IN THIS ISSUE
DO YOU STILL NEED TO DO YOUR TAX RETURN FOR 2013?
Individual’s income tax returns were due on 31 October 2013 and taxpayers who lodge their returns late could face interest and late lodgement penalties.
If you use a tax agent to prepare and lodge your return, depending on your circumstances, you may be eligible to lodge your return at a later date (eg 15 May 2014 or 5 June 2014) and not risk facing interest and late lodgement penalties.
VARIOUS ISSUES AFFECTING 2013 INCOME TAX RETURNS
Listed below are a variety of issues that you might need to be aware of when preparing your return or after you have lodged it.
The ATO has since put a fix in place. However, if you are claiming one of these tax offsets, it may be worth keeping this issue in mind in case you have also been affected and this was not properly fixed for your account.
ENSURE THE IT5 AND IT6 INCOME TESTS LABELS ARE COMPLETED CORRECTLY
Taxpayers and their agents need to ensure that the IT5 and IT6 income tests labels are completed correctly.
The ATO has recently said that it has reviewed a small sample of 2012-13 individual returns lodged since 1 July 2013 and found some possible errors:
Getting these labels wrong could impact how your “adjusted taxable income” is calculated for the purpose of working out whether you might be entitled to certain tax offsets or government support payments. It is best to check with your registered tax agent to confirm you are putting the right information in the right part of your return.
When completing this part of your return, verify that you have completed these labels correctly with your tax agent.
THINK ABOUT WHAT YOU MIGHT NEED TO DO BEFORE 30 JUNE 2014 ROLLS AROUND
The end of the 2014 income tax year is fast approaching and before you know it, 30 June 2014 will be upon you. Now is the time to think about what you might like to do for the rest of the 2014 financial year as well as start to think about planning for 2015.
If eligible for the net medical expenses tax offset, are you likely to reach the threshold for this year? Are there any tax deductible donations you have been putting off that you might want to make before 30 June 2014? If you are eligible, to qualify for the government’s superannuation co-contribution scheme, contributions must be made by 30 June (and there are other tests that also need to be satisfied). Are you near retirement? If so, is there discretionary income that you might want to consider deferring?
Your tax agent will be able to help you answer all these questions and more that you might have about your own individual situation.
ANNOUNCED UN-ENACTED MEASURES
In December 2013, the Assistant Treasurer, Senator Arthur Sinodinos, announced the outcome of consultations over the backlog of 92 announced but unlegislated tax and superannuation measures.
The Government previously announced that 18 measures would proceed, three would be amended and seven would not go ahead including for the former government’s proposal that would have impacted on car fringe benefits and the cap on self-education expenses.
Of the 64 measures that were considered further, 16 will proceed and 48 measures will not proceed. Details are set out in the table attached to the Assistant Treasurer’s media release.
Those that are proceeding that may be relevant to you include:
Those that are not proceeding that may be of interest to you include:
It is intended that most of these measures pass into law during 2014.
MRRT AND CARBON TAX REPEALS AND ASSOCIATED CHANGES
As part of its pre-election promises, the Coalition would abolish the carbon and mining taxes. The abolition of these taxes also involved the wind-back of certain other measures including:
Superannuation guarantee charge rate
From 1 July 2013
From 1 July 2014
From 1 July 2015
From 1 July 2016
From 1 July 2017
From 1 July 2018
From 1 July 2019
From 1 July 2020
From 1 July 2021
The Government will also not proceed with the following personal income tax cuts which were to commence on 1 July 2015:
There are Bills before Parliament containing the repeal of the carbon and minerals rent resource tax and the measures listed above at the time of writing. It is anticipated that these changes will pass through Parliament shortly.
TAXABLE PAYMENTS ANNUAL REPORTS AND CONTRACTORS IN THE BUILDING AND CONSTRUCTION INDUSTRY
Businesses in the building and construction industry are required to report certain information concerning contractors including their name, ABN, address, total amount paid to them for the year and the total amount of the GST included in that amount.
Recently, the ATO has been telephoning some businesses in the building and construction industry directly to:
It has also been contacting them to:
The businesses are being contacted directly even if they are clients of tax agents. As such, this is a big focus area for the ATO.
