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What disqualifies you from an SMSF

Posted on May 20, 2019 by admin

SMSF’s are regulated by the ATO and have specific eligibility criteria that members and trustees must follow. While anyone 18 years old or over can be a trustee or director of an SMSF, they mustn’t be under a legal disability, such as mental incapacity, or a disqualified person. The ATO can render an SMSF trustee as a disqualified person if they see the need, particularly in relation to illegal early access breaches. There are other ways a person may become disqualified and some may not even realise they have been. Continuing to act as an SMSF trustee or director of the corporate trustee while disqualified is an offence, further penalties may apply. A person is disqualified if they: Have been convicted of an offence involving dishonesty. Are or have been subject to a civil penalty order under the super laws. Are insolvent under administration (including being an undischarged bankrupt). Have been disqualified by a court or regulator (for example, by the ATO or APRA). The ATO has a Disqualified trustees register to see if an individual has previously been disqualified. The register provides information and easy search options to help determine whether a potential trustee has been disqualified. It is […]

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Tax incentives for start-up investors

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Tax incentives may be available to investors that are considering putting their money into qualifying start-up businesses. Eligible businesses are defined by the ATO as early-stage innovation companies (ESICs). The two key tax incentives for eligible early-stage investors, also known as ‘angel investors’, who purchase new shares in an ESIC are: Non-refundable carry forward tax offset that is equal to 20% of the amount paid for their qualifying investments. This offset is capped at a maximum amount of $200,000 for the investor and their affiliates combined in each income year. Modified capital gains tax (CGT) treatment, where capital gains on qualifying shares that have been continuously held for at least one year may be disregarded. Capital losses on shares that have been held for less than ten years must be disregarded. Note that the maximum tax offset of $200,000 does not limit the shares that qualify for the modified CGT treatment. The early-stage investor tax incentives are available to both Australian resident and non-resident investors. To qualify for the tax incentives, investors must have purchased the shares in a company that meets the requirements of an ESIC immediately after the shares are issued. They must be issued on or after […]

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ATO impersonation scam report

Posted on May 10, 2019 by admin

The ATO has released an Impersonation Scam Report for the month of February 2019. Highlighted are the various ways in which scammers have attempted to contact people, posing as the ATO. The most common method of contact was by phone calls or messages, accounting for 97% of reported scams over the month. Reports of 9,342 phone scams were officially recorded, decreasing significantly from 13,800 reports in January 2019. Emails accounted for 2% of scamming methods. The remaining 1% reported was scam by text message. According to the ATO, the amount collected by scammers was approximately $256,635, over $240,000 less than January 2019. Payments to these scams by bank transfers significantly increased in February, accounting for 47% overall. Although trends are down in the last month, the ATO is working to create better public awareness of these scams. The ATO has launched a new scam warning video across their various social media platforms, including Facebook, Twitter and LinkedIn.

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ATO warns of TBAR lodgement errors

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With upcoming annual lodgement dates for Transfer Balance Account Reporting (TBAR), the ATO is alerting funds of common lodgement mistakes that could lead to delays and additional processing time. The Transfer Balance Cap (TBC) is a $1.6 million cap on the total amount of superannuation benefits that a member can transfer into a tax-free retirement phase income stream. TBAR is used by SMSF trustees to report to the ATO any events that affect a member’s transfer balance. The information is used to record and track the member’s TBC and apply provisions if the member were to breach the cap. Reports can be lodged both online or by paper forms. The electronic method is recommended by the ATO as human errors are common when using the paper form to report. These issues are often a failure to provide the fund’s ABN and failing to report the event type. When these errors occur, the form will be suspended for manual review and the ATO may need to contact funds in some cases to resolve any issues. A TBAR must be lodged for the 2018-19 financial year if any member had a transfer balance account event occur in the last year, and if […]

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ATO monitors personal living expenses

Posted on May 6, 2019 by admin

In an ongoing effort to address the misuse and abuse of the tax and regulatory systems, the ATO has implemented a new tool to monitor what constitutes reasonable personal living expenses. Information is requested by the tax office to identify unreported cash income when looking at household expenditure. An individual will be required to provide this information to work out if they need to make adjustments to their business and record-keeping practices as well as help the ATO identify if they should be selected for an audit. In the event of an audit or when making an assessment in the course of examining an individual’s tax affairs, the ATO will employ a set of guidelines presented in the form of questionnaire worksheets. These worksheets will require taxpayers to provide certain details about the living expenses of their household. Discrepancies in tax returns that have been discovered by individuals completing a personal living expenses worksheet can be adjusted through voluntary disclosure. Taxpayers that voluntarily inform the ATO of mistakes before an audit may be eligible for reduced penalties.

