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K M T
Client Newsletter
consulting
June 2015
Ph: (02) 4648 1089
Taxation, Accounting & Business Services
Fax: (02) 4647 8966
8 Hannah Pl, Mt Annan (PO Box 372, Narellan) NSW 2567
Mob:
It’s June 2015 already, and the
end of yet another financial year
is almost upon us. Time again to
review the current-year changes
as well as some of the proposed
changes for future years. (Please
note the disclaimer below, and be
aware that recent Federal Budget
announcements will depend on
legislation being passed by
Parliament).
But first, a slight diversion . . . I
am really not a “pet” person, so
if you had told me a few weeks
ago that a picture of a dog would
appear in my next newsletter, I
would have called you crazy.
Never-the-less, the picture below
is of our youngest son Sam with
his new puppy “Polly”. We have
finally accepted defeat and
bought him a dog.
Current Year (2014-15)
Tax Rates
Individual tax rates have not
changed for the current year. The
low-income tax offset is still
available, so even though the tax
scales begin at $18,200, a resident
taxpayer can earn up to $20,542
before paying any tax.
Medicare Levy
The rate of medicare levy has
changed. The standard rate of
1.5% has increased to 2.0%.
Tax Offsets
Two more tax offsets have been
scrapped from 1 July 2014. They
are the Dependant Spouse Offset
and the Mature Age Worker Tax
Offset (both of these had already
been subject to age limitations).
“Budget Repair Levy”
This was introduced in last year’s
federal budget. Those earning
more than $180,000 per year will
be required to pay a levy of 2%. It
only applies on the income above
that level. Effectively, this means
that the top marginal tax rate (incl.
medicare) will increase to 49%.
The relevance of this is that when
you arrive for your appointment
this year, the side gate will be
closed, so please close it again as
you come and go. Meanwhile, we
will try to train Polly not to lick
you to death. She is very friendly
and loves visitors, but if you are
nervous about dogs, please give
me a call on arrival and I will
meet you at the gate.
And now for the boring stuff . . .
Building & Construction
The deadline for submitting your
“Taxable Payments Report” to the
ATO has been extended to 28
August. The report form is
available from the Tax Office
website (ato.gov.au –the code is
NAT 74109, or you can phone the
ATO for one on 1300 720 092).
From Budget Night 12 May 2015
The budget announcement that
seems to be getting all the
attention is the immediate writeoff for business assets costing
less than $20,000. This is only
available to small businesses with
a turnover of less than $2 million
per year. It will apply until 30
0412 028146
June 2017, after which the limit
will revert back to just $1,000.
I have already had a few calls
from clients about this, so I hope
the following will help to dispel
some myths . . .
1. There is no limit to the number
of assets you can claim. (eg:
several purchases of $19,999
each will all qualify).
2. The measure applies to new
assets and second-hand assets.
3. The asset must cost less than
$20,000. Assets costing more
than this must be depreciated
under the existing rules (ie:
you cannot get an immediate
claim for the first $20,000 and
then depreciate the balance).
4. It does not apply to trading
stock or goods for resale.
5. The asset must be “for the
business.” Personal-use assets
are obviously not included.
6. This is an important one . . .
Before you rush off, get an
ABN and buy a “business
asset”, you need to consider
whether you will actually
receive any tax benefit. For
some years, there have been
“non-commercial loss” rules
that limit claiming losses from
new businesses in certain
circumstances. If a new
business has only minimal
income and there is no past
record of being profitable, any
losses must be deferred. For
example, assume someone
with salary or investment
income starts a new business
which receives just $5,000
income and claims $20,000 in
expenses. The resulting loss of
$15,000 CANNOT be used to
reduce tax on the salary or
investment income. Instead,
the loss must be deferred until
either the business becomes
profitable or it turns over at
least $20,000.
DISCLAIMER: This newsletter is intended to be a general guide only. You should not take any action based on the information
contained herein without first seeking appropriate professional advice which takes account of your specific individual circumstances.
KMT Consulting Client Newsletter
From 1 July 2015
From 1 July 2016
Small Company Tax Cut
The tax rate for companies with a
turnover of less than $2 million
will be reduced from the current
30% to 28.5%. Although the tax
cut will be welcomed by small
company shareholders, there are
at least 2 anomalies with this twotiered approach . . .
