Tax Tips

Tax Tips for Australians

2012-03-14T16:12:00.000-07:00

How to protect your income AND improve your tax refund

Many of us insure our cars, our houses and our possessions, but how many of us actually insure our ability to earn income? The answer to that is very few! In fact we surveyed a sample of our clients and discovered that only 2% of last year’s returns had a deduction for income protection.

Income protection can be claimed as a tax deduction, yet most people still do not have any!

Now consider this: More than 25% of people over 30 years old will take more than 6 months off work between now and retirement due to illness or injury. Can you afford to live without your pay for six months?

So what is Income Protection?

Income protection is one of the most basic forms of life insurance. In the event that you are unable to work and you are insured – your policy will typically pay you 75% of your income for a period pre-determined by you.

And the best part is- Income protection is tax deductable!

How do I ensure I have Income Protection?

1. Check the insurance section of your last superannuation statement. Is there any income protection or salary continuance cover(Note that income protection organised as part of your super is not tax-deductible.)

2. Check your employment agreement to see if your employer offers income protection insurance as part of your salary package.

3. If you have completed the above checks and still don’t have income protection, you should either:

a. Call your super fund and ask what they can offer you, or
b. Call International Professional Services

Tax Tips: Home Office Expenses

2012-03-07T19:34:00.000-08:00

Do you carry out part or all of your work from a home office? If you do, then you may be entitled to claim office expenses associated with running your business from home.

Home office expenses can be classified into two broad categories which we look at in more detail below:

What are home office expenses?

1. Running Expenses: You may be entitled to claim a deduction for the running expenses of your office comprising:

Electricity
Gas
Depreciation of office furniture

You can claim running expenses in two ways; the amount of actual expense incurred or 26 cents per hour. You can’t claim a deduction for running expenses if there is no additional cost incurred. For example if you conduct your work in the living room of your home where other people watch the television.

1. Occupancy expenses: These are expenses which relate to owning or using your home as a place of business. This means that if you run your own business from home you can often claim a percentage of total home expense based on the floor area of the office. These expenses can include:

Rent
Mortgage
Water rates
Repairs
House insurance

Diary records noting the time that the home office was used for work is acceptable evidence and should be kept for at least four weeks.

Important note:

Please be aware that if you are able to claim these expenses, it may affect your ability claim a “main residence exemption” for capital gains tax purposes. This could leave you having to pay capital gains tax on your family home.

Tips on minimising your tax for a larger refund

2012-02-20T20:07:00.000-08:00

Contribute

The government will match your voluntary super contributions of up to $1000 should you earn less than $61, 290 a year. Here’s the thing- while direct deposits on a weekly basis are the most painless way of taking charge of that offer, you can still contribute a lump sum and maximise your super. Even if it’s not a huge amount, put together a little bit of cash and contribute it. Your retirement will thank you.

Know Your Refunds

What refunds are you eligible for? For example, the education refund introduced in 2008 could make all the difference if you have school-aged children. Research what falls under the criteria for refunds- things like laptops, internet connection, textbooks. You’re eligible for $750 for primary school children and $1500 for high school kids. It’s certainly worthwhile checking what has changed in the year since you last did tax. Another example is that education expenses for tertiary students on Centrelink can now also be addressed, as evidenced by the backpay recently sent out by the ATO, so check out where you stand on new refunds as well.

Delay

If you’re going to owe money at tax time, registered tax agents such as ourselves can help legitimately delay paying the tax- as it is essentially an interest-free loan should you have necessary expenditure. You can delay your tax until May the following year. This could allow you to also slowly set aside the required money and not have to take away from your savings schemes in the process. We would suggest the reverse is also true, if you’re getting a refund, go for gold and get it as soon as possible.

Negative Gearing

If you own a rental property, you are eligible to claim a 2.5% deduction for building costs or structural improvements to the property. Also, if you haven’t claimed the building allowance previously, you can claim it on this tax return.

Tax Return

Lots of people prefer the tangible nature of pen and paper but the ATO’s E-Tax is a pretty super little program. It will enable you to feed in all your data- super, interest on bank accounts, Centrelink payments and has an extensive help section that makes the whole process much more simple. There’s a side menu if you know exactly what you need, or you can go through the whole thing step by step. It also tells you immediately what your tax will be or how much you can expect from a refund, and can be lodged online.

