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Federal Budget

Personal Taxation

Personal Tax Rates: Budget Deficit Levy Not To Be Extended


The 2015–2016 Budget did not make any changes to the current personal tax rates, although in the lead-up to the Budget, the Treasurer indicated that the 2% budget deficit levy (tax) on incomes over $180,000 would not be extended beyond its initial three years.

The levy was announced in last year's Budget and applies for three years from 1 July 2014. It is due to cease at the end of the 2016–2017 financial year.

Work-Related Car Expenses Simplified

The Budget confirmed that the 12% of original value and one-third of actual expenses incurred methods would be discontinued. That means only the cents per km and logbook methods remain. The Government will set 66 cents per kilometre as the rate for using the cents per km method, irrespective of a car's engine size. The changes will apply from the 2015–2016 income year.

Medicare Levy Low-Income Thresholds For 2014–2015

From the 2014–2015 income year, the Medicare levy low-income threshold for singles will be increased to $20,896 (up from $20,542 for 2013–2014). For couples with no children, the threshold will be increased to $35,261 (up from $34,367 for 2013–2014). The additional amount of threshold for each dependent child or student will be increased to $3,238 (up from $3,156).

For single seniors and pensioners, the Medicare levy low-income threshold will be increased to $33,044 (up from $32,279). This threshold applies to those entitled to the seniors and pensioners tax offset (SAPTO).

The measure will apply from 1 July 2014.

Temporary Working Holiday Makers – Tax Residency Rules To Change

The Government will change the tax residency rules to treat most people who are temporarily in Australia for a working holiday as non-residents for tax purposes, regardless of how long they are here. This means they will be taxed at 32.5% from their first dollar of income.

This measure will apply from 1 July 2016.

Small Business

Tax Rate Cut To 28.5%

The Government announced, with effect from the 2015–2016 income year (ie from 1 July 2015), a 1.5% cut in the company tax rate applying to small businesses (turnover less than $2 million), reducing the tax rate to 28.5%. Companies with an aggregated annual turnover of $2 million or above will continue to be subject to the current 30% rate on all their taxable income. The current maximum franking credit rate for a distribution will remain unchanged at 30% for all companies.

Tax Discount For Unincorporated Small Businesses

The Government said that with effect from 1 July 2015 individual taxpayers with business income from an unincorporated business that has an aggregated annual turnover of less than $2 million will be eligible for a small business tax discount. The discount will be 5% of the income tax payable on the business income received from an unincorporated small business entity, and will be capped at $1,000 per individual for each income year.

Small Business Asset Accelerated Depreciation Write-Off

Small businesses would be able to immediately write off assets they start to use or install ready for use, provided the asset costs less than $20,000. This will apply for assets acquired and installed ready for use between 7.30pm (AEST) 12 May 2015 and 30 June 2017. Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed in the small business simplified depreciation pool. The Government will also suspend the current "lock out" laws for the simplified depreciation rules until 30 June 2017.

From 1 July 2017, the thresholds for the immediate depreciation of assets and the value of the pool will revert to existing arrangements.

Immediate Deductibility For Professional Expenses re Start-Ups

The Government will allow businesses to immediately deduct a range of professional expenses associated with starting a new business, such as professional, legal and accounting advice. The measure will be available to businesses from the 2015–2016 income year.

CGT Rollover Relief For Change To Entity Structure

The Government has confirmed that it will allow small businesses with an aggregated annual turnover of less than $2 million to change legal structure without attracting a CGT liability at that point.

The measure recognises that new small businesses might choose an initial legal structure that they later find does not suit them when the business is more established, for example a sole trader changing its business structure to a trust. The measure will be available from the 2016–2017 income year.

No FBT On Work-Related Electronic Devices

From 1 April 2016, ie the start of the 2016–2017 FBT year, the Government will allow an FBT exemption for small businesses that provide employees with more than one qualifying work-related portable electronic device, even where the items have substantially similar functions.

