How the 2017/18 budget will affect you?

Most taxpayers will soon be paying more tax, with the Medicare Levy set to increase by 0.5 percentage points — from 2 to 2.5 percent of taxable income — to help fund the $22 billion National Disability Insurance Scheme and avoid future budget black holes. This change will kick in on 1 July 2019. The Government is toughening up the laws that target multinational companies who avoid paying tax, stating the measures will bring in an extra $4 billion this financial year. There will also be extra money going to the tax office, to help tackle the illegal cash economy.

 

Upcoming Key Dates

15 May
2016 tax returns for all other entities that did not have to lodge earlier (including all remaining consolidated groups), and are not eligible for the 5 June 2017 concession.
Due date for:

• lodging
• company and super funds to pay if required

Note: Individuals and trusts in this category to pay as advised on their notice of assessment.

21 May
Lodge and pay April 2017 monthly activity statement.
Final date for appointing a tax agent for an FBT role. You must tell us who your new clients are by this date to make sure they receive the lodgment and payment concessions for their fringe benefits tax returns.
Lodge Fringe benefits tax annual return (if lodging by paper).

26 May
Lodge and pay eligible quarterly activity statement for quarter 3, 2016–17 if you lodge using:

• electronic lodgment service (ELS)
• electronic commerce interface (ECI)
• Tax Agent Portal
• BAS Agent Portal
• practitioner lodgment service (PLS)

28 May
Pay Fringe benefits tax annual return.
Lodge the Superannuation guarantee charge statement – quarterly (NAT 9599) and pay the super guarantee charge for quarter 3, 2016–17 if the employer did not pay enough contributions on time.
Employers who lodge a Superannuation guarantee charge statement – quarterly (NAT 9599) can choose to offset contributions they paid late to a fund against their super guarantee charge for the quarter. They will still have to pay the remaining super guarantee charge to us.
Note: The super guarantee charge is not tax deductible.

5 June
Lodge tax return, including companies and super funds where the tax return is not required earlier and both of the following criteria are met:

• non-taxable or a credit assessment as at latest year lodged
• non–taxable or receiving a credit assessment in the current year

This is for all entities with a lodgment end date of 15 May 2017, excluding large/medium taxpayers and head companies of consolidated groups.
Lodge tax returns due for individuals and trusts with a lodgment end date of 15 May 2017 provided they also pay any liability due by this date.
Note: This is not a lodgment end date but a concessional arrangement where you will not have to pay failure to lodge on time (FTL) penalties if you lodge and pay by this date.

21 June
Lodge and pay May 2017 monthly activity statement.

25 June
Lodge 2017 Fringe benefits tax annual return for tax agents (if lodging electronically). Payment (if required) is due 28 May.

30 June
Super guarantee contributions must be paid by this date to qualify for a tax deduction in the 2016–17 financial year.

Seniors

Aged pensioners, disability support pensioners, veterans and those on single parent payments will enjoy a one-off payment to help with this winter’s power bills. Singles qualifying on 30 June this year will receive a $75 rebate, and couples will receive $125. Those over the age of 65 who downsize their home can pour up to $300,000 of the proceeds into their super fund, and over 60s on welfare will now have to complete 10 hours of approved activity a fortnight, which can include volunteering. Pensioners who lost their pensioner concession card as a result of the assets test change earlier this year will now have the benefit restored.

 

Housing Affordability Boost

There’s great news for families and first-time home buyers, with the budget tackling housing affordability. If you’re a first home buyer, you’ll get to use the First Home Super Saver Scheme, allowing first home buyers to funnel some income into super accounts, at a lower tax rate than normal. Withdrawals will be taxed at a lower rate, but the amount you can contribute is capped at $15,000 a year and $30,000 all up. Both members of a couple can take advantage of the scheme. The Government says this will help first home buyers to save a deposit 30 percent faster.  They also want to free up housing by encouraging older Australians to downsize, by allowing them to tip up to $300,000 from the sale of their home into their super by doing so.  Foreign investors will be slugged $5,000 if they don’t occupy or lease their property for at least six months each year, and developers won’t be able to sell more than 50 percent of new developments to overseas buyers either.

Family

Parents who don’t vaccinate their children will lose about $28 per child per fortnight, with the money being withheld from the Family Tax Benefit Part A. In total, the Federal Government expects to withhold about $66 million worth of payments. $263 million has been budgeted to support vulnerable young parents through the expansion of the ParentsNext program, and $3.4 million has been put to the expanded trial of domestic violence units in legal centres.

Contractor or Employee?

The difference between a contractor and an employee is not always clear cut. The courts and tax office take a number of factors into account when determining the actual status, such as hours worked, superannuation, method of payment and leave to name a few. Any written agreement stating the nature of the relationship is certainly relevant, but it’s not conclusive, and should not be relied solely upon. Both employers and contractors need to be fully aware of their situation as serious penalties are involved with sham contracting arrangements. Find out more here.

“Holiday home” included in tax concession test

A taxpayer company has been unsuccessful before the Administrative Appeals Tribunal (AAT) in a claim to secure the capital gains tax (CGT) concessions for small businesses.

In this case, the AAT affirmed the Commissioner’s decision that the taxpayer did not satisfy the “maximum net asset value” test for the purposes of qualifying for the concessions. The AAT found that the individual who controlled the company could not exclude from the test his interest in a Queensland property, which he claimed was used for “personal use and enjoyment”.

TIP: The small business CGT concessions are intended to offer small business taxpayers a range of unique tax concessions. However, despite being targeted towards taxpayers who typically have less complicated affairs, the rules are riddled with complexities that may not appear obvious at first glance.

Each concession has its own particular rules. However, there are two basic conditions for the relief – either the taxpayer is a small business entity (SBE) or is a partner of a partnership that is an SBE, or the taxpayer satisfies the maximum net asset value test. If you have any questions, please contact our office.

 

Small business benchmarks catch out florist

The AAT has recently dismissed an appeal by a florist against the Tax Commissioner’s decision to issue income tax and GST assessments following an ATO audit of her florist business.

The taxpayer had reported that the cost of goods sold in her business represented 83% of her reported business income. The ATO had selected the taxpayer for audit because this figure was outside what it considered to be the industry benchmark range of between 44% and 54%.

In this case, the taxpayer was unable, due to a lack of evidence, to prove to the AAT that the assessments were excessive.

TIP: The Tax Commissioner has warned that businesses operating outside the relevant benchmarks could be subject to ATO review and/or audit, and where the businesses do not have adequate records to substantiate their performance, the ATO will make a default assessment using the appropriate small business benchmark.

Businesses may want to consider reviewing their record-keeping practices and assess whether they are at risk of an audit. Please contact our office for further information.