BT Corporate Advisory Pty Ltd: a Chartered Accounting firm, Malvern, Victoria.

23/12/2011 Education tax refund - what you need to know

We often get asked about Education Tax Refund, here is brief outline of this benefit:

The education tax refund (ETR) helps eligible families and independent students meet the cost of primary and secondary school education. You can claim the ETR for education expenses you incur while your child attends primary or secondary school. click here to read more

Families and approved care organisations can claim 50% of their eligible educational expenses if either of the following apply:

they were entitled to receive family tax benefit (FTB) Part A for the child
a payment was made for the child that stopped them from receiving FTB Part A for that child.

Independent students may also be eligible to claim the ETR. For the period 1 July 2010 to 30 June 2011, you can claim up to:

$794 for each eligible child in primary school - that is, a refund of $397
$1,588 for each eligible child in secondary school - that is, a refund of $794.

If your expenses exceed your refund limit for the year, any excess can go towards your following year's refund claim, as long as you are still eligible.

Please call our office to discuss it further or visit the ATO website: www.ato.gov.au

6/12/2011 Australian economic growth set to trump OECD countries

Australia’s economic growth is expected to be among the highest in the developed world next year thanks to mining investment and booming commodity prices, according to a report from the Organisation for Economic Cooperation and Development But the report suggests interest rates might need to come down again if Europe’s economic woes deepen. Click here to read more

The semi-annual Economic Outlook pegs Australia’s economic growth at 4% in 2012, with unemployment hovering at around 5.25% for the next several years. According to the OECD, growth numbers are projected to be slightly less rosy in 2013 at 3.2%, though inflation should stay right on target at 2.5%.

The Paris-based group applauded the Reserve Bank’s recent decision to cut interest rates, saying it helps offset negative effects surrounding concerns over the global economy.

The report says developments in Europe are of particular concern, and that its outlook for Australia assumes a baseline case that Europe manages to “muddle through” and avoid any major collapse. The OECD warns, however, that the Reserve Bank should be prepared to drop interest rates “significantly” if Europe’s economic situation gets worse.

The report also suggested Australia has room to boost spending in order to offset a drop in demand brought on by a deepening European crisis, though this would delay a plan to return the federal budget to surplus in 2013.

5/12/2011 Borrowers expecting more RBA cuts

Borrowers are anticipating further interest rate cuts to come late this year or early next year, according to a Loan Market poll. Click here to read more

The survey asked borrowers where they expected rates to move in the coming months. The results indicated that the majority expect more cuts from the Reserve Bank.

Thirty-nine per cent of respondents expected the cash rate to be cut again at the RBA's next board meeting on 6 December, while 29% expected a cut early next year.

Only 8% of respondents expected a rate hike in the near future, and 27% said rates would stay on hold for the next six months. Loan Market COO Dean Rushton said consumers needed further cuts to shore up shaky confidence in the midst of global instability.

"A recent survey we ran showed that the issues occurring in Europe were top of mind for consumers when considering their financial position and these issues are not going away and more cuts are needed to stimulate sectors of our economy," Rushton said.

Nevertheless, Rushton said the RBA's November cut had provided "clear direction for consumers", with most lenders passing on the cut in full.

24/11/2011 Q&A: Investment properties and depreciation.

Question: I own two apartments as investment properties. They are in the same block, which was constructed in 1989. Is it worthwhile getting a depreciation schedule done for these properties? They’ve never been renovated, but I’m planning on redoing the kitchen and bathroom in the next few years – so would I be better off waiting to get a depreciation schedule done post-renovation?

Answer: click here to view

In this scenario, you can claim both against Division 43 (building allowance) and you can also claim against Division 40 (plant items). The building allowance covers the actual construction cost of the building, and is depreciated at a rate of 2.5% per year for 40 years. So even if your property is already 19 years old, you still have a further 21 years of building allowance deductions available to you.

Had the apartments been built prior to 18 July 1985, the building allowance would not have been available.

Plant items include such things as carpets, drapes, stoves, heaters and hot water services. These items are depreciated according to their effective life, which is often between six and 15 years.

In answering this question, we make the assumption these apartments have been owned by you for a number of years. The depreciation schedules of existing property can be used immediately, and may be used to verify up to four years of depreciation if it has not been claimed up until now.

If this is the case, it is definitely worthwhile having the depreciation schedules done now, particularly in light of the fact that renovations are intended. When the renovations are completed, all new items can be adjusted to reflect the costs of additional works. Costs for new works, and in particular new plant items such as stoves and ovens (new kitchen), can be claimed from the time of installation. This way, you can claim the old and the new.

At the time of completion, a revision to the schedule can be made for a small tax-deductible fee, based on expenditure of the renovations. Make sure you keep all receipts!

A tip for bathroom and kitchen renovations: vinyl flooring is considered a plant item and thus is depreciable, whereas tiles are not depreciable.

19/11/11 Buying property through self-managed super funds can offer tax savings, by Kath Dolan, The Age, Nov 19, 2011.

