The Corderoy Times June 2017
The Corderoy Times
CAS Quarterly Newsletter | June 2017
What’s Happening at CAS?
The countdown to the EOFY has come and gone and we are happy to say “all is prepared”. As you can imagine there are a myriad of preparative tasks for us to complete leading up to June 30. One of those tasks is doing our own budgeting numbers and making some necessary business decisions for the new financial year. As a result we will have a small rise in our base cost for the individual returns to $195 and for our Pty Ltd clients our base cost for the company reviews will be $185.
Small Business Measures
Small Business Immediate Tax Deduction
The immediate write-off on depreciable items for businesses has been extended to 30 June, 2018. In addition, the threshold for qualifying businesses has been lifted from an aggregated annual turnover of $2m to $10m which will give up to 90,000 extra businesses access this tax break.
The $20,000 cap is exclusive of GST for businesses who are registered for GST while the $20,000 is inclusive of GST if you aren’t registered for GST. Some key points regarding the concession include:
• The asset can be new or second-hand
• The asset must be first used or installed ready for use by June 30, 2018
• After June 30, 2018, the write off threshold will revert back to $1,000
• The write-off of the asset is for the ‘taxable purpose proportion’ which is the proportion of the asset’s use in a financial year for producing assessable income (business purposes)
• The instant asset write-off only applies to certain depreciable assets. There are some assets, like horticultural plants, capital works assets (like building construction costs) and assets leased to another party on a depreciating asset lease that don’t qualify – If you are uncertain, we urge you to consult with us before you purchase the asset
• Assets costing $20,000 or more can be allocated to a pool and depreciated at a rate of 15% in the first year and 30% for each year thereafter.
While the $20,000 accelerated write-off incentive sounds attractive to small business owners, spending up to $20,000 on an asset to simply get a tax deduction may not be prudent. There are specific rules around this tax break so we urge you to seek professional advice before committing to a major asset purchase.
Access to Small Business CGT Concessions
The Government has announced it will tighten access to the small business Capital Gains Tax (CGT) concessions from July 1, 2017. As part of its tax integritypackage, the Government’s proposed changes will mean the CGT concessions can only be used in relation to assets used in a small business or ownership interest in a small business. This is purportedly aimed at taxpayers with an ownership interest in larger business entities that may currently be excluded when considering the eligibility threshold for the concessions.
The small business CGT concessions will continue to be available to small businesses with an aggregated annual turnover of less than $2 million or net assets of less than $6 million. The Government has not provided any further details on this measure and the breadth of these changes is currently uncertain.
The disposal of business assets after 1 July, 2017 should be carefully considered in light of the announced changes.
Extension of Taxable Payments Reporting to Courier and Cleaning Industries
The Government will extend the Taxable Payments Reporting System (TPRS) regime to include contractors in both the courier and cleaning industries effective from July 1, 2018. The TPRS already applies to the building and construction industry where businesses are required to lodge an annual report with the ATO disclosing payments made to contractors in the preceding 12 months. The ATO uses this information to detect mismatches between payments made to contractors and the income declared by those contractors.
Entities in the cleaning and courier industries will need to collect the required information from July 1, 2018. These business owners will need to consider how the required information can be extracted from their record keeping systems well before the first annual report is due for lodgement in August 2019.
Personal Taxation – Individual Tax Rates
There were no changes to personal income tax rates in the Budget. This means that the 2% Temporary Budget Repair Levy will end on June 30, 2017. The following table lists the individual income tax rates for Australian residents for the financial year ending June 30, 2018:
Taxable Income Tax Payable
$0 – $18,200 Nil
$18,201 – $37,000 19% of excess over $18,200
$37,001 – $87,000 $3,572 plus 32.5% of excess over $37,000
$87,001 – $180,000 $19,822 plus 37% of excess of $87,000
$180,001 and over $54,232 plus 45% of excess over $180,000
* This excludes the 2% Medicare Levy
Personal Tax – Higher Education Reform
The Government has unveiled extensive changes to the fee structure of Higher Education Loan Program (HELP) schemes. These changes include a decrease in the minimum repayment threshold, as well as significant amendments to repayment rates.
The Government also announced an annual increase in student contributions of 1.82 percent, totalling approximately 7.5 percent over a period of four years. The increase will come into effect from July 1, 2018. A new minimum threshold of $42,000 will be established with a 1% repayment rate and a maximum threshold of $119,882 with a 10% repayment rate. By way of background, for 2017/18, the minimum threshold is $55,874 and the minimum repayment rate is 4%. The maximum threshold for 2017/18 is $103,766 with an 8% repayment rate.
Goods & Services Tax
Purchasers to Pay GST on New Residential Premises
From 1 July 2018, the Federal Government will strengthen compliance with the GST law by requiring purchasers of new residential premises and land in new subdivisions to remit the GST on the sale directly to the ATO as part of the property settlement process.
