Category : Taxation

On US Election Results – Interest Rates and Taxes


So, the US election results are in.  How will this impact our domestic interest rates and taxes?

The Republicans (Trump) have now been voted in to the Presidency and now have control of the Congress and Senate (for at least two years).  This also means they have the wherewithal to appoint the next Justice to the Supreme Court.  This will therefore make the highest Court in the US conservative in approach.

What do the US election results mean for Australia?

In all honesty, probably not much.  We have a very secure and long-standing alliance with the Americans.  Can’t see that altering.

The only things that might occur are:

It could increase pressure on the RBA to further drop interest rates over here.  The rationale behind this thinking?

  • if Trump does change the various Free Trade Agreements currently in place, there is a chance this will devalue the US Dollar (note that, as of writing this, the USD has only “come off” about one cent – from 77 to 76 cents);
  • where the US dollar devalues, the price of our exports will increase (relatively);
  • this will have a significant impact on the global competitiveness of our exports;
  • to enable exports to be “cheaper”, the Aussie Dollar needs to be lower;
  • the only real way to lower the exchange rate is to reduce Australian interest rates to make the currency “less competitive” on the global stage.

And:

It may have some flow-on effect where large businesses relocate their Head Offices and or operations to the US to take advantage of the (proposed) lower corporate tax rate.  Put it this way, if you’re operating in both Australia and the US and taxes in the latter are 50% of those that apply here, why wouldn’t you relocate?  If Trump does get a significant reduction in taxes through, it may place pressure on our government to address the taxa rates over here.

So, on the ground, we possibly won’t notice much.  However, if all goes according to the crystal ball, we need to consider the impact on our interest rates and taxes and what it means for your business and our nation.

Simples Hey?

 

On Capital Gains Tax- the dates matter!


Did you know that the date on which you sign a contract (not when you pay for what you’ve bought) is THE date for Capital Gains Tax (CGT) purposes?

We often see people try to “manage” their CGT liabilities by signing a contract prior to the end of a financial year and then settling the contract after the year end.  Sounds great in theory.  But it doesn’t work.

CGT law holds that it is the date of entering in to a contract that is the relevant date for CGT purposes.

If you are considering purchasing or selling a capital asset (rental property, business or the like), you might want to have a talk to us first.  Getting the documents and dates right can help you manage your tax liabilities in a far more effective way.

Welcome to MTA Accounting


Come 1 July 2016 mta optima as we know it will be undertaking a rebrand of both name and logo. From 1 July we will be known as MTA Accounting, with exciting new branding and stationery to be rolled out.

So why the change?
Earlier this year we undertook an exercise where we reviewed the message we were trying to deliver to not only our existing customer base but also to the broader market. We identified that our industry along with many of our customers’ industries were experiencing disruption due to technology, increased competition, changing legislation and the simple ease of doing business with foreign markets that was once considered impossible. In other words this big world we live in is not that big anymore!

To keep pace with this disruption and for us to deliver on our strategic goals, we realised that we need to change our brand and the way we communicate so we can deliver our message more effectively to our target market. We came to the realisation that what was once our target market has changed somewhat and that the message that mta optima wanted to deliver was getting lost and potentially confusing to our targeted customers.

The new MTA
For these reasons, MTA Accounting was born. Under MTA Accounting  our core services will be Accounting/Taxation, Advisory and IT. We acknowledge that Accounting and Taxation is our core, traditional business but there are also elements of what we do that beautifully complement Advisory and IT services. To remain progressive (along with our customers) we need to be insightful and transformational, enabling all of us to flourish.

From 1 July you will note that all our stationery will change over to MTA Accounting. Our new website www.mtaaccounting.com.au is already live and (our various social media platforms are also being transformed). Our communication style will be more deliberate and written in a way that complements our customers and their needs. We will continue to look for new and improved ways of doing business with our customers but we will never move away from our traditional face-to-face interaction.

In the coming months we will make an exciting announcement about another brand that will come online to not only complement MTA Accounting but move further into a space of disruption where feeling a tad uncomfortable will be the “new normal”.

We welcome you on the journey with us.

On Superannuation in the 2016 Budget


Superannuation and government – a recipe for disaster!

Treasurer Scott Morrison delivered the Federal Budget on Tuesday night.  After many months of speculation, the detail (such as it is) finally came to light.  And how short-sighted the document turned out to be – especially for those with superannuation.

Having worked in and around superannuation since 1991, I have witnessed so many changes and it is little wonder that the average punter tends to tune out when the word “superannuation” is used.  It is therefore not surprising they really don’t seem to care and become easy prey for financial planners and industry superannuation funds.

train overboard

The changes being proposed by the Turnbull government in the budget can be summarised as follows (note that I’m not covering all of them here – just the major ones that will impact our clients).

I preface all this by stating that the policy platform relating to superannuation is somewhat confusing – the government wants people to provide for their retirement so that there will be less strain put on the welfare system when they retire.  Fantastic!

Why then do they limit the amounts that people can put into superannuation?  This flies against any and all forms of logic.  If you want to create a welfare replacement vehicle, encourage people to use it – don’t restrict them.

