Working on an upcoming property transaction? Check the vendor's GST details
Employee share schemes and start-up companies
Foreign employment income
Changes to how super excess concessional contributions are taxed
Accidental Credit Providers
Updates from the ATO
Various issues affecting 2013 income tax returns Listed below are a variety of issues that you might need to be aware of when preparing your return or after you have lodged it.
Increase in electronic refunds – the ATO has indicated there has been a marked increase in refunds being received electronically by taxpayers during Tax Time 2013. From 1 July 2013, individual taxpayers were required to include bank account details to obtain their refund via EFT. To avoid delay in receiving your refund include your bank account details on your tax return.
Centrelink clients to lodge by 30 June 2014 – the ATO has advised that if you are intending to lodge a lump sum Family Tax Benefit, Child Care Benefit or Single Income Family Supplement (SIFS) claim for the 2012-13 financial year, you must do so by 30 June 2014. This is due to changes to the claim lodgement period administered by the Department of Human Services. Also, if you received or expect to receive Family Tax Benefit, Child Care Benefit and/or SIFS for the 2012-13 financial year, you must lodge your income tax return by 30 June 2014 to receive your benefits.
Warning over income tax fraud schemes – there have been some recent tax fraud schemes occurring including schemes arranged by an organised crime syndicate that has allegedly been stealing information and creating fictitious payment summaries to obtain refunds fraudulently. There has also been a huge increase in phishing scams.
The ATO warns taxpayers to protect their personal and financial details. You should keep a wary eye out for these schemes and ensure you don’t get caught up in one.
Net medical expenses tax offset phase out – The net medical expenses tax offset phase out is planned to begin on 1 July 2013. Taxpayers who received the offset in 2012/13, will continue to be eligible for the offset in 2013/14, if they have eligible out of pocket medical expenses above the threshold. Following on from this, taxpayers receiving the offset in 2013/14, will also be eligible for the offset in 2014/15. The offset will however continue to be available until 1 July 2019 for taxpayers who have out-of-pocket expenses relating to disability aids, attendant car or aged care expenses.
More information about the changes can be found on the ATO website. At the time of writing, the Bill enacting this change had passed both Houses of Parliament but had not yet become law.
Think about what you might need to do before 30 June 2014 rolls around The end of the 2014 income tax year is fast approaching and before you know it, 30 June 2014 will be upon you. Now is the time to think about what you might like to do for the rest of the 2014 financial year as well as start to think about planning for 2015.
If eligible for the net medical expenses tax offset, are you likely to reach the threshold for this year? Are there any tax deductible donations you have been putting off that you might want to make before 30 June 2014? If you are eligible, to qualify for the government’s superannuation co-contribution scheme, contributions must be made by 30 June (and there are other tests that also need to be satisfied). Are you near retirement? If so, is there discretionary income that you might want to consider deferring?
Le Cornu Lewis Hancock can assist you with these questions and provide you with additional advice relating to your individual situation.
Announced un-enacted Measures In December 2013, the Assistant Treasurer, Senator Arthur Sinodinos, announced the outcome of consultations over the backlog of 92 announced but unlegislated tax and superannuation measures.
The Government previously announced that 18 measures would proceed, three would be amended and seven would not go ahead including for the former government’s proposal that would have impacted on car fringe benefits and the cap on self-education expenses.
Of the 64 measures that were considered further, 16 will proceed and 48 measures will not proceed. Details are set out in the table attached to the Assistant Treasurer’s media release.
Those that are proceeding that may be relevant to you include:
Capital gains tax treatment of certain compensation payments and insurance policies;
Superannuation measures around unlawful payments and illegal promotion of early release schemes; and
Applying a reverse charge for the supply of going concerns and farmland for GST.
Those that are not proceeding that may be of interest to you include:
Capital gains tax relief for taxpayers affected by natural disasters;
Capital gains tax: minor amendments ensuring the proper functioning of the capital gains tax provisions for deceased estates; and
Capital gains tax: refinements to the law for deceased estates (this would have allowed testamentary trusts to distribute the assets of a deceased without CGT implications).
It is intended that most of these measures that are to be processed will pass into law during 2014.
MRRT and Carbon Tax repeals and associated changes As part of its pre-election promises, the Coalition would abolish the carbon and mining taxes. The abolition of these taxes also involved the wind-back of certain other measures including:
The instant asset write-off amount of $6,500 for small businesses from 1 January 2014.The instant asset write-off will be reduced back to $1,000;
The accelerated deprecation for motor vehicles that is available to small businesses. This will no longer be available from 1 January 2014.
The loss carry-back measure – this measure will only apply for the 2013 income year;
The Schoolkids’ Bonus will no longer be available;
The increase to the superannuation guarantee charge percentage will be deferred by 2 years so that it remains at 9.25% for the 2014, 2015 and 2016 income years. See the table below for the proposed rate increases over the coming year:
Superannuation guarantee charge rate
From 1 July 2013
From 1 July 2014
From 1 July 2015
From 1 July 2016
From 1 July 2017
From 1 July 2018
From 1 July 2019
From 1 July 2020
From 1 July 2021
The Government will not proceed with the following personal income tax changes which were to commence on 1 July 2015:
Increase in the tax-free threshold from $18,200 to $19,400;
Increase the income tax rate to 33% (from 32.5%) for the income bracket $37,001 - $80,000;
There are Bills before Parliament containing the repeal of the carbon and minerals rent resource tax and the measures listed above at the time of writing. It is anticipated that these changes will pass through Parliament shortly.
