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New Approved Occupational Clothing Guidelines 2017

The government has issued new guidelines to set out criteria for tax deductible non-compulsory uniform

  • the clothing is in the nature of occupation specific, or protective clothing; or
  • the wearing of the clothing is a compulsory condition of employment for employees and the clothing is not conventional in nature; or
  • where the wearing of the clothing is not compulsory, the design of the clothing is entered on the Register of Approved Occupational Clothing.

 The new guidelines outline (among other things):

  • the steps that need to be undertaken by employers to have designs of occupational clothing registered; and
  • the factors that will be considered in determining whether designs of occupational clothing may be registered.

The guidelines commence on 1 October 2017, and the previous Guidelines are revoked with effect from the same day.

If the total value of a superannuation fund member's pensions exceeded $1.6 million on 1 July 2017, they may face adverse tax consequences.

However, there is a transitional provision that permits a minor excess over $1.6 million to be ignored, subject to certain conditions being met.

Basically, this will be satisfied if the value of their pension interests on 1 July 2017 exceeded $1.6 million by no more than $100,000 (i.e., their total value did not exceed $1.7 million), but the member is able to commute the pension(s) by an amount that is at least equal to that excess no later than 31 December 2017. 

This will mean that no 'transfer balance cap' consequences arise (e.g., no 'excess transfer balance earnings' will accrue on the excess and no 'excess transfer balance tax' will become payable).

Therefore, it is important that this issue is identified and, if applicable, dealt with promptly

The Leader of the Opposition, Bill Shorten, has announced that a Labor Government (should they be elected) will introduce a standard minimum 30% tax rate for discretionary trust distributions to "mature beneficiaries" (i.e., people aged 18 and over).

Although the ALP acknowledges that individuals and businesses use trusts for a range of legitimate reasons, such as asset protection and business succession, "in some cases, trusts are used solely for tax minimisation."

Labor's policy will only apply to discretionary trusts, so other trusts – such as special disability trusts, deceased estates and fixed trusts – will not be affected by this change

Change to travel expenses for truck drivers

Source:  NTAA Practice Update - August 2017

For the 2017/18 income year, the reasonable amount for travel expenses (excluding accommodation expenses, which must be substantiated with written evidence) of employee truck drivers who have received a travel allowance and who are required to sleep away from home is $55.30 per day (formerly a total of $97.40 per day for the 2016/17 year).

If an employee truck driver wants to claim more than the reasonable amount, the whole claim must be substantiated with written evidence, not just the amount in excess of the reasonable amount.

Source:  NTAA Practice Update - August 2017

From 1 July 2017, GST applies to imported services and digital products from overseas, including:

  • digital products such as streaming or downloading of movies, music, apps, games and e-books; and
  • services such as architectural, educational and legal.

Australian GST registered businesses will not be charged GST on their purchases from non-resident supplier if they:

  • provide their ABN to the non-resident supplier; and
  • state they are registered for GST

However, if Australians purchase imported services and digital products only for personal use, they should not provide their ABN.

 

Small Business 2017

Small Business 2017

The small business asset write off up to $20,000 has now been extended to 30 June 2018.  The deduction is used for each asset that costs less than $20,000 whether new or second hand.

From 1 July 2017:

  • The tax rate for small business is reduced to 27.5%
  • For sole traders, partnerships and trusts, there is a 8% small business tax offset (up to $1,000 limit) for those with a turnover of less than $5 million.
  • The small business turnover threshold has now been increased to $10 million (previously $2 million).  This means more businesses can access a range of small business concessions including the $20,000 instant asset write off and reduced company tax rate.

The reduced company tax rate of 27.5% will progressively apply to companies with turnover less than $50 million by the 2018-19 income year. 

 

Source:  NTAA - Practice Update August 2017

From 1 July 2017, GST applies to imported services and digital products from overseas, including:

  • digital products such as streaming or downloading of movies, music, apps, games and e-books; and
  • services such as architectural, educational and legal.

Australian GST registered businesses will not be charged GST on their purchases from a non-resident supplier if they:

  • provide their ABN to the non-resident supplier; and
  • state they are registered for GST.

However, if Australians purchase imported services and digital products only for personal use, they should not provide their ABN.


