Australia’s Prime Minister Scott Morrison recently announced that the instant asset write-off would be extended to June 30 next year and that the threshold would be increased to $25,000. These changes took effect from January 29, according to the Australian Taxation Office.
“This will enable over three million small businesses across the country with an annual turnover of less than $10 million to access the new $25,000 instant asset write-off from now until June 30, 2020,” the Department of Jobs and Small Business said in a statement.
Labour has announced plans to restrict certain existing tax exceptions for investors, if they were to win the coming elections. The party argues that the existing rebates and incentives – including those on capital gains, negative gearing, and franking credits – lead to tax avoidance.
All of these proposed tax changes share a similar trait, in that they will largely affect wealthier voters with funds to invest. The most substantial of these planned policy changes are the ones affecting franking credits.
The current franking credits system was introduced by the Howard government, and allowed avoidance of tax on company profits. Individuals under this system have therefore been able to – under certain circumstances – receive cash rebates for corporate tax, even if they paid no taxes.
Earlier this year, we reported on the Australian Tax Office’s (ATO) warning regarding malicious phone scams. In July, over 4,000 such calls had been reported. In November, this number sky rocketed to 27,000. With estimate losses reaching $830,000 in November alone, it’s clear the threat from the swindle has not subsided.
The scam first came to attention when the ATO issued a warning in March of this year. The methods of deceit and trickery have evolved since then. With each passing month, accounting professionals have observed that the scams are becoming more sophisticated. As of early December, more than 170 taxpayers have been scammed.
Earlier this month, the Grattan Institute released a detailed report hitting back at superannuation lobbyists who claim that many Australians will not retire with enough money.
The belief that “Australians don’t save enough for retirement…encouraged by the financial services industry fear factory, is mistaken”, the report states.
The Australian Taxation Office (ATO) is warning the public to watch out for phone calls from fraudsters during tax time. The latest method involves a three-way phone call between the scammer, the victim and a second scammer impersonating the victim’s tax agent.
“One recent example had a taxpayer unfortunately thinking the telephone conversation was legitimate, and ended up withdrawing thousands of dollars in cash and depositing it into a Bitcoin ATM, fearing the police had a warrant out for his arrest,” Assistant Commissioner Kath Anderson said.
7-Eleven was fined $192,780 for forging employee and payroll records. Payroll and bookkeeping were the most common contraventions across all companies.
This April, the Federal Circuit Court penalised Avinash Pratap Singh, a manager and shareholder of 7-Eleven in Brisbane of $32,130; moreover, a $160,650 penalty was imposed on S & A Enterprises (QLD) Pty Ltd., of which he is a director.
An investigation by the Fair Work Ombudsman (FWO) revealed repeated violations by both companies, namely short-changing and accounting falsification.
Judge Salvatore Vasta revealed that the intended operations “created records that appeared to show that the employees were paid at the rates of pay prescribed by the modern award, including penalty rates and overtime rates of pay, which actually bore no relation to their hours of work or actual hourly rates.”
For many years the accounting industry has been operating in a ‘soft market’ for professional indemnity (PI) insurance. In this market, insurance premiums are quite low with broad policy wordings (that’s good news for you).
Now we are beginning to see the early signs of a shift towards a ‘hard market’. This requires the attention of all accountants because:
- Premiums will typically increase – in the past we have seen increases of up to 20% in a hard market.
- Policy wordings often change – this can significantly impact your cover where policies become restrictive.
Don’t delay reviewing your current arrangements!
Contact Accountancy Insurance – the specialists in PI for accountants for an obligation free quote for PI Shield and lock in an affordable premium before the market shifts!
The Australian Taxation Office (ATO) will now chase citizens who hide their gains via cryptocurrencies.
In order to determine how the cryptocurrencies would be taxed by the ATO it is important for them to define how they classify cryptocurrencies, says Liz Russell, senior tax agent at Etax.com.au. Despite the long-running debate over whether cryptocurrencies are an asset, currency, or collectable, the ATO has made it clear they consider them assets.
The Australian Institute think tank produced a new model of the coalition's new tax plan, suggesting high-income earners will benefit from the new tax cuts the most. The final stages of the Turnbull government’s new tax plan will flatten the Australian tax scale, providing the biggest help to Australia’s top 20%.
