WSC NEWS - AUGUST 2009 

This issue includes the following topics:

The Cash Economy and the new personal living expense guide
ATO's 2009/10 Compliance Targets
Self Managed Superannuation Funds (SMSFs)
Related party transactions of SMSFs under review
Claiming the Tax Break on Laptops
Car Depreciation limit for 2009/10
Another Tax Scam
Shire Business Awards
Attention MYOB Software users
BEC Starting a Business Workshop


The Cash Economy and the new personal living expense guide

The ATO has developed a new guide to explain the importance they place on examining taxpayers' household expenditure when identifying omitted cash income in the course of reviews or audits.

Basically what the ATO will do is work out the taxpayer's family's living expenses, and compare this to their declared income - if the income is less than the expenses, something may be wrong .....

Personal living expense worksheets

During an audit , the ATO often asks taxpayers to complete a questionnaire detailing the living expenses for their household.

The worksheets detail the type of information they look at when examining taxpayers' personal living expenses, including such items as tobacco and alcohol, heating, power, water and sewerage, phone, gardening and security, eating out, takeaways, lunches and coffees, lottery tickets, clothing and footwear, and 'grooming' expenses.

Of course, many of these can be checked with third parties (banks, utilities, etc.), although other expenses have to be estimated.  This new guide is integral to those estimations.

If, in the course of an audit, the ATO reassesses the taxpayer's income to a higher figure, the taxpayer would then have to take the ATO to court to prove that the ATO's assessment is excessive.  The taxpayer may also have to pay penalties and interest.


ATO's 2009/10 Compliance Targets

The Tax Office has signalled that it will soon be issuing its 2009/10 Compliance Program, setting out where it intends to concentrate its audit activity.

Some of the things the Compliance Program will concentrate on include:

• Early identification of businesses that need help (particulary small businesses) and may fall behind in payments. Early indications are late lodgements, or payment hiccups;
• Continuing development of industry benchmarks, which will be used in audits;
• Ensuring employers comply with their PAYG and superannuation obligations;
• Serial bankruptcies; and
• Highly paid individuals.

Self Managed Superannuation Funds (SMSFs)

The ATO is also about to increase its pressure on trustees of SMSFs and their approved auditors.

In the last 12 months they made 60 - 70 funds non-complying, and more cases are coming through.  One fund, whose trustees extracted funds for their own use, had to pay penalty tax of 45% on the value of the assets of the SMSF.  A costly decision.

 Related party transactions of SMSFs under review

The ATO is warning SMSF trustees to be careful about people offering to set up an agreement between their SMSF and a related party to purchase assets, particularly properties.

These arrangements may breach the in-house asset rules that the SMSF must follow to be considered a complying super fund.

The in-house asset rules are one off the may investment restrictions that apply to SMSFs.  Basically only 5% of a SMSF's assets can be "in-house assets", which are investments in related parties or lease arrangements with related parties (subject to some exceptions).

The arrangements the ATO is concerned about use a paid third party to set up an agreement (sometimes referred to as 'a joint venture agreement') between the fund and a related trust to purchase as asset that provides income for the trust and the fund.

The ATO believes that these arrangements are an attempt to circumvent the in-house asset rules, as the related party transaction is really an investment in the related trust by the SMSF.


Claiming the Tax Break on Laptops

The following advice from the ATO about laptops will be relevant to any small business (basically being a business with a turnover of less than $2 million) looking to acquire a laptop before December 2009, or any business which did in fact acquire a laptop between 13 December 2008 and 30 June 2009.

Small businesses can still take advantage of the Tax Break (the bonus 50% deduction) in relation to most depreciating assets acquired by 31 December 2009 which cost at least $1,000.

To claim the Tax Break, the relevant asset must basically have been acquired for the principal purpose of carrying on a business.

The ATO will accept that a laptop computer will be used for the principal purpose of carrying on a business if, when the taxpayer first acquires and then uses the laptop computer, it is reasonable to conclude that they will use it more than 50% of the time for the purpose of carrying on a business.


Car Depreciation limit for 2009/10

The Tax Office has advised that the depreciation limit for the 2009/10 financial year is $57,180 (unchanged from the 2009/09 year).


Another Tax Scam

The Tax Office is warning people to be wary of a fraudulent email being circulated that claims to offer 30% discount on their taxes.  The email uses the Tax Office logo and in the subject heading the words 'Cut Off Taxes Program (COTP) has been released - Join Now'.

The email asks people to click on a link which directs them to a bogus Tax Office website and asks them to register for the program supplying their tax file number.  We recommend recipients simply delete this email.

Shire Business Awards

Just a reminder that voting for the Sutherland Shire Local Business Awards closes on 26 August. If you haven't already voted for WSC Caringbah in the "Professional Services" category, but would like to, please click here and then on "Vote" (we are number 36 on the list of businesses in this category).

Attention MYOB Software users

Please note that the the latest versions of MYOB are MYOB Accounting Plus (v18.5) and MYOB Premier (v12.5). Users should be careful not to let their software become outdated as this may affect performance and makes it difficult to transfer files to and from you bookkeeper and/or accountant.

BEC Starting a Business Workshop

This Friday 21 August, Matt will be presenting a segment at a "Starting a Business Workshop" with Maria and Lara of the Business Enterprise Centre, Kirrawee. This workshop is suitable for anyone thinking about starting their own business or who have recently commenced business and need some tips and advice. It will give attendees a comprehensive look at all the aspects they will need to set up and start a business and ensure they are headed along the road to achieving their goals. For more information, click here.

An Important Message
While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.