But you have to structure your deal carefully from the start.

It's not a strategy likely to appeal to young investors for whom access to superannuation funds at the age of 60 seems like light years away.

But for those in the decade or two before retirement on an above-average income with some financial nous and their own home paid off, investing in property via a self-managed super fund (SMSF) might lead to substantial tax savings. click here to read more

Self-managed super funds are gaining in popularity.

For most, superannuation is an avenue for enforced retirement savings. But since legislative changes made by the federal government in 2007 allowed SMSFs not only to buy property but to do so using borrowings, more Australians began transferring their money into self-managed funds and using them as a way into the property market.

Mathew Cassidy, a director at financial services specialists The Partners Group, told the Melbourne Home Buyer and Property Investor Show recently that home buying via SMSFs was gaining in popularity and potentially offered investors tax-free income in retirement and a nil rate of tax on realised capital gains.

''When you actually crunch the numbers on doing it [investing] in super versus … negative gearing, it's still worth it for probably 95 per cent of people to do it through super,'' Mr Cassidy says. He argues it's particularly useful for people who have repaid their home and are starting to focus on investment.

''At that point you haven't got that long towards retirement and one of the other great strategies is it actually allows you to accelerate the growth on your super, subject to buying a quality property, because you're gearing inside your fund.''

It's a complex process but, in a nutshell, involves setting up a legally binding and separate security trust structure to make the purchase on your behalf, rolling your money into a SMSF, buying a property and securing a loan.

You may opt to borrow from a bank, with its decreed loan-to-value ratio (usually 70 per cent for residential property), or self-fund. The latter in effect gives you a loan agreement with your super fund, which pays you interest while you settle the loan transaction.

''It enables people to effectively get around the loan-to-value ratios imposed by the banks [and] lend against their other assets outside,'' Mr Cassidy says. ''It means they can put even more of those assets into super than they normally would be able to.''

Anyone considering borrowing through a SMSF needs to do their homework, particularly on the legal framework required (the security trust, for example, must be established correctly with help from lawyers or you may find yourself up for stamp duty or capital gains tax).

You would also be wise to canvass alternatives (such as straight-up negative gearing), ensure you've got a plan in place for adequate post-retirement cash flow and examine potential pitfalls. What happens to your other assets if you default on your loan, for example?

Mr Cassidy says it's critical to plan carefully and seek financial advice if you're contemplating borrowing via a SMSF. But for the right people, he says, the non-traditional loan structure involved can offer a degree of security regular loans can't.

''If you or I go to buy a property and we don't repay the loan, the bank has full recourse against all our assets,'' he says. ''Under this transaction it's what's called a limited recourse loan, which means the recourse or claim against you is limited to that asset only. And that's based on the ATO's rules to protect investors so that they don't effectively compromise their superannuation savings.''

14/11/11 What is the GST property tool?

We often get queries about GST and Property transactions. Recently the ATO released a tool that assists in determining the outcomes and answers some of your queries. Anyone effected by this should try and complete a 5 minute questioner and consult with us on the outcomes.
click here to read more

What is the GST property tool?

The GST property tool is designed to help you determine the GST implications for property-related transactions you make. This product is an interactive decision making tool based on questions and answers. It will assist you to correctly treat and report GST on property sales and other transactions.

The topics covered within the tool include:

sale, lease or purchase of real property, including
- residential premises
- commercial residential premises
- commercial premises
- vacant land
claiming GST credits
margin scheme eligibility
GST-free supplies of real property.
To complete the questioner please go to:

http://www.ato.gov.au/content/00296166.htm

2/11/11 If subdividing and then selling the land (PPOR), will I have to pay CGT?

Our very good client had the following question for us that we answered and would like to share it with the people who may similar ideas:

Question: I’ve had my home for more than 20 years, but have decided to downsize and move closer to the coast. It’s a pretty old place and I was just wondering what the merits are of simply knocking it down, subdividing and then selling the land. It’s my Principal Place Of Residence (PPOR), so will I have to pay CGT?

Answer: click here to view

To explore this issue, we’ve chosen to examine the capital gain for a couple who bought a house in 1989 for $155,000 (house valued at $100,000 and land $55,000), and sold in 2011. This is then compared to the gain to be had from demolishing the same house in 2010, subdividing the land into two blocks and selling the blocks of land in 2011.

We are assuming subdivision costs of $24,000; that the couple’s marginal tax rates are 38%; that costs associated with the sale of the main residence are equal to the cost of selling the two blocks; and that the circumstances of subdividing the land were not considered to be an “enterprise or a business” for GST purposes and therefore GST does not apply.

Scenario 1
The couple purchased the home in 1989, lived in it for 22 years and sold the house in 2011 for $1,000,000. At face value, the couple has received a “capital gain” of $845,000. Under the Income Tax Assessment Act, the couple may take advantage of the main residence exemption, thus their capital gain is effectively tax-free. The cash flow or profit in this case is $845,000.