Further ESS Changes

Significant changes to the employee share schemes (ESS) rules were announced in October 2014. Additional changes announced in the Budget will:

  • exclude eligible venture capital investments from the aggregated turnover test and grouping rules (for the start-up concession); 
  • provide the CGT discount to employee share scheme interests that are subject to the start-up concession, where options are converted into shares and the resulting shares are sold within
    12 months of exercise; and
  • allow the Commissioner to exercise a discretion in relation to the minimum three-year holding period where there are circumstances outside the employee's control that make it impossible for them to meet this criterion.

These changes will take effect from 1 July 2015.

GST

"Netflix Tax" To Start 1 July 2017

The Government has announced that it will impose GST on offshore intangible supplies to Australian consumers with effect from 1 July 2017. The measure has been cited in the media as the "Netflix" tax. The Government released draft legislation which contains the details of the changes.

The key concept in determining if a supply is made to an Australian consumer is determining if the entity is an Australian resident. Broadly, for individuals, the term takes its ordinary meaning. Similarly, a company will be an Australian resident if the company is incorporated in Australia or if it is effectively owned or controlled by Australian residents.

Child Care And Pension/Welfare Measures

Major Childcare Payments Revamp


The Government announced it will establish a new and simpler mainstream Child Care Subsidy from 1 July 2017. Key points include the following: 

  • Abolition of the current Child Care Benefit, Child Care Rebate and Jobs, Education and Training Child Care Fee Assistance programmes; and 
  • A single means tested Child Care Subsidy for all families, subject to a new activity test, for up to 100 hours of subsidised care per child per fortnight.

Child care subsidies will remain linked to immunisation requirements strengthened, from 1 January 2016, under the Government's "no jab, no pay" policy.

Paid Parental Leave – No Double-Dipping

The Treasurer said the Government will stop people from claiming parental leave payments from both the Government and their employers – he said this was effectively double dipping. This would apply from 1 July 2016.

Age Pension Assets Test: Threshold Increased, Taper Rate Tightened

The Government confirmed that the Age Pension assets test threshold for a single homeowner will be increased to $250,000 (up from $202,000) and $375,000 for a homeowner couple (up from $286,500) from January 2017. The assets test threshold (or assets free area) for non-homeowners will be increased to $450,000 (single) and $575,000 (couple).

The assets test taper rate at which the Age Pension begins to phase out will be increased from $1.50 of pension per fortnight to $3.00 of pension for each $1,000 of assets over the relevant assets test threshold. The measures will commence from 1 January 2017.

The Government will also be dropping its 2014 Budget proposal to index the Age Pension to CPI.

Superannuation

Defined Benefit Super Schemes: Government To Close Loophole

The Government confirmed that a 10% cap will apply to the "deductible amount" for pension income received from a defined benefit superannuation scheme for the purposes of the social security income test. Recipients of Veterans' Affairs pensions and defined benefit income streams paid by military superannuation funds are exempt from this measure. In addition, the measure will not affect the means test treatment of income streams purchased for retail providers of these products. The measure will apply from 1 January 2016. 


What Does Your Leadership Say About You?

Do you have what it takes to make sure everyone in your team makes it to the finish line?

How do you motivate your employees? What kind of leadership style do you think will work best for a particular project?

To be an accomplished leader, you need to have a certain set of skills and attributes that serve to inspire and motivate others. Leaders are driven and committed individuals who have ambition, and are willing to work hard to achieve their aspirations and goals.

There are many different approaches that can be taken to achieve success in a leadership position. So it is important to know which approach and which skills should be utilised in different project ventures.

Start thinking about what kind of leader you want to be, by first identifying your own strengths and weaknesses. This can help to determine how you can play to your strengths and overcome your weaknesses, before taking on a team of individuals. Also, start to consider the kind of leader you would readily follow or look up to when working in a team.

Think about how you plan to motivate your team. Will you act as a role model and lead by example or find what motivates each individual and encourage that manner of thinking? Everyone is different, which means they respond to different forms of motivation. Be prepared that you may need to try out different methods before you reach success.

No matter what kind of leadership style you choose, every leader must be organised so they are prepared for anything when completing a project. Incorporating a consistent and systematic approach to the project makes it easier to delegate tasks, set deadlines, evaluate progress and meet expectations.

