Minimising the risk of fraud

The Australian Taxation Office is urging all businesses and individuals to take care in relation to avoiding the risk of fraud.

With a focus on criminals lodging fraudulent returns in order to obtain unwarranted refunds through accessing banking information that is not their own, the ATO recommends businesses and individuals practice the following:

Discussions with staff and clients

Keep your employees and your clients about safe behaviours to protect them from being vulnerable to criminals, such as not clicking on downloads, hyperlinks or opening attachments in unsolicited emails.

Protection on devices

Ensuring the devices you use for confidential information such as transferring funds and purchasing goods and services are all up to date with protective software, such as malware detectors and firewalls. Also, ensure autofill forms are not saved or used.

Proof of identity

Before taking on new clients, ensure they provide numerous pieces of proof of identity. You should also question discrepancies before lodging their tax returns.

Internal security

Ensure all employees have access to only what they need in order to perform their role within the company. When employees cease employment, cancel their AUSkeys.

Understanding the First Home Super Saver Scheme

With much controversial discussion surrounding the First Home Super Saver Scheme, understanding exactly what the Scheme entails is necessary.

The scheme was announced in the 2017-18 Federal Budget as a means to reduce the pressure surrounding housing affordability across Australia.

The formalities of the scheme are as follows:

As of 1 July 2017, individuals can make voluntary contributions, both concessional and non-concessional, into their super fund. As of 1 July 2018, individuals can release these contributions, as well as their associated earnings, and use this money to help purchase their first home. Individuals eligible for this scheme are able to use up to $15,000 per financial year, with a total maximum of $30,000 for all years you have earned super.

To be eligible for the First Home Super Saver Scheme, individuals must meet the following criteria:

• Must be at least 18 years of age.
• Must not have previously owned property in Australia, or have previously released First Home Super Saver funds.
• Must have the intend to live in the property you use the funds to purchase as soon as practicable, for at least the first 6 of the 12 months of owning the property.

ATO cracking down on developers avoiding GST

This year, the Australian Taxation Office has placed a greater focus on property developers and are particularly watching company directors with a history of GST obligations avoidance.

As of May 2017, the Government announced new requirements on those purchasing newly constructed residential properties or new subdivisions to remit the GST directly to the ATO as part of the settlement process. The ATO has placed a strong emphasis on making sure this occurs legitimately, ensuring property developers do not get away with failing to meet their GST obligations.

These proposed requirements were addressed in consultation in November 2017 and are to be implemented as of 1 July 2018. The impending changes will mean that developers no longer have a three-month period to remit GST; hence they no longer have time to be dishonest and avoid GST evasion through phoenixing.

For contracts already entered into, there will be a two-year transitional period, allowing developers involved in these contracts a grace period to adjust to the extensive reforms. Contracts entered into prior to 1 July 2018 will not be affected by these reforms, provided they are settled prior to 1 July 2020.

Maximising your SMSF returns

Many Australians opt for a self-managed super fund but fail to understand how to truly make it perform optimally.

If you have an SMSF and are serious about maximising your returns, consider the following:

Risk

Without taking risks, you won’t be able to experience great profit. However, there you still need to be cautious of where you invest your money. After taxes, at the moment, property and real estate are not the best of investments, but this hasn’t always been the case. Many individuals with a SMSF are interested in cryptocurrencies. At the end of 2017, they were performing extremely well, however at the beginning of 2018; there was a significant drop in the worth of this currency.

Do your research

Knowing what kind of risk-taking will work for you will come down to you doing your research and investigating what options are best. Subscribing to mailing lists where investment trends are discussed, as well as keeping up to date with technical and compliance news relating to SMSF are great strategies for maximising SMSF returns.

Speak to a professional

If in doubt, it’s always best to speak to a professional. They can assist you in making the right decision regarding your SMSF and give you personalised advice. A financial advisor can also assist you in managing your fund, organising and strengthening your portfolio and advise on technical issues.

It’s never too early

No one in their retirement reflects on their life and wishes they had of started worrying about their nest egg later in life rather than earlier. Paying attention to your super and retirement options from a young age is important if you want to be comfortable in your retirement phase.

ATO reforms on deductible gift recipients

The Government has announced a reform of the Deductible Gift Recipient (DGR) status to strengthen governance arrangements, reduce administrative complexity and ensure trust and confidence in the sector.

The reforms are as follows:

• From 1 July 2019, non-government DGR’s must be registered as a charity with the Australian Charities and Non-for-profits Commission. Non-government DGR’s that are not already registered will automatically be registered as of 1 July 2019 and will have a 12 month transitional period to assist with compliance.
• The four DGR registers currently administered by other government departments will be integrated into the ACNC’s charity register, and duplicative reporting requirements will be abolished. DGR endorsement assessments for the registers will be undertaken by the ATO. Eligibility for the register of cultural organisations will be extended to include organisations that promote Indigenous languages.
• External Conduct Standards will be enforced by ACNC to strengthen the oversight of overseas activities.
• There will be additional funding to support additional reviews of charity and DGR eligibility based on risk.

Succession planning and the transfer balance cap

The superannuation transfer balance caps have been problematic for SMSF members who don’t take careful consideration when succession planning.

Failure to understand the impact of these transfer balance cap changes can have on your finances may force you to transfer large amounts of money out of your super.

The transfer balance cap of $1.6 million that was introduced as of 1 July 2017 limits the amount of superannuation that can be transferred into an individual’s retirement phase. The cap incorporates all accounts the individual holds balances in.

SMSF members ought be weary of the scenario in which a SMSF is paying two pensions, one to each party of a couple where both parties are receiving money under the transfer balance cap. When one of the spouses die, the remaining spouse could be in breach of the transfer balance cap because now they are the sole beneficiary of more than $1.6 million.