Over the past 20 plus years, we have seen limits – some very generous, others less so.  Passing strange it is that superannuation limits tend to reflect the underlying state of the budget!  When things are going pretty well, the limits are up, when things tighten up, so do the amounts people can contribute.

So here goes:

$500,000 Lifetime Limit on “private contributions” (in the legislation, these are called “Non-concessional contributions”)

The idea has always been that there were opportunities for people to add to their superannuation accounts during the year using tax-paid/after-tax money that they might have saved up.  This can also include amounts withdrawn and re-contributed to the fund when it is in pension phase.  Prior to Tuesday this week, people could deposit $180,000 per year into their fund or, elect to “bring forward” a couple of years contributions and put $540,000 into their fund.  This works really well for people who haven’t been able to build big balances in the superannuation system as they were running businesses, bringing up families and generally contributing to the wealth of the nation.  Now, the government, in their wisdom, is placing a “cap” on the amount they can contribute in this way.

The net effect of this is to restrict the ability of people to put money into their superannuation accounts for their retirement.

Remember when it was possible (some years ago) to put $1,000,000 into superannuation?  Lots of people took that opportunity up.

Now, if you’re one of the lucky ones who have made contributions of this type since 2007 and are currently over the new $500,000 limit, good for you.  It just means that you won’t be able to make any more.  If you’re not at the new $500,000 limit yet, well, you can make additional contributions to get you there – but PLEASE don’t go over the limit or you will get stung with Penalty Tax.

One interesting note – the budget papers make reference to the fact that the date of 1 July 2007 was chosen as this is the date from which the Tax Office has “reliable contributions records”.

I am not sure whether backdating a limit commencement start time is valid Constitutionally.  Watch this space!

Limiting the Size of your Pension Fund

The government refers to this as a “Transfer Balance Cap” – what they really should call it is “You can’t have a pension bigger than this”.

What it means is that, from 1 July 2017, you will be able to transfer a maximum of $1.6 million into your retirement account.  Subsequent earnings on the amount transferred will not be subject to tax.

I don’t know about you, but I have found that where you segregate assets, it becomes difficult to “un-segregate” them.  Let’s say you have a fund with $2m in it. You transfer $1.6m of shares into the new “Maximum Pension Fund” box.  The share market tanks – all of a sudden, you have well less than $1.6m in that account.  Can you top it up?

Conversely, you transfer $1.6m into your “Maximum Pension Fund” box and the shares appreciate markedly so that the balance in that “box” is now well over $1.6m.  Do you have to transfer funds out?

Or, riddle me this one – your single asset in your superannuation fund is a building worth $2m.  Do we have to transfer 80% of that building into the “Maximum Pension Fund” box?

Apparently the government is going to “consult” on how this will all be implemented.  Good luck with that.  This has all the hallmarks of an absolute mess and will result in uncertainty for the superannuation industry for years.

I find it somewhat galling that the government will be effectively trying to legislate how much you can save in your pension fund to access the tax-free earnings.  Many people have saved and worked hard over decades to give them a retirement that they can enjoy.  To come in and take this away from them is unfair – especially for those who are already in pension phase and who have planned their lives and activities around what they thought was some level of certainty.

Contribution Limits

As mentioned above, the government keeps telling everyone to put more money into superannuation.  Then they place a limit on how much you can contribute before you run into penal tax rates.

If you have a look at the levels of allowable (read “deductible”) superannuation contributions over the past years, you will see it is a dog’s breakfast.  Starting (for the under 50 year olds) at $50,000 in 2008/9, it has reduced to $25,000 from 2009/10 then increased to $30,000 from 2014/15 and it reverts to $25,000 from 2017/18.  It’s a bigger mess for those aged over 60!

If the government wants people to contribute to superannuation to fund their retirement, set a limit and stick to it.  For younger people with a plan to put money aside, it becomes impossible for them to budget to achieve this.

I will point out there are some positive proposals in the budget with regard to superannuation, however, the issues highlighted above are so short-sighted and ill-thought-through that the government is making the superannuation system even more unwieldy than it was previously.

On the 2016 Budget – Super or not?


So we have a new Budget delivered tonight.

What does it all mean?  High points as we see them:

  • increase in threshold for the second highest marginal rate increases from $80,000 to $87,000;
  • small business is now defined as a business with a turnover of up to $10m (increased from $2m) – this is a good thing and will be appreciated by a number of our customers
  • limit/cap of value a retiree can put into their retirement account of $1.6m (this is a different approach!) – it is going to have an impact on those of you with large super accounts. Sure, there aren’t a lot of you out there, but you will be impacted in a not so great way with this.
  • concessional super contributions maximum is reduced again to $25,000
  • lots of mucking around with super which will only serve to make it more confusing – they cannot help themselves!
  • new focus on internships for young unemployed people – this looks interesting and is potentially a sensible approach – using the funds that were used to pay welfare to support businesses who employ under this program.  This is possibly a far better use of the funds.
  • focus on chasing the multinationals – not really a concern for our customers!
  • reduction in company tax rate to 27.5% from 28.5% for businesses under $10m turnover with an expansion in the level of businesses that qualify for the reduced rate in coming years

Initial feedback from the media seems to be pretty positive, but, as always, “the devil is in the detail”.