2017 Work Related Expense Claims

Source:  NTAA - Practice Update

The ATO is increasing attention, scrutiny and education on work-related expenses (WREs) this tax time.

Assistant Commissioner Kath Anderson said: "We have seen claims for clothing and laundry expenses increase around 20% over the last five years.  While this increase isn't a sign that all of these taxpayers are doing the wrong thing, it is giving us a reason to pay extra attention."

Ms Anderson said common mistakes the ATO has seen include people claiming ineligible clothing, claiming for something without having spent the money, and not being able to explain the basis for how the claim was calculated.

"I heard a story recently about a taxpayer purchasing everyday clothes who was told by the sales assistant that they could claim a deduction for the clothing if they also wore them to work," Ms Anderson said.

"This is not the case.  You can't claim a deduction for everyday clothing you bought to wear to work, even if your employer tells you to wear a certain colour or you have a dress code."

Ms Anderson said it is a myth that taxpayers can claim a standard deduction of $150 without spending money on appropriate clothing or laundry.  While record keeping requirements for laundry expenses are "relaxed" for claims up to this threshold, taxpayers do need to be able to show how they calculated their deduction.

The main message from the ATO was for taxpayers to remember to:

  • Declare all income;
  • Do not claim a deduction unless the money has actually been spent;
  • Do not claim a deduction for private expenses; and
  • Make sure that the appropriate records are kept to prove any claims.

 

More than one-third of Australian pensioners are living below the poverty line, making the country among the worst performers in the world for the financial security of older people.


The findings of the OECD report, Pensions at a Glance 2015, compared Australia to 33 other countries.


Australia was ranked second lowest on social equity, with 36 per cent of pensioners living below the poverty line, which the report defined as half the relevant country's median household income.


Australian pensioners fared better than their counterparts in South Korea, where 50 per cent live below the poverty line but performed poorly against the OECD average of 12.6 per cent.


The report, released last month, found the Australian government contributes less to old-age benefits than other OECD countries. The Australian government spends 3.5 per cent of GDP on the pension, below the OECD average of 7.9 per cent.


The findings are backed up by the Global Age Watch Index 2015 report card which rates countries by how well their older populations are faring


It ranked Australia lowest in its region on income security, due to the high rate of old age poverty and pension coverage which is below the regional average.


Paul Versteege?, senior research and advocacy adviser with the Combined Pensioner and Superannuants Association, said the base Australian pension rate was low compared to median household incomes


"There are huge discrepancies among retirees in various countries," he said.


"In Australia there is quite a large group that has to subsist on the age pension as its only source of income. In spite of pension reform and recent increases to the pension, the base pension is still quite low for singles."


The annual payment for a single person is about $22,000 and $34,000 for a couple, with 2.25 million Australians claiming the pension.


Council on the Ageing chief executive Ian Yates said the report challenged perceptions that the entitlement was too high.


"Claims that the age pension is somehow too extravagant and unsustainable do not bear out," he said.


"We have always argued for progressive improvements to the pension but at the moment an increase to the pension is highly unlikely and more focus ought to go towards building superannuation contributions."


Chief executive of Vision Super Stephen Rowe said he was "staggered" by the findings of the OECD report, saying it painted a bleak picture for many older Australians.


"Are we generous enough with the pension? I don't think so."


He said that Australians retiring now have not received the full benefit of compulsory superannuation contributions, introduced in 1992, but were grappling with rising living costs.


"The basic cost of living in Australia is quite high, compared with  some other OECD countries," Mr Rowe said.


Chief executive of National Seniors Michael O'Neill said the pension had gone backwards in real terms and many older people had not accumulated enough superannuation to supplement the benefit.


"In terms of sustainability, the report confirms that Australia spends substantially less than the OECD average on pensions," he said.

"In fact, our pension spend has dropped and plateaued since 2000. Against other countries, our proportion of pensioners living below the poverty line is startling."