Top 10 Tax Tips for Individuals

2012-02-14T13:55:00.000-08:00

Tax is inevitable – if you are earning money. So even though we all have to pay it – there is no reason why you should pay more than your fair share. Here at IPS our goal is to provide the best taxation solutions in one location. Here are our top ten tax tips for individuals:

Investments should be in the name of the family member who pays the least amount of tax. Even better would be to use a family trust so that there is true asset protection and income sharing.
If you are on salary try to salary sacrifice some of your salary into tax free benefits. E.g. a laptop computer can be salary sacrificed and have no tax paid at all.
Pay deductible expenses as close to June 30 as possible to minimize the cash flow impact.
Keep receipts organized and use the tax office record keeping software to itemize what you have been spending so that your accountant’s job is easier at year end – it will save you money.
Don’t prepare you own tax return – you WILL miss opportunities to claim deductions.
If you use your car for work, keep a log book AND keep all your expenses for the year. It will allow you the option of selecting the best method of claiming the cost of running your vehicle – rather than just the easiest method.
Keep track of your interest and provide tax file numbers to your bank so that you don’t have tax deducted until you file your return.
As we approach June 30, if you have made a capital gain and have an investment that is making a loss consider selling that investment to offset it against your gain. As an example, lets say that you have some shares which you sold and have made a profit. You also own some shares that have been smashed by the market lately. Consider selling them to crystallize the loss – which can offset the gain. You can even buy them back later if you really want to hold them.
Superannuation provides great tax saving benefits. Salary sacrificing and contributing to your low income earning spouse’s fund can give great tax benefits.
Prepay the interest on your investment property so that you can claim the deduction now.

Remember we all have to pay our fair share of tax but there are strategies that can be used to minimize the amount that you pay.

http://www.ips.com.au/ipsOurServices.html

Tax Tips 2012

2012-02-08T16:43:00.000-08:00

1. Use the electronic payment method for receiving your tax refund

When lodging your tax return with the ATO, your refund will be directly deposited to you rather than by cheque. Generally, it will be deposited into your account much faster and you can immediately use that money to start earning interest or for other investment opportunities. A cheque comes via the post and takes at least 3 days to clear. You can also set up banking alerts with some accounts and have it notify you when the amount arrives.

2. Consider salary packaging items instead of purchasing them yourself

There are certain tax advantages in doing so, depending on your employer and your income tax bracket. Check with your employer regarding FBT (fringe benefit tax) policy and items you can salary package as there may be existing policies in place. Consider items like cars (this will become more tax effective the more kilometers you drive), superannuation, computers, mobile phones, and gym memberships. Using pre-tax dollars rather than post-tax dollars can represent significant savings!

3. Monitor Superannuation and consolidate to save on fees

Super is often overlooked by many people. In fact, most people have more super in their accounts than in their bank accounts. However, we only tend to check it once a year when the super statement comes out! Regularly reconcile your super account with your payslip to ensure the amounts are correct. It is estimated that there is in excess of $10 billion in lost or unclaimed superannuation. Check out the following site to see if you have any unclaimed super. You may also have super spread out amongst several funds. This is not ideal. Consolidate all your super into one account to save on the fees.

https://superseeker.super.ato.gov.au/individuals/default.aspx?pid=0

4. If you owe money to the ATO, beware that there are general interest charges & penalties for late payment

The general interest charge (GIC) also incorporates a high “penalty” rate of interest. Late payment attracts the attention of the ATO (audits!!!), which is not good!. Regularly pay on time and note the due dates in your calendar. If you have a valid reason, you can ask for remission of interest or penalties by writing a letter to the ATO.

5. Ensure you have a good record keeping approach for tax deductions

Regularly file tax receipts and avoid using the shoe box approach. You will be surprised by how many tax deductions get missed. Use a separate credit card for work related expenses. Did you know that your credit card statement can be used as a “receipt” to substantiate expenses being claimed for tax purposes? A nice rule of thumb is to use a single credit card for all your work related expenses.

