Merry Christmas & Happy New Year
Posted on | December 14, 2010 | Comments Off
We wish to advise that our office will close from
5:30 p.m. on Thursday, 23 December 2010
and will re-open at
9:00 a.m. on Monday, 10 January 2011
We would like to take this opportunity to wish our clients and friends
a joyous Christmas and a prosperous new year.
Thank you.
Hurley & Co.
Chartered Accountants
185 SMSF’s made non-complying
Posted on | December 10, 2010 | Comments Off
The Australian Taxation Office has announced that 185 self-managed superannuation funds (SMSF) were made non-complying in the financial year ended 30 June 2010. The ATO cites the following reasons for non-compliance, including:
- SMSFs providing loans to related parties
- Illegal early release of super
- Serious breaches of the in-house asset rules
- Refusal to lodge returns.
To avoid the risk of your self-managed superannuation fund from being declared as non-compliant, give us a call on (02) 9954 – 3843 or make an online enquiry by clicking here.
Source: Australian Taxation Office
Tax Alert for December & January 2011
Posted on | November 22, 2010 | Comments Off
We are pleased to supply you with the December 2010/January 2011 edition of Client Alert, which contains information on a number of important developments in taxation up to and including 17 November 2010.
Trust Entitlements and Loans: Tax Office Issues Guidance
The Tax Office has released its keenly awaited guidance on the tax treatment of trust entitlements and loans. The guidance, known as a practice statement, explains how the Tax Office will apply its ruling on when a private company with an unpaid present entitlement makes a loan to the trust estate which generated the entitlement. The Commissioner of Taxation said he was aware of the importance of this issue to businesses, particularly small businesses, which use a trust structure.
The Commissioner said the practice statement provides practical ways for businesses to work towards a compliant structure with minimal impact on their cash flows or how they operate. He said that where businesses had made mistakes in the past, the practice statement provides several options for private companies to self-correct.
TIP: The opportunity to self correct is available for a limited time only. Please contact our office if you think you may be affected.
Tax Office Highlights Common PAYG Instalment Errors
The Tax Office has been calling selected business operators in the $2 million to $100 million annual turnover range to discuss instances where the pay-as-you-go (PAYG) instalment amount received for the quarter under review is significantly different to the PAYG instalment amount received in a previous quarter.
The Tax Office has noted common errors that preparers make when completing PAYG instalment details on business activity statements – for example, instalment income amounts being adjusted rather than instalment rates varied.
TIP: if you are experiencing difficulty with correctly completing your instalment activity statements, please contact our office.
SMSFs and Private Companies Investing in Trusts: Tax Office Warning
The Tax Office has warned self-managed super funds (SMSFs) not to invest in trusts with the intention of making funds available for lending to members. The warning comes in a taxpayer alert which describes an arrangement where an SMSF invests money in an unrelated trust that then on-lends the funds to an SMSF member or relative. The Tax Office says such arrangements attempt to circumvent strict rules prohibiting SMSF trustees from lending money or providing financial assistance to a member or a relative using the resources of the fund.
In another similar taxpayer alert, the Tax Office warned private companies against investing in trusts with the intention of making funds available for lending to shareholders. The taxpayer alert describes an arrangement where a private company invests funds in an unrelated trust that then on-lends the funds to a shareholder or an associate of a shareholder. The Tax Office warns the arrangement may be an attempt to circumvent tax rules which are aimed at preventing private companies from making tax-free distributions of profits to shareholders or their associates.
Self-education Expenses for Youth Allowance Recipient Deductible
The High Court unanimously dismissed the Commissioner of Taxation’s appeal and held that a taxpayer was entitled to a deduction for expenses incurred in deriving income from receiving Youth Allowance. The Full Federal Court had previously dismissed the Commissioner’s appeal and held that self-education expenses incurred by the taxpayer in deriving Youth Allowance were allowable deductions.