Scenario 2
The same house was purchased in 1989, but demolished in 2010 in order to subdivide the block and sell the two smaller blocks. The sale of both blocks of land in 2011 totalled $1,150,000 or $575,000 each. This would seemingly represent a gain of $995,000, which is $150,000 better off than selling the old house.

However, with reference to ATO ID 2003/248 (available from the ATO website) and Section 118-165 of the ITAA 1997, the taxpayer is denied a main residence exemption on the capital gain made on the disposal of the land.

Put simply, the main residence exemption no longer applies and the couple is liable for tax on the capital gain made on the land for the entire 22 years of ownership.

The gain on the blocks is then worked out as follows:

Capital Gain = Net Proceeds from Sale – (Original Purchase Price – Value of building at Purchase + Subdivision Costs)

Capital Gain = $1,150,000 – ($155,000 – $55,000 + $20,000) = $1,030,000

This gain is halved for tax purposes as a result of the 50% Capital Gains Discount (allowable for assets held for over a year).

Therefore: Taxable Capital Gain = $515,000

We then multiply this figure by the tax rate 38% (add 1.5% Medicare levy) to determine CGT payable.

CGT Payable = $515,000*39.5% = $203,425

The cash flow or profit in this case is = $1,150,000-155,000-203,425 = $791,575

Conclusion
By opting to demolish, subdivide and sell their land, the couple is approximately $53,425 worse off than they would have been if they had simply sold their home (without the effort of demolition and subdivision). So if this answer highlights nothing else, your main residence has special tax treatments which need to be considered before you decide to demolish the dwelling. Professional advice in these circumstances is a must.

27/10/11 NIB holdings limited (nib) - 2011 return of capital (capital return)

This information applies to you if:

you are an individual, not a company or trust
you are an Australian resident for tax purposes
you held shares in nib and received the return of capital in July 2011
you did not acquire your shares under an employee share scheme, and
any gain or loss you made on the shares is a capital gain or capital loss - this means that you held your shares as an investment asset, not
- as trading stock
- as part of carrying on a business, or
- to make a short-term or 'one-off' commercial gain.

Background click here to view

All shareholders who held nib shares on 13 July 2011 (record date) were entitled to receive the capital return.

The capital return was completed on 21 July 2011.

Components of the capital return

The capital return was $0.1607 per share. This payment was a capital payment. It was not a dividend for any purpose and had no dividend component.

Are there any tax consequences for me?

There are two tax consequences. You need to:

work out whether you have made a capital gain (you cannot make a capital loss on a capital return)
adjust the cost base (and reduced cost base) of any nib shares you owned on 21 July 2011.

For more information please call us or go to: http://www.ato.gov.au/content/00296286.htm

25/10/11 Expenses you can claim in the year you incur them

Working or operating expenses you incur for the everyday running of your business - such as office stationery, rent of office premises, salary or wages - are called revenue expenses. You can claim a deduction for most expenses you incur for the everyday running of your business in the same income year you incur them.

These include expenses you incur as (click here to view the list):

advertising and sponsorship expenses
bad debts
bank fees and charges
business motor vehicle expenses
business operating expenses
business travel expenses
clothing (corporate wardrobes and uniforms, occupation-specific clothing, protective clothing) expenses
education, technical or professional qualification expenses
electricity costs
fringe benefits - the cost of any fringe benefit provided and fringe benefits tax on the benefit
home office expenses where the home is used as business premises
insurance premiums, including workers' compensation, accident or disability, fire, burglary, professional indemnity, public risk, motor vehicle, loss of profits insurance
interest on money borrowed for income tax obligations, employer super contributions, late payment or lodgment of tax, to produce assessable income or to purchase income-producing assets
land tax on business premises
legal expenses, such as those you incur to defend future income earning, borrow money, discharge a mortgage or obtain tax advice
losses from a previous year
luxury car lease expenses
motor vehicle expenses
office stationery
costs for operating a commercial website, such as site maintenance, content updating, internet service provider fees
parking fees
advertising or public relations costs
phone expenses
rates on business premises
registered tax agent and accountant fees
rent or lease of business premises
repairs and maintenance of income-producing property
costs for replacing income-producing property costing $300 or less
salary, wages, bonuses or allowances paid
subscription costs for business or professional journals, information services, newspapers and magazines
costs for sunglasses, sunhats and sunscreen where your activities require you to work outside
super contributions
tax preparation costs, such as income tax or GST returns
tender costs, even if the tender is unsuccessful
costs for trading stock, including delivery charges
transport and freight expenses
travel expenses related to relocating employees
union dues and periodical subscription fees to trade, business or professional associations
water rates on business premises.

24/10/11 Q&A about buying the first home

Yesterday we were asked the following question by our client. The answer we got from our mortgage broker that we think you can take note of is as follows :

Question: I have recently changed jobs (two months ago) and my wife is expecting our first child in the next six months. With the housing market ripe for the picking, and having saved a 15% deposit, we’re thinking of buying our first home.

