09th Feb, 2021
Tax planning or tax avoidance – do you know the difference? Tax planning is a legitimate and legal way of arranging your financial affairs to keep your tax to a minimum, provided you make the arrangements within the intent of the law. Any tax minimisation schemes that are outside the spirit of the law are referred to as tax avoidance, and could attract the ATO’s attention.
The ATO has outlined some common features of tax avoidance schemes, and we can help you to steer clear of them. While it’s not always easy to identify these schemes, the old adage of “if it seems too good to be true, it probably is” is a good rule of thumb.
Tax avoidance schemes range from mass-marketed arrangements advertised to the public, to individualised arrangements offered directly to experienced investors. Other schemes exploit the social/environmental conscience of people or their generosity. As different as these schemes are, the common threads involve promises of reducing taxable income, increasing deductions, increasing rebates or entire avoidance of tax and other obligations.
Schemes may include complex transactions or distort the way funds are used in order to avoid tax or other obligations. They may also incorrectly classify revenue as capital, exploit concessional tax rates, or inappropriately move funds through several entities including trusts to avoid or minimise payable tax.
Currently, the ATO has its eyes on retirement planning schemes, private company profit extraction and certain problematic financial products.
17th Nov, 2020
Several tax announcements from the 2020 Federal Budget have now been passed into law.
These include bringing forward changes to the personal income tax thresholds so that they apply from 1 July 2020. From that date, the top threshold of the 19% personal income tax bracket is increased from $37,000 to $45,000. The top threshold of the 32.5% tax bracket is increased from $90,000 to $120,000. The low income tax offset increases to $700 and the low and middle income tax offset (up to $1,080) is retained for 2020–2021.
A range of tax concessions already available to small businesses have been extended to medium sized businesses as well, and businesses with turnover less than $5 billion can deduct the full cost of eligible depreciating assets that are installed ready for use between 6 October 2020 and 30 June 2022.
The ATO has issued updated tax withholding schedules to reflect the 2020–2021 income year personal tax cuts. Employers must now make sure they are withholding the correct amounts for pay runs processed in their systems from no later than 16 November onwards.
With these changes coming partway through the income year, employees and other payees will receive their entitlement to the reduced tax payable for the entire 2020–2021 year when they lodge their income tax returns for that period.
11th Apr, 2020
The ATO has advised that it has extended and expanded its pilot program which offers an independent review service to eligible small businesses disputing income tax related audits. The pilot will continue until 31 December 2020.
The independent review is conducted by an officer from the ATO’s Review and Dispute Resolution business line. This officer will not have been involved in the audit and will bring an independent “fresh set of eyes” to the review. The independent reviewer will consider the documents setting out the taxpayer’s position and the ATO audit position. They will schedule a case conference with the taxpayer and the ATO audit officer generally within one month of receiving the taxpayer’s review request. The case conference is an opportunity for all parties to assist the independent reviewer with understanding the facts and contentions.
The audit case officer will contact a taxpayer if it is eligible for an independent review. A written offer of independent review will also be included in the audit finalisation letter.
09th Jun, 2019
The Notice of Requirement to Lodge a Return for Income Year Ended 30 June 2019 has been registered. This covers income tax returns and other lodgments for franking account returns, including special rules for late balancing corporate tax entities that elect to use 30 June as a basis for determining their franking deficit tax liability; venture capital deficit tax returns; ancillary fund returns; trustees of SMSFs; and member information statements by superannuation providers.
The Notice also covers use of approved forms for lodgment, lodgment deferrals, lodgment exemptions, and penalties for non-lodgment.
The Notice of Requirement for Parents with a Child Support Assessment to Lodge for the Income Year Ended 30 June 2019 has also been registered.
04th Mar, 2019
An extra 44,000 taxpayers have been hit with the additional 15% Division 293 tax for the first time on their superannuation contributions for 2017–2018. This is because the Div 293 income threshold was reduced to $250,000 for 2017–2018 (it was previously $300,000).
Individual taxpayers with income and super contributions above $250,000 are subject to an additional 15% Div 293 tax on their concessional contributions.
Taxpayers have the option of paying the Div 293 tax liability using their own money, or electing to release an amount from an existing super balance, which means completing a Div 293 election form.
06th Feb, 2019
The Federal Government has announced that it will amend the law to extend the concessional tax treatment for genuine redundancy payments and early retirement scheme payments to align with the Age Pension qualifying age.
Currently, an individual must be aged below 65 at the time their employment is terminated to qualify for a taxfree component on a genuine redundancy payment or an early retirement scheme payment.
Where an individual is under age 65 and meets the requirements of the Income Tax Assessment Act 1997, they receive tax-free a base amount of $10,399 (for 2018–2019), plus $5,200 for each whole year of service.
The government says it will amend the law to align genuine redundancy and early retirement scheme payments with the Age Pension qualifying age from 1 July 2019.