If you work as a contractor in the building and construction industry, payments that have been made to you by another business are likely to be reported to the ATO through this system.
If you are a contractor and have any concerns about these reports, speak to your tax agent who will be able to assist you with any queries you may have.
WORKING ON AN UPCOMING PROPERTY TRANSACTION? CHECK THE VENDOR’S GST DETAILS
Are you about to purchase some property? If so, you should know whether the vendor is registered for GST as this may affect your transaction.
The ATO has advised that it has recently disallowed claims for input tax credits related to the purchase of commercial real property. In these cases, the ATO has noticed that the taxpayers and their agents failed to check that the vendor was registered for GST at the time of settlement.
There is information on the ATO’s website containing advice and information about what to check for.
However, the best source of advice will be your tax adviser who can help ensure you obtain necessary information about the vendor’s GST status prior to your property transaction.
EMPLOYEE SHARE SCHEMES AND START-UP COMPANIES
Are you employed by a start-up company? Have you been issued shares or options in an employee share or option scheme? If so, you should be aware that Treasury has recently been consulting on these rules with the tax profession. This consultation may result in some changes to the rules that apply to the taxation of employee shares schemes. However, whether this occurs will depend on the outcome of this consultation.
FBT: OTHERWISE DEDUCTIBLE RULES AND SALARY SACRIFICE EXPENSE PAYMENT FRINGE BENEFIT – TD 2013/20
On 23 October 2013, the ATO issued Taxation Determination TD 2013/20 entitled "Fringe benefits tax: when an employer reimburses an amount of expenditure incurred by an employee to a third party, under a salary sacrifice (or similar) arrangement with that employee where that expenditure is notionally subject to Division 35 of ITAA 1997, is the amount included under s 35-10(2E) increased when applying the ‘otherwise deductible rule’ in s 24 of the Fringe Benefits Tax Assessment Act 1986?"
The answer to the question posed is "Yes. The amount included under the ‘income requirement’ in subsection 35-10(2E) of the Income Tax Assessment Act 1997 (ITAA 1997) when applying the ‘otherwise deductible rule’ in s 24 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) is increased by the amount of the reimbursement.
If you have salary sacrifice arrangements with your employer, you may wish to speak to your tax adviser about whether this Tax Determination has any impact on your particular circumstances.
FOREIGN EMPLOYMENT INCOME
Do you earn foreign employment income? If so, you should note that on 27 November 2013, the ATO issued Taxation Ruling TR 2013/7 entitled "Income tax: foreign employment income: interpretation of s 23AG(1AA) of ITAA 1936."
The Ruling sets out the Commissioner’s views on the interpretation of aspects of subsection 23AG(1AA) of ITAA 1936. This Ruling specifically considers:
who is a ‘member’ of a disciplined force within the meaning of the relevant provisions.
The Ruling applies to Australian resident individuals serving in a foreign country as an employee or office holder.
The Ruling does not consider certain terms in the provisions and does not deal with the period of foreign service. There is other guidance on these issues.
If you derive income from foreign employment, you may wish to speak to your tax adviser about whether this ruling has any impact on your particular circumstances.
$900 CHEQUES WILL NO LONGER BE ISSUED
In a media release issued on 8 December 2013, the Treasurer, Joe Hockey, announced that the Government will introduce legislation to stop further $900 cheques from being issued to taxpayers who were eligible for one and may not yet have received one 4 years after the Global Financial Crisis.
CHANGES TO HOW SUPER EXCESS CONCESSIONAL CONTRIBUTIONS ARE TAXED
The ATO has advised that excess super concessional contributions made from 1 July 2013 will be included in an individual’s assessable income and taxed at their marginal tax rate. As part of the assessment process clients will receive a non-refundable tax offset of 15% of their excess concessional contributions along with an additional excess concessional contribution charge.
From 1 January 2014, employers need to make superannuation contributions to a fund that offers a MySuper product for any employee who does not select a preferred fund.
If an employer has not heard from their super fund about their MySuper arrangements, they should contact the fund now.
Employees should speak to their employer about this or their super fund if they are unsure what arrangements their super fund has put in place to meet the MySuper requirements.
UPDATES FROM THE ATO