Declaration of Trust over Land Sold, so No Personal Tax Liability
A taxpayer has been successful in obtaining a declaration from the Supreme Court of Western Australia that a valid trust had been created over a property he had originally bought in 1990 under his own name. The trust had been declared in favour of a family trust at the time of the land’s subdivision five years later. As a result, the Commissioner of Taxation could not argue that the taxpayer was personally liable for capital gains tax on one of the lots sold in 2006. Instead, the profit had been included in the family trust’s tax return in that year and had been offset by the trust’s carried forward losses.
Subsidy Paid for Loss-making Contracts Assessable as Income
In a recent case, the Administrative Appeals Tribunal ruled that a taxpayer in the waste disposal business was assessable on a “subsidy” paid to it by a competitor in connection with the taxpayer assuming unprofitable waste disposal contracts that it acquired from the competitor under an agreement. Even though the transaction was a one-off, the Tribunal found it was assessable as ordinary income as the agreement was entered into in the ordinary course of the taxpayer’s business with a view to making a profit.
Employing your Spouse? Ensure There’s an “Employment Relationship”
Two recent cases before the Administrative Appeals Tribunal dealt with the scenario of a husband employing his wife to assist with looking after rental properties. The question before the Tribunals was whether there was a “genuine employment relationship”. As the two cases show, if it is found that there was no employment relationship in the circumstances, the taxpayer would not be entitled to deductions for salary or wages, fringe benefits, and superannuation contributions paid in relation to “employing” the spouse. Rather, the outgoings would be considered to be private or domestic in nature.
TIP: it is not against the law to employ your spouse. However, the arrangement must be genuine and this requires examining the totality of the relationship when characterising it. As demonstrated by the cases, one cannot transform an existing domestic relationship simply by calling it a different name, or by adopting some aspects of an employment relationship.
Increasing Adjustments in BASs as Debts Remain Unpaid
In another case, the Administrative Appeals Tribunal held that three taxpayers were required to reverse earlier claims for input tax credits in their later Business Activity Statements. As the taxpayers accounted for GST on an accruals basis, the credits were attributed to the tax period in which the tax invoices were received. However, those invoices remained unpaid after 12 months. Under the GST legislation, if an invoice remains outstanding after 12 months, a recipient is required to reverse any input tax credits previously claimed. The Tribunal noted there was little evidence of the invoices being paid, and therefore affirmed that the taxpayers had an increasing adjustment.
For more information or to make an appointment with our professional staff, please contact Hurley & Co. Chartered Accountants on (02) 9954-3843 or click here to make an online enquiry.
The value of SMSF audits
Posted on | November 1, 2010 | Comments Off
Darin Tyson-Chan, the founder of SMSF Magazine, has an interesting article on the InvestorDaily regarding the additional benefits of self-managed superfund audits.
He states that:
Auditors can actually assist in the proper running of the fund, so if an SMSF is experiencing compliance issues the auditor can help rectify the situation.
In particular, working with an auditor in the event of a breach serious enough to have a contravention report lodged can be significant benefit to the SMSF… if a contravention has been reported to the ATO … this [having an auditor] can help avoid the possibility of having the SMSF declared non-complying.
For the full article, please visit the InvestorDaily website. To find out more about SMSFs from establishment to audits, contact Hurley & Co on (02) 9954-3843 or click here to make an online enquiry.
Tax Alert for September
Posted on | August 27, 2010 | Comments Off
Payment Summaries and Reporting of Incorrect Super Amounts
The Tax Office says some employers have been incorrectly including compulsory superannuation amounts as reportable employer super contributions on their employees’ payment summaries for the 2009-10 income year. Reportable employer super contributions should only include additional super contributions made by an employer, for example, super contributions made on behalf of an employee under a salary sacrifice arrangement. The payments being incorrectly included cover things such as super guarantee contributions and industrial agreement (award) super contributions.
TIP: Employees should review their payment summaries and ask for amended payment summaries from their employers if they incorrectly contain compulsory super amounts as reportable employer super contributions. This is important because incorrect amounts included may affect eligibility for certain tax concessions and Centrelink benefits, and may cause a liability for the Medicare levy surcharge.
