cents & sensibility

tax news | views | clues

   IN THIS ISSUE

 

  • Superannuation guarantee amnesty introduced

  • ATO scrutinising car claims this tax time

  • What the super housing measures mean for SMSFs

  • Car limit for 2018/19

  • FBT: Car parking threshold

  • Personal Income Tax Cuts passed!

  • Early release of super on compassionate grounds: ATO

  • ATO putting clothing claims through the wringer

  • Tax time tips for small business

  • Major Australian banks set to remove SMSF loan offerings, citing a need to “streamline” its product offering

  • knpeople  

Superannuation guarantee amnesty introduced

 

The Government has introduced legislation to complement the superannuation guarantee ('SG') integrity package already before Parliament by introducing a one‑off, twelve-month amnesty for historical underpayment of SG.

 

The Bill incentivises employers to come forward and "do the right thing by their employees" by paying any unpaid superannuation in full, as well as the high rate of nominal interest (but without the penalties for late payment that are normally paid to the Government by such employers).

 

Employers that do not take advantage of the amnesty will face higher penalties when they are subsequently caught – in general, a minimum 50% on top of the SG Charge they owe. 

 

In addition, throughout the amnesty period the ATO will continue its usual enforcement activity against employers for those historical obligations they don't own up to voluntarily.

 

The amnesty will run for twelve months from 24 May 2018.

 

 

ATO scrutinising car claims this tax time

 

The ATO has announced that it will be closely examining claims for work-related car expenses this tax time as part of a broader focus on work related expenses.

 

Assistant Commissioner Kath Anderson said: 

 

“We are particularly concerned about taxpayers claiming for things they are not entitled to, like private trips, trips they didn’t make, and car expenses that their employer paid for or reimbursed.”

 

This is no doubt because over 3.75 million people made a work-related car expense claim in 2016/17 (totalling around $8.8 billion), and, each year, around 870,000 people claim the maximum amount under the cents-per-kilometre method.

 

Ms Anderson said that the ATO’s ability to identify claims that are unusual has improved due to enhancements in technology and data analytics: “Our models are especially useful in identifying people claiming things like home to work travel or trips not required as part of your job . . . simply travelling from home to work is not enough to qualify, no matter how far you live from your workplace.”

 

Ms Anderson said there are three golden rules for taxpayers to remember to get it right.

“One – you have to have spent the money yourself and can’t have been reimbursed, two – the claim must be directly related to earning your income, and three – you need a record to prove it.”

Case studies

 

False logbook

A traffic supervisor claimed over $11,000 for work related car expenses, and provided a logbook to substantiate his claim. 

 

However, upon investigation the ATO discovered that the logbook wasn’t printed until the following year – the taxpayer admitted the logbook was fraudulent and it was ruled invalid.

 

Even though the logbook was invalid, the taxpayer was able to provide other evidence to show that he had travelled at least 5,000 kilometres for work-related purposes, so the ATO used the cents per kilometre method to calculate the taxpayer’s deduction (but his claim was reduced from over $11,000 to under $4,000).

 

Claiming for home to work travel

A Laboratory Technician claimed $3,300 for work-related car expenses, using the cents per kilometre method for 5,000 kilometres. 

 

However, he advised that his employer did not require him to use his car for work; this claim was based on him needing to get to work.

 

The ATO advised the taxpayer that home to work travel is a private expense and is not an allowable deduction – his claim was reduced to nil and the ATO applied a penalty for failure to take reasonable care.
 

What the super housing measures mean for SMSFs

 

The ATO has reminded members of SMSFs that they will be able to use their voluntary super contributions to assist with buying their first home, or to make a contribution into their super from the proceeds of the sale of their main residence (under changes passed by Parliament in December 2017).

 

The First Home Super Saver Scheme

The First Home Super Saver (FHSS) Scheme allows SMSF members to save faster for a first home by using the concessional tax treatment available within super.

 

From 1 July 2018, SMSF members can apply to release certain voluntary concessional and non-concessional contributions made from 1 July 2017, along with associated earnings to help buy their first home.

 

Note: There are various conditions that need to be met in order to take advantage of this measure – contact our office if you would like to know more.

 

The downsizing measure

SMSF members who are 65 or over and exchange a contract for sale of their main residence on or after 1 July 2018 may be eligible to make a downsizer contribution of up to $300,000 into their super.

 

This downsizer contribution won’t count towards their contributions caps or total super balance test in the year it’s made. 

