ATO claws back $850m in unpaid SG in FY 17-18

Compliance activities undertaken by the ATO in the 2017-18 financial year saw the ATO raise around $850 million in unpaid super entitlements.

Compliance activities undertaken by the ATO in the 2017-18 financial year saw the ATO raise around $850 million in unpaid super entitlements.

ATO deputy commissioner, superannuation, James O’Halloran said that during the 2017-18 financial year, the ATO received around 31,000 employee notifications and contacted approximately 24,000 employers.

“We also completed 19,000 employee-generated cases. Additionally, we initiated a further 13,000 SG audits and reviews based on our risk modelling. Total liabilities raised by this casework were approximately $850 million,” said Mr O’Halloran.

Miranda Brownlee
25 October 2018
smsfadviser.com

Appetite for property in SMSFs shows signs of life despite tough market

Interest in property investment from younger SMSF trustees continue to hold steady despite tighter policy controls around SMSF lending and some banks exiting the space altogether, says one mid-tier firm.

Pitcher Partners managing director Michael Minter said while the SMSF lending space has faced much tighter lending controls this year, particularly following the royal commission, the idea of using super to buy property within a super fund remains appealing to SMSFs from generation X and Y.

This comes despite the latest data from APRA showing that investor home loan approvals dropped by 12.4 per cent over the quarter, representing 31.1 per cent of new home loan approvals – a total of $117.5 billion.

Interest-only loans now represent 16.2 per cent of new home loan approvals, a 54.9 per cent pe in the last quarter.

While there are important risks to consider, Mr Minter said younger SMSF trustees are still attracted to holding property in super for some of the benefits associated with it, including a lower tax rate on SMSF income, a lower capital gain tax rate and tax deductions such as insurance premiums.

Mr Minter said there are two main types of generation X and Y investors.

“The first is the business owner who currently paid rent, but would prefer to buy a property, and have the rent paid into their super fund. The second wants to build their super balance through strategic property investments by borrowing and gearing,” he said.

He warned that there are important considerations that need to be made before undertaking property investments in super or an SMSF, however.

Practitioners, for example, he said, need to review their client’s financial goals current financial situation and tax obligations.

“Compare their current super fund against running an SMSF. Investment carries risk and the client must decide what level of risk you are comfortable with,” he said.

He also noted that $200,000 is the preferable amount to start an SMSF.

“Before making any property investment, the client should establish a set of investment criteria that they are comfortable with, including whether it’s residential or commercial, local or elsewhere or big or a mix of smaller properties. But whichever approach you adopt, research the options and the market thoroughly,” he said.

SMSF Reporter
23 October 2018
accountantsdaily.com.au

Superannuation gender gap narrowing, research shows

Over the past decade, there has been improvement in the number of women holding superannuation accounts and the size of their superannuation balances compared with that of men, according to a research house.

Research from Roy Morgan indicates that the proportion of women with superannuation has improved with 64.7 per cent of women now holding assets in super, compared to 57.4 per cent of women in 2008.

The proportion of men holding super has also improved but not as significantly, rising from 66.5 per cent in 2008 up to 69 per cent for this year.

The results were based on the Roy Morgan Single Source survey, which has conducted personal interviews with over 500,000 Australians over the past decade.

The survey also indicates that the average balance for women has also grown by 87 per cent, jumping from $68,000 in 2008 up to $127,000 this year.

The average balance for men grew 53 per cent from $115,000 up to $176,000.

According to Roy Morgan, the gap in superannuation balances between women and men has been closing across all age groups in the past decade.

The research shows that the biggest gain was made by the 50 to 59 female group, which improved by 15.2 percentage points, jumping from only 54.5 per cent of the male average in 2008 up to 69.7 per cent in 2018.

The other groups to show big improvements were those aged 35 to 49 with a 14.2 percentage point increase to 75.4 per cent, and the 60+ segment, up 9.8 percentage points to 72.1 per cent.

The female age that is closest to the male average is the 14 to 34 segment at 85.6 per cent, which has increased marginally from 83.9 per cent back in 2008.

Roy Morgan industry communications director Roy Morgan said that with the current gap indicating that the average superannuation balance for women represents just 72.2 per cent of the average male balance, there is still a long way to go, but is still a significant improvement on the 59.1 per cent recorded in 2008.

“In addition to problems associated with lower average incomes, females are more likely to have interrupted employment. However, despite these negative factors operating against them, women have made gains in closing the superannuation gap to men,” said Mr Morgan.

“Generally, both sexes are still unlikely to fund an adequate retirement entirely from superannuation unless contribution levels are increased and continue higher for several decades.”

