Updated 16/12/2011:

Hi All,

Further to the below blog, please click here for the Australian Tax Office's exposure draft relating to reporting taxable payments in the building and construction industry.

Cheers,

Ronnie

Hi All,

Independant Contractors - Reporting

The link above is an extract from Pitcher Partners recent newsletter – the Australian Taxation Office (ATO) is clamping down on contractors/subcontractors and for that matter, so is the State Revenue Office (SRO) which collects WorkCover and Payroll Tax.

The first step in the process looks to be that building construction businesses (whether trading as a company, trust, partnership or sole trader) will now be required to report contractors/subcontractors that they employ, to the ATO.

We know with absolute certainty that the ATO and SRO provide information to each other – just a day or so ago we had the experience where a person applied for registration as a tax agent and then completed an application for WorkCover. The SRO (who handles WorkCover) called that person and asked a number of very direct questions. When asked why these questions were asked, the person was told that they arose because of the information exchange between the ATO and SRO and that their respective records needed to record this information.

What does this mean – well for you as a building construction business, if the person or persons your are paying as a contractor or sub contractor does not in fact qualify under the various taxation definitions, then you will become liable for the compulsory superannuation (9%) WorkCover and where applicable, payroll tax. This could also include penalties and interest where the arrangements go back for some time – hopefully non of the taxing bodies will do this however the SRO has been very aggressive in this area and one business that we know of has been hit with interest and penalties in excess of $75,000 covering a four year period.

For the Contractor/Subcontractor the ramifications are different but just as onerous as they will not be able to split their income, provide cars for their spouse through the business and will be denied deductions not ordinarily available to salary and wage earners.

The commencement date for the reporting of contractors/subcontractors to the ATO is 1 July 2012.

You have the rest of this financial year to determine whether the contractors/subcontractors that you engage in your business, are in fact bona fide. You need to protect your business.

Please do not hesitate to contact us should you need to clarify any matter in relation to the definition of a bona fide contractor/subcontractor.

Barker & Jennings Update, November 2011

Directors Penalty Notices – Employee PAYG and Superannuation

Proposed legislation before Parliament amending the Directors Penalty Regime was yesterday!

The proposed legislation was to include amendments to:

• allow the ATO to immediately (without first issuing a Director Penalty Notice) commence recovery of all director penalties when the company’s unpaid liability remains unpaid and unreported three months after the due date.
 
• impose a personal liability on directors for unremitted superannuation contributions, in addition to unpaid PAYG;

What does this mean – for now those company directors who are not ensuring that their compulsory superannuation (the 9%) and tax deducted (PAYG) from employees wages are paid on time have had a significant threat to their personal liability stayed but not alleviated.

If you are the director of a company that is not remitting its superannuation and its employee tax (PAYG) and is allowing the debt to build up, then you are still at risk because if you are not paying your BAS (PAYG & GST) and superannuation liabilities, then your company is trading in an insolvent state and you may well find your company being liquidated.

For more information contact Ron on 03 5333 3915 or email ron@bej.com.au

Directors now Personally Liable

We have blogged this before – you may recall the liability that a director or directors can face for not lodging and paying BAS’s on time and also for not paying employee compulsory (9%) superannuation on time.

The latest sting in the tail for company directors is that the ATO no longer has to issue a Directors Penalty Notice. You will recall that this gave the company 21 days to pay outstanding employee superannuation and tax withheld (PAYG Withholding) from employee’s wages.

With the recent changes, if a company were to miss a BAS lodgement date by three months or fail to pay its PAYG Withholding tax within three months of the due date, then the directors become immediately liable for the debt and there is no requirement for the Tax Office to issue a Directors penalty Notice.

Similarly – if employee compulsory superannuation (the 9%) is not paid within three months of its due date, then once again the directors become personally liable for the debt.

What’s the difference now?

• The ATO does not have to issue a Directors Penalty Notice
• If a company is wound up after the three months, the Directors are still personally liable for the unpaid PAYG Withholding and the unpaid compulsory superannuation.
• Directors become personally liable after three months whereas in the past personal liability only arose if the company/directors failed to comply with the Directors Penalty notice.
• The ATO can choose when it wants to pursue the directors for payment – this could be months or even years later.

Suffice to say that this is a significant “sleeping” power that has been granted to ATO – Directors have to know of and ensure that you fulfil your obligations otherwise you may well end up selling personal assets such as your home, to pay the debt and associated penalties. Worse case scenario, you could end up being bankrupted.

