Campbelltown

Toughening the multinational anti-avoidance law

admin — Mon, 17 Jun 2019 12:22:28 +0000

Toughening the multinational anti-avoidance law

Tax avoidance by multinational companies are not a new issue as professionals such as accountants are discussing about this issue for a long time. At last, the Australian Government has done something to stop this which definitely will help the small businesses to exist in this competitive market.

For Australian economy, small businesses are always an important part, as they are contributing around 34% of GDP in whole Australian economy. The Australian Bureau of Statistics identified small businesses who are employing fewer than 20 employees. However, if the Australian Government can assist small businesses, it could be increase up to 50% of total GDP. Obviously, toughening the multinational tax avoidance law is one important step towards helping the small businesses to encourage them to be more involved in Australian economy

Most of our clients are small to medium size businesses so we know how hard to operate small businesses to comply with all regulations and paying taxes. Larger corporations are already in an advantaged situation due to economic scale. On top of this, not paying tax help them to cut their services & product’s prices to eliminate small and medium size competitors.

Australian Taxation Office (ATO) is claiming they already have received $1.5 billion from large multinational companies since June 2016, after the new law implemented. So, we can assume the amount of tax has been lost as a result of tax avoidance by multinational companies could be used for strengthening the Australian Economy.

Prior to this law tax avoidance structure, there was thin capitalisation (Intra group debt) regime in where excessive amount of interest deduction depends on debt to asset ratio. In reality that was not working as more than 30% of large multinational companies did not pay a cent where’s they made millions of dollar from Australia.

From 1st of July 2017, The Australian Government has implemented 40 percent of tax rate (higher than standard company tax rate of 30%) on multinational companies who used to use overseas tax havens to avoid tax in Australia which is known as Google tax. Australia is the second country after UK who has implemented this tax on multinational companies.

Nevertheless, introduction of multinational anti avoidance tax law much appreciated and will help to boost Australian Economy as income from resource sectors has been reduced lately dramatically.

Changes in plant and equipment depreciation deduction within the property

admin — Mon, 17 Jun 2019 12:22:05 +0000

Changes in plant and equipment depreciation deduction within the property

ATO allows all property investors to claim deductions for the wear and tear occurs plant and equipment within the property which has been proposed in 2017-18 Financial year budget.

Under the proposed changes investors will able to claim deductions for new plant and equipment if they install in the property but when its handover to the new owner will not be allowed to claim any deductions for plant and equipment which installed by the previous owner.

This changes will hugely impact on property investors and that can discourage some of the investors to invest in the property market. These changes are for investors to stop over claim deduction for property and plant.

Investors, who purchase an established property after 09th May 2017 would be affected by this change. But there are no changes in relation to claiming capital work deductions also known as building write off that includes any capital work carried out in the property.

Now the question might arise what does it mean by plant and equipment. Plant and equipment are easily removable or mechanical assets that installed within the property e.g air conditioners, smoke alarms, garbage bins, blinds and curtains and also hot water systems.

Above change will not affect following cases:

– Owners of brand new residential properties

– Residential property investors who exchanged contractors prior to the 09th May 2017

– If anyone operates a business in property investment (Just buying a one or two properties not considered as a business and for further details please look at www.ato.gov.au).

New properties and hugely renovated properties will not be affected by this change. If the investors purchase a property from a developer purchaser will get six months to claim a deduction as long as the developer did not claim the deduction.

One of the biggest change in property investment in more than 15 years, parliament passed the Treasury laws amendment ( Housing Tax Integrity ) bill 2017 as at 15th November 2017. Therefore, above changes is now a legislation

Single Touch Payroll (STP)

admin — Mon, 17 Jun 2019 12:16:41 +0000

Single Touch Payroll (STP)

Most of the business people by this time heard about STP/Single Touch Payroll. As a Tax Agent, we deal with most of the clients who’s employees less than 20. This magic number 20 is very important for STP as from 1^st July 2018 if any business employee number 20 or more STP reporting was mandatory. If employee less than 19 STP reporting starting from July 2019.