6. Consider the timing of lodging your tax return

If you are in tax refund position, do your return as soon as possible. The sooner you do your return, the sooner it will be processed and you will get your tax refund. However, if you are in a tax payable position, lodge as late as you can (within the lodgement dates of course!). As you can put the money to better use than the ATO! Consider using a tax agent as the due date for lodgement will be extended.

7. Check the specific deductions for occupation types

The ATO has prepared a deduction guide for 20 occupation types. The Guide shows what the ATO considers to be reasonable deductions for each individual occupation. Have a look as you will be surprised at what you could have claimed.

http://www.ato.gov.au/individuals/pathway.aspx?pc=001/002/010/006/001&mnu=37095&st=&cy=1&mfp=001/002%20

8. Net medical expenses tax offset

You can claim 20% of medical expenses over $1,500 as a tax offset. There is no upper limit on the amount that can be offset. So, if your medical expenses were $10,000, the tax offset would be $1,700 or ($10K – $1.5K) x 20%. Note that cosmetic surgery without a medicare benefit is not allowed to be claimed.

9. Income protection insurance

If you have income protection insurance, the ATO allows you to claim this as a work-related expense.

10. DIY tax planning (income tax)

Around May or June, take the latest copy of your payslip and calculate roughly what your total Taxable Income will be by the end of the year.
If your taxable income is border lining between two tax brackets, then it may be in your interest to claim some deductions to move to the lower tax bracket. Have a look at the individual tax tables from the ATO as follows.

http://www.ato.gov.au/individuals/content.aspx?doc=/content/12333.htm

Example

If you will have a taxable income of $82,000 by June 09, that will put you in the 40% tax bracket. Your employer should have been taking out tax during the year at the rate of 40%.

Now, you know that you need deductions of at least $2,000 to drop to the lower 30% tax bracket. You may decide to use various tax strategies like salary sacrificing to super, attending a work-related course, or other tax deductible expense.

So, the tax withheld on $82K by your employer should be $20,076 (based on ATO monthly PAYG withholding tables). But, if you reduce your taxable income to $80,000, the tax payable is only $19,200.

11. DIY tax planning (HELP / HECS repayment)

As per No.11, you can also assess your taxable income as at June 2009 to determine whether you are border lining the repayment thresholds for the Higher Education Loan Programme (HELP).Have a look at the HELP repayment thresholds for the year ended 30 June 2009.

http://www.ato.gov.au/individuals/content.aspx?doc=/content/8356.htm&page=3&H3%20

TAX TIPS 2012

2012-02-02T20:33:00.000-08:00

To Claim the Home Office or Not

Expenditure on a home office where claims can be made for a proportion of interest, rates etc. will normally expose the residence to captial gains tax. Let's assume an architect conducts his business from a home office and the space devoted to this activity is 25% of the total floorspace area. Claims can be made for 25% of interest, rates and proportions of utility costs, insurance, etc.

The Taxation Office considers that on disposal the property will be proportionately subject to capital gains tax. This may be of concern particularly where the property has enjoyed real gains in value. Where such a claim may be optional, consideration should be given to not making the home office claim in the first place. This could ultimately save many thousands of dollars in capital gains tax.

Defer Sale Date

The disposal date for capital gains tax is normally the contract date. Where a sale of an asset is contemplated late in a financial year consider, where possible, deferring the contract until the new financial year. A few weeks deferral in contract signature could delay payment of capital gains tax by a year.

Deferral of the sale to a subsequent financial year will also be advantaged if the prevailing tax rates in the subsequent year are less than the current year.

Minor benefits don't cancel each other out

The latest interpretations of the tax law indicate that fringe benefit exemptions do not cancel each other out.Eligibility for an exempt minor benefit is not affected by other exempt benefits under the fringe benefit tax law.

For example, an employee who receives a portable computer as an exempt benefit under S:58X would still be eligible for a $90 Christmas gift from an employer under S:58P.

Entertainment may be a minor benefit

Entertainment can qualify for exempt minor benefit exclusion from GST.

