and others delivering services regulated by ASIC have not been addressed in this budget," said Paul Drum.  "This government-imposed cost pressure will not only negatively impact smaller accounting practices and others providing financial services, but also consumers in the future."

CPA Australia previously recommended the government not pursue its full cost recovery model for funding ASIC's regulatory activities, and that it reinstate funding previously cut from the ASIC budget.  "The government can expect to hear more from us on this," Drum added.

Savers

The government has not introduced measures that would encourage Australians to save outside the superannuation regime.

Sport Integrity  

The Government will establish a new body, Sport Integrity Australia, to carry out anti-doping and integrity functions, and a National Sports Tribunal to hear and resolve rule violations. The Government has also signed up to the Council of Europe Convention on the Manipulation of Sports Competitions.



A standard deduction for work-related expenses should be examined with a view to eradicating the need for millions of Australians to lodge tax returns, the nation's tax watchdog has recommended. 

The Inspector-General of Taxation's (IGT) review into the Future of the Tax Profession said such a move would make it easier for millions of Australians who claim billions of dollars in work-related expense deductions each year.

ATO Taxation Statistics show that in 2016-17 there were more than 8.84 million people claiming $21.98 billion in work-related expense deductions.

The IGT has also raised concerns that the Australian Taxation Office's current online tools aimed at nudging taxpayers to amend their returns if they are out of sync with their nearest neighbour, could be possibly resulting in people under-claiming on their tax returns.

Why a standard deduction has not been introduced

Both major parties have considered the idea of a standard tax deduction in the past, but it has never been legislated due to the high cost.

Following the 2010 Henry tax review recommendation that it be considered, former treasurer Wayne Swan announced that the Rudd Government would grant a standard tax deduction and this would end in a bigger tax return for 6.4 million Australians. But the proposed legislation was never introduced into Parliament.

Then, when Scott Morrison was Treasurer, he asked a parliamentary inquiry to look into the possibility of introducing a standard deduction for all taxpayers or doing away with certain deductions in favour of lower personal tax rates.

But the 2017 Standing Committee on Economics report of its Inquiry into Tax Deductibility found the cost of such a scheme would be significant.

It found that if a standard deduction of $500 was granted, there would be an additional cost of $2.3 billion, and if the standard deduction was increased to $1,000, then the additional cost would be $4.6 billion.

Acting inspector-general of taxation Andrew McLoughlin said, while there was presently little appetite for change, a change should still be considered as there could be compliance cost savings for individuals and reduced administrative costs for the ATO. He called for a cost-benefit analysis to progress the debate.

In his response to the IGT review, Assistant Treasurer Stuart Robert said a long-standing principle of the Australian tax system was to tax an individual on their income "after accounting for legitimate costs incurred in earning that income".

But he but noted the ATO had taken steps to make compliance easier for individuals with work-related expenses, such the myDeductions app.

MYOB New STP products


New STP products

 

The new STP payroll products have just rolled out for MYOB and this option may suit many clients with 4 employees or less.

 

By choosing to go on an STP compliant software you will not have to do your 2019 PAYG summaries the old way.  This STP software includes the ability to send the ATO Year To Date information and will save you from being caught in the May or June rush.  This period if often really busy and due to the new systems required by the ATO various issues or delays may occur.

 

If you would like to take up any of the new options (or the $15CDF Offer)  Clarke McEwan can liaise with MYOB to setup the file for you.

 

Interested?   Read on for details.

 

+ MYOB launched 2 new payroll products in Australia on 1st April 2019

+ Essentials Payroll: A stand-alone payroll only $10/month (limited to 4 employees)

+ Essentials Connected Ledger plus Payroll: $30/month (limited to 4 employees)

 

$10 Payroll only Product features:

·         Process payroll for employees

·         Keep and share timesheets

·         Manage PAYG

·         Flexible wage categories

·         Automatically calculate leave

·         Capture expenses and deductions

·         Automatically calculate and pay super to your employees

·         Automatically calculate payroll tax and receive automatic updates for payroll tax tables every financial year

·         Report Single Touch Payroll directly to the ATO with 1 click

·         Complete EOY payroll tasks

·         Print or email payslips

·         Employees can access payslips and timesheets online, or on mobile

 

Reports include:

·         Journals

·         General Ledger Details

·         Past Pay Runs

·         Payroll Summary & Details

·         PAYG Payment Summaries

·         Pay Items Report

 