My concern is this: what is the general consensus from the banks when assessing a loan application where someone has been in their current job for less than year? And considering my wife will be on maternity leave in around six months, will they take her current salary into account when assessing how much we can borrow? I’ve also heard banks are more stringent with these scenarios than non-bank lenders… is this true?

Answer: click here to view

Firstly, congratulations on your baby! It’s an exciting time, but also a time when you should be careful with your numbers. It’s also a great time to look at purchasing a home for your growing family – as long as it fits within your budget.
When assessing what you could borrow, all lenders and mortgage brokers would assess your serviceability based only on your current income.

Even though the baby is not due for a few months, and your wife is currently working, the plan is that she will be on maternity leave and you will be down to one income for a period of time.
Neither you nor the lender know 100% what will happen (will your wife go back to work full-time, part-time or not at all?), but they need to ensure that they aren’t putting you into a position of hardship. All lenders, no matter whether they are bank or non-bank, would hold the same view.

In regards your recent job change, this is where different lenders will assess you differently. It’s important to note that there is no general distinction between bank and non-bank lenders in this regard, but each lender has its own policy when it comes to length of employment.

Most will consider your two-month work history if you’ve been in the same industry for longer than two years. Some will want you to have completed your probation period, and some will consider the other strengths of your application; for example your deposit size, credit history and how much unsecured personal debt you have.

So, in summary, make sure that you have a good deposit, and I think you should talk to your mortgage broker about working out how much you can afford to borrow. I hope this allows you to purchase the home you want. Good luck!

14/10/11 10 questions you must ask before you invest in property

Thinking about property investment? 10 questions you must ask before you invest. Due diligence is essential before you invest in a rental property. Make sure you don’t miss a trick with these savvy questions. click here to view

1. What’s being built nearby?

New infrastructure projects can be beneficial or detrimental to your investment property. Find out what’s being planned and when it’s due for completion by logging onto www.infrastructureaustralia.gov.au. This has links to all state infrastructure planning departments.

2. What’s it worth?

A property’s selling price doesn’t mean it’s worth it. Invest in a property valuation – usually starting at around $350 – to assess the property’s true worth and then use that to negotiate on the price.

3. What’s happening in the local market?

What’s happening in the local area can directly impact the property market – either negatively or positively. The best way to find out? Get out there yourself. “I’m a great believer in getting out there and see what’s going on for yourself,” says Angus Raine of Raine and Horne. “Go to the local retail strip, look for the standard and style of retailers there and assess whether gentrification has taken place or is about to.”

It’s also wise to look at local demographics, crime rates and employment drivers in the area – take a look on the Australian Bureau of Statistics’ websites, www.abs.com.au.

4. What’s the rental potential?

Just because an agent says a property will earn $400 a week in rent, doesn’t mean it will. Use property portals such as www.domain.com.au and www.realestate.com.au to get a realistic idea of rents on comparably properties and ask an independent company to do a rental appraisal.

5. Capital gains or rental return?

Investors need to consider whether they are chasing rental returns or capital gain and in the case of multiple investments, it should be the latter. “The rental income will help you hold the property but it won’t help you buy again,” says Century 21 owner Charles Tarbey. “Capital gain should be, in the early stages of investment, top of your list because it will allow you to buy your second and third property. If you look at high rental return and low capital growth, you’ll be sitting there a long time before you have any equity to do something else.”

6. Is there competition?

A market saturated with investors will reduce your chances of successful rental returns. “There are some parts of capital cities where there are a high level of investors in one street,” says Tarbey. “This will create issues around capital appreciation.”
Tarbey advises investors to contact the local council to find out what percentage of homes are owner occupied and exercise caution in big apartment blocks.

7. What’s included in the title search?

Don’t assume everything is included in the sale. Make sure you identify what’s for sale – including parking spaces and storage facilities – and ensure this is reflected in the title search. “It can be quite a problem,” says Gambaro. “Sometimes developers don’t update things and if this happens, it can crash a contract and you could lose a lot of money. The best way to avoid this is to ask for a Community Management Statement, which tells you the allotment of the car parks and storage and ask your conveyancer or solicitor to include it in the contract.”

8. What’s the state of the accounts?

Properties on strata plans incur a monthly maintenance charge, which is deposited into a sinking fund and used to pay for the lifts, grounds and carpets. Ask to see the Body Corporate Disclosure (it’s a legal right), which outlines exactly what’s been spent and what works are planned.

9. Who’s your target market?

It’s essential you identify your potential tenants and know what they would be looking for in a rental property. If you’re looking at a property in a university town, you should be looking at a multiple occupancy homes near transport and amenities. If, on the other hand, you’re going for the family market, look for a large home, with a garden and spacious communal area.

10. How much work is it for you?

A potential rental property should be good to go – taking on one in need of renovation will only delay the time its get to market. At the most, allow for paint work and furnishing and steer well clear of homes in need of structural improvements – you’re likely to lose a months rent before you even have tenants. Small, paved gardens make for easier maintenance and make sure you factor in the cost of a management company to take care of day to day running.