Luckily, if you take time to plan carefully how to avoid the above limitations, you can have control over where (and to who) your super will go to when you pass.

Consider the following:

Accumulation vs pension phase
The new transfer balance cap rules state that, at any given time, individuals cannot have more than $1.6 million in their pension phase. The money in the pension phase is taxed at zero percent; the money in the accumulation phase is taxed at 15 per cent. If you are already in the pension phase, and are with a spouse also in the pension phase, it is fruitful to think ahead as to what will happen to the money when one of you passes. Perhaps looking into what investments you can make now would be wise, particularly given that investment properties held for a period of longer than 12 months are taxed at a rate of 10 per cent.

Nominations
One option is to execute a binding death benefit nomination, which allows an individual to nominate who they would like their death benefits to be paid to. When preparing the BDBN, an individual can elect where their money goes and the trustee of their estate is bound to carry out these wishes. The other option is to execute a non-binding death benefit nomination, which allows the trustee some flexibility as to where they place your money. This is a good option if your wishes for your money are not as tax effective as possible; the trustee has the option to vary where you wanted the money to be placed.

In addition, when succession planning, it is important to remember that superannuation is not an asset that forms part of an individual’s estate; there are limitations as to who is a beneficiary of another’s superannuation. An individual must be a dependent of the deceased or a legal personal representative. If an individual fits this criteria, there are only two ways that they can be paid the benefit; through an income stream or via a lump sum.

To ensure you are not leaving your spouse or children the stress of the repercussions of breaching the transfer balance cap when you pass, speak to one of our accountants to establish the best possible plan for your estate.

FBT issues that raise ATO attention

With the FBT year-end just around the corner, it is a good time to review your FBT compliance to avoid raising attention from the Australian Tax Office (ATO).

The ATO is currently targeting the following rules for FBT:

Motor vehicles
Situations where an employer-provided motor vehicle is used or available for private travel for staff. This is a fringe benefit and must be declared on the FBT return (if lodgment is required). However, there are some circumstances where this is exempt; be sure to check before lodgement.

Employee contributions
The ATO focus on employee contributions that have been paid by an employee to an employer and are declared on both the FBT return and employer’s income tax return to ensure they are correctly reported.

Employer rebate
A taxpayer must be a rebatable employer to claim a FBT rebate, the ATO will check the taxpayer’s eligibility as some employers incorrectly claim for this rebate.

Living-away-from-home (LAFHA) allowance
Common errors with the LAFHA allowance include claiming reductions for ineligible employees, failing to obtain declarations from employees, claiming a reduction in the taxable value of the LAFHA benefit for exempt accommodation and food in invalid circumstances and failing to substantiate expenses relating to accommodation and food or drink.

Non-lodgement
Employers who provide fringe benefits must lodge a FBT return unless the taxable value of all benefits has been reduced to nil.

Car parking valuation
Common errors include market valuations that are significantly less than the fees charged for parking within a one km radius of the premises on which the car is parked, the use of rates paid where the parking facility is not readily identifiable as a commercial parking station, rates charged for monthly parking on properties purchased for future development that do not have any car park infrastructure, and insufficient evidence to support the rates used as the lowest fee charged for all day parking by a commercial parking station.

Secrets to a savvy SMSF

Opting for a self-managed super fund (SMSF) can be a clever financial decision, but it’s not for everyone.

If you aren’t prepared to adhere to the following tips, your SMSF will most likely fail to perform as well as you would of hoped it to.

Stay informed
You can’t expect your SMSF balance to be the most profitable for you in your retirement phase if you don’t remain educated on the vastly changing compliance laws. Remaining up-to-date with these changes, and how they impact upon your nest egg is an essential aspect of making your SMSF work for you, your spouse and your children.

Strategy
The ultimate long-term goal of your SMSF is to allow you to retire comfortably, maintaining the life you have become accustomed to throughout your working years. To do this, you need to have a strategy; the decisions you make regarding your SMSF should be part of this strategy, not just transfers here and there because your financial advisor told you to. Your strategy should be reviewed at least annually. You need to be aware of how each decision will impact upon and ultimately lead you towards the financial security you work so hard to achieve for your later years.

Seek advice
Running a self-managed super fund doesn’t involve having all the answers, but it does require understanding when it’s time to talk to a professional to get the best advice on your SMSF. You can never ask too many questions when it comes to your future financial security.

FBT parking exemptions for small businesses

It is quite common for small businesses to provide their staff with car parking benefits, however, many business owners may not take into account the effect parking has for fringe benefits tax (FBT) purposes.

Fortunately, if you are a small business, car parking benefits are exempt if you meet all of the following conditions:

– the parking is not provided in a commercial car park
– you are not a government body, a listed public company, or a subsidiary of a listed public company
– either your gross total income for the last income year before the relevant fringe benefits tax (FBT) year was less than $10 million, or you were a small business for the last income year before the relevant FBT year.

Where an employer reimburses an employee’s car parking fees, i.e., if they park at a commercial car park, this will subject the employer to FBT.

Super funds boast high returns in 2017

Superannuation funds in Australia have delivered a return of 10.5 per cent for 2017 – the first double-digit growth since 2013.

According to recent findings, there was a 1.3 per cent rise in November 2017 and 0.6 per cent rise in December 2017 alone.

The new figures mark the sixth consecutive year of positive returns for super funds.

Super fund returns overtook returns in the property market, as property returns weighed in at 9.1 per cent last year.

Investors should review their super fund’s performance at the start of the new year and make sure it is delivering value for money outcomes.

Although the returns provide a degree of confidence for investors, it is important to remember that markets are volatile and having a long-term investment strategy in place is vital.