The new tax plan was designed to be implemented over a period of 7 years in three stages
The first stage will target the 48,000-90,000 income group and will provide a tax offset of up to $530 for the group. According to the Guardian, the Australia Institute's model shows that part two and three of the plan “will increase the 32.5-cent-in-the-dollar income tax threshold from $90,000 to $200,000 and eventually abolish the 37-cent tax bracket from mid-2024”, as a result flattening the tax income scale. The first stage of the plan seems to have enough support to pass the senate. Labour and other crossbenchers are questioning the two later stages.
10th May 2018
As the government announces its plan to cut taxes for companies and provide relief for lower and middle-income workers, Treasury Chief Scott Morrison also noted the need to put a stop to tax evasion. To that end, the Australian Taxation Office is notably ramping up its efforts to collect from companies with unpaid tax bills.
Among the companies targeted is Facebook, which settled an outstanding tax bill in October but has just been hit with an additional charge of $31.3 million for other instances of underpayment. Google also has been hit, with the ATO looking to collect on a numbers disparity in the search engine giant’s financial reporting. Google uses AASB 15 to report on its finances, allowing it to declare a revenue of $1.02 billion. Using AASB 118 would have required the company to report revenue of over $3.45 billion.
24th April 2018
2018 has so far highlighted the fact that taxpayers are under the magnifying glass, and vulnerable to brutal consequences handed out by the Australian Taxation Office (ATO).
It is no secret that one topic receiving attention is superannuation guarantee (SG) compliance. According to an article published in SMSF Adviser in March this year, the ATO has more than doubled the number of SG non-compliance cases in the current financial year and raised approximately $509 million from work carried out over a 6 month period. The activity represents a 105 per cent increase from the cases that were completed in the same period last year. In terms of revenue raised from this initiative alone, a 50 per cent increase was noted resulting in an additional $37 million of revenue to the ATO.
10th April 2018
Recent comments by Australian Taxation Office Deputy Commissioner Mark Konza outlined the ATO’s priorities regarding international tax enforcement, noting that a special focus would be placed on the energy and resources sector as well as the pharmaceutical industry. Regarding energy and resources, the ATO will be paying close attention to “exploration expenditure” among other methods used by international companies to avoid paying taxes.
"With Australia set to become the world's biggest exporter of liquefied petroleum gas by 2022, the oil and gas industry is a particular focus for us,” he said. “With big developments and long-term contracts being a feature of the LPG industry, it is important we get the pricing right from the start or it could all end in tax tears."
26th March 2018
The internet and technology have created countless opportunities and advances that few people could have imagined 30 years ago. Email has made it possible for people on opposite sides of the world to communicate in seconds, search engines have enabled people to answer nearly any question imaginable in mere minutes, and smart phones have allowed people to be connected to news, pop culture and the internet wherever they go. With all these advances also comes drawbacks. Cyberattacks, hacking and stealing of personal information have become rampant problems in this digital age. The Australian Government has recently enacted new laws to make data breaches more transparent.
16th February 2018
Cutting corporate taxes is a hotly debated issue across the globe. Strong supporters argue that doing so attracts investment, while opponents argue such legislation hurts local economies, job seekers and families. Despite this, the Australian government aims to push forward with plans to cut corporate taxes.
With the goal to encourage growth and compete for investment, the government plans to cut taxes for all companies by 25 to 30 percent by 2025. The bill has been met with mixed support. While MP’s in the lower house voted in favour of the bill 75 to 71, the legislation has yet to win over the Senate. Opponents argue that passing the bill will mainly benefit the shareholders of foreign companies, increase the budget deficit and fail to spark the economy.
31st January 2018
Over the past several months, bitcoin has made headlines across the globe as the cryptocurrency’s value has skyrocketed to unprecedented heights. The now infamous digital coin, which was valued at just slightly below one thousand dollars a year ago, shot up to twenty thousand dollars late last year. As the currency has rocketed into the mainstream spotlight, the Australian Tax Office (ATO) has taken notice. The government agency is currently in the process of establishing a cryptocurrency taskforce to monitor transactions.