13/10/11 Guide to property

Overview

Your home is generally exempt from tax. If you have an investment property, build or renovate for profit, or use a property in the running of a business, there may be implications for income tax, capital gains tax and goods and services tax (GST). click here to view

Your home

In most cases there are no tax implications for the home that you live in, and no tax implications when you sell it. This situation may change if you rent out part of your home or use it for work, or it's on more than 2 hectares of land. If you're saving for your first home, you may be eligible for government contributions to help you build your savings quickly.

Inheriting a dwelling

There are usually no capital gains tax implications at the time you inherit a dwelling. Capital gains tax may apply when you subsequently sell or otherwise dispose of the dwelling.

Residential rental properties

If you rent out property to others, you must declare the income in your tax return, and you can claim tax deductions for many of the related expenses. You may have to pay capital gains tax when you sell the property.

Vacant land

Vacant land is generally a capital asset that is subject to capital gains tax. However, if you purchase the land for resale to earn a profit, or use the land in a business-like way, it is considered trading stock. In this case you treat proceeds from the land as ordinary income, and you may need to register for GST.

Subdividing

If you subdivide land - including if you subdivide land adjacent to your home - the subdivided land will generally be subject to capital gains tax. However, if you purchase land to subdivide and resell for a profit, or use the subdivided land in a business-like way, the proceeds may be treated as ordinary income and you may need to register for GST.

Property development, building and renovating

If you build new residential premises for sale, you'll be liable for GST on the sale and entitled to claim GST credits for related purchases. If you renovate a property and sell it for a profit, there could be implications for income tax, capital gains tax and GST.

Property used in running a business

If your property is used to run a business - whether it's commercial premises like a shop or office, or even your own home - there will be income tax implications while you own it and capital gains tax implications when you sell. You may also be liable for GST, and entitled to claim GST credits, when you buy, sell, lease or rent commercial premises.

Please call our office to discuss any queries that you may have and also refer to the following link:
http://www.ato.gov.au/corporate/PrintFriendly.aspx?ms=corporate&doc=/content/00262404.htm

There are many different types of scams - online, phone, mail and face-to-face. Online scams, such as email 'phishing' scams are on the rise and are designed to trick you into giving away your money, passwords and personal details (such as your tax file number - TFN).

From time to time, the ATO will send you emails, SMS or post messages on their official social media profiles promoting new services or alerting you to due dates, for example tax time is approaching or that your business activity statement is due. However, they will never send you an email requesting you to confirm, update or disclose confidential details like your name, date of birth, address, passwords, TFN, credit card details etc.
This page is constantly updated with examples of the latest ATO related scams as we become aware of them.

The following article appearing in the Sunday Age may be of interest to some people:
Investing super funds in property is not easy but can provide some protection from volatile sharemarkets. Click here to read full article.

10/10/11 New flat-rate fringe benefit tax rules for cars to be phased in over four years by Ron Hammerton. 11 May 2011.

A NEW flat-rate system for calculating car fringe benefits tax, which was announced last night in the federal budget, will be phased in over four years to gradually standardise the current statutory kilometre-based formula to a flat 20 per cent in a move that will cost industry an extra $953 million. Click here to read full article.

On 2 May 2010, the government announced instant asset write off and simplified depreciation changes for small business.

The changes will enable small businesses to write off all depreciable assets where the taxable purpose proportion is less than $5,000 in the income year in which they start to use the asset, or have it installed ready for use.

This amount was subsequently increased to $6,500 as part of the carbon pricing announcements. It will also allow most other assets to be depreciated in a single pool at a 30% rate. The change will apply from the 2012-13 income year.

On 26 May 2011 legislation was introduced into parliament to allow an income tax deduction for the costs of certain insurance premiums for total and permanent disability (TPD) to the extent of the percentages prescribed in the regulations.

The regulations will prescribe the percentages of insurance costs that can be claimed as allowable deductions for certain TPD insurance policies.
The measure will apply from the 2011-12 income year.

The cost of TPD insurance provided through superannuation is deductible to the extent the policies provide cover which is consistent with the definition of 'disability superannuation benefit' in the Income Tax Assessment Act 1997. Where broader insurance cover is provided, super funds are required to obtain an actuary's certificate to determine the deductible part of the premium (unless the deductible part is specified in the insurance policy). The changes will provide an alternative to the need to engage an actuary to determine the deductible portion of certain TPD insurance premiums. For more information refer to the new legislation Tax Laws Amendment (2011 Measures No. 4) Act 2011 [Act No. 43 of 2011] and the Explanatory Memorandum.

From 1 July 2011, taxpayers with a dependent spouse born on or after 1 July 1971 will no longer be entitled to claim the dependent spouse tax offset. The offset will be gradually phased out as the population ages to remove disincentives, for younger dependent spouses without children, to enter the workforce.

Next week the ATO will be writing directly to clients who are affected to let them know.