TIP: If employers have issued payment summaries to their employees that incorrectly include compulsory super amounts, they can notify affected employees and issue them with amended payment summaries. If employers have also already lodged their payment summary annual reports with the Tax Office, they will need to lodge an amended annual report.
New SMSF Member Verification Process in the Pipeline
The Tax Office has announced that it expects to implement, later this year, a new self-managed super fund (SMSF) member verification process, which is designed to enable authorised APRA-regulated super funds and other authorised entities to confirm whether or not the member requesting a rollover is actually a member of the SMSF.
The new process adds another plank to efforts by the Tax Office to deter schemes which seek to obtain illegal early access to or release of superannuation. The first plank, which has been in operation since January this year, involved upgrading the SMSF registration process so that new SMSFs may not be displayed on the Super Fund Lookup (SFLU) Website for up to seven days while the Tax Office carries out a risk assessment of the SMSF.
TIP: The new process is expected to make processing member rollovers from superannuation funds to SMSFs more efficient and secure. However, it would be important for the Tax Office to be notified quickly of any SMSF membership changes. For example, it would be prudent to ensure name changes are appropriately dealt with before a rollover is attempted by a member. For more information, please contact
ATO Keeps a Close Eye on the Cash Economy
The Tax Office has reminded taxpayers that increased data-matching and benchmarking will be used to identify businesses participating in the cash economy.
The Tax Office says, this year, it will write to 110,000 small business taxpayers which it believes may be participating in the cash economy. It said the majority of the letters sent were to businesses reporting outside the small business performance benchmarks.
However, the Tax Office noted that businesses that fall within the benchmarks should not assume that they are safe from an ATO audit or review.
The Tax Office said the benchmarks complement its recently expanded data-matching program, which now includes data from online auction sites eBay and Trading Post.
TIP: The Tax Office Compliance Program for 2010-11 noted that the cash economy continues to be a major focus. Specific behaviours that the Tax Office is concerned about include: paying cash-in-hand wages; skimming some or all of the cash takings; barter and running part of normal business activities off the books.
Share Investor, Not a Share Trader
In a recent case, the Administrative Appeals Tribunal found a taxpayer was not carrying on a share trading business but rather he was a share investor.
During the 2007 and 2008 income years, the taxpayer was engaged in the buying and selling of shares. The taxpayer had lodged his tax returns on the basis that he was a share trader for the relevant income years.
However, after examining the indicators for such a business, the Tribunal was satisfied that the taxpayer was not carrying on a share trading business.
TIP: Shareholders should be aware that the Tax Office has its sights set on share disposals as part of its Compliance Program for 2010-11. It had also issued an alert mid last year warning taxpayers against claiming losses on revenue account when they had previously claimed gains on capital account (Taxpayer Alert TA 2009/12).
Excess Super Contributions Assessments Upheld
The Administrative Appeals Tribunal has found it did not have the jurisdiction to review a decision of the Commissioner, who had refused to make a determination to disregard (or to reallocate) excess non-concessional superannuation contributions made by two taxpayers. This was because the Tribunal was of the view that the making of the Commissioner’s discretion is independent of the issuing of the assessments.
TIP: Super investors can apply to the Commissioner to disregard or reallocate excess contributions for a financial year. However, the Commissioner’s discretion is limited to special circumstances outside the control of the investor.
Soldier’s Motor Vehicle Travel Expense Claim Denied
The Administrative Appeals Tribunal has denied a claimed deduction for motor vehicle travel expenses incurred by a soldier in the Australian Defence Forces in transporting his ‘deployment priority 1’ kit from home to barracks as the Tribunal found they did not have the essential character of a business expense, nor were they incurred in gaining or producing assessable income. Instead, the Tribunal considered the expenses were of a private or domestic nature in the circumstances.