Miranda Brownlee
15 October 2018
smsfadviser.com

Fringe Benefits Tax (FBT): employees’ private use of vehicles

The Australian Taxation Office has issued guidance for employers on determining an employee’s private use of a vehicle.

Draft Practical Compliance Guideline PCG 2017/D14 should provide more certainty and transparency about the circumstances where the ATO won’t apply compliance resources to investigating whether private vehicle use meets the car-related FBT exemptions.

Eligible employers who rely on this guideline won’t need to keep records to prove that an employee’s private use of a vehicle is minor, infrequent and irregular.

The eligibility conditions include the provision of an eligible vehicle, with no non-business accessories, to an employee to for work duties that is not part of salary-sacrifice arrangement, costs less than luxury car tax threshold and all steps have been be been taken to limit private use.

The vehicle must travel from home to work with diversion allowance of less than 2 kilometres, does not have a single private trip of more than 200 kilometres and total private trips of no more than 750 kilometres during FBT year.

One complying illustration is an employee who stops at a newsagent to pick up a paper (for personal use) on the way to work, but the diversion adds less than 2 kilometres to the total journey.

The same employee who travels from work to football practice which is more than 2 kilometres diversion from usual work to home travel will not be able to use this ruling.

Given the complexities this may generate, we suggest you talk to us about whether the new guidance applies to your FBT circumstances.

AcctWeb

ATO to contact clients over bank details

The Tax Office will be sending SMS text messages to clients who provided incorrect bank account details in their tax return over the next few weeks.

From 5 to 23 November 2018, the ATO will send SMS text messages to your clients if incorrect bank account details were included in their tax return and they are entitled to a refund.

Tax agents will receive an email list of clients who have been contacted for their information, with no action needed to be taken.

The text message will contain information telling clients that their refund cannot be processed due to incorrect bank account details and that they are required to phone the ATO to correct the details.

Clients who contact the Tax Office and provide correct details within seven days will be issued their refund electronically. On the flipside, clients who do not will be sent a cheque.

The ATO notice comes after increasing reports of new tax scams, including a recent scam involving fraudsters impersonating registered tax agents.

The ATO has asked that tax agents to reach out to clients to inform them that the Tax Office would never demand immediate payments; threaten them with arrest; and request payment by unusual means such as iTunes vouchers, store gift cards or Bitcoin cryptocurrency.

Scams are among the core issues affecting taxpayers and small business clients in 2018, with the ACCC revealing that $2.3 million in scams were reported as of August this year.

Jotham Lian
26 October 2018
accountantsdaily.com.au

ATO set to pounce on undisclosed income streams

The ATO has warned that it will be increasing efforts to identify taxpayers who leave out certain payments and foreign income streams, as new international reporting standards kick in this month.

The tax office said it will strive to recover an annual shortfall of nearly $1.4 billion caused by inpiduals who leave income out of their tax returns, as part of its broader plan to recoup the $8.7 billion inpidual tax gap it revealed earlier this year.

Foreign income sources will be scrutinised, with the Common Reporting Standard (CRS) seeing the first lot of data to be exchanged with over 100 foreign tax authorities on 30 September.

According to the ATO, AUSTRAC data shows that taxpayers most commonly receive foreign funds from countries including the UK, USA, China, Switzerland, Hong Kong, New Zealand and Singapore.

“It’s important that everyone pays their fair share of tax, regardless of whether they earned income in Australia or abroad,” said ATO assistant commissioner Kath Anderson.

“We understand that people make mistakes and can forget to include some of their income. But those who leave out income to avoid paying their fair share of tax should be aware that there can be penalties and interest. Penalties can range from 25 per cent up to 75 per cent of the shortfall, in addition to paying the money owed.

“The most common mistake we see is taxpayers leaving out cash wages. But we are also seeing taxpayers either deliberately or accidentally failing to include income from second jobs, capital gains on cryptocurrency, the sharing economy, the gig economy and foreign-sourced income.”

Speaking to Accountants Daily, BDO partner Mark Molesworth said the implementation of CRS and the notice from the tax office meant accountants should revisit questions around foreign income streams with their clients.

“It will be worth for accountants to specifically ask clients whether they do have any sources of income offshore, any investments offshore,” said Mr Molesworth.

“It would be worth mentioning to clients, without indicating that they disbelieve their clients, that the CRS is now coming in and the data is going to be provided to the tax office, and if there is something that needs to be disclosed, then now would be the time to do it.

“My view is they would be very wise to make a voluntary disclosure and talk to the tax office before the tax office starts talking to them because their powers are broad and can be applied quite harshly, and you tend to get a better hearing from the tax office if you are voluntarily disclosing something to them rather than waiting for them to talk to you.”

