Monthly Archives: March 2014

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New privacy laws could leave many businesses vulnerable.

New Privacy Laws

Changes to Australia’s privacy laws kicked in recently in what the Australian Information Commissioner, John McMillan, said were the biggest reforms to the privacy regime in 25 years.

The recently released Australian Privacy Principles guidelines publication, from the Office of the Australian Information Commissioner (OAIC), apply from March 12, 2014, and cover all government agencies and other entities covered by the Privacy Act.

The principles outlined include ensuring the transparent management of personal information, anonymity and pseudonymity, the collection of solicited and unsolicited personal information and more ( download the guidelines here ).

What is Division 293 tax?

What is Division 293 tax?

Division 293 tax is being introduced from the 2012–13 year to reduce the tax concession on superannuation contributions for individuals with income greater than $300,000 a year.

Division 293 tax will be charged at 15% of an individual’s taxable concessional contributions above the $300,000 threshold (which are capped for 2012–13 at $25,000). For individuals who are members of a defined benefit fund, Division 293 tax may be calculated on notional contributions which are not capped

 

Are you liable to pay Division 293 tax?

You are liable to pay Division 293 tax if you have taxable contributions for an income year. If your income for surcharge purposes, plus your low-tax contributions, are greater than $300,000, the taxable contributions will be the lesser of the low-tax contributions and the amount above the $300,000 threshold

 

Assessing your Division 293 tax debt

The ATO use the following information to assess whether you’re liable to pay Division 293 tax:

  • Income tax return to determine income for surcharge purposes
  • MCS and SMSF annual returns to determine low-tax contributions.

Assessments for Division 293 tax will generally not be issued until both pieces of information have been received. In the first financial year (2012–2013), assessments will not be issued until January 2014, when the ATO’s systems will be switched on.

The threshold at which a Division 293 tax calculation will result in an assessment being issued is $300,000.

There are two types of original Division 293 tax assessments that will be issued;

  • Due and payable liability.
  • Deferred liability.

Free tax seminars

The Australian Taxation Office (ATO) is conducting seminars for small business via webinar.

Webinars are online seminars that:

  • allow you to participate over the internet using a computer, smart phone or tablet
  • let you attend from the convenience of your home or office
  • save you time and money
  • have a chat facility so you can ask the presenter questions.
  • Phone and tablet users can download a free app to join our webinars (see bottom of invitation).

Please note all sessions are scheduled in Australian Eastern Daylight Savings Time (AEDST)

This is New South Wales, Victoria, Tasmania and Australian Capital Territory time.

 

 

Series one – Tax basics for small business

 

Who should attend?

Small business operators, and those just starting or thinking about starting a new business, should consider participating in these free tax webinars.

 

Why should you attend?

You will learn about tax issues relevant to owning and operating a small business and receive practical tips for your business.

 

What will be covered?

Each of our webinars will explore a specific tax issue for small business, including:

  • Tax basics introduction
  • Income tax deductions
  • Home-based business
  • Motor vehicle deductions
  • Concessions for small business
  • Activity statement essentials
  • Goods and services tax
  • Budgeting and record keeping
  • Small business assistance
  • Employer obligations overview
  • Super obligations for employers
  • Issues for contractors

 

When are they on and how to I register?

Click on this link, for the full schedule and registration details of our Tax basics webinars:
ato.gov.au/General/Speakers-and-seminars/In-detail/Small-business/Introductory-sessions-for-small-business/

 

Tax basics videos

The ATO also offers a suite of Tax basics videos for small business. These videos cover an extensive range of topics: ato.gov.au/TaxBasicsVideos

 

Series two- Construction industry- Taxable payments

reporting

 

Who should attend?

People working in the building and construction industry.

 

What will be covered?

Taxable payments reporting commenced on 1 July 2012 and requires businesses that operate in the building and construction industry and who pay contractors for building and construction services, to report those payments to the ATO annually.

The one-hour webinar session will answer the questions of who reports, what is reported and provide tips to assist you now.

 

When are they on and how to I register?

Click on this link, for the full schedule and registration details of our Taxable payment reporting webinars:
ato.gov.au/Business/Building-and-construction/In-detail/Taxable-payments-reporting/National-webinars/

 

The ATO’s other webinar programs

 

Rental property owners

The ATO runs one-hour webinars for owners and prospective rental property owners on the following two topics:

  • Tax issues when buying and owning a rental property
  • Tax issues when selling a rental property

Trustees of SMSFs

The ATO runs one-hour webinars for trustees of self-managed super funds on these three topics:

  • Self-managed super funds for trustees – an overview
  • Self-managed super funds – accepting contributions and managing investments
  • Self-managed super funds – accessing your super

 

When are these topics on and how do I register?

Click on this link, for the full schedule and registration details of these webinars: www.ato.gov.au/seminars

 

Webinar apps

To download the free app for your iPhone or iPad, Android phone or tablet:

Visit gotowebinar.com.au
Click on “Mobile apps” – on the left hand side menu.

Newsletter: March 2014

Local government payments in ATO sights

The ATO has previously sought from local government council and shire authorities throughout New South Wales, Victoria, Queensland, and Tasmania details of entities who provided contractor services in the 2011 and 2012 financial years. The ATO says it will now acquire details of entities receiving taxable payments from local government council and shire authorities throughout the country covering the 2011 to 2014 financial years.

 

The ATO says it will electronically match the information collected with its own data holdings to identify instances of non-compliance with tax lodgment and payment obligations. Records relating to 20,000 to 40,000 individuals are expected to be matched under the program.