The role of the ATO’s cryptocurrency taskforce
Not surprisingly, the task force’s main purpose will be to ensure investors in cryptocurrency are paying their fair share of tax. Though, due to the decentralised nature of cryptocurrency, it can be difficult for governments to track.
The task force will include specialists in technology, banking, tax law and finance, who will work together to devise strategies to track gains from cryptocurrency investments.
“We are consulting with key stakeholders who have expressed an interest in tax issues relating to cryptocurrencies...We will discuss common queries and scenarios, practical issues and the tax implications for current and anticipated future developments in relation to cryptocurrencies,” an ATO spokesman said.
18th December 2017
The ATO Commissioner’s Annual Report was recently released. In the article, Commissioner of Taxation Chris Jordan reviews the year noting the ATO’s highlights, lowlights and what Australian citizens can expect in the coming years.
The report generally notes that 2017 was a positive year for the ATO. However, Jordan states that the agency’s integrity was tested with the IT hardware failures and associated service interruptions that occurred, as well as the revelations revealed from May 2017’s Operation Elbrus.
These setbacks caused the ATO to take a number of steps to restore public confidence: the agency instigated several reviews, started an intensive program to resolve and develop their IT systems, and responded to external critics.
According to the report, the ATO’s efforts to resolve internal problems and regain public confidence paid off. The Commissioner’s article backs up this claim with a number of impressive statistics. For example, in Tax Time 2017, there are more lodgments than the previous year, with a total of 7.7 million for tax agents and self preparers. Also, compared to the same time last year, there has been a 30% reduction in complaints in regards to system performance.
The report then goes on to review the highlights from the previous year. Below are some of the most notable:
- The ATO’s Tax Avoidance Taskforce raised $4 billion of additional liabilities against several large multinationals and businesses.
- The early engagement and alternative dispute resolution resulted in a 61% reduction in appeals to the Administrative Appeals Tribunal. In 2016-17 there were only 357 appeals compared to 922 in 2013-2014.
- Reminding habitual late payers with automated SMS, instead of a formal letter or phone call, brought in an additional $800 million in payments. As the SMS cost just $.09, compared to $1 cost of a formal letter, the ATO is now able to act more efficiently and save money on following up with late payers.
- There are now 4 million enrollments in the ATO’s voice authentication service, which allows citizens to prove their identity in a faster and more efficient manner.
- SuperStream, the information sharing and standardised electronic payment system for super funds and employers, produced notable efficiencies: around $400 million per year for funds and $400 million per year for employers. SuperStream produced savings for members at approximately 2.4 billion per year.
In the year ahead, the Commissioner notes that the ATO will continue to reform their administration of the super and tax systems. They will also continue to place more emphasis on the client experience and developing a service culture.
The reports notes some of the areas the ATO’s efforts will be focused on, which include sensible risk management, greater transparency with clients, the prevention of problems instead of correction, better use of data for compliance and service purposes, and greater empathy and appreciation for tax payers.
The report ends with Commissioner Chris Jordan stating that his vision for the ATO is to elevate the organisation’s service to the standard of the top organisations in the world. He then finishes the article thanking all those who are part of the ATO.
The full report can be viewed at the ATO’s website, which can be found here.
23rd November 2017
Money laundering is a problem that affects Australians and businesses worldwide. Recently this issue has been brought into focus with Australia’s new AML legislation. But how is money laundering defined? For those who don’t know, it happens when criminals try to hide the source of money they gained via illegal means. These means can be tax evasion, drug trafficking, theft or any range of illegal activities that generate money. Once the criminals acquire the money, they will attempt to run it through a legitimate business to 'clean' the 'dirty' money.
What do accountants need to know about anti-money laundering legislation?
Generally speaking, the new law changes are created to give the public confidence in Australia’s financial systems. Once the laws are implemented, they will make it much more difficult for criminals to generate a profit from illegal activities. What’s more, the AML laws will help Australia keep its reputation as a nation that does not tolerate corruption, and will provide a positive image for the country as a good destination to conduct business.
The AML law is being implemented in two phases. While many accountants were exempt from Phase 1, which has been in effect for a number of years, these same accountants may no longer be exempt from the Phase 2.