FBT and Meal Entertainment
For some time, there has been a
special concession which allowed
certain non-profit employers (eg:
hospitals and charities) to provide
fringe benefits up to certain
capped amounts without paying
FBT. Meals and entertainment
benefits were exempt from these
caps, which meant that even very
large expenses (eg: weddings and
holidays) could effectively be paid
from pre-tax income. Beginning
in the 2016-17 FBT year, these
benefits will be capped at $5,000
per employee per year.
1. The $2 million threshold does
not allow for the different cost
structures in different
industries. Companies with
lower costs (and higher
profitability) will receive a
greater tax advantage).
2. There can be a disincentive to
grow beyond the $2 million
threshold, since the higher
30% tax rate will then apply to
the entire profit (not just the
amount attributable to the
turnover which exceeds the
threshold).
Other Small Businesses
Individuals with small business
income will get a tax discount of
5% of the tax attributable to that
income. The maximum discount
will be limited to $1,000 and will
be in the form of a tax offset.
Claiming Car Expenses
For many years, there have been 4
different methods of claiming car
expenses for individual taxpayers:
1. 12% of original value.
2. One-third of actual expenses.
3. Cents per kilometre.
4. Proportion of expenses based
on a log book.
From 1 July the first 2 methods
will be abolished, leaving only the
“per kilometre” or the “log book”
methods. Further, the 3 different
“per kilometre” rates (based on
engine size) will be scrapped and
just one rate of 66 cents per km
will apply.
New Business Start-Up Expenses
Professional, legal and certain
other costs of setting up new
business structures will become
immediately deductible in full.
(Currently these must be deducted
over 5 years).
Changing Business Structures
Currently, converting from one
type of business entity to another
(eg: from a trust to a company)
can have Capital Gains Tax
implications when assets and
beneficial interests are transferred.
From 1 July 2016 most small
businesses will be able to change
entity structure without triggering
CGT liabilities.
Higher Education Loan Program
Anyone with such an education
fee liability (HELP debt) will be
familiar with the current
requirement to start making
compulsory repayments once their
income exceeds a certain
threshold. The Government has
announced that this requirement
will also extend to those living
overseas for 6 months or more.
SUPERANNUATION
Employer Contributions
The mandatory superannuation
guarantee amount of 9.5% has not
changed and is currently legislated
to remain at this level until the
2021 financial year.
Contribution Limits
For this current (2014-15) tax
year, the age-based contribution
limits are:
Concessional (ie: deductible)
Under 50:*
$30,000
50 and over:*
$35,000
* (age on 30 June 2014)
Note that these are the total
amounts permitted for the year
from all sources. Before you
decide to “top up” your super you
will need to check how much your
employer has already contributed.
Non-concessional (ie: nondeductible)
The annual limit is $180,000
($540,000 under the 3-year “bring
forward” rule). But watch out for
the “work test” if you are 65 years
of age or older.
The mechanisms for dealing with
excess contributions were outlined
on page 2 of our 2014 newsletter,
which can be accessed from our
website.
And a reminder on making
superannuation contributions:
You cannot claim a tax deduction
for them unless they are actually
paid to the fund by 30 June.
“SuperStream”
This government initiative seeks
to move all transactions related to
contributions and reporting to an
electronic environment. From 1
July 2015, superannuation funds
must receive contributions and
information electronically.
BUT NOTE that this change will
ONLY affect you if ALL of the
following are true . . .
a) you have your own selfmanaged fund (SMSF),
b) your employer contributes to
it,
c) your employer is NOT related
to you (eg: not your own
company or a family member).
If ALL of the above are true, you
MUST provide the following
details to your employer by 30
June:
- ABN of your fund
- Bank account details
- An “electronic service address.”
The last of these is to allow the
fund to receive contribution
messages from your employer and
pass them on to you.
To obtain an electronic service
address from an authorised
DISCLAIMER: This newsletter is intended to be a general guide only. You should not take any action based on the information
contained herein without first seeking appropriate professional advice which takes account of your specific individual circumstances.
