We are now on the final quarter of the financial year, we should be starting to plan and prepare for the upcoming year end! A lot of changes are happening on the upcoming 2018 financial year. This brief article will list down some changes that will impact tax practitioners, advisers and the clients during the year.
ATO Audit and Data Matching
ATO will heighten their audit activity and continue on expanding its extensive data matching capabilities. Meaning, they will be stricter and news are coming that work related expenses are a big target.
Talk of allowing individual taxpayers a standard tax deduction for work related expenses has been around for more years than we may care to remember. However, still no updates are coming from the ATO and instead they are implementing a stricter approach on how individuals claim their deductions. With this, tax payers should focus on their record keeping – which many are not good at.
The ATO is also seeking to ensure businesses have evidence to support all their income, expenses and lifestyles. This may seem like a very basic issue, but the ATO focuses on businesses that indicate unrealistic income relative to the assets and lifestyle of the business and its owner.
Capital Gains Tax
Treasury has recently released draft legislation that significantly restricts the availability of the small business CGT concessions. The changes, labelled “integrity measures”, implement an announcement in the 2017/18 Budget.
“The Government will amend the small business capital gains tax (CGT) concessions to ensure that the concessions can only be accessed in relation to assets used in a small business or ownership interests in a small business.”
Single Touch Payroll
Single Touch Payroll (STP) is an initiative being introduced by the Australian Tax Office (ATO) to provide real time visibility over the accuracy and timeliness of organisations’ payroll processes. STP will enable employers to report salary or wages, pay as you go (PAYG) withholding and super information directly to the ATO at the same time they pay their employees. It applies to all employers with 20 employees or more based on a headcount as at 1 April 2018. Employers with fewer employees can still report voluntarily, although this is not a requirement. It is proposed that STP will commence from July 2018. The Government has announced it will expand STP to include employers with 19 or less employees from 1 July 2019. It is subject to legislation being passed in Parliament – draft legislation to implement that has just been released.
Allocation of profits within professional services firms
A huge issue in 2018 will be the ATO’s new guidelines. Currently being worked on for allocation of profits within professional services firms. They have suspended some guidelines and web materials after becoming aware of some arrangements with high risk factors that are not specifically addressed in the guidelines. The ATO has said it will begin consulting with interested stakeholders on replacement guidance and the application of any required transitional arrangements, noting new guidance will apply prospectively. The new guidelines are expected to be finalised in June 2018.
ATO disclosing tax debt info
There is a proposal that allow ATO to disclose the tax debt information of businesses. To credit agencies where the businesses have not effectively engaged with the ATO to manage their debt. The proposed amendments will apply in relation to records and disclosures of information on or after the first 1 January, 1 April, 1 July, or 1 October to occur after the day the Bill receives Royal Assent (regardless of whether the information was acquired before, on or after that day).
GST on residential properties to be paid by purchaser
Purchasers of new residential premises to withhold and remit the GST on the purchase price directly to the ATO from 1 July 2018 as part of the settlement. The rules do not apply to the payment of a deposit, but apply to instalment and settlement amounts. So if a payment consists of a deposit and additional payment, the new rules would only apply to the additional amount, although this would probably not be a usual situation.
The seller must provide a written notice to the purchaser when selling the property. The notice must state if the purchaser will be required to make a payment of GST. So if a private individual sells a family home or unit to another person, then the notification must be made.
There is a draft legislation also proposes employers who do not meet their Super Guarantee obligations can face criminal penalties. So keep in mind your obligations to avoid any penalties.
Also, they have recently released draft legislation proposes that a super fund member’s share of the outstanding balance of a limited recourse borrowing arrangement (LRBA) will be included in the member’s “total superannuation balance. This is intended to apply to new LRBAs entered on or after the new law commences on 1 July 2018. Refinancing of existing loans entered into prior to that date would be excluded. The changes seek to ensure that related-party transactions with super funds and LRBAs cannot be used to circumvent the reduced contribution caps operating from 1 July 2017.
Corporate Tax Rate
A proposed bill is now with the Senate, to progressively lower the corporate tax rate. Change is targeted from 25.5% to 25% by 2026-2027. Also, an associated bill that seeks to ensure a company will not qualify for the lower company tax rate. (if more than 80% of its assessable income is passive income)
$20,000 instant asset write-off
Also please be reminded that the $20,000 instant asset write-off ends on 30 June 2018. The threshold goes back to $1,000 from 1 July 2018. But be on the lookout, because there are some news that the Government might extend beyond 30 June 2018.
There are some more updates that are not listed on the above. I suggest you to be on the loop so you won’t miss anything.
I know it’s a lot to take in right now but you have to be aware of the said updates to avoid any problems in the future. If you want assistance on those topics, please contact 02 4732 3844 or visit www.judgeaccountants.com.au.