In plain words, single touch payroll is a new reporting system in where through STP enabled software employer will able to report each week how much they are paying to their employees, withholding tax and super each week. The good side of the reporting is that end of the financial year not requires separate payment summaries to be issued to the employees.

This STP government introduced through ATO for a few reasons such as:

Efficient wages, tax and super on time reporting.
This will stop or at least reduce the cash economy
It will ensure super and tax is paid to the ATO by the businesses on time.

Now 45,000 businesses are STP reporting to the ATO each week. There will be almost 730,000 business are going STP reporting to the ATO from 1st July 2019.

There are a lot of small businesses are not still ready for STP. Personally, I have advised many of our clients to be ready for this and few of our over 20 employees started STP reporting since July 2018. Unfortunately, many micro businesses are not still ready, or they are not well equipped to deal with this. Most of the micro businesses rely on their tax agents who report quarterly their wages through the BAS’s. Some of these business people come from overseas and English is not great or not technologically advanced. But no doubt they are good at what they are doing. Problem is that STP has to be through to the software which operation might not easy for many business owners. If they hire for a bookkeeper to do this or use their Accountant that could be costly for them.

ATO is tirelessly working with many software companies to reduce software cost so that suits micro employees. At the moment ATO recommended few STP enabled software are:

AccXite Pty Ltd
Australian Payroll Professionals Holdings Pty Ltd
Bass Off Pty Ltd
Cristabel Pty Ltd
Easy Payslip Pty Ltd
Employment Hero Pty Ltd
E-Payday Pty Ltd
Etax Accountants Pty Ltd
Free Accounting Pty Ltd
Globe BD
Govt Reports
Intuit Australia Pty Ltd
Lodgeit Pty Ltd
Ironbark Software
My accountant Technology Pty Ltd
MYOB Australia Pty Ltd
OB Secure Messaging
Our map of
Price Waterhouse Cooper
Reckon Australia Pty Ltd
Single Touch Pty Ltd
SRI Enterprise Software Pty Ltd
Total Forms (Catsoft)
Xero Australia Pty Ltd

Recent studies by Xero indicated that one in five businesses are still relying on very old methods such as a spreadsheet or paper-based system. But time is running out as Single Touch Payroll deadline is very nearer. ATO promised to reduce the software cost and expecting they could influence software companies to charge monthly in between $5-$10 for micro companies to process, maintain and report to the ATO through to the software.

I personally support STP and in my opinion, big change in the business reporting since GST introduction in Australia and this could lead to fairer Australia what ATO’s aim. In reality, there could be some hiccups initially but eventually, it will better for businesses, ATO, government, software companies and Accountants.

Self Managed Superannution Fund (SMSF)

admin — Mon, 17 Jun 2019 12:15:42 +0000

Self Managed Superannution Fund (SMSF)

If anyone expecting a comfortable life in retirement need to think about their super. Superannuation is the tax-effective way to save for the future. Your employer must pay a minimum of 9.50% of your gross pay towards your super and you have also the opportunity to contribute and also government make a contribution if you are alow-income earner.

By law, employees can choose their super fund where employer supposed to pay. Superannuation funds can be structured either accumulation fund or defined benefit funds. Nowadays over 90% of funds are accumulation funds. Accumulation funds are general superannuation funds in where employer contribute mostly and also employees can contribute themselves. Defined benefit funds are those in where final super payment based on a formula that takes into members final salary and number of years that a person works for a company or a government department.

There are five broad types of superannuation funds in Australia such as:

– Industry super funds

– Retail super funds

– Corporate/company super funds

– Public sector super funds and

– Small super funds

Small super funds include self-managed superannuation funds. Main difference between SMSF and other super funds members of an SMSF also the trustees of SMSF. Therefore, SMSF trustees/members invest/utilise the super fund and also responsible for complying with super and tax laws.

An SMSF must be operate solely for the providing benefits upon retirement to the members or their dependents. If someone set up SMSF for early access to the super fund, buying holiday home or expensive art to decorate the home is illegal.