Under the current law, the seller of new residential premises or subdivided land is required to collect and remit the GST associated with the sale to the ATO through its Business Activity Statement. The Government has identified that some property developers are failing to remit the GST on their sales, despite claiming credits for GST incurred on development costs. To combat this non-payment of GST, the responsibility for payment of the GST will be shifted to the purchaser. Given most purchasers use conveyancers to assist with the transfer and settlement of properties, the Government believes this change should not represent a significant additional burden for purchasers.
We expect that property developers will face additional compliance costs as a result of the change, and will be forced to change the settlement statement provided to the purchaser to identify the GST payable on the sale so that the purchaser can remit this amount to the ATO. The change could also result in cash flow issues for developers as they will no longer have the benefit of the GST component of the sale proceeds in their bank account for the period between settlement and lodgement of their Business Activity Statement. Finally, purchasers’ conveyancing costs may increase subject to what processes are established by the ATO to facilitate payment of the GST.
Digital Currency & GST
From July 1, 2017, the Government will align the GST treatment of digital currency (e.g. Bitcoin) with money. Digital currency is currently treated as intangible property for GST purposes. Consequently, consumers who use digital currencies as payment can effectively bear GST twice, once on the purchase of the digital currency and again on its use in exchange for other goods and services subject to GST. This measure will ensure purchases of digital currency are no longer subject to the GST.
Retailers will be disappointed to hear that plans to impose the GST on low-value imports has been deferred for another 12 months to July 1, 2018. This will disadvantage them in comparison with international retailers, particularly those that dominate the online sector.
Tax Integrity Measures
The Government will continue to target the black economy and will provide $32 million to extend the funding of audit and compliance programs by the Australian Taxation Office (ATO) for another year. These programs are designed to counter behaviours related to the black economy, such as non-lodgement of tax returns, omission of income on returns and non- payment of employer obligations.
A further focus of the Government is to prohibit the manufacture, distribution, possession, use or sale of electronic point-of-sale suppression technology and software, which can be used to delete selected transactions from electronic records.
The ATO will continue its compliance work against serious and organised crime and will provide $28.2 million to the ATO to target serious and organised crime in the tax system. This extends an existing measure by a further four years to 30 June 2021.
Disclosure of Tax Debts by ATO to Credit Reporting Agencies
Having an outstanding tax debt is incredibly stressful. The Australian Taxation Office (ATO) have for some years engaged external debt collectors to pursue the tax debts of small businesses and following a parliamentary inquiry in 2014, the ATO have been working to improve its relationship with small business taxpayers. That inquiry revealed a number of taxpayers were intimidated, bankrupted, had mental breakdowns and contemplated suicide after drawn-out disputes with the Tax Office.
In a new measure, from July 1, 2017 the ATO will be allowed to disclose the tax debt information of businesses to credit reporting agencies unless they have engaged with the ATO to manage their debts. The measure will initially apply to businesses with an Australian Business Number (ABN) and a tax debt of more than $10,000 that is at least 90 days overdue. Taxpayers that have entered into a payment arrangement or have otherwise engaged with the ATO to manage their debts will not be impacted.
This represents a significant shift in the ATO’s approach to managing tax debts where the current consequences for failing to pay tax debts include the imposition of penalties and a general interest charge. As a result, some taxpayers have treated their tax debt as less important than the payment of other forms of debt. This new approach might change that priority as tax debt information reported by the ATO may remain on commercial credit files for five years and impact on future finance and supplier credit applications, even if the debt is subsequently paid.
This change is no surprise given the ATO’s latest annual report that shows the total level of collectable debt as of June 30, 2016 was $19.2 billion. Small businesses make up the majority (65.2 per cent) of taxpayers with debts and only 72.3 percent of small business tax liabilities got paid on time. This change is obviously a strategic move by the ATO under pressure to recover escalating tax debts.
If you have concerns about your tax debt please contact us today to discuss your options.
Quick Tips to Grow Your Business, Increase Profits and Maximise Return on Investments
Creating blogs and offering your readers valuable and educational content is one of the most effective ways to grow your business. Quality original content can boost your rankings with Google and the other search engines plus it helps your audience to get to know your business and what you offer. Think of your content as a hook and if you can hook your readers, the more likely they are to purchase your products and services and become advocates of your brand.
Your content can be in different formats including newsletters like this one, blogs, videos, eBooks and white papers.
Important dates to remember
End of Financial Year 30th June
PAYGW Summaries (Group Certificates ) due to employees 14th July
Superannuation fourth quarter due 28th July
BAS lodgment: Paper due 28th July
Business portal due 11th Aug
Agent due 25th Aug
July PAYGW Monthly 21st Aug
Aug PAYGW Monthly 21st Sept
2017 Tax checklists will be available on the CAS website
Corderoy Accounting Services
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9302 4295 fax