Hi All,

It’s that time again!! Time to gather up all your receipts and come see the team at Barker & Jennings.

Whether you are running a small business, an investor or simply an employee, please check out the attached ‘Tax Tips’ from CPA Australia, there’s tips that will help you all.

We’ve also included a small business checklist that gives some critical points for you to think of before starting the new financial year.

 CPA Good Practice Checklist - Small Business

CPA Tax Tips - Business

CPA Tax Tips - Employees & Investors

As always, if you want any further information regarding the above, please don’t hesitate to contact us on (03) 5331 3366 or click here.

Updated 16/12/2011:

Hi All,

Further to the below blog, please find attached the Australian Tax Office's exposure draft relating to reporting taxable payments in the building and construction industry.

Cheers,

Ronnie

Hi All,

Independant Contractors - Reporting

The link above is an extract from Pitcher Partners recent newsletter – the Australian Taxation Office (ATO) is clamping down on contractors/subcontractors and for that matter, so is the State Revenue Office (SRO) which collects WorkCover and Payroll Tax.

The first step in the process looks to be that building construction businesses (whether trading as a company, trust, partnership or sole trader) will now be required to report contractors/subcontractors that they employ, to the ATO.

We know with absolute certainty that the ATO and SRO provide information to each other – just a day or so ago we had the experience where a person applied for registration as a tax agent and then completed an application for WorkCover. The SRO (who handles WorkCover) called that person and asked a number of very direct questions. When asked why these questions were asked, the person was told that they arose because of the information exchange between the ATO and SRO and that their respective records needed to record this information.

What does this mean – well for you as a building construction business, if the person or persons your are paying as a contractor or sub contractor does not in fact qualify under the various taxation definitions, then you will become liable for the compulsory superannuation (9%) WorkCover and where applicable, payroll tax. This could also include penalties and interest where the arrangements go back for some time – hopefully non of the taxing bodies will do this however the SRO has been very aggressive in this area and one business that we know of has been hit with interest and penalties in excess of $75,000 covering a four year period.

For the Contractor/Subcontractor the ramifications are different but just as onerous as they will not be able to split their income, provide cars for their spouse through the business and will be denied deductions not ordinarily available to salary and wage earners.

The commencement date for the reporting of contractors/subcontractors to the ATO is 1 July 2012.

You have the rest of this financial year to determine whether the contractors/subcontractors that you engage in your business, are in fact bona fide. You need to protect your business.

Please do not hesitate to contact us should you need to clarify any matter in relation to the definition of a bona fide contractor/subcontractor.

Common Superannuation Mistakes 

Below is a link to the Australian Taxation Office's ''Common mistakes made by employers'' page.

http://www.ato.gov.au/distributor.aspx?ms=businesses&doc=/content/00283610.htm

For any other questions regarding the this or any other superannuation related query, please don't hesitate to give us a call at Barker & Jennings, your Ballarat accountants and financial planners on (03) 5331 3366.

Super Update – things to consider....

Concessional Contributions Cap

Concessional Contributions include:

• Employer contributions (including contributions made via a salary sacrifice arrangement)

Personal contributions claimed as a tax deduction by a self-employed person. 

Concessional contributions cap for people 50 years old or over

There is an increased concessional contributions cap for people 50 years or over until 30 June 2012.  If you were 50 years old or over, the annual cap for 2010, 2011 and 2012 financial years is $50,000.  If you have more than one fund, all concessional contributions made to all your funds are added together and count towards the cap.

Warning:  For all those who get paid weekly or fortnightly  -  A large number of employees will have an extra pay day the 2011 financial year.  You need to take this into consideration when working out whether your superannuation contributions will be below you super contributions caps for the year.  If the extra pay will put you over your cap, you may want to:

• Stop or reduce any voluntary contributions, such as salary sacrifice.
• Delay making any personal contributions that you intend to claim as a tax deduction in your income tax return until next year.

The government is announced changes from 1 July 2012, that it will permanently increase the concessional contributions cap to $50,000 for individuals, 50 years or older, who have total super balances below $500,000.

Non-Concessional Contributions Cap

Non-Concessional Contributions include:

• Personal super contributions for which you do not claim an income tax deduction 

Those under the age of 65 may be able to make non-concessional contributions up to $450,000 over a 3-year period.  This is known as the “bring-forward option”.  Those above the age of 65 are limited to the annual non-concessional cap of $150,000 and are not eligible for the bring-forward option.