If you are claiming the offset through reduced amounts withheld from your salary and wages, you should increase your withholding rate now in order to avoid a possible debt.

20/09/11 SMSFs: limited recourse borrowing arrangements - application of key concepts - SMSFR 2011/D1

On 14 September 2011, the ATO released for public comment draft Self Managed Superannuation Funds Ruling SMSFR 2011/D1 entitled "Self Managed Superannuation Funds: limited recourse borrowing arrangements - application of key concepts".

The draft Ruling explains key concepts relevant to the application of the limited recourse borrowing arrangement (LRBA) provisions, as those provisions apply to a self managed superannuation fund (SMSF) that enters into an LRBA. The LRBA provisions are found in ss 67A and 67B of the Superannuation Industry (Supervision) Act 1993.

"The money borrowed under the LRBA (and secured by the single acquirable asset) may be applied not only in acquiring the acquirable asset but also in carrying out repairs and maintenance to the asset whether necessary at the time of its acquisition or at a later time."
In contrast, the money borrowed cannot be used to improve the asset.

The research and development (R&D) tax incentive replaces the R&D tax concession from 1 July 2011 and has two core components:

This tax incentive provides generous benefits for eligible R&D activities and is targeted toward R&D that benefits Australia.

ATO continues to conduct field visits to identify whether individuals are being incorrectly engaged as contractors. Industries under scrutiny include:

If you are an employee or an employer in the industries above please contact our office for assistance.

15/08/11 ATO warns: honesty is the best policy when claiming your tax refund this year

Tax Commissioner Michael D'Ascenzo today warned the community that if they are trying to defraud or overstate their refund claims this tax time then they are likely to be caught.

The warning follows a sharp increase in the number of potentially suspicious tax returns that have already been detected by the ATO.

"We are only a month into tax time and we have already noticed an increase of these type of claims compared to this time last year," Mr D'Ascenzo said.

"So far we have stopped nearly 40,000 returns that we believe include potentially overstated or fraudulent refund claims, which have included claims for spouse offset, education tax refunds and refund of franking credits. This is up from this time last year, largely as a result of the increasing sophistication of our systems to detect these claims.

"This has potentially prevented around $150 million in total refunds being inappropriately issued.

"If you are unsure of what you can claim or think you have made a mistake I encourage you to contact the ATO. You can call the ATO to discuss personal enquiries on 13 28 61, business enquiries on 13 28 66 and not-for-profit enquiries on 1300 130 248. "Most of us do the right thing towards our obligations. However, if you are thinking of deliberately do the wrong thing - consider yourself warned."

The ATO will apply significant administrative penalties and may also prosecute taxpayers who attempt to defraud the revenue or superannuation systems by deliberately overstating their deductions or offsets.

The Education Tax Refund (ETR) helps with the cost of educating primary and secondary school children. Eligible parents, carers, legal guardians and independent students are able to get money back on education expenses. Click here to find answers to the following questions “How will the refund work?; Who is eligible?; What education expenses can't I claim for?; If I'm not required to lodge a tax return, can I still claim the refund?” and more, or call us on (03)9005 2133 for advice.

This guide will help you work out what work-related expenses you can claim a tax deduction for and the conditions you must meet before you can claim as an employee in the building and construction industry. Click here to view or call our office on 9005 2133 for assistance.

This guide will help you work out what work-related expenses you can claim a tax deduction for and the conditions you must meet before you can claim if you are a flight attendant or cabin crew member. Click here to view or call our office on 9005 2133 for assistance.

On 15 June 2011 the Treasurer, Mr Wayne Swan, announced that the new R&D tax credit scheme will go ahead with effect from 1 July 2011, the Government having secured the support of crossbench senators to secure passage of the legislation, available here:

Following discussions with the Greens, the Government will introduce quarterly payments for small and medium businesses from 1 January 2014.
An advisory group will be established through the Innovation Australia Board to monitor the implementation and operation of the Credit. The Government, through AusIndustry, will run an extensive education program to ensure firms are kept up to date.

Relevant tax information is available from the ATO for certain industry and occupation employees, please refer to the following link, click here. Please contact our office to discuss your circumstances.

The end of the 2010/11 financial year is almost here, so now's the time to review what strategies you can use to minimise your tax. Here are four key areas of opportunities and risks that can be identified and addressed before the end of the financial year, click here.

The Federal Budget for 2011/12 was handed down by the Treasurer, Mr Wayne Swan, at 7:30 pm (AEST) on 10 May 2011. The Budget was a fiscally tight one, designed to return the budget to surplus in 2012/13, despite the impact of recent natural disasters. It contained anticipated tax changes such as amending the FBT statutory formula method for valuing car fringe benefits, removing the low income tax offset for minors receiving unearned income, and refunding excess concessional superannuation contributions. Click here to view full item.

This Taxpayer Alert describes arrangements where a taxpayer claims a deduction for expenses incurred in relation to various educational courses and seminars where the expenses have insufficient connection with the taxpayer's current income-earning activities and are private or domestic in nature.