KMT Consulting Client Newsletter
message provider, you will need
to do the following:
1. Go to: www.ato.gov.au
2. In the search box, type in
“SuperStream” (one word)
3. Select: “SuperStream data and
payment standard”
4. Near the bottom of the page,
click on “Frequently asked
questions for SMSF’s”
5. Approximately half-way down
the next page, you will find a
link to “SMSF message
service providers.”
OTHER DEVELOPMENTS
ATO penalties increase
From 31 July 2015, the value of
an ATO “penalty unit” will
increase from $170 to $180. In
practical terms this means that the
ATO can apply a penalty of $180
per month for late lodgements of
Business Activity Statements or
income tax returns (as well as
interest on late payments). If you
need assistance with unlodged
BAS or tax returns, please let us
know as soon as possible.
Family Tax Benefit (FTB)
The government recently
announced two key changes to
FTB:
1. The “large family supplement”
will cease being paid from 1
July 2016.
2. Whilst families are overseas,
they will only be eligible for
Part A payments for six weeks
in any 12-month period.
Important! Please Note:
For Family Tax Benefit purposes,
Centrelink has reduced the time
limits for lodging tax returns or
otherwise advising them of your
income. This means that you will
miss out on 2014 FTB unless
you lodge your 2014 tax return
by 30 June 2015. There are just
a few weeks left, so please let me
know if you need any assistance
in attending to this.
Electronic Correspondence
The ATO is gradually moving
towards paperless (ie: electronic)
methods of correspondence.
Starting in March this year, tax
agents have been able to access
client correspondence from the
ATO website rather than having
to wait for the physical delivery of
the paper copy. At present, this is
only available for individuals (ie:
not companies, trusts, or other
structures).
Why is this relevant? Because we
are also hoping to forward this
correspondence electronically
whenever possible. One advantage
of this is that you will receive it
more quickly, since we do not
have to wait for the paper copy to
arrive and then re-address it to
you.
To help us with this, and to ensure
that you don’t miss anything,
please let us know promptly if
your email address changes. You
can advise us by emailing either
of the following:
[email protected]
[email protected]
You can also advise us by using
the “Contact Us” page on our
website (see below).
Please note that the previous
“optusnet” email addresses have
been discontinued and are no
longer operational.
NEW WEBSITE
If you arrived at this newsletter by
clicking on an email link, then
you will be aware of our new
website. If not, please have a look
at www.kmtconsulting.com.au.
Checklists
The website contains some helpful
checklists that you can consult as
a reminder of the information you
need for each year’s tax return.
There are 3 checklists:
- Individuals
- Businesses
- Superannuation Funds
Before coming in for your
appointment, please consult the
checklist most relevant for your
circumstances to ensure that you
have gathered all the required
information.
A FEW OTHER REMINDERS
Trust Resolutions
Those of you who are running
enterprises or making investments
through discretionary trusts will
need to make a resolution about
how any net income will be
distributed. The resolution must
be made by 30 June each year at
the latest. If you are affected by
this requirement, I will contact
you before then.
Information Requests
We frequently get requests from
other organisations (eg: banks,
credit card providers, real estate
agents) who are evaluating your
eligibility for finance or other
applications. Typically, they are
seeking information about income
levels or copies of tax returns.
Since we are subject to strict
ethical requirements which
include the preservation of client
confidentiality, we CANNOT
release any such information
without your express consent.
If you are aware that another
organisation may contact us with
such a request, please contact us
in advance to tell us whether we
have your permission to release
the information.
Record-Keeping Program
If you are still keeping your
business records the old-fashioned
way (eg: a hand-written manual
cashbook – or worse – a shoebox)
we have a simple electronic
method to keep track of income
and expenses using Microsoft
Excel. It is very easy to use and in
most cases you can be up and
running in about 15 minutes.
Please let us know if you would
like a copy of the spreadsheet and
the instructions (there is no
charge).
And finally . . .
Please give me a call if you have
any questions about any of the
matters discussed in this
newsletter, or if you would like
assistance with year-end tax
planning.
- Tony Kernan
DISCLAIMER: This newsletter is intended to be a general guide only. You should not take any action based on the information
contained herein without first seeking appropriate professional advice which takes account of your specific individual circumstances.