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Super changes to protect employees’ entitlements

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Several revisions from the Treasury Laws Amendment (2018 Measures No.4) Bill 2018 took effect from 1 April 2019. These measures are designed to help reduce the super guarantee (SG) gap, protect employees’ super entitlements and strengthen the ATO’s ability to recover unpaid super. Changes to disclosure laws will now allow the ATO to disclose information to employees about an employers’ failure to meet SG obligations. This will also allow for the ATO to reveal their processes involved in retrieving these amounts. Additionally, a free voluntary online education course is now available to help employers understand and meet SG obligations. Education directions permit the ATO to instruct employers who don’t meet their SG obligations to complete the online education course, which includes an assessment element. Individuals are encouraged to notify the ATO of non-complying employers. If your employer is approachable, you could make them aware of the online course and its benefits prior to the ATO contacting them and directing them to complete it.

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Increase to fuel tax credit rates

Posted on April 29, 2019 by admin

The ATO has increased fuel tax credit rates from 4 February 2019. As fuel tax credit rates are updated regularly, it is important to check the rates each time you lodge a business activity statement (BAS). Fuel tax credits provide businesses with a credit for the price of fuel used in machinery, plants, equipment, heavy vehicles, or light vehicles travelling on private roads. The amount of credit will depend on when the fuel is acquired, what fuel is used and the activity it is used for. The changes in fuel tax rates are indexed twice a year, in February and August in line with the consumer price index (CPI). The current rates apply from 1 July 2018 to 30 June 2019. If you claim less than $10,000 in fuel tax credits each year, you can use a simplified method to make claims to the ATO. For further information on claiming fuel tax credits and specific rates, you should consult your registered tax agent.

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Is your SMSF meeting its PAYG obligations?

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The ATO has called on self-managed funds to check whether they are meeting new pay-as-you-go (PAYG) withholding obligations for capped defined benefit income streams paid to their members. SMSFs have PAYG obligations to withhold tax from income streams that have been paid to their members in circumstances where: The member is 60 years or older. The member is under 60 years and has a death benefit capped defined income stream (where the deceased was 60 years or over when they died). If you have no tax that you need to withhold from a member’s super, then you are required to provide the individual with a pension payment summary and lodge a PAYG withholding summary with the ATO. This should be done by 14 August, following the end of the financial year that the payment was made.

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ATO to monitor high-risk LRBAs and TBARs within SMSFs

Posted on March 25, 2019 by admin

The ATO is focusing on risky Limited Recourse Borrowing Arrangements (LRBAs) and failures in Transfer Balance Account Reporting (TBAR) in SMSFs this year. They have announced plans to contact trustees with high concentration risks in their funds and to crack down on misreporting. Limited Recourse Borrowing Arrangements:LRBAs allow a superannuation fund to borrow under strict conditions. The existing population of SMSFs that have entered into LRBAs, potentially on the basis of poor or conflicting advice, is a key area of concern for the ATO and has been rated a medium to high-risk. In 2017, approximately 95% of the LRBAs were for the purpose of purchasing property. Due to this prevalence, the ATO has concerns about the risk of members’ retirement savings in the event of a property decline. Transfer Balance Account Reporting:TBAR is used to advise the ATO when a transfer balance account event occurs within an SMSF, enabling an individual’s transfer balance cap and total superannuation balance to be recorded and tracked. One area of TBAR arrangements the ATO will be monitoring is the reporting of capped defined benefit income streams. In 2018, approximately 86% of SMSFs reporting a capped defined benefit stream had failed in their reporting obligations. […]

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Changes to personal income tax

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The Personal Income Tax Plan has gone through recent changes regarding rates, thresholds and offset entitlements. These changes were announced in the 2018-2019 Federal Budget and were implemented at the start of the 2019 financial year. For the upcoming tax season, individuals should review these changes in case they are affected. The 32.5% tax bracket was increased from $87,000 to $90,000 for the years 2018 to 2022. The following two years will see a further increase to $120,000 and in 2024 it will increase again to $200,000. These changes will apply to residents, foreign-residents and working holiday makers. Pay As You Go (PAYG) withholding rates and schedules will also be updated to include these changes. Australian residents whose income does not exceed $125,333 could now be entitled to an addition to the low and middle income tax offset. This can be available after an assessment of a person’s individual income tax return. This addition applies to the 2018 to 2022 financial years. The amount you receive will be based on the following income levels: If below $37,000 you are entitled to $200 Between $37,000 and $48,000 you are entitled to $200 plus 3% of the amount of the income that […]

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