17/06/2015
Once again we have come to the end of the financial year. This financial year has been unquestionably filled with many challenges and issues due to the national and global economic condition, in the midst of these I hope you had a good year.
I am writing this email to inform you, my valued client, about the end of financial year tax strategies and planning based on the Federal Budget 2015.
First of all it has been a great delight to work with you and thank you for the opportunity you have given me to assist you in your personnel and business accounting and tax affair. I hope I have given you satisfactory service. I assure you we as Right way Accounting Team is endeavouring to improve the level service provided to you.
As a business, Right Way Accounting Tax Solution (RWATS) has grown in the number clients, mainly through referral by satisfied clients. Thank you very much for that.
As you might have aware that government is under great pressure to generate more money as our budget is in huge deficit. So ATO is raising their compliance standard for individual and businesses through the support of the highly sophisticated information technology.
Following points you have to consider before the end of the financial year, which is 30th of June 2015.
Individuals
1. This year ATO has already advised that they are going to target mainly on the following area
a. Work-Related Expenses (D1-D5) - That means ATO will look at every Work-Related deduction claimed. ATO is introducing a new method to confirming their status about your claim, once they are satisfied with the tax return, they’ll send a letter call “OK letter”, which confirm that your tax return is closed and there won’t be any need of further investigation. But if you don’t receive the “OK letter”, even if you received your refund, that means your tax return is open for amendment when further information available. Therefore gather all your receipt for your deduction. As I have been advising you for last 2 years if you feel any expenses relating to your work, then take a photo of the receipt and save it in your computer. ATO is happy with the electronic copy of the receipt. Main areas to take cares are
i. Work related car expenses (D1) – You need to have a proper log book to claim the number KM. This is the last year when you can claim maximum on Cents per km method. Next year (2015/16) things are changing, please read below for more information.
ii. Self-education expenses (D4) – There should be very strict connection between self-education expenses and the income. ATO is looking for even a small point to disallow the self-education expenses completely.
iii. Work related Internet and telephone expenses and home office expenses – ATO might require, if in doubt, telephone and internet bills. For home office they might require a diary. So prepare for that.
b. Investment property – People are asking whether $20k small business deduction for the purchase of an asset available for the investment property. It is clearly “NO”. ATO is targeting the following on investment property
i. Especially for the property not rented for the full year, ATO want to make sure that property is available for rent or you might have use it for your private purpose or rent it to your family or friend at a very nominal rate. In that case deduction will be apportioned for the period actually it was available for rent. Holiday home is hot target this year.
ii. Ownership of the property – ATO is concentrating on the proper apportioning of negative gearing based on the ownership. Say for example if husband and wife own the property the negative gearing should be allocated equally on both of their tax returns. Land title record has been already linked to ATO database.
c. Overseas Income has come under ATO radar. They are using AUSTRAC to trace all the international transaction to find whether the tax payer earn any money overseas. It is requested for voluntary declaration in order to avoid huge penalty.
2. Few changes this year and suggested action
a. Income tax rate is remain the same for 2015/16. So you shouldn’t see any changes on your income in 2015/16 as long as your gross don’t change.
b. Medicare levy has been increase to 2% from 1.5% effective for this year.
c. A temporary Budget Repair Levy of 2% to the tax payers who earned more than $180,000. This levy will apply to the excess of $180,000 income, not to the whole lot.
d. Concessional Superannuation contribution cap for the tax payer who is under 50 years, has increased from $25,000 to $30,000. But if you are 50 years or over the cap is $35,000.
e. As the SGC cap has increase it is a good time to do an effective salary sacrifice to put bit more super into your account in order to reduce tax before the end of the financial year.
f. ATO is removing 2 Work related car expenses calculation methods, they are 12% of original Value and 1/3 Method from 1st of July 2015. Most importantly they are bring down cents per km rate to standard 66c per KM (from 77c and 76c) for all sort of vehicle, for the maximum of 5000km. So to get the best out of your work related car expenses for 2015/16, you have to keep a log book for 13 weeks and claim deduction on log book method. If not you have to use the Cents per Km method.
g. For investment property holders, you can see that the interest rate has come down. That means your interest expenses might have gone down too and eventually your investment property might have turn from negative gearing to positive gearing. Therefore it is a good time to talk to bank and make an interest prepayment, so that you can move the positive gearing into negative.
h. If you claim LAFHA for living and working outside your normal place of resident period has been reduced to 12 months. That means your LAFHA allowance will become taxable income after 12 months. So please watch out on it.
i. If you are a shareholder of a private company, because the company tax rate is coming down to 28.5% from 30%, please note your franking credit still remain 30% as long as company dry down the retained profit earned and tax paid before the 30th of June 2015.
j. ATO has abolished and phased out the following offset from 1st of July 2014
i. Mature age Workers Offset
ii. Dependent spouse offset
Small Business
1. Company tax rate is expected to come down from 30% to 28.5% once it is pass through the parliament. But franking credit remain 30% until company completely wipe out the retain profit earned and paid tax before 30th June 2015.
2. If your business turnover is less than $2 Million and your aggregated net business asset is less than $6 million, then you’ll be eligible for immediate deduction of business asset purchased valued less than $20,000. This includes new and used asset. This facility is only available as long as the asset is purchased and installed between 12 May 2015 and 30 June 2017. After and before this date, those assets will be depreciated on a normal phase.
3. If you own a motor vehicle, through the company or trust, you must have a log book or it will be treated as 100% private use and comes under Fringe Benefit Tax. This law is going to be enforced tightly, so keep the log book, if you don’t have.
4. If you are in a construction industry, such as kitchen, painting, cleaning and concrete pumping, from this year onward you have to report Taxable Payment Annual report for all the payment you have made to subcontractors as sales commission, subcontracting jobs and so on. This is especially those payment made for ABN.
5. Government has introduce an incentive for those “Unincorporated Entity” such as sole traders, partnership and trustee of the trusts, 5% tax offset on their business tax for upto $1000. This will start from 1st of July 2015
6. Start-up cost, such as professional expenses and other business formation expenses, can be claimed as immediate deduction. Usually it is claimed over 5 years. This is starting from 1st of July 2015
7. If you are running a company and if you are taking money out of the company bank account, apart from your salary, for personnel use, then you have to return the money back to the company before the end of 30th of June 2015. If not then we have to make an arrangement to have a Division 7A loan drawn. Please advise me if you need assistant on it.
8. SGC rate remains 9.5%.
Should you have any query please feel free to contact me on 0422870736