Entertainment is specifically not income tax deductible, but minor entertainment benefits could qualify for fringe benefit tax exemption.This is an unusual situation where an exempt minor benefit is not income tax deductible.

Normally exempt minor benefits are tax deductible as they constitute an incidental cost of employment.

How to claim meal entertainment

Meals entertainment may be claimed as a minor benefit , or dealt with under a 50/50 method - but not both.

The 50/50 method of dealing with meal fringe benefits allows half the benefit to be income tax deductible, but subject to fringe benefit tax. The other half is simply not tax deductible.

An employer may not claim a minor benefit exemption for meals where the 50/50 method is adopted.If this method has been adopted, the employer must deal with all meal entertainment under the 50/50 method with no exclusions, including exempt minor benefits.

GST - Saving on Deductible FBT Items

A planning opportunity exists that saves GST (where an employer is GST registered). An employee may package items that are FBT exempt or otherwise deductible to an employer into his/her salary package. The advantage here is that the employer can claim an input tax credit on the benefit and no FBT is payable. had the employeee paid for the cost it would have cost the employee 10% more with GST. Examples of these types of costs include: subscriptions, conference costs, etc.

Overtime Meals

A deduction may be able to be claimed for overtime meal expenses incurred where an overtime meal allowance was received from your employer and the allowance was paid under industrial law, an award, or agreement. If the meal allowance received was greater than the actual expense incurred, the deduction is limited to the amount of expenditure incurred. Written evidence will be required if the claim per meal exceeds certain Tax Office thresholds.

Self-Education Expenses

A part-time or full-time student studying at university, college, school, or other place of education may be able to claim the cost of self-education. There must be a direct connection between the study and current work activities. No claim is allowable where study is undertaken to get a new job, or to open up a new business or income earning opportunity.

Non-Commercial Rent

Landlords need to be mindful of the Tax Office's view on non commercial rental arrangements. If you are renting a property at less than normal commercial rates, this can limit the amount of deductions to which you are entitled. The situation often arises in family situations, where one family member may rent a property to another family member at a nominal rental. In these situations, a deduction for rental property expenses can only be claimed up to the amount of the rental income received from the arrangement.

Capital Allowance Write Off

Landlords listen up! You should review all your rental properties to ensure you are receiving your full entitlement to depreciation on the construction costs of income producing buildings on the property. Some landlords may not appreciate the potential of this tax deduction and how it can be turned into cash in the landlord's pocket. Every income producing residential building where construction commenced after 17 July 1985 qualifies for the Division 43 capital works allowance. The amount of the allowance depends on the date construction commenced. Buildings where construction commenced between 18 July 1985 and 15 September 1987 are entitled to the 4% claim per annum. The claim was reduced to 2.5% for buildings that were constructed after 16 September 1987.The claim is allowable on the actual construction costs of the building.

Need A New Computer?

An opportunity exists for employees to cash in on large tax savings by salary sacrificing the purchase of a laptop computer or similar portable electronic device (e.g. mobile phone, calculator, PDA, laptop and portable printer, Blackberries and hand-held PCs).

Section 58X of the FBT Assessment Act 1986 exempts from Fringe Benefits Tax certain work related items. This section exempts from Fringe Benefits certain items such as electronic diaries, mobile phones, calculators, briefcases, tools of trade, computer software used in the employee's employment and notebook, or laptop or similar, portable computers used primarily for use in the employee's employment.

What this means to the employee is that by salary sacrificing the cost of the computer with their employer, the computer is purchased from gross dollars, effectively saving tax on the entire purchase price. The employer incurs no Fringe Benefits Tax cost. Further, the cost of the benefit is normally outright deductible to the employer. A further saving can be made by the employee effectively avoiding GST on the purchase price as, assuming the employer is GST registered, they are able to claim a GST input tax credit for any GST incurred. This means the salary sacrifice amount need only be for the GST exclusive price of the computer.

December Exchange Rates

2012-01-09T16:05:00.000-08:00

The Tax Office has released the average foreign exchange rates for December 2011, used for converting foreign currency into Australian dollars. The rates are reproduced below (foreign currency equivalent to $1 Australian).