TIP: Taxpayers can claim motor vehicle expenses on the basis they are carrying bulky equipment, but only if they can qualify that it is a necessary part of their job.
Superannuation Benefits — Timing of Payment by Cheque
The Tax Office has issued a draft self-managed super fund determination which states that a superannuation benefit can be considered to be ‘cashed’ at the time a cheque or promissory note is issued to the member or beneficiary, provided the money is payable immediately (ie not post-dated) and the trustee takes all reasonable steps to ensure that the money is paid promptly (ie generally within a few business days).
For more information, please contact Hurley & Co at (02) 9954-3843.
Important: This is not advice. Clients should not act solely on the basis of the material contained in this Bulletin. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. The Bulletin is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval. For more information, contact Hurley & Co on (02) 9954 3843 or visit us at www.hurleyco.com.au
Tax Alert for July – August
Posted on | August 13, 2010 | No Comments
Trust Income and Bamford: Tax Office View
The Tax Office has released a Decision Impact Statement outlining the Commissioner’s view on the High Court’s decision on a case which dealt with key elements of the tax law by which the liability of trustees and beneficiaries to tax is determined.
The case is broadly known as the Bamford decision and concerned the assessment of the (tax) net income of the Bamford Trust. In particular, the case examined the meaning of the phrases ‘income of the trust estate’ and ‘that share’.
This long-await Decision Impact Statement sets out a number of general propositions, as understood by the Tax Office, which have emerged from the High Court’s decision. It covers the Tax Office’s administrative treatment of tax returns for the 2009/10 and earlier income years. It also identifies a number of issues in relation to tax laws dealing with trust income which the Tax Office considers to remain unresolved.
For more in depth information and advice, please do not hesitate to contact us.
Div 7A Loans and Trust Entitlements
The Tax Office has released a Taxation Ruling, which sets out the Commissioner’s views on when a private company with an unpaid present entitlement (UPE) from an associated trust is considered to have made a loan to the trust for the purposes of the deemed dividend provisions.
Broadly, the ruling provides that the company will be considered to have made a loan under the provisions to the trust if the UPE has been satisfied and the company agrees to loan the amount to the trust, or if the company does not call for payment of a subsisting UPE and thereby agrees that it can be used for trust purposes.
For further advice regarding these new changes, please contact us on (02) 9954 3843.
Commissioner’s Discretion to Disregard Deemed Dividend Provisions
The Tax Office has also released a Draft Taxation Ruling in which it outlines the requirements to be satisfied before the Commissioner can make a decision to disregard a deemed unfranked dividend from arising when a private company lends, pays or forgives an amount to a shareholder or associate of the shareholder (unless adequate arrangements are in place). The draft ruling also sets out the requirements to be satisfied before the Commissioner may allow the dividend to be franked if the deemed dividend provisions operate.
The draft states that the Commissioner may exercise this discretion where:
- the provisions apply to deem a private company to have paid a dividend to a particular entity, or where an amount is included in the assessable income of a particular entity in relation to a private company; and
- that result arises because of an honest mistake or inadvertent omission by the recipient of the dividend, the private company or any other entity that contributed to the result.
Vacant Land not Input Taxed as ‘Residential Premises’
In a recent case, the Full Federal Court unanimously dismissed a taxpayer’s appeal against an assessment of GST in respect of the sale of two separate blocks of vacant land in 2004 and 2005. The Full Court held that vacant land is not land capable of being occupied as a residence or for residential accommodation within the GST definition of ‘residential premises’.
SMSFs and Instalment Warrants: Rules to be Tightened
The Government proposes to amend the superannuation law to reduce the prudential risks for superannuation funds investing in limited recourse borrowing arrangements (eg instalment warrant arrangements).
The Government hopes to achieve this by repealing the provision in the superannuation legislation which allows a trustee of a regulated superannuation fund to borrow money using limited instalment warrants, and replacing it with two new provisions.