How AML affects accountants
When it comes to money laundering, accountants can be easy targets for criminals. Criminals can exploit accountants, which is why the AML legislation will eventually affect many of those in this profession. While New Zealand accountants will need to be ready to comply with the law by 1st October 2018, Australian accountants have a bit more time to prepare. The law will not affect more accountants until 2019.
Which accountants will be affected? Those accountants who manage client funds or accounts, engage in or give instructions for various transactions (including buying, selling or transferring) on behalf of a client, act as a formation agent of legal arrangements or persons, as well as perform other duties.
To comply with Australia’s AML act, accountants will have to identify a new customer before providing a designated service. In addition to this, accountants must set up an AML/CTF programme that does the following:
· Assesses the risk of performing accounting for a client, considering the customer on an individual basis
· Conducts employee due diligence
· Assigns a nominated AML/CTF Compliance Officer
· Utilises an AML/CTF risk awareness training programme
· Submits an annual compliance report
· Reports any suspicious matters to the supervisor
· Conducts an appropriate customer identification process
· Engages an independent party to perform regular independent reviews of their AML/CTF programme
· And more
This article provides a general overview of some of the new challenges accountants face as part of the of the AML law changes. However, as the law is extensive, this article is not comprehensive. If you would like to know more, Accountancy Insurance recommends you to reference this helpful site as well as the Australian government’s site.
25th October 2017
Australia’s company taxes are some of the highest in the world. As of October 2017, Australia has the fifth highest company tax of the 35 countries in the OECD. And if the current company tax rate is not reduced in the near future, Australia will likely have the third highest rate.
When it comes to domestic shareholders, cutting company tax rates may prove little benefit due to Australia’s imputation tax credit system. However, a failure to reduce these tax rates could have an effect on foreign investment in the country, as many investors compare company tax rates when they choose where to invest.
In 1986, Australia’s company tax rate was 49 percent. While that number fell to 30 percent by July 1, 2000, there has been little to no change since then. Today the majority of businesses are still taxed at 30 percent. And there is a growing fear that if company taxes are not reduced, Australia will become a less than ideal country for investment.
Treasurer Scott Morrison summed up this concern in a recent interview, “Unless we can convince the Labor Party, and the Parliament, to pass the tax cuts that we currently have in the Parliament, which we introduced back in 2016, then the Labor Party will leave Australian businesses stranded on a tax island—uncompetitive with the United States, with the United Kingdom, with Singapore.”
To put Australia’s company tax rate in perspective, it must be compared to those of other countries. Singapore’s company tax is currently 17 percent and the United Kingdom is 19 percent. While the USA currently has a 35 percent company tax rate, President Trump and his present administration are intending to reduce it to 20 percent.
Would a reduction in company tax make Australia more competitive for investment? It is questionable. The current proposal intends to reduce the tax rate to 25 percent. As it would likely take more than ten years for these cuts to be phased in, Australia would still have higher rates than the UK, Singapore and many other countries in the OECD. If Australia becomes a less ideal place for foreign companies to invest, then what are the consequences?
According to Morrison, it could have a direct effect on job creation. “The world is moving to lower taxes on corporate investment all around the world. And if you get out of step with that, the money will go elsewhere and so will the jobs.”
In other words, Morrison seems to believe a failure to reduce company taxes now could cause a higher unemployment rate in the future and potentially hurt the economy.
29th September 2017
Australian policymakers are taking action with taxes in response to local complaints over the ascending price of real estate, due to flocks of foreign investors.
In Melbourne and Sydney’s high-end residential buildings, many apartments costing around $1 million are left vacant and dark at night. These homes, aptly named ghost homes, have been bought by mostly Chinese investors living overseas who wish to diversify their wealth in foreign assets. As a result, Australian locals have noticed the price for a home has become surprisingly high, so high that even middle-class families cannot afford them.
New taxes imposed nationwide
To cope with public disapproval, Australian local governments have increased taxes on foreign buyers purchasing a property in their states.
In New South Wales, the surcharge of stamp duty for foreign buyers has been doubled from 4% to 8%. Land tax has increased from 0.75% to 2%, and a new tax—especially designed for such situations—has also been enacted in Western Australia.
