WSC Caringbah – April 2010 E-Newsletter

This issue includes:

Attention All Business Owners - Do You Have Any Idea How Much Tax You Will be Liable for in 2010 and When it Will be Due?
Introduction of our New Ezy Pay System
Help! I've Put Too Much into my Super Fund
Entertainment - What is it and When are you Caught for FBT?
Rental Properties - Travel Expenses
Tax Office's Start to the Year Maybe not as Good as They Hoped for

Attention All Business Owners – Do You Have Any Idea How Much Tax You Will be Liable for in 2010 and When it Will be Due? 

If the answer is a long way from any certainty, we encourage you to contact us to arrange an appointment for April or May to:

1.    Review and perform a Health Check on your current year-to-date financials;
2.    Budget for the remainder of this financial year’s income and expenses;
3.    Assess whether you are likely to have a tax liability;
4.    Discuss any possible ways you can reduce or better manage this tax liability;
5.    Map out a 12 month time-line on approximately how much tax you will need to pay and when; and
6.    Discuss any other issues of concern regarding your business.

If you’d like any assistance with any of the above, please do not hesitate to call Brett, Matt, Linda or Mike on 9531-0922.

Introduction of Our New Ezy Pay System

We are in the process of introducing an Ezy Pay facility for our business clients which enable pre-payment of part or all of the next year’s compliance fees in monthly instalments.  We believe this will assist many clients with their cash flow management.  The instalments are totally at each client’s discretion but would require a minimum of one-twelfth of the previous year’s fees. 

Please contact Kathie on 9531-0922 if you would like to receive a Direct Debit Request Form or would like more information.

Help!  I’ve Put Too Much Into my Super Fund

One of the great things about superannuation is the concessional tax rates.  Concessional contributions, which come from pre tax income, are deductible at the relevant company or marginal tax rate and are taxed in the super fund at 15%.

There are caps imposed on how much you can put into super and still get the concessional tax rate.  In the 2007/2008 and 2008/2009 financial years, the concessional contributions cap was $50,000 for those under 50 years of age and $100,000 for those who were 50 or older on 30 June 2007.  The concessional contributions cap for the current financial year is $25,000 for those under 50 and $50,000 for those 50 or over on 30 June 2009.  The non-concessional contributions threshold is $150,000 (which can be averaged across three years  - allowing you to exceed the cap in one year and reduce your contributions in others giving you a total of $450,000 over three years). 

Excess contributions are not uncommon and many taxpayers inadvertently breach their contribution limits.  The problem is that if you breach the concessional contributions cap, the tax on the contributions over the cap is an additional 31.5% on top of the initial 15% paid by the super fund.  And, it’s very difficult to do anything about it once you have put the cash into the superannuation account.  Where both the concessional and non-concessional caps are breached, the excess contributions tax could be as high as 93%.

The problem with making excess contributions is that under the law, once the contribution has been accepted by the fund the preservation rules apply (meaning that you can only get the money out once you meet the conditions of release – for example, you turn 60).

In some cases, where an honest mistake has been made, the amount can be refunded.  However, if you are over the contributions cap, have changed your mind about the contribution, or you have had a change in income levels so that you cannot utilise the tax deduction, then it is unlikely your excess contribution would be called an honest mistake.  However, if you inadvertently banked money into the wrong account (and that account was the superannuation funds account) then that might be an honest mistake if you can prove it.

The important thing is to be aware of what your contributions caps are, the total amounts that have been contributed, and what’s contained in your trust deed. 

Those most likely to breach the cap are those with multiple employers and those who have entered into salary sacrifice arrangements in past years and have not reviewed the amounts being paid into their superannuation fund. This includes those utilising the transition to retirement strategy.

For advice on managing your SMSF and getting money in and out of your fund, speak to us or your financial adviser today.

Entertainment - What is it and When Are You Caught for Fringe Benefits Tax "FBT"?

Editor:  Entertainment is always a problem for FBT purposes because it relates to the provision of food and drink which sometimes is not liable for FBT ( eg. travel) and sometimes is  (eg.staff parties).

The following are some examples of what is entertainment:

*    restaurants where family and clients are entertained;
*    food and drinks provided at a staff social function;
*    entertainment and drinks provided to employees on Friday nights;
*    the cost of taking staff and their partners out to lunch; and
*    cost of taxis and limousines to and from entertainment venues.

An employer who has provided meal entertainment fringe benefits may work out the taxable value of their meal entertainment under one of these three methods.

*    50/50 split method;
*    12 week register method; or
*    actual expenditure incurred on meal entertainment method.

Editor:  If you think that you may have provided 'entertainment benefits', the method we can help you choose to determine the FBT taxable value can substantially reduce the FBT payable.

Rental Properties - Travel Expenses

Editor:  The following is about claims by taxpayers with rental properties and demonstrates how we can help you with those claims.

What travel expenses can taxpayers with a rental property claim?

Taxpayers can claim:

*    preparing the property for new tenants (except for the first tenants);
*    inspecting the property during or at the conclusion of tenancy;
*    undertaking repairs, where those repairs are a consequence of the damage or wear and tear incurred while being rented out;
*    maintenance of the property, such as cleaning and gardening, while it is rented or available for rent;
*    collecting the rent; and
*    visiting their agent to discuss their rental property.

Domestic travel requiring an overnight stay

A rental property may be located so far from where a taxpayer lives that it would be unreasonable to expect them not to stay near the property overnight when making an inspection.

If this is the sole reason for the trip, they are entitled to claim a deduction for travel expenses incurred in travelling to the rental property.

Where an overnight stay is involved, they would be entitled to claim for meals and accommodation.

Tax Office's Start to the Year Maybe Not as Good as They Hoped For

Editor:  The Tax Office has started off this year on the receiving end of a lot of "flak".

First, they implemented their new "Change Program" which was an $800m upgrade to their computer system and literally hundreds of thousands of refunds in the pipeline ground to a halt, angering taxpayers and tax agents alike.

In mid-March about 150,000 refunds were issued and dated 13 March, got held up for some undisclosed reason and were then sent to Australia Post about 10 days later.  Taxpayers are understandably confused as to why it seems to have taken more than two weeks for their refund to get to them.

New Notices of Assessment

Then, without telling anyone, they produced new notices of assessments which taxpayers have little hope of understanding.

The old notices of assessment used to be a reasonably simple one page document that spelt out the amount owing or being refunded.

The new notices of assessment are four pages long, with lots of information taxpayers don't need or want, are different for different types of taxes and often just tell taxpayers that there is a debit (DR) or credit (CR).

As tax agents, we have reacted to the new notices of assessment on behalf of clients and the Tax Office has promised to try and make them more simple - and shorter.  That's the good news.

The bad news is, like trying to turn the Titanic, it's going to take the Tax Office until June or July to make the necessary changes.

Unfortunately, until then we are going to have to put up with the assessments as they are.  If you receive one of them from us, or from the Tax Office, and need a hand, give us a call.