11/05/11 Tax crime investigations and results; The ATO released the following findings:

Our tax and superannuation systems are two of Australia's most important assets - they provide the revenue and wealth that supports our society.

While Australia generally has a strong culture of voluntary compliance, a small number of people still try to cheat the system and gain an unfair advantage by deliberately avoiding their tax and super obligations. We work with the government and community to protect the majority of people by deterring, detecting and dealing with anyone who has intentionally not complied.

We ensure those people who are disengaged from the tax system and resistant to complying with their obligations face serious consequences for their behaviour, including prosecution.

We take all forms of tax evasion and intentional non-compliance seriously. The seriousness of these offences is also being recognised through the sentences being handed down in the courts, examples of which are in our prosecution media releases below.

-serious offences for fraud - which are investigated by the ATO and prosecuted by the Commonwealth Director of Public Prosecutions (CDPP)
-summary offences under the Tax Administration Act - which are prosecuted by the ATO and mainly involve lodgment offences.

* The serious fraud cases and convictions include Project Wickenby-related cases.
** This information is current up to 31 March 2011.

* The summary offence cases do not include multiple cases/convictions for the same individuals or companies.
** This information is current up to 31 March 2011.

The Regulations amend the Income Tax Assessment Regulations 1997 to determine cents per kilometre rates for calculating tax deductible motor vehicle expenses for 2010-11.

The rates for the 2010-11 income year have not changed from the 2009-10 rates because the Private Motoring Subgroup index at September 2010 was still below its level at September 2008. The rates are as follows:

We are often asked what you can and can’t claim in running a business. The answer depends on a lot of factors and usually we can identify and summarise a good guide applicable to your company. The following information is also useful as a preliminary source of information: http://ato.gov.au/print.asp?doc=/content/00266008.htm

When a person dies, an executor is appointed by the deceased person's will to administer the deceased estate in accordance with their will. The Supreme Court can also appoint an administrator to deal with the deceased estate – for example, where there is no valid will or the person nominated to be executor can’t discharge their duties. The executor distributes the deceased estate to the beneficiaries.

There are many issues to consider from the tax planning point of view and we will be able to advise you of various options. Please refer to the following link for more information and contact us directly to discuss your situation: http://ato.gov.au/individuals/content.asp?doc=/content/00267079.htm

The ATO today issued a taxpayer alert warning people to be cautious when entering into an arrangement with a firm that includes steps to split their income with an associate, usually their spouse, by using a discretionary trust.

"I'm concerned that people involved in this arrangement may be unaware of the risk that it may be ineffective under the taxation laws and the superannuation guarantee provisions," Tax Commissioner Michael D’Ascenzo said.

"We are concerned that individuals may enter into these arrangement to reduce tax liabilities by splitting their income with an associate and that the arrangement may not satisfy the personal services income tests and that the anti-avoidance provisions could possibly apply," Mr D’Ascenzo said.

"The ATO is reviewing these arrangements and will be writing to entities facilitating them about our concerns that they may risk contravening the promoter penalty laws."

Mr D’Ascenzo also reminded firms entering into such arrangements that they may not be withholding the appropriate amount of tax and providing the correct superannuation support to the individual participants and may be liable for penalties and charges under the Taxation Administration Act 1953 and the Superannuation Guarantee (Administration) Act 1992.

Anyone who has participated in these arrangements should seek guidance from the ATO prior to 30 April 2011 and before they are contacted by us. If they do so, they will be entitled to a reduction in any penalties that might apply if the arrangements prove to be ineffective.

Taxpayers wishing to discuss their involvement in theses arrangements or to provide information about people or companies who may be promoting arrangements covered by this alert should call the ATO on 1800 177 006. People can also use this number if they want more information about this taxpayer alert.

The Gillard Government will introduce higher superannuation concessional contribution caps for individuals aged 50 and over, following the release today of a discussion paper by the Assistant Treasurer and Minister for Financial Services and Superannuation.

"This measure is one of a number of reforms, including increasing the superannuation guarantee rate to 12 per cent and a new Government contribution for low income earners, which will deliver substantial improvements in retirement savings and a fairer distribution of superannuation taxation concessions," Mr Shorten said.

From 1 July 2012, individuals aged 50 and over with total superannuation balances below $500,000 will be able to make up to $50,000 in concessional superannuation contributions. This doubles the cap of $25,000 that is scheduled to apply from 1 July 2012.

"These changes will provide flexibility for those nearing retirement to make additional 'catch-up' contributions at the stage in their lives when they are most able to do so."

It is expected to benefit around 275,000 people, and will be of particular benefit to those who have had periods outside the workforce, for example, women with broken work patterns.

The discussion paper presents a number of options for key parameters of the measure, including the process for determining eligibility for the higher cap and methodology for determining total superannuation account balances.

The Government values consultation and invites interested parties to view the consultation paper and provide comments. Copies of the consultation paper can be viewed on the Treasury website (www.treasury.gov.au). The closing date for submissions is 25 March 2011.