Similar to NSW, the government of Victoria stopped stamp duty concessions for investors from overseas and replaced it with a 1.4 - 5.5% stamp duty charge. A tax of 1% on vacant property was also imposed.
According to Credit Suisse, 16% and 25% of the new homes in New South Wales and Victoria were bought by foreigners. The Chinese are considered the biggest group of foreign investors in the Australian real estate market. From 2015 – 2016, the group spent $32 billion on property purchases, mostly in Melbourne and Sydney. To put that number in perspective, that’s more than four times the amount that Americans spent.
A study from CoreLogic Inc. revealed that the price for a Sydney home has doubled since 2009. This has caused local residents to blame foreigners for both rising housing costs and homelessness, which they believe is fueled by the many homes that are bought and left vacant.
According to an analysis by the City Futures Research Centre, more than one in 10 homes were empty the night they took a census in 2016. The survey also concluded that vacant residences in Melbourne and Sydney have risen 19% and 15% in the past five years.
Reaction from Chinese investors
Regardless of the new rules meant to discourage them, millionaire investors from China are still interested in investing in Australia’s real estate market. As the Yuan currency is not performing well, they see Australia as a haven for their cash. What’s more, the price of a two-bedroom apartment in Shanghai is still 25% more expensive than in Sydney and Melbourne. Therefore these Chinese investors believe they are getting a great deal when purchasing a home or apartment in Australia.
However, this new tax reform is causing some Chinese investors to rethink how they are utilising the properties they purchase. Rather than using the property as a holiday home and leaving it vacant the rest of the year, some may consider renting property out through Airbnb, for example.
30th August 2017
The Australian Labor Party has revealed their plan to propose a private senator’s bill, which will lead to the amendment of the Taxation Administration Act 1953. The Bill, if successfully amended, would require many private companies to publicly release their tax affairs annually.
This is the second time Labor has pushed this change. The attempt was initially introduced in 2013 when Labor had filed for the amendment of the bill to force private companies in Australia with annual turnover more than $100m to publicly release their tax records annually.
The bill, which passed legislation in 2013 by the then Labor government, was wound back by PM Malcom Turnbull’s Coalition Government in 2015. Instead, the act was amended following the Greens’ controversial deal with the Coalition to reinstate the bill by raising the threshold of the private companies’ annual turnover from $100m to $200m.
In their 2015 heated statement, Labor noted the change had left out around 600 big Australian private companies to be exempted for public tax disclosure and accused the Greens of selling out its progressivism. Some Coalition MPs commented that it would pose a risk to the safety of millionaire owners or executives of such companies that fell below the disclosure measurement, and it might eventually lead to kidnapping incidents.
Earlier in July, Shadow Assistant Treasurer, Andrew Leigh, announced that Labor will revive the plan for another amendment to the bill. And if it isn’t successful in the senate stage, they will make it a mandate and bring it back again after the election.
The Australian Tax Office has stated the purpose of the laws in 2015, “The first objectives of the transparency tax laws are to discourage large corporate taxpayers from engaging in aggressive tax avoidance practices and to provide more information to inform public debate about tax policy, particularly in relation to the corporate tax system.”
The controversial 2013 bill amendment states that it requires the Australian Tax Office to publish limited information about the tax affairs of about 1,600 large corporate taxpayers with annual turnover of $100m, before being lifted to $200m in 2015. It also mandated the required publication of periodic aggregate tax collection information and those shared with government agencies related to their foreign acquisition and investment decisions affecting Australia. This means lots of private business information, including the total income of companies, will be accessible to the public. Undoubtedly, there are growing concerns about the misuse of the disclosed information.
Following the announcement, Labor strongly confirmed their support towards the planned proposal which, in their belief, could promote greater tax transparency and tackle inequality, “With rising inequality and mounting government debt, Labor stands on the side of middle Australia and small business, not millionaires and multinationals,” Leigh said.
Mr. Leigh also said, “The proposal would stand alongside other Labor transparency measures, including disclosure of tax haven activity in government tenders, public reporting of country-by-country reports and protection for whistleblowers who uncover tax dodging by multinationals.”
The new proposal by Labor, if passed, would also restore a spotlight on a secret list of private companies that have enjoyed a tax reporting exemption since 1995, claimed The Guardian.