Country	Average
Canada	1.0721
Denmark	5.8803
Europe (Euro)	0.7968
Fiji	1.8835
Hong Kong	8.0921
India	54.078
Israel	3.9408
Japan	82.24
Kuwait	0.2889
New Cal/Tahiti	93.8895
New Zealand	1.3528
Norway	6.1531
Oman	0.4104
PNG	2.3804
Philippines	45.9141
Poland	3.5443
Saudi	3.8923
Singapore	1.3579
Solomon Islands	7.8667
South Africa	8.6641
Sri Lanka	118.2185
Sweden	7.1288
Switzerland	0.9725
Thailand	32.2235
Turkey	1.9398
UK	0.671
USA	1.0427
Vanuatu	103.6795

How to Claim Sun Protection as a Tax Deduction

2011-12-13T13:48:00.000-08:00

If you or someone you know works in the sun for sustained periods, they could save big bucks by claiming their sun protection equipment!

Occupations and industries in which the ATO considers people to work in the sun for prolonged periods include:

Building and construction
Delivery and courier services
Farming, agriculture and horticulture
Fishing
Forestry and logging
Landscaping and gardening services
Open-air minerals, oil and gas exploration and extraction
Outdoor sports, and
Other outdoor services

Sunglasses

The Tax Office accepts deductions for sunglasses when they are used because a worker is exposed to the harmful effects of the sun, generally for a prolonged period. For example, a short walk between two work premises is not allowed. However, if you work on a building site where you spend all day outside or you wear sunglasses to reduce the glare while driving (if you drive the majority of the time for work), you are entitled to claim.

There is no limit on the expenditure for the sunglasses, however if they cost more the $300 and they are expected to last for longer than 12 months, you will need to claim the depreciation of the glasses on your tax return rather than the purchase price.

Sunscreen

Expenses for sunscreen and hats are also an allowable tax deduction for anyone who is classified as an outdoor worker.

However, because such items can also be associated with private use, there must be a sufficient connection between the expenditure on the hat or sunscreen and your income earning activities.

2011/12 Mid-Year Economic and Fiscal Outlook

2011-12-05T16:42:00.001-08:00

The government has released the 2011/12 Mid-Year Economic and Fiscal Outlook (MYEFO), which forecasts solid economic growth, low debt and a return to surplus in 2012/13, despite recent global economic downturn cutting $20b from government revenues.

The government has also announced reforms to stop individuals from being able to exploit the tax exemption for living-away-from-home allowance and benefits. This tax exemption is being increasingly misused by a narrow group of people, particularly highly-paid executives and foreign workers, at the expense of Australian taxpayers.

It is proposed that, from 1 July 2012:

• access to the exemption for temporary residents will be limited to those who maintain a residence for their own use in Australia, which they are living away from for work purposes, such as “fly-in fly-out” workers, and
• individuals will be required to substantiate their actual expenditure on accommodation and food beyond a statutory amount.

Superannuation guarantee increase passes House of Reps, 23 November 2011

2011-11-28T15:16:00.000-08:00

The House of Representatives has passed legislation on the gradual increase of compulsory superannuation contributions from 9% to 12%.

The legislation also includes measures to remove the current age limit of 70 on superannuation guarantee payments as well as removing superannuation contributions tax for people earning $37,000 or less per annum.

Most of the measures are expected to take effect from 1 July 2013.

Directors Penalty Notices - Temporary Reprieve

2011-11-23T13:55:00.001-08:00

Yesterday, directors were given a temporary reprieve from the potential of personal liability to meet employees' superannuation obligations but it is only temporary.

Bill Shorten the assistant treasurer said the measure would be re-introduced in early 2012 following more consultation with stakeholders.

So, for the time being, it remains that Director Penalty Notices relate only to unpaid PAYG – but change is likely in 2012.

Spreading the Christmas cheer? Tips to avoid the FBT hangover

2011-11-21T22:02:00.000-08:00

It’s that time of year again, when we open our hearts (and our wallets) to celebrate the year that’s been. Generosity with clients and employees abounds as we say thank you with gifts and parties – but tax rules abound, so beware the ‘FBT hangover’. Taxation Consulting expert Kim Reynolds gives us a whirlwind tour of the tax implications of your festivities.