 

However, it will count towards the transfer balance cap and be taken into account for determining eligibility for the age pension.

 

SMSFs must ensure the member's contribution has satisfied all relevant conditions and completed the downsizer contribution form before accepting a downsizing contribution.

 
Car limit for 2018/19

 

The car limit is $57,581 for the 2018/19 income year (unchanged from the previous year).  This amount limits depreciation deductions and GST input tax credits.

 

FBT: Car parking threshold

 

The car parking threshold for the FBT year commencing 1 April 2018 is $8.83.  

 

This replaces the amount of $8.66 that applied in the previous year commencing 1 April 2017. 

 

Personal Income Tax Cuts passed!

 

Parliament has passed the Government's Personal Income Tax plan, meaning that the first stage of the proposed income tax cuts will start to take effect from 1 July 2018.

 

According to the Prime Minister, taxes "will now be lower, fairer and simpler".

 

The Government's plan has three steps:

1. The Government will introduce the Low and Middle-Income Tax Offset (in addition to the Low-Income Tax Offset) from 1 July 2018, being a non-refundable tax offset of up to $530 per annum to Australian resident low and middle-income taxpayers (apparently over 10 million taxpayers will get at least some tax relief from this new offset in 2019 income year). 

 

The offset will be available for the 2019, 2020, 2021 and 2022 income years and will be received as a lump sum on assessment after an individual lodges their tax return.

2. Lifting tax brackets, to protect Australians from the impact of ‘bracket creep’, as follows:

  • From 1 July 2018, the top threshold of the 32.5% personal income tax bracket will increase from $87,000 to $90,000. 
  • From 1 July 2022, the 19% personal income tax bracket will increase from $37,000 to $41,000, and the top threshold of the 32.5% personal income tax bracket will further increase from $90,000 to $120,000.
  • The low-income tax offset will also be lifted to $645.

 

3. The 37% tax bracket will be removed entirely from 1 July 2024, and the top threshold of the 32.5% personal income tax bracket will be increased from $120,000 to $200,000.

 

Early release of super on compassionate grounds: ATO

 

From 1 July 2018, responsibility for the administration of the early release of superannuation benefits on compassionate grounds will be transferred from the Department of Human Services (DHS) to the ATO.

 

Since the ATO is responsible for most of an individual's interactions with the superannuation system, this change will enable the ATO to build on these existing relationships and provide a more streamlined service to superannuation fund members.

 

A key improvement under the new process is the ATO providing electronic copies of approval letters to superannuation funds at the same time as to the applicant, which will mitigate fraud risk and negate the need for superannuation funds to independently verify the letter with the Regulator. 

 

Individuals will also upload accompanying documentation simultaneously with their application, rather than the current 'two-step process'.

 

Since DHS will accept early release applications up until 30 June 2018, there will be a short transition period where DHS will continue to process those existing applications and complete any necessary reviews. 

 

Nonetheless, from 1 July 2018 the ATO will process all new applications.

  

ATO putting clothing claims through the wringer

 

A focus on work-related clothing and laundry expenses this Tax Time will see the ATO "more closely examine taxpayers whose clothing claims don’t suit them".

 

According to Assistant Commissioner Kath Anderson, around 6 million people claimed work-related clothing and laundry expenses last year, with total claims adding up to nearly $1.8 billion.

 

She went on to say:

"While many of these claims will be legitimate, we don’t think that half of all taxpayers would have been required to wear uniforms, protective clothing, or occupation-specific clothing.”

 

With clothing claims up nearly 20% over the last five years, the ATO believes a lot of taxpayers are either making mistakes or deliberately over-claiming. 

 

Common mistakes include people claiming ineligible clothing, claiming for something without having spent the money, and not being able to explain the basis for how the claim was calculated.

 

“Around a quarter of all clothing and laundry claims were exactly $150, which is the threshold that requires taxpayers to keep detailed records. We are concerned that some taxpayers think they are entitled to claim $150 as a ‘standard deduction’ or a ‘safe amount’, even if they don’t meet the clothing and laundry requirements,” Ms Anderson said.

 

“Just to be clear, the $150 limit is there to reduce the record-keeping burden, but it is not an automatic entitlement for everyone. While you don’t need written evidence for claims under $150, you must have spent the money, it must have been for uniform, protective or occupation-specific clothing that you were required to wear to earn your income, and you must be able to show us how you calculated your claim.”