There will be a lot of analysis of the budget in the coming days – and lots more information will come out.  The growth and unemployment forecasts in the figures look OK and the deficit projections are (as usual), pretty bullish.

Couple all that with the reduction in interest rates by the Reserve Bank to day and you might just think we were heading towards an election!

Once we have had a chance to review the budget in more detail, we will provide more information to you.

On Tax Scams – Beware but Take Note!


Today, we had one of our clients phoned by a “representative” of the Australian Taxation Office (ATO) concerning “fraudulent activity” relating to his tax returns and stating that a “petition notice” had been lodged against his file.

Source:  smartraveller.gov.au

Source: smartraveller.gov.au

Our client was suspicious and immediately phoned our office as he was (naturally) a bit concerned about the matter.  We indicated to him that this looked and sounded like a scam and we would check it out.  On phoning the ATO, we were assured that this was in fact a scam and there was nothing to be concerned about with regard to our client’s affairs.  We advised our client of this fact immediately after speaking with the ATO.

We also advised the Tax Office of the contact name and phone number as provided by the scammer and, hopefully, they will be receiving a “friendly” visit from the Australian Federal Police in the very near future.

If you receive phone contact direct from the ATO concerning your tax affairs, be highly suspicious – this is not their standard method of contacting a taxpayer.  They will normally come through us (or your Registered Tax Agent) and contact will initially be made by letter.  If you are contacted by phone regarding tax “irregularities”, make sure you get the name of the person calling and their phone number and let them know you will call them back as you are in a meeting.  Let us (or the ATO) know immediately – the ATO contact number is 13 28 61.  If you receive a suspicious email, forward it to the ATO at ReportEmailFraud@ato.gov.au

The scammers are scum and they deserve to have the full weight of the law applied to them.

On Director Fees and Bad Advice


In the lead up to the end of the financial year, we often hear of wonderful schemes that are apparently available to reduce taxation liabilities.danger-sign11

One of our crew came across some advice on a blog that is just plain wrong.  It concerns us deeply when advice given freely isn’t based on legislation.  The blog in question related to the payment of Director Fees or Director Bonuses at the end of the financial year (or even after!).  The advice provided by an accountant said that this was all fine and there are no super liabilities associated with such a payment.

Now, in certain limited circumstances this is true, however, based on our experience, it will not generally apply to the owners of smaller businesses. 

As we discussed in the office, always go to the legislation and, in this case, we refer to section 11(b) of the Superannuation Guarantee Administration Act 1992. 

We always work on the thinking that if it sounds too good to be true, it probably is!

No More Benchmarking


We welcome the ATO withdrawal of a number of their benchmarks for analysis of taxpayers. 

From our experience, the ATO benchmarks were largely irrelevant and paid little heed to what actually went on in the “real world” – the fact that they cobbled together a range of business types in to the one group served to de-value the process even further – along with increasing the ambiguity and problems associated with trying to help our customers through the “nasty letter” phase that an “adverse” benchmark result generated.

We appreciate the need to bring fraudulent taxpayers to account – the benchmark process adopted by the ATO, with its inherent flaws and shortcomings, is not the way to do it.

Capital Gains – Event E4 – YeeHaa


Just been sorting through some CGT issues for one of our customers and they are disposing of an asset in a Unit Trust.  Unfortunately, we’ve come in to the realm of CGT Event E4 – this provision is a really nasty little piece of work and helps to show that the use of Unit Trusts for ivnestment purposes needs to be very carefully considered.

Where you are looking at establishing a business and thinking of running it through a Unit Trust, you need to to be very careful that you structure your operation such that you can avoid running in to E4 – it’s not pleasant.

Thankfully, we haven’t set anyone up in a Unit Trust in these type of situations – we generally come across them when a customer comes to us with a view to us doing their work.

For those of you that do trade through a Unit Trust, you really need to think carefully about what your options are as there are ways to fix the issue – better to do it when you’re not planning on selling though!

What’s the REAL cost?


Another interesting one today.

One of our customers had a discussion with us late last year with regard to a transaction they were proposing to undertake.  We scoped out the work and gave them a price to provide them with some advice regarding the likely taxation implications of the transaction.  Suffice to say they thought the price we quoted was too high (it was well under $1,000) and decided not to engage us.

Well, they proceeded with the transaction and went to contract which was duly signed and such.  All good.  No involvement from us – despite our offer.

Trouble was, as a consequence of not spending the less than $1,000 for our advice, they have now incurred an additional tax bill which we estimate will be in the realm of $30-40,000.  Our advice would have resulted in their tax bill being reduced to $0.

Next time your adviser recommends that they undertake some work relating to a transaction you are contemplating, think about the value that they can add to the outcome rather than focussing on the cost.  You’ll be pleased you did. 

Unlike our customer who now has plenty of time to deal with the consequences of their decision.

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