Let’s look at the possible fringe benefits tax (FBT) and income tax implications that can arise from providing ‘entertainment’ to staff and clients, in particular, regarding Christmas parties and gifts including:

· How the $300 minor benefit exemption works

· How to value meal entertainment benefits – 50/50 split method and the actual method

Christmas Parties

Minor and infrequent benefits

Several years ago, the Australian Taxation Office (ATO) increased the minor benefit exemption from $100 per employee to $300 per person. This is great news for small businesses, which typically pause to celebrate with their employees during the festive season.

In practice, this exemption allows for an FBT exemption to be claimed for benefits provided, where each benefit (on a benefit by benefit basis) is less than $300 (including GST), regardless of whether it is provided to an employee or an employee’s associate (i.e. spouse or family member), provided that the benefit is made on an infrequent and irregular basis.

For example, a business hosts a family friendly Christmas party and encourages employees to bring spouses and children. The cost of the party is $220 per head. In addition to this, the employer also provides each employee with a gourmet food and wine Christmas hamper valued at $165 each. Under the minor & infrequent benefit exemption, the costs of the Christmas party can be exempt from FBT, as they are under $300 per person. The provision of the hamper is considered separately to the provision of the Christmas party and is also considered exempt.

It should be noted that where this exemption applies, no income tax deduction will be available for the expenditure.

Meal entertainment - 50/50 split method

Businesses may elect to simplify their FBT paperwork, by nominating to pay FBT on 50% of all meal entertainment benefits provided in an FBT year, regardless of who it is provided to (employee, associate, client etc).

Under the 50/50 split method, where Christmas parties include food and drink, 50% of this cost will be subject to FBT and 50% will be deductible/claimable for income tax and GST purposes, regardless of where is it provided and to whom it is provided. Taxi travel to and from the event will also be considered to be meal entertainment and will be treated the same way.

Exemptions such as the exempt property benefit and the minor benefit exemption are not available for meal entertainment when being valued under the 50/50 method.

Meal entertainment – actual method

The actual method applies where an employer has not made an election to value their meal entertainment expenditure for FBT purposes under either the 50/50 split method or the 12 week register method. As the name suggests, this method relies on a determination of actual expenses incurred.

Under the actual method, FBT is generally only payable on that portion of the meal entertainment provided to employees and their associates.

To calculate how much meal entertainment relates to employees and associates, the employer can use the exact cost attributable to each person or, where it is difficult to make an exact allocation, a “per head’ apportionment.

Recreation expenditure / exclusive use of premises

Where an employer hires a band or other form of entertainer for a Christmas party, this expenditure is “recreation expenditure” and is generally dealt with based on actual expenditure.

Property benefits

Another FBT exemption that is often made use of during the festive season is that of the exempt property benefit. This applies to Christmas parties held on a business premises, on a working day and attended by employees and clients. Where employees’ associates attend the event, the benefit provided to the associate may be taxable where it is not excluded under another exemption, such as the minor benefit exemption referred to above.

Christmas Gifts

Gifts, including gift vouchers and hampers with food and drink, where the food and drink are unopened and are designed for consumption at a later date, are generally not considered to be “entertainment”. While still considered for FBT purposes and subject to FBT (unless an exemption such as the minor and infrequent exemption applies), such gift items are considered for income tax and GST purposes under normal deductibility rules.

However, gifts such as movie/theatre tickets or sporting events are considered to be entertainment. The income tax and GST implications of giving these gifts will therefore be determined by the FBT treatment of the gift. That is, where the gift is made to an employee or their associate, FBT will be payable and an income tax deduction allowed (except where the minor benefit exemption applies). However, where the gift is for a client, no FBT applies and no income tax deduction will be available.

Interaction between FBT, income tax and GST

The interaction between FBT, GST and income tax can be confusing. In simplest terms, where a benefit is classed as ‘entertainment’ (which can include entertainment by way of food, drink or recreation and accommodation or travel to do with providing entertainment by way of food, drink or recreation) an income tax deduction and GST credit can only be claimed when the benefit has been subject to FBT.