In Tray features include:

·         Save documents against banking and spend money transactions

·         Clients can email documents directly to the software

·         Capture receipts and automatically send to the In Tray via the app (coming soon)

 

Extra features from Connected Ledger + Payroll product ($30/m)

·         Cashbook Features

·         Save time and ensure accurate data by automatically importing bank transactions from your client's bank

·         View, add, edit and delete accounts from the chart of accounts

·         Client Dashboard - Drill down into your client's file directly from the dashboard & Greater coding efficiencies and improved workflows

·         Additional Reports

·   Budget Management

·   Profit and Loss

·   Balance Sheet

·   GST reports

·   Banking Reconciliation and Transactions

 

Looming tax bills for expatriates



Australians who work or retire abroad face higher – and possibly retrospective – tax bills if they sell their Australian homes. Accountants may need to warn clients.

Is it still worth taking a foreign posting? Australian employers wanting to send staffers abroad are already getting push-back following proposed measures to retrospectively tax expatriates who sell their home in Australia.

A measure intended to improve local housing affordability runs the risk of penalising Australians taking postings abroad and migrants who return to their countries of origin, by stripping from them the main residence exemption (MRE) from capital gains tax (CGT).

A bill before the Senate seeks to retrospectively remove the main residence exemption from CGT for non-residents from the time the property became the taxpayer's main residence, instead of from the time they became a non-resident.

Expatriates caught in housing affordability net

The Senate is still considering Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No.2) Bill 2018.

"The government's position is that if you're from overseas and you buy property in Australia, but you remain a non-resident for tax purposes, you won't get the CGT MRE," says Robyn Jacobson FCPA, senior tax trainer at TaxBanter. "They're trying to make it less attractive for foreigners to buy houses here, trying to make more houses available to Australians, and trying to improve housing affordability.

"I get that. But as the proposed legislation stands, it also applies to Australian expatriates who have taken a job posting overseas and are non-residents for tax purposes, as well as Australian citizens who have chosen to retire overseas," says Jacobson.

If someone from either of these groups sells the dwelling that was their home for many years, and they happen to be a non-resident at the time of the CGT event – that is, when they sign a contract to sell the property – they will not be entitled to the MRE for the entire period they owned the home.

Retrospective laws on expat homes

Moreover, the loss of the MRE for these groups is retrospective, says Jacobson.

"When you change tax policy, it should start from the date it is announced or a future date. But as this proposed amendment currently stands, the loss of the MRE potentially goes all the way back to the date from which CGT has applied, which is 20 September 1985," she says.

Jacobsen believes the retrospectivity is unfair.

People were not to know when they bought their home that when they sold it, as a non-resident, they would have a taxable capital gain going back to when they bought it.

The proposed measures do not allow for any pro-rating of the period during which the person was a tax resident and lived in the home.

They cannot use the market value of the home on the date they became a non-resident, and confine the taxable capital gain to that which arose since that date, nor can they apply the six-year absence rule.

Tax laws currently allow people to maintain the CGT exemption on their main residence if they have a temporary absence of up to six years, as long as they are not claiming another property as their main residence at the same time."

Thousands of expats affected by tax on homes

Inadvertently or not, the Bill affects "hundreds of thousands of Australians living and working offshore," says Jacinta Reddan, chief executive of the Australian Chamber of Commerce in Hong Kong and Macau.

"This simply has not been thought through. Firstly, we're living in an increasingly globalised world, and the expatriate diaspora is both an enormous benefit to the Australian economy, because people return bringing with them increased skills, and to the nation's engagement with the world."

Secondly, she says, being an expatriate does not mean immunity from unexpected life events such as divorce or loss of a job, illness or death.

"These can hit us all regardless of where we live, and we often don't have a choice about when to sell our homes. Making all of the gains from a property sale taxable just because the person is a non-resident at the time of disposal is penalising Australians for living and working offshore, which is manifestly unfair," says Reddan.

The Chamber is seeing a backlash from corporate members who report resistance from staff offered critical offshore postings.

New tax rules hit estate administration

Ian Raspin FCPA, director at estate taxation advice specialist BNR Partners, says the amendment "opens up Pandora's box" in terms of estate administration.