Lastly, just because you're in charge doesn't mean you know everything. Having this kind of attitude can limit your ability to grow and develop as a leader. Being open to learning new things, especially from your team, can serve to improve your knowledge and skills.


Tax Planning

There are many ways in which entities can defer income, maximise deductions and take advantage of other tax planning initiatives to manage their taxable incomes. Taxpayers should be aware that in order to maximise these opportunities, they need to start the year-end tax planning process early. Of course, those undertaking tax planning should be aware of the potential application of anti-avoidance provisions. However, if done correctly, tax planning can provide a number of tax savings for entities.


Deferring Assessable Income

  • Income received in advance of services being provided is, generally, not assessable until the services are provided;
  • Taxpayers who provide professional services may consider, in consultation with their clients, rendering accounts after 30 June in order to defer the income;
  • A taxpayer is required to calculate the balancing adjustment amount resulting from the disposal of a depreciating asset. If the disposal of an asset will result in assessable income, a taxpayer may want to consider postponing the disposal to the following income year and
  • Rollover relief may be available for balancing adjustments arising from an involuntary disposal of assets where replacement assets are acquired.


Maximising Deductions

Business Taxpayers

  • Taxpayers should review all outstanding debts prior to year-end to determine whether there are any potential debtors who will be unable to pay their bills. Once a taxpayer has done everything in their power to seek repayment of the debt, the taxpayer could consider writing off the balance as bad debt;
  • The entitlement of corporate tax entities to deductions in respect of prior year losses is subject to certain restrictions. An entity needs to satisfy the continuity of ownership test before deducting the prior year losses. If the continuity of ownership test is failed, the entity may still deduct the loss if it satisfies the same business test;
  • A deduction may be available on the disposal of a depreciating asset if a taxpayer stops using it and expects never to use it again. Therefore, asset registers may need to be reviewed for any assets that fit this category and
  • Small business entities are entitled to an outright deduction for the taxable purpose proportion of the adjustable value of a depreciating asset, subject to conditions.

Non-Business Taxpayers

  • Non-business taxpayers are entitled to an immediate deduction for assets used predominantly to produce assessable income and that cost $300 or less, subject to conditions and
  • The self-employed and other eligible persons are entitled to a deduction for personal superannuation contributions subject to meeting conditions such as the 10% rule.  


Companies

  • Companies should ensure that all dividends paid to shareholders during the relevant franking period (generally the income year) are franked to the same extent to avoid breaching the benchmark rule;
  • Loans, payments and debts forgiven by private companies to their shareholders and associates may give rise to unfranked dividends that are assessable to the shareholders and their associates. Shareholders and entities should consider repaying loans and payments on time or have appropriate loan agreements in place;
  • Companies should consider whether they have undertaken eligible research and development (R&D) activities that may be eligible for the R&D tax incentive and
  • Companies may want to consider consolidating for tax purposes prior to year-end to reduce compliance costs and take advantage of tax opportunities available as a result of the consolidated group being treated as a single entity for tax purposes.


Trusts

  • Taxpayers should review trust deeds to determine how trust income is defined. This may have an impact on the trustee's tax planning;
  • Trustees should consider whether a family trust election (FTE) is required to ensure that any losses or bad debts incurred by the trust will be deductible and to ensure that franking credits will be available to beneficiaries and
  • Taxpayers should avoid retaining income in a trust because it may be taxed in the hands of the trustee at the top marginal tax rate.

 
Capital Gains Tax

  • A taxpayer may consider crystallising any unrealised capital gains and losses to improve their overall tax position for an income year and
  • Eligible small business entities can access a range of concessions for a capital gain made on a CGT asset that has been used in a business, provided certain conditions are met.