 

Ms Anderson said the ATO also has conventional clothing in its sights this year. “Many taxpayers do wear uniforms, occupation-specific or protective clothing and have legitimate claims.  However, far too many are claiming for normal clothing, such as a suit or black pants.  Some people think they can claim normal clothes because their boss told them to wear a certain colour, or items from the latest fashion clothing line.  Others think they can claim normal clothes because they bought them just to wear to work.

 

“Unfortunately, they are all wrong – you can’t claim a deduction for normal clothing, even if your employer requires you to wear it, or you only wear it to work”.

 

Tax time tips for small business

 

The ATO claims that it is committed to supporting small businesses and making it as easy as possible for them to understand and meet their tax obligations at tax time.

Consequently, Assistant Commissioner Mathew Umina has some tips to help small business in the lead up to and during tax time, including:

  • keeping up-to-date records, which will help small businesses to complete and lodge their tax returns, manage cash flow, meet their tax obligations and understand how their business is doing;
  • consider small business tax concessions, such as:

– simplified trading stock rules (if the estimate of the difference between opening and closing trading stock is $5,000 or less, the small business doesn't

need to do a stocktake);

 

– concessions that allow new small businesses to claim an immediate deduction for start-up costs like professional, legal and accounting advice;

 

– simplified depreciation rules, including the $20,000 instant asset write-off for assets costing less than $20,000 bought and installed by 30 June 2018.

 

Please contact our office if you need any advice as to how any of the abovementioned small business tax concessions may be relevant to your business.

 

Major Australian banks set to remove SMSF loan offerings, citing a need to “streamline” its product offering

 

Westpac announced that it would no longer offer SMSF loans for new consumer or business lending. This means the SMSF Investment Property Loan will no longer be available for sale, and business lending to an SMSF for either residential or commercial securities will no longer be available.

 

The changes are set to come into place on 31 July 2018, customers with existing SMSF loans will continue to be serviced by the bank to split, switch, or extend loans.

 

However, existing clients will not be able to switch from principal and interest repayment structures to interest only. Clients also won’t be able to extend interest only terms.

 

Westpac subsidiary St. George last week announced that it would also be removing its SMSF Home Loan product and Business Lending to SMSFs from sale as of 31 July 2018. 

 
knpeople

 

Australia’s Biggest Morning Tea

We’ve been busy over the past few months and we’ll kick off with Australia’s Biggest Morning Tea, held in our office on Thursday 24th May.  Thanks to the staff who helped cater for this event and for those who donated to this very important cause!

 

  

knp Retreat

On the 31st of June, we all headed off to Daylesford/Hepburn Spring for a staff conference/retreat.  We were booked in at Grange Bellinzona, a beautiful Edwardian venue offering an excellent environment for relaxing and a productive retreat.  Along with the conference and team bonding, a lot of fun was had by all. 

 

On the Friday night of the staff retreat, we celebrated with our end of financial year dinner.  The dress code was to come with a unique head piece.  All the knp team participated and it was great to see the effort some went to. 

 

The winner of the most unique head piece went to Julieanne. An amazing effort, as Julieanne painted her own face. Congratulations Julieanne.

The Amelia Award – presented at our end of financial year dinner.

 

The Amelia Award is an annual award honouring the life of Amelia Karagiannis which is presented at the End of Financial Year Dinner. The following criteria is used to select the winner of the Amelia Award: 

 

  • Someone who creates a positive impact on other people’s lives at knp 
  • Sincerely cares about others wellbeing at knp 
  • Cheerful, friendly and brightens up other people’s day 
  • Is there in time of need 

 

We had five nominations for this year’s Amelia Award. The five staff members nominated were:

 

  • Rebecca Chan
  • Talia Ravensdale
  • Foteni Stefanou
  • Nicki Cebis
  • Melissa Langley

 

All were very deserving of this award however there can only be won winner.  

 

 

 

If you’re interested in a relaxing escape, details of Bellinzona can be found here:
https://www.grangecc.com.au/bellinzona-daylesford/

 

Dry July

This year Nicki (the only brave one from knp) has decided to take on Dry July!  Nicki has kissed the booze goodbye for 31 days to raise money for people affected by cancer.

 

If you would like to support Nicki and follow her journey go to: https://www.dryjuly.com/users/nicki-cebis 

 

 

 

Important: Clients should not act solely on the basis of the material contained in Cents & Sensibility. 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. Cents & Sensibility 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.  

 

Please contact us if you wish to discuss how the points raised in this edition specifically affect you.Yours faithfully,

 

The knp Team