"It certainly can catch a property that's been left in a will to adult children, if they inherit it from a non-tax resident. It's bad legislation, not only because it's retrospective, but because it becomes highly subjective as to whether a person is a tax resident or not. There is a lot of case law in Australia whereby it's just not clear," he says.

While various groups continue to lobby the government against the Bill, Jacobson says there are two strategies available to people who believe they might be affected by the new measures.

"First, the rules start for property sales after 9 May 2017. But a transitional rule says that if you held the property at that date and you sell it before 1 July 2019 – in other words, sell it by 30 June next year – the new rules don't apply to you. You would have had to have held the property in May last year, and you have to enter into a contract to sell it, by 30 June."

Expat homes for sale

Jacobson expects such selling to intensify over 2018 and 2019.

"It might not be the best time to sell the property but if they're going to save millions of dollars in tax, in some cases, they may want to. These will be people who are overseas and have no intention of coming back."

Another strategy may suit non-residents who don't want to sell before 30 June 2019. "They would need to genuinely re-establish their tax residency back in Australia, before they sell," she says.

This is where Raspin's concerns on subjectivity come into play. "We're concerned that this could potentially bring Part IVA (of the Income Tax Assessment Act) into consideration, where it is at least open to the Tax Commissioner to say that a person, in trying to re-establish tax residency in Australia, only moved back here to try to avoid income tax," he says."

If you are presently working abroad and you think you may need your current situation reviewed, get in touch with us.

#mainresidenceexemption #ex-pats #overseasposting #retireoverseas #internationalcitizen #capitalgains #CGTexemption #MRE #workoverseas #aussiesoverseas #australianexpats

Employer Superannuation Guarantee Amnesty

 










Back in May 2018, the Government announced an amnesty for employers who had fallen behind with their superannuation    guarantee (SG) obligations. Under the amnesty, employers could catch up or "self-correct" outstanding SG payments for any period from 1 July 1992 up to 31 March 2018. The intent was to reduce the estimated $2.85 billion owed by employers in late or missing SG payments.

Running from 24 May 2018 for 12 months, the amnesty was to provide relief from some of the punitive penalties that normally apply to late SG payments. To take advantage of the amnesty, employers were to make voluntary disclosures to the ATO about outstanding payments.  

But, the legislation enabling the amnesty has stalled in the Senate. Up until recently, the ATO was encouraging employers to make voluntary disclosures with the view that when the legislation passed Parliament, the amnesty would be applied. However, any employer who made a voluntary disclosure to the ATO will not benefit from the reduced punitive penalties unless the legislation passes, which at this stage, is highly unlikely in its current form.

Further, the Tax Commissioner has no discretion under the law to reduce the penalties applied to employers in this scenario, so if the legislation doesn't pass, then there isn't much the ATO can do to soften the blow.  In September 2018, an ATO spokesperson confirmed that until the legislation is enacted, the tax office will be required to apply the existing law.

"The administration component of the SG charge remains legally payable and deductions cannot be claimed. However, the ATO will not require payment of the administration component until the outcome of the legislation is known," an ATO spokesperson told Accountants Daily.

"If the proposed law does not come into effect, any contributions and payments made under the Amnesty will not be tax-deductible, and any self-assessments that anticipated the new law will need to be amended to include the administration component, and employers will be required to pay the administration component. Part 7 penalties will be imposed and may be remitted in accordance with our existing remission policies.

"You will not be able to receive a refund for payments you have made under the Amnesty if the law does not pass, as these amounts were always payable under the existing law."  However, a senior tax trainer at TaxBanter,  Robyn Jacobson believes disclosure will ultimately lead to better outcomes for employers.

"The employer will always be better off disclosing than not disclosing: they will either get a better deal on penalties if the law doesn't pass (although the amount won't be deductible, but that is the current law anyway), or they will be protected under the Amnesty if it does pass," said Ms Jacobson. 

"In this environment, there is an increased chance that the employee will become aware of their employer's non-compliance and approach the ATO directly. Importantly, if an employee does a 'dob-in', a subsequent ATO review or audit of the employer will render the employer ineligible for the Amnesty.

"Ultimately, the employer needs to decide whether to disclose now, and they need to understand the implications of their decision if they don't." **

Editors note: If the SGA affects you we urge you to contact your tax practitioner for advice about your employees and contractors.

#clarkemcewan #superamnesty #employersuper #employeesuper #SGC

**content courtesy of accountantsdaily**