Follow-up assistance available for natural disaster affected small businesses

2011-11-14T18:52:00.000-08:00

The ATO is continuing to offer assistance to small businesses affected by natural disasters earlier this year under its Small Business Assistance Program.

Under the program free services are available to those businesses that need help, including:

· Assistance with preparing and lodging outstanding Activity Statements,

· Assistance renegotiating arrangements to pay outstanding debt, and offer specific help to those experiencing serious hardship, and

· Assistance reconstructing lost or destroyed records and, if necessary, assisting to make a reasonable estimate.

Interested businesses can register for an onsite visit at ato.gov.au/business or can attend an upcoming ATO seminar in their area by registering at ato.gov.au/seminars. Any information shared is confidential.

Tax Commissioner Michael D'Ascenzo said it has been difficult year for many Australians and he would like to remind communities and businesses impacted by the recent natural disasters that the ATO continues to be here to assist them.

"Our Small Business Assistance Program aims to help businesses get on the right track from the start and develop good habits in relation to their tax obligations early. It also seeks to help established businesses who need assistance but have been reticent to seek this from the ATO," Mr D'Ascenzo said.

"I encourage businesses to make contact with the ATO for any tax help and support and to also take advantage of our programs and services that can help them."

You can view all assistance options available for your buisness at ato.gov.au/smallbusinesssupport

2011-11-09T14:48:00.001-08:00

PROPOSED new laws introduced in Federal Parliament yesterday have significant ramifications for all company directors.

Under the Tax Laws Amendment (2011 Measures No. 8) Bill, the veil of protection granted to company directors will be further weakened and the assets of directors will increasingly be at risk.

The Bill is designed as part of a crackdown on Phoenix operations, or businesses that liquidate a debt laden company only to open their doors again under a new company structure.

CRC understands the need for strong legislation that allows the Australian Tax Office to recover taxes from shonky operators but the impacts of this legislation are enormous for directors of legitimate companies that are going through tough times or have failed to submit the relevant paperwork in time.

Under the proposed new regime, tougher rules will apply as soon as the Bill is passed to directors if their companies fail to lodge superannuation guarantee statements with the tax office on time or if there are any shortfalls in superannuation or PAYG payments.

Under the Bill the Commissioner for Taxation would be able to immediately claim against directors’ assets if superannuation and PAYG shortfalls are unpaid and unreported after only three months.

These changes would make it easier for the tax office to claim the personal assets of directors to pay for unremitted employee superannuation guarantee amounts.

At present the tax office has to issue a Director Penalty Notice, which gives directors time to get their house into order, but this proposed regime will involve an immediate claim on directors’ assets.

As a result it will become exceptionally important for company directors to ensure that all tax office returns – Activity Statements and Superannuation Guarantee Statements – are lodged by the due date.

Directors will need to ensure that company executives and officers are lodging tax returns on time and making the correct payments to ensure that they are minimising the impact of potential claims against their own personal assets.

These changes further whittle away at the very protections which make company structures so appealing for business owners and increasingly leave the personal assets of directors at risk from claims from the tax office.

2011/2012 Income Tax Rates

2011-11-07T21:49:00.000-08:00

Ever wanted to know how to calculate your individual income tax rates? Well the ATO supply the data but many people are not aware of what they are and how to calculate your actual tax rate and effectively how much tax you will pay.

We will share with you the income tax rates in Australia based on how much you earn and with a real life example of how you can calculate your tax for the year based on this data. Nice and simple, just the way the ATO don’t like to make it!

$0 to $6,000 = No tax to pay, yay
$6,001 to $37,000 = 15cents for every dollar over $6,000
$37,001 to $80,000 = $4,650 plus 30 cents for every dollar over $37,000
$80,001 to $180,000 = $17,550 plus 37 cents for every dollar over $80,000
$180,001 and over = $54,550 plus 45 cents for every dollar over $180,000

EXAMPLE

Let’s say you earn $55,000 per year. Straight away you need to pay $4,650.

Now you need to pay 30 cents for every dollar over $37,000 as per the guidelines above.

This means you need to times 30 cents by $18,000 dollars. That means you owe another $5,400 in tax (0.30 x 18,000). Combine this with the $4,650 you owed from the start and a salary of $55,000 is taxed exactly $10,050.