There are number of rules for contributing towards to the SMSF. Before accepting any contribution trustees of SMSF must ensure contributions are within the cap of members. For accepting any contribution from the members trustees of SMSF must ensure following:

– Members already provided their TFN

– Employers contribution can be accepted any time. Employers contribution are called as mandated contribution in where employer contribute towards to the employees super under a law or industrial agreement.

– If someone aged over 75 non mandated superannuation contribution are not allowed. Non mandated contributions include: contributions made by the employer above their mandatory superannuation guarantee, personal super contribution, super co-contributions, eligible spouse contributions, contributions made by a third party such as insurer.

– Generally, SMSF cannot accept asset as contribution except for the following situations:

– listed shares and other securities

– business real property (land and buildings used wholly and exclusively in a business).

Acquiring assets from related parties e.g. members of the super funds are not allowed except the following cases:

Your fund can’t acquire an asset from a related party unless it is acquired at market value and is:

– a listed security (for example, shares, units or bonds listed on an approved stock exchange)

– Business real property

– An in-house asset provided the market value of your fund’s in-house assets does not exceed 5% of the total market value of your fund’s assets

– an asset specifically excluded from being an in-house asset.

Members contributions can be classified as concessional and non-concessional:

Concessional contribution: Concessional contribution can be called asbefore-tax contribution. This types of contributions are employer mandatory contribution, salary sacrifice and also contribution from a self-employed.Concessional contributions are taxed at 15%. From 2017-18 Financial year onward $25,000 maximum contribution concessional contribution each year allowed regardless of the age. End of 30.06.2017 if anyone had less than $500,000 will able to carry-forward any previously unused portion of the concessional cap and able to make extra deposits in later financial year.

Non-Concessional contribution: Non-concessional contributions are actuallyafter-tax contributions. From 1^st July 2017 annual cap of non-concessionalcontribution $100,000 with a bring forward rule. If you are under 64 years you can make the larger payment in any year e.g payment of $300,000 current financial year but not allowed to contribute next two financial year. Exceeding non-concessional contribution can be expensive as tax rate is 47%. Lifetime limit of non-concessional contribution is 1.6 Million.

To set up self-managed super consider appointing professionals. We have clients with SMSF and welcome any interested clients. We can assist any client to set up new SMSF or assist ongoing self-managed superannuation fund by preparing annual SMSF annual return and provide time to timeadvice.

For set up SMSF minimum two members requires and maximum four members requires. By set up, corporate trustee individual can set up self-managed superannuation fund.

Structure	Features
Individual trustees	– There must be two trustees. – One trustee must be a fund member. – If the fund member is an employee of the other trustee, the fund member and the other trustee must be relatives.
Corporate trustee	– The corporate trustee company can have one or two directors, but no more. – The fund member must be the sole director or one of the two directors. – If there are two directors and the fund member is an employee of the other director, the fund member and the other director must be relatives.

Penalties
Structure	Features
Individual trustees	– If super laws are breached, administrative penalties are levied on each trustee. – For example, for failing to prepare financial accounts and statements, each trustee is liable for a $2,100 penalty (10 penalty units). This would amount to $8,400 if there were four trustees. – The value of a penalty unit is $210.
Corporate trustee	– If super laws are breached, administrative penalties are levied on the corporate trustee. – For example, for failing to prepare financial accounts and statements, a corporate trustee would be liable for a $2,100 penalty (10 penalty units). – The value of a penalty unit is $210.

Many Australians think SMSF right for them but many cases that is not. According to the tax office (ATO), there are about 560,000 operational SMSF’s and total members of those SMS’s 1,050,000. All those super funds control around 572 billion dollars assets. SMSF’s are growing and 88 new SMSF were set up every weekday on average for past some months. To set up SMSF and operate for benefit of members you need to ask following three questions:

– Do you have enough knowledge about investment, investment strategy, investment diversification etc?

– Do you have enough time to do the above?

– Do you have enough money in the super fund so that it will able to cover operation cost e.g. auditor fees, accountant fees, ATO fees make profit out of the investment?

If the above question answers are yes, then you can consider for set up a self-managedsuper fund. You can set up four-member SMSF to minimise expenses and increase the fund size. I will recommend you contact with professional to do the setup SMSF for