Superannuation

  • Individuals who wish to take advantage of the concessionally taxed superannuation environment but wish to stay under the relevant contributions caps should consider keeping track of contributions and avoid making last-minute contributions that would be allocated to the next financial year;
  • For 2014–2015, the general concessional contributions cap is $30,000. For those who are aged 49 or over on 30 June for the previous income year, a higher $35,000 cap applies;
  • For 2014–2015, the non-concessional contributions cap is $180,000. Individuals under 65 years may bring forward the non-concessional cap for the next two years (ie $540,000 over three years from 2014–2015);
  • From 1 July 2013, excess concessional contributions tax has been abolished. Instead, excess concessional contributions are included in an individual's assessable income (and subject to an interest charge);
  • From 1 July 2013, excess non-concessional contributions tax continues to apply where relevant, unless the option to withdraw excess contributions is exercised. Associated earnings will be included in the individual's assessable income (subject to a 15% tax offset);
  • Individuals with salary-sacrifice superannuation arrangements may want to have early discussions with their employers to help ensure contributions are allocated to the correct financial year and
  • From 2012–2013, individuals earning above $300,000 are subject to an additional 15% tax on concessional contributions. However, despite the extra 15% tax, there is still an effective tax concession of 15% (ie the top marginal rate less 30%) on their contributions up to the relevant cap.


Fringe Benefits Tax

  • The four rates used in the statutory formula method for determining the taxable value of car fringe benefits have been replaced with a single statutory rate of 20% for fringe benefits and
  • The first $1,000 of the aggregate of the taxable values of "in-house" fringe benefits (ie in-house expense payment, in-house property and in-house residual fringe benefits) provided to an employee during a year is exempt from FBT. However, the $1,000 reduction does not apply to an in-house benefit provided on or after 22 October 2012 under a salary packaging arrangement.


Individuals

  • For the 2014–2015 income year, the general tax-free threshold available to Australian resident taxpayers is $18,200;
  • Certain low income taxpayers are entitled to the low income offset. The maximum offset for 2014–2015 is $445;
  • The medical expenses offset is being phased out and will no longer be available after 2018–2019. Transitional arrangements will allow taxpayers to claim the offset from the 2012–2013 income year until the end of the 2018–2019 income year, subject to limitations and
  • The private health insurance offset has been means tested since 1 July 2012. There are three private health insurance incentive tiers. 


Maintaining Your Health In The Workplace

Continue to produce a high-quality standard of work by maintaining a high-quality standard of healthy living.

There's no denying that when you're not feeling 100% healthy, work becomes a whole lot harder. Sitting for long periods of time at a desk five days a week definitely takes a toll on the body. To counteract some of the strains or pressures felt from working such long hours, try out some of the following activities.

Drink More Water

When you hit a brick wall at work, put down the sugary snack and pick up the water bottle. This lull in concentration isn't due to needing an afternoon sugar hit. It's because you're dehydrated.

Go For A Walk

If you're cooped up in an office all day, one of the best things you can for your body is to go for a walk during your lunch break. Not only will you be burning calories, you'll also have a chance to de-stress and refresh.

Clean Your Work Space

Your desk may be home to thousands of germs. So make sure you regularly get out the disinfectant and clean your workspace, to avoid catching any nasty colds or flus.


Dealing With A Difficult Employee

For some, it's an easily handled situation. For others, it's one of their worst nightmares. And the chances are it's bound to happen to every employer at least once during their career.

Having to deal with someone in your team who just isn't coping in the office is not a pleasant situation for anyone.

There may be a variety of reasons for this, including (but not limited to) a personality clash between you and the employee, or between the employee and someone else, the employee having a bad or lazy work ethic, the workload may be too much to handle, the job isn't what it was expected to be like, or maybe external factors like the employee's home life are significantly affecting his/her work.

Whatever the reason, it's a situation that no employer wants to find themselves in, for it can severely affect the working environment of your office, as well as the quality of work expected from your clients.

As much as many of us would like to think, this kind of problem does not just fix itself, so although discussing the issue may be daunting to some, the sooner action is taken, the sooner a solution can be reached.

Here are some tips to get you started on what you should prepare before addressing the issue with your employee.

Be Specific

You need to know the exact reason/s why you have decided to call a meeting with this particular employee. It's no good just telling them that you're not happy with their work attitude or quality of work produced. You need to explain to them exactly what it is you are not happy with. They may be incredibly rude to other employees, but never miss a deadline. Or they may always offer to do the coffee run, but somehow manage to send an email to the incorrect address repeatedly. Make sure you are clear with what is displeasing you.