These new provisions seek to ensure that:
- the recourse of the lender (or any other person) against a superannuation fund trustee for default on the borrowing is limited to rights relating to the acquirable asset;
- the asset within the arrangement can only be replaced in prescribed circumstances that arise from owning the original asset; and
- the borrowing is referable and identifiable only over a single asset (excluding money) or a collection of assets which are identical and are treated as a single asset.
For assistance with SMSFs and instalment warrants, please contact us on (02) 9954 3843.
Superannuation Co-contribution: Proposed Changes
The Government has also introduced a Bill seeking to modify the operation of the Government superannuation co-contribution scheme. In brief, the Bill will:
- freeze the indexation of the co-contribution income thresholds for the 2010/11 and 2011/12 income years. That is, the lower and higher income thresholds will remain at $31,920 and $61,920 (the current thresholds for the 2009/10 income year), respectively, for the two years; and
- permanently set the current matching rate at 100% and the maximum co-contribution that is payable on an individual’s eligible superannuation contributions at $1,000.
The amendments are proposed to apply to the 2009/10 and later income years.
Henry Tax Recommendations to Watch Out For
The long-awaited Henry tax report has been publicly released with the Government’s initial response. There are a number of recommendations made by the Government which, if implemented, will impact many taxpayers. Below is a snapshot of some of the main reforms put forward by the Government:
- reducing the company tax rate to 28%;
- allowing small businesses to immediately write-off assets valued at under $5,000 ($1,000 under the present law);
- increasing the superannuation guarantee rate from 9% to 12%, phasing in from 1 July 2013.
- providing a contribution of up to $500 for workers with incomes up to $37,000 from 1 July 2012.
Various Rates and Thresholds for 2010/11
The Tax Office has released the following rates and thresholds for the 2010/11 income year:
- car depreciation limit and luxury car tax threshold — $57,466;
- fuel efficient car limit — $75,375;
- CGT improvement threshold — $126,619.
GIC and SIC Rates Released
The Tax Office has advised that the general interest charge and shortfall interest charge rates for the first quarter of the 2010/11 financial year (ie 1 July 2010 – 30 September 2010) are as follows:
| Rate | Annual (%) | Daily (%) |
| GIC | 11.80 | 0.03232877 |
| SIC | 7.80 | 0.02136986 |
The Tax Office has also released the interest rate for overpayments, early payments and delays in refund for the first quarter of the 2010/11 income year. The applicable interest rate is 4.80%.
Important: This is not advice. Hurley & Co. Clients should not act solely on the basis of the material contained in this Bulletin. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. Hurley & Co therefore recommend that our formal advice be sought before acting in any of the areas. The Bulletin is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval. For more information, contact us on (02) 9954 3843 or refer to our website at www.hurleyco.com.au. Liability limited by a scheme approved under Professional Standards Legislation.
Company Tax Return Checklist Now Available
Posted on | July 7, 2010 | Comments Off
As company tax returns for the year ended 30th June 2010 are now due for lodgement, we have prepared a checklist which will help you provide the necessary documents to have your tax return completed by our professional staff as soon as possible. This complimentary Checklist allows us to gain a comprehensive view of your requirements to achieve the best possible results without compromising on quality and accuracy.
Please email us at admin@hurleyco.com.au or call us on (02) 9954 3843 during business hours, to request your free copy now. Make sure to also request our complimentary checklist for individuals.
Related posts:
Individual Tax Return Checklist
Posted on | July 5, 2010 | Comments Off
As the Individual Income Tax Returns for the year ended 30th June 2010 are now due for lodgement, we have prepared a checklist which will help you provide the necessary documents to have your tax return completed by our professional staff as soon as possible. This Checklist allows us to gain a comprehensive view of your requirements to achieve the best possible results without compromising on quality and accuracy.
Please email us at admin@hurleyco.com.au to request a copy or phone us during business hours on (02) 9954 3843 now.
Launch of our new website
Posted on | June 1, 2010 | Comments Off
We are proud to announce the launch of our new website. In this section, we will post regular updates on our firm.