Nice and simple and something you should get in the habit of knowing how to do in order to better understand the amount of tax you will be paying. If you pay more than this without earning more, you will get a refund. You can also talk with an accountant or research ways to claim deductions that are relevant to your work – this is a great way of offsetting your income by reducing it with deductions which ultimately means less tax and more refund.

2011-10-24T16:42:00.000-07:00

Claiming Car Expenses without a Logbook

Do you use your car for work but don’t have a logbook? Don’t stress! It may still be possible for you to claim work-related car expenses on your income tax return.

How does it work?

You can reduce your tax payable or increase your refund using the one-third of actual expense method. This method allows you to claim one-third for each car expense you incur. The eligible car expenses do not include capital costs such as the initial purchase of the car or improvements to it such as replacing an engine.

Please remember you can only claim these expenses when they are work related. I.e. used for work purposes to earn an income. You must keep written evidence for all of your expenses except fuel and oil which we can work out for you based on your odometer records.

What you need to know

Use this method if you used your car to drive more than 5,000 business kilometres in the tax year or if you only used the car for a proportion of the tax year, simply divide 365 by the number of days you owned the car and multiply that answer by your kilometres travelled. The result is the amount of kilometres you would have travelled in a full year. If it is more than 5,000 then you can still use this method.

If your answer is less than 5,000, or you did not travel more than 5,000 business kilometres in the year, you should use the cents per kilometre method or the logbook method.

If you need any clarification on using this method or any other aspects of travel related expenses, please contact us on info@ips.com.au

Carbon Tax Query

2011-09-27T18:44:00.000-07:00

Q: Are there any financial reporting considerations as a result of the Federal Government’s recent announcement of the new carbon pricing scheme?

A: As most readers are probably aware, the Federal Government announced the proposed implementation of a new carbon pricing scheme on 10 July 2011. The plan involves imposing a fixed price on carbon emissions for the first 3 years, commencing on 1 July 2012 followed by a flexible emissions trading scheme on 1 July 2015. While the biggest impacts will be felt on the 500 entities whose carbon emissions render them immediately liable to the new cost, other entities will be affected as their costs through the supply chain may rise. The first bills for the new plan were tabled in Parliament last week.

Set out below are the major financial reporting considerations members should be aware of in both the short and longer term.

Considerations for period end prior to any commencement date of the scheme

At this stage the short term financial reporting implications associated with the scheme for period ends prior to the commencement date of the scheme are limited and centre around:

1. Asset impairment: the Federal Government’s announcement will give affected entities more certainty about the future impact of a carbon pricing scheme on the value of their assets. This may require the alteration of asset impairment testing models as at the relevant period end. The Government’s announcement would qualify as an adjustable post balance date event if the issue of a carbon pricing scheme had been considered in the models used to test impairment at your relevant period end. However, if the directors had determined at the period end that there was not sufficient certainty to factor a carbon pricing scheme into the impairment testing model the government’s announcement would be a non-adjusting event.

However, these effects may be limited given that the legislation has not yet passed through parliament, substantial government assistance packages are available in some industries and cost increases to customers may also be possible.

2. Directors report disclosures: companies that are going to be substantially impacted should consider the need to disclose details in the “likely developments” section of their directors report based on their assessment of the likelihood the current carbon pricing scheme legislation will be enacted.

Longer term implications

Longer term the proposed carbon pricing scheme legislation is likely to generate additional recognition, measurement and disclosure issues as entities work within the new proposals. This will make it important to ensure that over the coming year the entity’s systems and processes are up to the task of coping with the new developments as they occur.

A project to develop comprehensive guidance on accounting for the rights and obligations inherent in an emissions trading schemes was being undertaken by the IASB however this has currently been suspended to allow the board to pursue its convergence agenda with FASB. With the FASB project nearing completion, the emissions project may be reactivated with future timing depending on the outcome of the agenda consultation process currently being undertaken by the IASB.

The Institute’s reporting and assurance team has collated onto our carbon resources webpage links to a range of resources that can assist members understand the plans and assess the impact on businesses with which they are involved.