"Superannuation is good for individuals, good for business and good for the economy. These specific changes give people aged 50 and over more flexibility to increase their super and I encourage all sections of the superannuation industry to make submissions on the discussion paper," Mr Shorten said.
Submissions may be lodged electronically or by post to:

Manager, Contributions & Accumulation Unit
Personal and Retirement Income Division
The Treasury, Langton Crescent
PARKES ACT 2600
Email: over50supercap@treasury.gov.au

As outlined in this year's compliance program, Commissioner is seeking improvement in correct reporting by trustees, including trust income and distribution to beneficiaries. ATO focus is on timely lodgement of 2010 trust returns and overdue returns.

In December 2010, ATO has sent letters to some of trust owners reminding them to lodge overdue returns. They are increasing compliance activity on the overdue trust returns, including application of failure to lodge on time penalty or prosecution action.

People in recently impacted natural disaster areas are not being contacted at this stage.

The Government announced, on 27 January 2011, that it will introduce a flood levy for the 2011-12 income year to assist affected communities recover from the recent floods and rebuild essential infrastructure. The levy forms part of a package of measures designed to assist affected communities.

The flood levy will apply to all taxpayers that have a taxable income of more than $50,000 in the 2011-12 income year. Taxpayers who have a taxable income of less than $50,000, or are in receipt of an Australian Government Disaster Recovery Payment for a flood event that occurred during the 2010-11 income year will be exempt from paying the flood levy.

Claims for years where you lodged a tax return. You are eligible for a deduction for your study expenses for each year you lodged a tax return if:

You do not need to do anything to claim a deduction. If you paid tax in the 2007, 2008, 2009 and/or 2010 years, we will write to you between 1 March 2011 and 30 April 2011 to advise you that we will amend your assessment to include a deduction of $550 for each year you are eligible.

This does not mean that you will get a refund of $550 for each year. Tax deductions reduce the amount of income you have to pay tax on, so if you are entitled to a $550 deduction, this means the income you pay tax on will be reduced by $550.

Jen studied anthropology full-time and received youth allowance in 2007 and 2008. She also worked as a retail assistant while she was studying in 2007. She has lodged her tax returns for each of these years. Jen paid tax in 2007 but not in 2008.

On 14 March 2011, Jen receives a letter from us advising her that her 2007 assessment will be amended.

Jen's taxable income for 2007 was $18,406, including youth allowance of $3,805. Her tax payable (including Medicare levy) for the year was $1,427.50. After we amend her assessment to allow a deduction for study expenses of $550 her taxable income is reduced to $17,856. ($18,406 - $550 = $17,856).
This means that her tax payable is reduced to $1,290. Therefore, Jen will receive a refund of $137.50, plus interest on this amount. As Jen did not pay tax in 2008 we will not amend her assessment to allow a deduction for study expenses.

David studied psychology full-time in 2010. He received youth allowance as well as working part-time as a tutor. During the year $150 tax was withheld from David’s tutoring income. When he lodged his tax return, he received a refund of the $150. As David did not pay tax, we will not amend his 2010 assessment.

To assist affected taxpayers, the ATO issued the following press release on 5 January 2011. This press release sets out the manner in which the ATO can assist practitioners and taxpayers dealing with the crisis, including by:

The ATO has also granted an automatic 1 month extension for the lodgment of monthly activity statements and related payments (from the original due date of 21 January 2011 to 21 February 2011) for businesses with addresses within one of the identified flood affected postcodes.

Generally, superannuation cannot be accessed before a person reaches at least 55 years old. However, under some very specific circumstances, the law allows earlier access to superannuation. The information contained on the website outlines situations in which application can be made to APRA, a super fund or another agency for the early release of funds.

There are no special provisions to access superannuation as a result of the recent floods. Normal provisions continue to apply.

Tax Commissioner Michael D'Ascenzo announced today that the ATO has again approved ‘bucket donations’ for the 2011 Queensland and Northern New South Wales floods as it did for the large number of donations made after the Victorian bushfires in 2009.

The ATO will allow deductions for donations up to $10 made to 'bucket appeals' for the floods without needing to keep a receipt.

“It is important in tragic times like these that we support the community and make it as easy as possible for people to help,” Mr D’Ascenzo said.
"While this is a difficult time, the compassion, dedication and resilience of the Australian community will hopefully ensure swift support to those affected by the floods and a speedy process of rebuilding and putting people’s lives back on track.”

People who give to ‘bucket appeals’ can claim a tax deduction equal to their contribution up to $10 in their 2010-11 tax return without the usual need to keep a receipt.

“For those making donations through other means, such as a bank or retail outlet, make sure you are provided with a receipt in order to claim,” said Mr D’Ascenzo.

“For donations made via the web, a bank or credit card statement will be enough.”

People are also reminded that in order to be deductible the donation must be made to a 'deductible gift recipient' and if their donation is over $10 then they will need to keep a receipt for tax purposes.