 

TIP: Be aware of the ATO’s use of electronic data-matching to check tax compliance. According to the ATO, most people are willing to meet their tax and superannuation responsibilities. However, the ATO says it uses a range of measures, including electronic data-matching, to identify the small minority of taxpayers who do not fully meet their responsibilities.

Tax bill for transfer of land to joint development trust

A taxpayer (the trustee of a trust) has been unsuccessful before the Federal Court in arguing against a capital gains tax bill following a transfer of land it owned to a “joint venture trust”. The transaction took place in August 1998 and the amount in dispute totaled some $7.6 million. The joint venture trust was set up to facilitate commercial development of the land owned by the taxpayer as well as adjacent land owned by other owners.

 

The taxpayer argued that there was no change in the beneficial ownership of the land and that there should therefore be no tax liability on the transfer. However, the Court held that the transaction was taxable and that the exceptions to the tax liability as argued for by the taxpayer did not apply in the circumstances. The Court also affirmed the Tax Commissioner’s decision to impose an administrative penalty at the rate of 25% of the tax shortfall.

Forestry managed investment scheme losses refused

An individual has been unsuccessful before the Administrative Appeals Tribunal (AAT) in a matter concerning losses claimed in tax returns for the 2006 and 2007 income years.

 

The individual had invested in a forestry managed investment scheme and the losses from that investment, which amounted to $1 million over the two years, had been claimed on the basis that he was a member of a partnership. During an audit of the taxpayer’s affairs, the taxpayer disclosed to the Tax Commissioner that the partnership losses should not have been claimed and that the 2007 return had been lodged by his tax agent without his authority. The Commissioner refused the claims for losses and issued amended assessments. However, the Commissioner also treated the taxpayer as a person who had made a voluntary disclosure and he decided to reduce the shortfall penalty originally imposed by 80%.

 

The taxpayer objected to the amended assessments and penalty on the basis that an ATO officer had led other taxpayers to understand that the investment he had made in the scheme could be made. However, the AAT affirmed the Commissioner’s decision. It held, among other things, that the returns had been lodged by the taxpayer’s tax agent with his authority and that he had failed to discharge the onus of showing that the scheme had not been entered into or carried out for the sole or dominant purpose of the individual obtaining a “scheme benefit”. This meant that in the circumstances, the Commissioner could, under the tax law, refuse the losses claimed and issue the amended assessments.

Property rental deduction claims mostly refused

 

An individual has been mostly unsuccessful before the AAT in challenging the Tax Commissioner’s decision to refuse a variety of deductions relating to rental properties. The individual, who worked full-time as an industrial chemist, owned rental properties with her husband and had done so for many years. In the 2003, 2004 and 2005 income years, they owned nine rental properties. The taxpayer declared a net rental loss for those years, arguing that she carried on a business of letting rental properties.

 

The AAT agreed that the taxpayer was carrying on a business of letting rental properties and allowed some claims, including part of her telephone, computer and other work-related expense claims. However, it refused most of the other disputed expenses, which included car expenses, travel expenses, repair and maintenance costs and the costs of investment courses and seminars. The AAT refused the claims, saying they either lacked the necessary connection with the individual’s income-producing activities, or there was insufficient evidence to support the claims.

Brothers in business together, but not a partnership

The Supreme Court of Western Australia has found that two brothers were not in a partnership. The two brothers had spent some 30 years in business together – their businesses included an accounting practice, property development, share dealings, corporate consulting and farming. However, the Court heard that their relationship deteriorated and culminated in a dispute as to whether they were in a partnership in those years – one brother (referred to by the Court as John, who was an accountant and tax agent) said no, while the other brother (referred to by the Court as Tony, who was not an accountant) said yes.

 

The Court said thousands of documents were filed, but none of them were a partnership agreement between the two brothers. It said the various deeds of settlement establishing trusts presented in evidence provided proof of the brothers’ intentions to trade exclusively through corporate entities and trusts and not to trade as partners. At the time of writing, it is understood that one of the brothers (Tony) is seeking an appeal against the decision.

Daughter found to be “puppet director” of company trustee

A married couple has been successful before the AAT in a matter concerning access to the capital gains tax concessions for small businesses. The key issue in dispute concerned a trust (in respect of which the couple were beneficiaries) and the trust’s entitlement to the concessions in connection with a capital gain made on the sale of assets by the trust in the 2008 income year. Specifically, the main issue was whether the trust was controlled, either alone or with others, by the couple’s daughter.

 

The Commissioner argued that the daughter was a controller of the trust and that, therefore, the trust was connected with other entities controlled by the daughter, with the result that the trust breached the eligibility requirements for any of the capital gains tax concessions sought by the couple. However, the AAT found that the husband alone was the person who controlled the trust for the purposes of the small business concessions. Therefore, entities connected with the daughter, who was found to be a mere “puppet director” of the company trustee, did not have to be taken into account in determining the trust’s entitlement to the concessions claimed by the couple.

 

In finding that the husband alone controlled the trust, the AAT noted, among other things, that the trust was not accustomed to acting in accordance with the daughter’s wishes independently of her father’s wishes in circumstances where her wishes and directions were actually her father’s.

 

TIP: The tax law provides four concessions to reduce, eliminate and/or provide a roll-over for a capital gain made on an eligible asset that has been used in a small business. These concessions include the “15-year exemption”, the “50% reduction”, the “retirement exemption” and the “roll-over” concession.

 

The availability of the concessions is subject to satisfying a range of conditions, and these rules can be tricky to apply in practice – improperly claiming the concessions can have devastating consequences. Please contact our office for further information.