Refund of Excess Concessional Contributions

From 1 July 2011, the government has announced that, if a person breaches the concessional contributions cap by less than $10,000 (not indexed), there is the option to have the excess contributions taken out of the super account and assessed against their marginal tax rate, rather than incurring the additional 31.5% excess concessional contributions tax.  This measure will only apply once and only to breaches in the 2012 financial year and onwards.  This measure ensures that the most a person will pay on an excess concessional contribution (within the $10,000 limit) will be at their marginal rate of tax as opposed to the top marginal rate of tax.

Warning:  Any excess above the concessional contributions tax goes towards your non-concessional cap.  Depending on your non-concessional cap balance, this could lead to a breach of your non-concessional cap.  Should both your caps be breached in the one year, this could lead an excess contributions tax as high as 93%.

Currently, if a member exceeds their concessional contributions cap, the excess above the cap is subject to excess contributions tax of 31.5%.  This is in addition to the 15% contributions tax.  This liability can currently be paid via the superannuation account by completing a voluntary release authority or by the member personally.

Minimum annual payments for super income streams

Once you start a pension or annuity on or after 1 July 2007, a minimum amount is required to be paid each year.  There is no maximum amount unless you are receiving a transition to retirement income stream (those between the ages of 55 and 65 and still working), where the maximum you can take is 10% of your account balance on 1 July of each year or from the commencement date of your income stream.

The following table lists the minimum percentage factor of each age group:

Preservation age

Generally, you must reach preservation age before you can access your super.

The following table lists the preservation ages:

Disclaimer
The information contained in this report has been obtained from sources Barker & Jennings believed to be reliable.  Information contained in this report are published for the assistance of recipients, but are not relied upon as authoritative and may be subject to change.  Barker & Jennings does not accept liability for any direct or consequential loss arising from any use of material contained in this report as the information is general information obtainable by anyone and does not take into consideration the financial situation or particular needs of any particular person.

Liability limited by a scheme approved under Professional Standards Legislation

Hi All,

As the end of financial year rapidly approaches us once again, it is critical you take some time now to assess your financial position.

We, at Barker & Jennings would like to assist you in this assessment and help you to take advantage of any tax planning options that may be available to you.

Superannuation planning is at the forefront of these options.

In order to utilise this fantastic vehicle, which can give you tax benefits now, as well as building for your future, you need to get in contact with us ASAP.

All superannuation contributions need to be received by your superannuation fund prior to June 20, so that the amounts can be treated correctly and the deductions claimed in your 2011 Tax Returns.

As always, if you have any queries, please don’t hesitate to get in contact with us on (03) 5331 3366.

Federal Budget 2011-2012

Are you baffled with all the talk about the release of the 2011-2012 Federal Budget? Barker and Jennings have located a Federal Budget Summary that simplifies the budget so that you can clearly see how it may or may not affect you over the coming years.  

Cyntax Federal Budget Summary 2011-12 

For any other questions regarding the budget, give us a call at Barker and Jennings, your Ballarat accountants and financial planners on 03 5331 3366.

Barker & Jennings Update, March 2011 

Tax Objections – Be careful what you say!!!!

The findings from the recent case of Saxby v R heard in the Tasmanian Supreme Court, where the taxpayer has received a criminal conviction and incarceration, serves as a timely reminder that we must always act in a truthful and transparent manner in our dealings with the commissioner of taxation.

The below information was extracted from the Thompson Lawyers February newsletter:

Saxby’s case is one of the first reported court decisions where the Commissioner of taxation has successfully prosecuted a taxpayer for making a false statement. Not only did the taxpayer still have to pay the amounts owing on the amended assessments, he now finds himself with a criminal conviction and incarceration.

All taxpayers need to ensure that in future, all communications to the Commissioner must be true and accurate in every respect, and blanket assertions are to be avoided unless such statements are true and correct.

It may also be the case that if a taxpayer finds himself or herself in similar circumstances, being faced with an administrative penalty, that it may be well enough not to object and simply pay what is owing.

Taxpayers are now put on notice. The Commissioner has a victory and it is likely that other taxpayers will be charged with similar offences in the future. Only time will tell.

To see the newsletter in its entirety, please click here

Barker & Jennings Update, February 2011 

Paying superannuation for contractors

The Australian Taxation Office (ATO) has identified some employers in the various industries that are not paying the compulsory 9% super into their eligible employees and/or contractors nominated superannuation fund.

It is important employers understand they need to pay the 9% super contributions for contractors especially where that contract is wholly or principally for the contractor's labour - even if the contractor quotes their Australian Business Number (ABN) and/or is registered for GST .

