Our brand new office!
After happily spending our first six years in business in Stanley Street Wodonga and due to our continued growth, we are on the move up……
That’s right – we are very proud to advise all of our clients and colleagues that as of 8.30am Tuesday 23rd January 2017 we will occupy new modern office premises on the first floor at:
UNIT 8, 103-105 Hume Street WODONGA
All of our other contact numbers and emails remain the same as does our PO Box, and we are only 350m away from our current location in the Wodonga CBD above the offices of GHD. We encourage any of our clients to visit us at any time to have a look at our new surrounds, as long as you can tackle the simple one flight of stairs. If you believe you may have issues accessing us on the first floor, please just call us to make other meeting arrangements.
Our offices in Stanley Street will be closed permanently as of 5pm Tuesday 17th January 2017.
As usual we have attached some articles to this newsletter that may be of interest to you – so please take the time to glance your eye over these just in case something is relevant to your personal situation.
Keep taxing on.
The Team at Lidgerwoods Accountants
Personal income tax cuts are law!
The following are the rates for adult residents for the 2016/17 income year (i.e., from 1 July 2016).
The above rates do not include the temporary budget repair levy (due to expire on 30 June 2017), nor the Medicare levy of 2%.
The ATO has updated the tax tables and PAYG withholding tax schedules (and their online tax withheld calculator) to reflect these changes.
Editor: The government has finally legislated (and quite late) the tax cuts originally announced in the May 2016 Budget. The significant difference applies to the marginal tax rate of 37% that now starts at $87,000 (used to be $80,000 in prior years).
Scams & Identity Theft – Beware
Assistant Commissioner Graham Whyte said that, while most people were able to identify scams, it is important to remain alert.
For example, although the ATO makes thousands of outbound calls to taxpayers a week, there are some key differences between a legitimate call from the ATO and a call from a potential scammer:
“We would never cold call you about a debt; we would never threaten jail or arrest, and our staff certainly wouldn’t behave in an aggressive manner. If you’re not sure, hang up and call us back on 1800 008 540”.
ATO also warns against identity theft
The ATO is also reminding Australians to protect themselves against identify theft this tax time. Highly organised crime networks use a range of methods to steal personal information in order to commit refund fraud.
The ATO recommends following a few easy steps for taxpayers to protect themselves against identity theft:
The ATO also says that taxpayers should report the loss or theft of their TFN without delay, if they can’t find their TFN, and/or think their TFN has been stolen or misused.
Editor: Lidgerwoods has seen a significant rise in scams, both emails that appear to be legitimate, and particularly from the phone message left with our clients threatening arrest unless immediate payment is made. Any issue, any time, any doubt – call the ATO on 1800 008 540 or call us here at Lidgerwoods.
Latest ATO Benchmarks Released
The ATO has released the latest benchmarks for small business based on the data from 2014 income tax returns and business activity statements, covering over 1.3 million small businesses.
Assistant Commissioner Matthew Bambrick said that, if a small business is inside the benchmark range for their industry and the ATO hasn't received any extra information that may cause concern, they can be confident that they probably won't hear from the ATO.
"For example, one business told us how their accountant used the tailored benchmarks to work out that their expense to turnover ratio was higher than other businesses with a similar turnover. Using this information the business adjusted some of their inputs and how they were pricing their products. These changes resulted in an overall improvement in their performance."
While the benchmarks are a helpful guide for small business, Mr Bambrick said it was also one of a number of tools the ATO uses to ensure a level playing field.
Editor: Lidgerwoods recommend that the best way to look up your own business benchmark category is to use Google by searching for “ATO Benchmarks <your industry>” Some of the information is often a few years behind but very relevant to see how your business stacks up with others. Not all business industries are benchmarkable and if you need any assistance just contact our office.
Recent client audit activity by the ATO has resulted from clients lodging figures that are only slightly different to their industry benchmark levels expected by the ATO. If this concerns you in your business please talk to us about our Accountancy Insurance offer that all clients would have seen over the last few months. It’s not too late to take up the policy that would cover you for our fees in the event of an audit issue with the ATO.
Record keeping is always key to taking on the ATO
In a recent case before the Administrative Appeals Tribunal (AAT), amended assessments issued to a taxpayer by the ATO, which were based on the amounts of unexplained deposits to the taxpayer's bank accounts (in some years, in the hundreds of thousands of dollars, in others, millions), have been largely upheld.
The total further tax claimed by the ATO was almost $4 million, and, on top of that, they imposed an administrative penalty of almost $2 million (imposed at the rate of 50% for recklessness).
The taxpayer was partially successful in proving that some of the amounts deposited into bank accounts held in his name were not assessable income.
In particular, the taxpayer was able to demonstrate that some of the deposits were reimbursements of amounts he paid in relation to a group of companies of which he was an investor, and some were transfers from one of his bank accounts to another.
However, in relation to many of the deposits to his bank accounts, he had no corroborative evidence as to what they represented.
Therefore, he failed to discharge his onus to prove the amounts should not have been included in his assessable income.
Editor: Yet again the AAT has provided taxpayers with another reminder as to the importance of documentation and good record-keeping.
Crucial issue to consider when buying a company
Where a buyer commences to hold all of the shares in a company (including a company acting as trustee of a trust), they are highly likely to be appointed as a director of that company.
Although being a director in itself does not make the director personally liable for the debts of the company, there are two types of tax debts that are major exceptions to this rule, being PAYG withholding (‘PAYGW’) and compulsory employee superannuation guarantee (‘SG’).
That is, directors can be made personally liable for any outstanding PAYGW or SG, even if they were not a director at the time the debt was incurred.
Therefore, a key component of the due diligence process undertaken by a potential purchaser should be an assessment of whether the company is up-to-date with its PAYGW and SG obligations (as part of this, a potential buyer should also consider whether any ‘contractors’ to whom payments were made would be seen as 'employees' in the eyes of the ATO).
The buyer will also ordinarily want the vendor to provide some kind of indemnity in relation to the buyer’s PAYGW and SG exposure.
Note also, however, that the ‘old’ directors do not cease to have exposure to unpaid PAYGW and SG. That is, both the ‘old’ and ‘new’ directors are all jointly and severally liable for these debts. This position does not alter even if a director resigns before the due date for payment of a relevant amount to the ATO.
Editor: Very important information for any ingoing or outgoing officeholders on any companies. New directors of existing companies take on a lot of responsibility and potentially become liable for issues even before they were involved. Ceasing directors likewise cannot simply walk away from these debts also. Lidgerwoods always advises our clients when officeholding changes are proposed so that all parties are aware of these implications.
Superannuation changes passed by Parliament
The government's extensive changes to the taxation laws regarding superannuation were passed by Parliament on 23 November 2016.
According to the Treasurer, Mr Scott Morrison: "The superannuation reform package better targets tax concessions to make our superannuation system fair and sustainable, as the population ages and fiscal pressures increase.
"The reforms include the introduction of a $1.6 million transfer balance cap, which places a limit on the amount an individual can transfer into the tax-free earnings retirement phase and the introduction of the Low Income Superannuation Tax Offset".
The amendments also include the following two new measures to provide more flexibility to help Australians save for their retirement:
Editor: Lots of changes to superannuation over the last year – seems to be a never ending cycle of change in this field. We are happy to refer you to a financial advisor if you need one. The 10% rule change in 2017/18 tax return will be a great opportunity for employed taxpayers to increase their deductions in that year.
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
Lastly we welcome your feedback. If you found this E-Newsletter very useful (or not?),
'The Team' at Lidgerwoods Accountants