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OCTOBER 2008
First Home Saver Accounts (FHSAs)
Australia seems to weathering the financial crisis better than other countries. However, with many people losing money on the markets, how do you encourage your children to save?
One way is to introduce to them to our financial planning team at ESV Strategic. Another is to get them into a First Home Savers Account.
Why open an FHSA?
Basically, the government will contribute up to $850 per year; tax free, into the FHSA of eligible account holders. Earnings on FHSAs are only taxed at 15%, and the account provider (bank) is liable to pay it.
There are no limits on the amount that can be held in the account. However, Account-holders must be 18 years of age and make contributions (from after-tax income) of at least $1,000 for each of four financial years (not necessarily consecutive) before they can withdraw their money. Other people can contribute to the account.
What is the down-side?
If the Account holder decides not to go ahead with buying or building their first home, they must contribute the funds deposited to the FHSA into their superannuation fund.
What about the First Home Owners Grant?
Taxpayers are still entitled to apply for a First Home Owners Grant if they decide to open an FHSA.
Cash Economy under Fire: ATO Directly Contacting Taxpayers
As part of the Tax Office's drive to rein in the cash economy, they are sending letters directly to taxpayers identified as having large volumes of cash transactions.
Recently, the ATO sent 44,000 letters to businesses in the retail, construction and consumer service industries. Letters have also been directed to businesses that have reported a low or negative cash flow which may indicate they are under-reporting income.
The way you deal with such a letter can affect the outcome of any audit activity that eventuates. If you receive one of these letters, we strongly suggest that you contact us.
More ATO Industry Benchmarks
Tied to these cash economy projects, the Tax Office has issued new industry benchmarks for the roofing and concreting industries and updated its taxi industry benchmark.
Other industries for which the ATO has already produced benchmarks are the floor sanding and polishing, roof tiling and painting industries.
These benchmarks are available on the ATO's website show performance information which the ATO uses to profile taxpayers for compliance risk. Einfeld Symonds Vince incorporates them, where applicable, into our review process.
Bill to Remove Same-Sex Discrimination Introduced
The government has introduced legislation removing same-sex discrimination from a range of Commonwealth laws.
The changes will provide for equality of treatment under a wide range of laws between de facto couples (including same-sex couples) and will ensure children are not discriminated against because of the structure of their family.
For FBT and income tax purposes, the reforms are expected to become operative on 1 April 2009 and 1 July 2009 respectively.
These amendments include a new definition of ‘de facto partner’ which will apply equally to same and opposite-sex relationships. The definitions of ‘child’ and ‘parent’ will also be expanded to include the children of same-sex couples.
Amendments will be made to ensure that de facto partners, children of same-sex couples, and persons whose relationship is traced through them will be considered to be family members and relatives for the purposes of relevant Commonwealth legislation.
Living Away From Home Allowance (“LAFHA”) Disallowed
A company has been unsuccessful in its attempts to have an allowance paid to an employee treated as an exempt fringe benefit. The employer sought a Private Ruling from the Commissioner on whether an allowance it paid to one of its employees was not a living-away-from-home allowance for FBT purposes. The Commissioner decided it wasn’t and when the employer’s objection to that Ruling failed, the matter was sent to the AAT for adjudication. The employee, an accountant, was required to work long hours and decided to rent a property much closer to work than the farm at which he normally resided which was 60kms away. The AAT’s decision was based on the reasoning that while the employee “chose to reside in accommodation that was closer to his place of work during the week but that he was not required to do so in order to perform the duties of his employment”. So, the amount was not a LAFHA for FBT purposes. Genuine Redundancy Payments
The Tax Office has issued a Draft Ruling that includes examples that show that taxpayers who operate their own business (through a company or trust) can be paid out "genuine redundancy payments" which are concessionally taxed. The Draft Ruling looks at the four necessary components in a basic genuine redundancy payment i.e. (1) The payment being tested must be received in consequence of a termination. (2) The termination must involve an employee being dismissed from employment. (3) The dismissal must be caused by the redundancy of the employee's position. (4) The payment must be made genuinely because of a redundancy. The Draft Ruling is not contentious and, in reality, amalgamates and updates the terminology of a number of older Rulings on the topic. The examples using owner employees do provide some comfort. Advice should be sought from Einfeld Symonds Vince prior to any major business event. Government's Trust Tax Changes Reversed in the Senate
The Rudd Government's attempt to reverse the trust loss changes that applied from 1 July 2007 in relation to family trusts has been derailed. The Government sought to reverse the expansion of the definition of 'family' which allowed any lineal descendant of a nephew, niece or grandchild of the test individual or test individual's spouse to be included, from 1 July 2007. The amendments also sought to prevent family trusts from making a one-off variation to the test individual specified in a family trust election (other than in relation to a marriage breakdown) from 1 July 2008. Medicare Tax Statements Available Online
The Medicare benefit tax statement will help us determine your entitlement to a net medical expenses tax offset. Sydney to Gong
Einfeld Symonds Vince are entering a small team in the annual Sydney to Gong Ride on Sunday 2 November 2008 to help raise money for MS Australia. “Team ESV”, being led by Mark Waterhouse, one of our Business Services Partners, will try and raise donations for the MS Society in their efforts to pedal the 90km from Sydney Park in St Peters to Wollongong, via Brighton Le Sands, the Royal National Park and the spectacular Sea Cliff Bridge, hopefully with a tail wind most of the way! Multiple Scelerosis is the most common disease of the central nervous system and affects over 16,000 Australians. With no known cure, MS Australia provides support to those whose lives are affected by Multiple Scelerosis. To donate to “Team ESV” and help raise money for the Multiple Scelerosis Society of Australia, go online to http://register.gongride.org.au/?Team+ESV or follow the link.
Employees over 65 years of age cannot benefit from a tax concessions available to redundancy payments.
You can now access your Medicare benefit tax statement on the internet, via Medicare Australia’s Online Services. If you are not registered for Online Services, we encourage you to do so soon so that you can retrieve a Medicare benefit tax statement online, via the internet at medicareaustralia.gov.au/online.
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The information in this newsletter is quite general in nature and anyone intending to apply it practically to their own circumstances should seek professional advice to verify it’s individual applicability.
If you have any queries regarding the information contained in this
update please do not hesitate to contact us.
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