Jotham Lian
19 September 2018
accountantsdaily.com.au

Senate passes $20,000 instant asset write-off extension

Despite months of delays, the Senate has today passed legislation to extend the $20,000 instant asset write-off to 30 June 2019.

Today, the Senate passed legislation to further extend the threshold for the instant asset write-off to $20,000 for a further 12 months to 30 June 2019, after it was first announced in the federal budget in May.

The announcement by new Treasurer Josh Frydenberg comes after a number of tax measures have been delayed, including notable measures such as the extension of the Single Touch Payroll regime to employers with 19 or fewer employees and the proposed Superannuation Guarantee Amnesty.

Today's announcement comes three months later than the announcement to extend the write-off for FY18 last year.

While the extension would be welcome news to small business owners, there have been calls in the industry to consider broadening the parameters of the measure, including increasing the $20,000 limit or the $10 million turnover threshold, as well as to consider changes such as Labor’s proposed Australian Investment Guarantee.

The Institute of Public Accountants has long advocated for the instant asset write-off to become a permanent feature of the tax regime, noting that small businesses need certainty to reinvest in assets that aid their productivity.

“What should be kept in focus is the positive impact that this initiative has on the broader economy as it incentivises small businesses to reinvest in their future, making way for growth, employment and prosperity,” said IPA chief executive Andrew Conway.

“We fully support a higher instant asset write-off becoming a permanent feature of our tax system going forward. The Henry Review into Australia’s tax system recommended that a higher threshold should apply.

“The need for this initiative to be set in stone, particularly for small businesses, is paramount as it brings an injection of economic growth, giving small businesses the confidence to buy new equipment, reinvest in their operations and grow.”

Jotham Lian
12 September 2018
accountantsdaily.com.au

Victorian Vacant Property Tax

Residential property tax of 1% of the property’s capital improved value is imposed on vacant properties.

Properties will be deemed vacant if they are left unoccupied for six months or more in a calendar year. Exceptions include deceased estates, renovations and holiday homes. It is understood to be enforced by investors self-reporting, but could be checked by utility usage.

If there is no electricity or water consumed on a property, it is reasonable to assume that there is no occupant. Records of both those utilities are readily available to the taxing authority (State Revenue Office).

The tax is intended to encourage investors to either put their property on the rental market or sell it.

About $2.6 million has been put aside in this year’s Victoria State budget for “implementation” to undertake additional compliance and monitoring activity.

Source: AcctWeb

Director Penalty Notices

If a company fails to comply with their obligations under the PAYG withholding system or the SGC provisions, company directors can be held personally liable for the amount the company should have paid.

The Australian Taxation Office can force directors of a company that is unwilling or unable to meet these obligations, to personally pay those debts by issuance of a director penalty notice (DPT), for an amount equal to these amounts.

The first type of DPNs are issued to company directors that have lodged its business activity statements, instalment activity statements and/or superannuation guarantee statements within three months of the due date for lodgement, but the PAYG withholding and/or SGC debts remain unpaid.

Various solutions are possible.

The second type of DPNs are issued to company directors where a company has failed to lodge its business activity statements, instalment activity statements and/or superannuation guarantee statements within three months of their due lodgement date.

The only solution is paying the debt in full.

Source: AcctWeb

ATO updates crypto guidance

The ATO has updated its guidelines on the tax treatment of cryptocurrencies, including issues on exchanging one cryptocurrency for another and record-keeping requirements.

In an update on the ATO website following its earlier guidance in July, the tax office has advised that if you carry on a business that involves transacting with cryptocurrency, then trading stock rules apply, rather than capital gains tax (CGT) rules.

Further, following 799 pieces of inpidual feedback and submissions, the ATO has provided additional guidance on the practical issues of exchanging one cryptocurrency for another and the record-keeping requirements.

Some of the issues raised included difficulties in keeping records due to high-volume trades or accessing data required for proper record keeping.

“As part of our research, we discovered low-cost software solutions that would be able to both record each cryptocurrency transaction (including cryptocurrency to cryptocurrency transactions) and convert the value of the proceeds into Australian dollars,” said the ATO in response.

“The software can take information directly from the exchange or a digital wallet and do the calculations, which helps alleviate the issues with recording trades and accessing data.”

According to the tax office, where you exchange one cryptocurrency for another cryptocurrency, you dispose of one CGT asset and acquire another CGT asset.

Taxpayers must compare the CGT cost base of the cryptocurrency item disposed of with the market value of the new cryptocurrency item obtained for all exchange transactions.

The ATO will continue to monitor community feedback and provide updates on new and emerging cryptocurrency risks.

Tax&Compliance Reporter
18 September 2018
ccountantsdaily.com.au