2017 Tax Planning

 

Individuals

  • Top tax bracket earners can celebrate the end of the temporary budget repair levy from 1.7.2017, giving you an effective tax cut of 2%
  • If you owed tax last year or received a large refund, you may want to adjust your tax withholding with your employer for the upcoming tax year to avoid excessive refunds or nasty surprises
  • If you are feeling generous, make donations to registered charities before the 30th June. To be tax deductible, it must be an outright donation, not a raffle or toy
  • Consider topping up super contributions by salary sacrificing – review your concessional contribution limits – the compound impact of earnings on even small increases to super are substantial over your working life
  • Consider prepaying next year's interest on your negatively geared investment property
  • If you've made a capital gain this year, consider selling any under performing investments that trigger a capital loss within the same tax year
  • If you have earned a side income from ebay, gumtree, air b and b, uber etc, please talk to us about the tax treatment of this income
  • If you want to claim your car travel, be sure you have a valid logbook, otherwise we can only use the km method to claim for your car up to 5000 km
  • Consider the superannuation changes – see below under superannuation. 


Superannuation

  • From 1 July 2017, the condition of having to have less than 10% of income come from wages in order to claim a concessional super contribution as a tax return deduction will be removed. This opens up opportunities for those who want to make deductible contributions to super from their own money or from business earnings in a sole trader structure.
  • From 1 July 2017 taxpayers with an income up to $ 37,000 will receive a (LISTO) contribution to their fund equal to 15 % of their total concessional contributions of the year up to $ 500
  • From 1 July 2017, there is a new $ 1.6 million cap on the total amount that can be transferred into the tax free retirement phase for superfund account based pensions, excess assets move back into accumulation mode
  • Up to 30 June 2017, taxpayers earning over $ 300,000 will trigger the Division 293 tax ( an additional 15% tax imposed on the amount over the threshold). This reduces to $ 250,000 from 1.7.2017, catching more taxpayers into this net.
  • The current non concessional contributions limit of $ 180,000 reduces to $ 100,000 from 1.July 2017. This is a big change impacting the baby boomer generation. Talk to us before end of June, if this impacts you. It has a dramatic effect to those eligible to access the bring forward rules.
  • Members with a total super balance of over 1.6 million for the 2018 financial year, who make contributions in the new tax year, will have excess non-concessional contributions. There are some complex rules affecting those with balances close to $ 1.6 million, who still wish to make contributions, so talk to us, before making further contributions.
  • The concessional contributions limit is dropping from the current $ 30,000 to $ 25,00. 
  • For those with super savings of less than $ 500,000, they will be able to access their unused concessional contributions cap on a rolling basis for five years. Talk to us if this affects you.
  • Transition to retirement income streams are no longer tax exempt from 1.7.2017. Earnings from assets supporting a TRIS will be taxed at 15 % regardless of when the TRIS was commenced.


Business:

On 23 May 2017, the ATO announced the 15-16 Budget changes are now law.

From 1 July 2017
  • The tax rate for small businesses is reduced to 27.5 %
  • For sole traders, partnerships and trusts, there is a 8 % small business tax offset ( up to $ 1000 limit) for those with a turnover of less than $ 5 million.
  • The small business turnover threshold has now been increased to $ 10 million ( previously $ 2 million). This means more businesses can access a range of small business concessions including the $ 20,000 instant asset write off and reduced company tax rate.

The Federal Budget 2017-18 proposed an extension to the asset write-off program to 30.6.2018. So watch this space as legislation is being tabled. For now, you can rely on the small business asset writeoff up to $ 20,000 to 30thJune 20117.


Other things you might consider :

  • Prepay expenses - includes insurance, utilities or professional subscription
  • Maximise super contributions up to concessional contributions limits, this can include sole traders, provided that wages income is less than 10 % of total income
  • Write off bad debt - keep records of actions you have taken to recover the debt
  • Make sure you pay your employee's super on time and in a way that is super stream compliant. You can bring forward payments due in July relating to June wages, by paying them before 30 June.
  • Conduct a stocktake and write down inventory to lower cost or realiseable market values.


 Some general tips to make your business reporting easier:

  • Set reminders for due dates throughout the year
  • Separate your business and personal finances
  • Go paperless - this will save you space and there are a host of tools available to allow you to access your records from anywhere
  • Migrate to a cloud software - we recommend Xero or MYOB, this enables us to help you in real time, any time when you are stuck with a transaction. It enables us to keep you focused on regular business reviews with up to date accounts at least monthly in a "live environment". This enables a true partnership between us to ensure your business success.
  • Visit the small business tax room. This is a great ATO iniative to keep you informed https://www.ato.gov.au/newsroom/smallbusiness/



 


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