Taxable payments annual reports and contractors in the building and construction industry Businesses in the building and construction industry are required to report certain information concerning contractors including their name, ABN, address, total amount paid to them for the year and the total amount of the GST included in that amount.
Recently, the ATO has been telephoning some businesses in the building and construction industry directly to:
test the levels of understanding of the requirements of the new system; and
help businesses to comply with their taxable payments annual reporting obligations.
follow up with businesses that have not yet lodged a report (where ATO records indicate they should have); and
follow up with businesses who have advised the ATO that they are not required to report (where ATO records indicate they have a reporting requirement).
The businesses are being contacted directly even if they are clients of tax agents. As such, this is a big focus area for the ATO.
If you work as a contractor in the building and construction industry, payments that have been made to you by another business are likely to be reported to the ATO through this system.
If you are a contractor and have any concerns about these reports, speak to Le Cornu Lewis Hancock who will be able to assist you with any queries you may have.
Working on an upcoming property transaction? Check the vendor's GST details Are you about to purchase some property? If so, you should know whether the vendor is registered for GST as this may affect your transaction.
The ATO has advised that it has recently disallowed claims for input tax credits related to the purchase of commercial real property. In these cases, the ATO has noticed that the taxpayers and their agents failed to check that the vendor was registered for GST at the time of settlement.
There is information on the ATO’s website containing advice and information about what to check for.
We recommend that you contact Le Cornu Lewis Hancock prior to your property transaction, to ensure you obtain the necessary information about the vendors GST status. Employee share schemes and start-up companies Are you employed by a start-up company? Have you been issued shares or options in an employee share or option scheme? If so, you should be aware that Treasury has recently been consulting on these rules with the tax profession. This consultation may result in some changes to the rules that apply to the taxation of employee shares schemes. However, whether this occurs will depend on the outcome of this consultation.
Foreign employment income Do you earn foreign employment income? If so, you should note that on 27 November 2013, the ATO issued Taxation Ruling TR 2013/7 entitled "Income tax: foreign employment income: interpretation of s 23AG(1AA) of ITAA 1936."
The Ruling sets out the Commissioner's views on the interpretation of aspects of subsection 23AG(1AA) of ITAA 1936. This Ruling specifically considers:
what is the 'delivery of Australian official development assistance by the person's employer' within the meaning of the relevant provisions;
when foreign service is 'directly attributable' to the activities listed in the relevant provisions;
what is a 'disciplined force' within the meaning of the relevant provisions;
what is the meaning of 'deployment' within the meaning of the relevant provisions; and
who is a 'member' of a disciplined force within the meaning of the relevant provisions.
The Ruling applies to Australian resident individuals serving in a foreign country as an employee or office holder.
The Ruling does not consider certain terms in the provisions and does not deal with the period of foreign service. There is other guidance on these issues.
If you derive income from foreign employment, you may wish to speak to LeCornu Lewis Hancock about whether this ruling has any impact on your particular circumstances.
Changes to how super excess concessional contributions are taxed The ATO has advised that excess super concessional contributions made from 1 July 2013 will be included in an individual’s assessable income and taxed at their marginal tax rate. As part of the assessment process clients will receive a non-refundable tax offset of 15% of their excess concessional contributions along with an additional excess concessional contribution charge.
MySuper From 1 January 2014, employers need to make superannuation contributions to a fund that offers a MySuper product for any employee who does not select a preferred fund.
If you make contributions to a Fund on behalf of employees who have not selected a preferred fund, and you have not received information from that Fund about their MySuper product, you should you contact the Fund now.
Employees should speak to their employer about this or their super fund if they are unsure what arrangements their super fund has put in place to meet the MySuper requirements.
Accidental Credit Providers In accordance with the Privacy Act 1988 (Cth), businesses providing credit must have clear and separate policies and procedures for the management of, and dealing with “credit information”.
Prior to 12 March 2014, the credit information provisions only applied to banks and the like, however the definition of “credit provider” has now been expanded and covers other businesses, including those providing credit on more than 7 day terms.
If you are caught within the definition of credit provider, you must have in place a credit information policy , and procedures on how to deal with such information.
The changes are significant, and apply to all businesses. If you have any concerns regarding the new provisions, contact Le Cornu Lewis Hancock for further information.
Updates from the ATO
Nurses, midwives and direct carers – claiming work-related expenses – there is information on the ATO website for work-related expenses that can be claimed by nurses, midwives and direct carers.
Assets in the professional photography services industry - the ATO is reviewing the assets used in the professional photography services industry with a view to making new effective-life determinations. The new determinations will apply to new assets purchased or installed on or after 1 July 2015.
Requesting copies of tax documents from the ATO - The ATO has advised that a taxpayer or their authorised representative can use "Copies of tax documents request – individuals and authorised representatives" form to request copies of tax returns, payment summaries and notices of assessment. You can access the document for individuals here.
Taxwise® News is distributed quarterly by professional tax practitioners to provide information of general interest to their clients. The content of this newsletter does not constitute specific advice. Readers are encouraged to consult their tax adviser for advice on specific matters.