Barker and Jennings (B&J) continually notifies its clients of their mandatory superannuation (the 9%) requirements however B&J is finding those that do not comply with the law are being found out.

Recently a client who did not honour their obligations, in spite of the constant reminders, was found not to have paid $6,638.85 compulsory contributions on behalf of an employee. With penalties and interest this liability grew to $9,553.20.

The often unknown real penalty is that none of the $9,553.20 is deductible for taxation purposes – this represents a significant after tax cost to employers.  The employer has missed out on tax saving of $2,091.24 and in addition has had to pay $9,553.20 to the ATO.

To help determine if contractors are eligible for super, use the ATO’s Employee/contractor decision tool. For employers in the building and construction industry, use the ATO’s Building and construction industry - employee/contractor decision tool.

For further information about employers' super obligations, refer to the ATO’s Guide to superannuation for employers. 

Barker & Jennings Update, December 2010 

Hi All

The ATO is further increasing its attention on businesses using various benchmark criteria. Already a number of clients have received letters pointing out that their business is outside the benchmarks for the industry sector that they operate in.

Now the ATO is specifically targeting businesses which may well have a significant cash component to their sales – please see the list of fifteen business sectors listed towards the end of this blog as these will be targeted.

What you need to know is that the ATO benchmarks are based on information collected from income tax returns and the industry sector is dependent upon the business code provided in the tax return. The major problem with these benchmarks (basically industry averages) is that the business code can apply to a number of different businesses and in addition not all businesses disclose profit and loss items in an identical manner. The criteria are flawed however over time the ATO will refine this. In the meantime there is no need for you to become alarmed if you receive a letter.

The confidence that you should have is that Barker & Jennings reconciles all of your business information with a specific focus on information that is provided to the tax office from different sources – for example, we make sure that the information you have provided via your BAS is the same as that disclosed in your financial accounts and same as that reported in your tax return. This process includes a reconciliation of the income, expenses and wages. For example if you have advised the ATO that you have collected $50,000 in GST (Item 1A on you BAS) then your income should be $500,000 and we check to make sure that this is correct. The same process is followed for your BAS Items 1B, W1 & W2 plus any other non BAS reportable items in your accounts and tax return.

It is likely that any letters sent, will be posted direct to you from the ATO – no need to panic – call us and we will help go through the information contained in the letter.

New ATO Benchmarks Focus on Cash Sales

9 November 2010 - Media Release 2010/37

The ATO today released a new category of small business benchmarks which focus on cash sales within a business.

Coinciding with the fourth annual cash economy international revenue conference in Brisbane, Second Commissioner Bruce Quigley said the new benchmarks are part of a suite of benchmarks used by the ATO to identify and deter activities in the cash economy.

“These benchmarks are a useful way to help businesses compare their performance against other businesses in their industry and check they are meeting their obligations, including assessing whether they are likely to be selected for a review or audit.
“We strongly believe prevention is better than cure. This is a timely reminder for people to check that their record keeping and reporting is on track and fix any errors.

“Using these benchmarks, the ATO can determine the average proportion of cash sales a business should be making and which businesses are not reporting as much cash income as others in the same industry.

“Businesses whose performance falls significantly outside one or more of these benchmarks are more likely to be selected for a review or audit.

“This year we are contacting around 100,000 businesses which operate in cash industries,” Mr Quigley said.
The benchmarks have initially been developed for fifteen industries including; restaurants and takeaways, hairdressing and beauty, clothing retailing, grocery retailing and hardware and building supplies.

The cash sales benchmarks are based on data matching undertaken with banks to identify credit and debit card sales, as well as information provided by small businesses to the ATO on activity statements.

Mr Quigley said the continued use of benchmarks is seen as a positive approach for dealing with the cash economy.

“The ATO regularly shares its cash economy insights and programs with other international jurisdictions as part of a coordinated global information approach. We look forward to continued positive relations and learnings with these groups,” Mr Quigley said.

The fourth annual cash economy international revenue conference is held in Brisbane from 8 to 12 November.

Background

Small business cash sales benchmarks

The cash sales benchmarks have initially been developed for the following fifteen industries:

• Beauty services 
• Hairdressers
• Clothing retailing
• Hardware and building supplies retailing
• Coffee shops
• Meat retailing and butchers
• Florists
• Newsagents
• Fruit and vegetable retailing
• Pubs, taverns and bars
• Fuel retailing Restaurants
• Garden supplies retailing
• Takeaway food services
• Grocery retailing and general stores