Record Everything

Before you call a meeting, try to maintain a record of the problems that may arise due to the employee. This will then form the basis of your evidence if employee denies anything that has happened. Or it could even give you a better understanding of why they behave in a particular way if you see a pattern forming.

Take The Time To Listen

If an employee has been underperforming for quite a while, many employers may eventually find themselves focusing solely on the bad behaviour or quality of work produced. Instead, they should be stopping and paying attention to what may actually be the cause of the bad work.

Sometimes just listening to your employee can make all the difference in the world. Perhaps they noticed a change in their quality of work as well and were too afraid to say anything, or perhaps they just needed a quick chat with the boss to let them know what was going on in their life.

Give Clear Feedback

Instead of always complaining about the employee, give them some clear feedback on their work. Again, some employers may find this to be a difficult or uncomfortable task, but it's something that needs to be done.

Remember, it's more difficult having an employee in the office not pulling their weight and negatively affecting those around them. Giving the employee specific information targeted at helping them improve their work quality helps them firmly understand exactly what you want from them, and increases the chances of a positive outcome for all. 


Time Limits On Trustee Tax Assessments Clarified

The ATO has issued Practice Statement PS LA 2015/2 which outlines its practice of limiting the period within which it will raise an original trustee assessment. The practice means that returns lodged by trustees are broadly exposed to similar time limits for review as other taxpayers.

Generally, the ATO notes it will not issue an original trustee assessment more than four years after the relevant trust tax return was lodged, or more than two years after lodgement for the 30 June 2014 and later income years if the trust was a small business entity (and certain specific qualifications under the tax law do not apply). However, the ATO notes that the time limits can be extended in certain cases.

The following example illustrates the time limit within which the ATO can raise an original trustee assessment:

The 2010 income tax return for the Oak Family Trust was lodged on 9 May 2011. The trust was not a small business entity for the 2010 income year. An audit of the trust reveals that some of the trust net income should be assessed to the trustee. The Practice Statement provides that the Tax Office must issue an assessment to the trustee by 9 May 2015 (unless the time limit is extended).


Tax Concessions Following Business Sale Cancelled

The Administrative Appeals Tribunal (AAT) has confirmed that the general anti-avoidance rules under the tax law applied to a "scheme" carried out by taxpayers in order to enable them to qualify for the capital gains tax (CGT) concessions for small businesses on the sale of a business. In particular, the AAT examined the effect of a "restructure" of the business which occurred several weeks before the sale. An effect of the "restructure" was to enable the taxpayers to meet a requirement to access the CGT small business concessions.

Before the AAT, the taxpayers sought to argue that, contrary to the position they took on claiming the tax concessions on the lodgement of their tax returns, they did not qualify for the concessions. However, the AAT held the taxpayers did qualify for the concessions. It also held that, after finding that the steps to "restructure" the business constituted a "scheme", the general anti-avoidance rules under the tax law applied to cancel the "tax benefit". The AAT found the taxpayer entered into the scheme for the dominant purpose of obtaining a tax benefit (reduced tax) and not for any asset "protection purpose".

TIP: The ATO uses data-matching to identify taxpayers that may be inappropriately seeking the CGT small business concessions. Business "restructures" which occur just prior to a particular transaction which result in significant tax benefits could potentially raise red flags. Where a restructure is effected for purposes such as asset protection (which the courts have said is a legitimate non-tax purpose), such benefits must be real and not simply illusory. 


Penalty For Promoting Pharmaceuticals Donations Scheme

The Federal Court has imposed a $1.5 million penalty after finding a promoter of a scheme involving the purchase and donation of pharmaceuticals to charities with foreign operations engaged in conduct that resulted in himself and two other corporate entities being promoters of a tax exploitation scheme.

The ATO noted the penalty of $1.5 million was the "highest civil penalty to date". In commenting on the decision of the Federal Court, ATO Deputy Commissioner Tim Dyce said the scheme involved the purchase and donation of AIDS pharmaceuticals to charities in Africa. "As we discovered, the purchasers only paid 7.5% of the grossly inflated price of the drugs, yet claimed tax deductions of 100%," said Mr Dyce. 


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