What's New @ Dewings?

The South Australian State Treasurer Tom Koutsantonis handed down his first budget on 19th June 2014.

This budget was in part at least a response to the significant Federal Government cuts to education and health announced in the Federal budget. As the last Labor State government in the nation, the Treasurer made no secret of where he thought the cause of some of the budget's more difficult measures lay.

The budget announced an increase to the Emergency Services Levy though the removal of some general remissions that had been in place (i.e. concessions offered to certain segments of the community, such as pensioners) and provisions to introduce the previously announced Transport Development Levy on parking spaces in the Adelaide CBD.

It was also announced that the Motor Accident Commission's monopoly on third party insurance premiums would be stripped away. While not technically privatisation, this measure will allow the Government to access up to $1 billion in surplus reserves.

One positive new measure was the introduction of a Seniors Housing Grant, which will pay eligible seniors (those aged over 60) up to $8,500 towards the cost of a new home used as a principle place of residence. Conditions apply, and the grant will begin to phase out for properties valued at over $400,000, disappearing altogether for properties valued at over $450,000.

You can read more in the official Budget Papers available here.
 

The Federal Government's proposed Temporary Budget Repair Levy of 2% has passed the Senate and will become effective from 1st July 2014.

The Levy adds an extra 2% tax to that part of an individual's taxable income that exceeds $180,000. This effectively makes the top marginal rate of tax 47% (plus Medicare), and will apply for three years from 1st July.

The rate of Fringe Benefits Tax (FBT) will increase to 47%, in line with the Levy, as will a number of other taxes and penalties that are connected to the top marginal rate of tax. The FBT rate increase, however, will not apply until 1st April 2015, and will cease 1st April 2017, so in effect it will only apply for two years.

While the Government seems to be having difficulty finding support for many of its Budget proposals, the Budget Repair Levy passed the Senate with support from Labor.

We wrote about the upcoming changes to the process of making and receiving superannuation contributions in February this year.

Dubbed SuperStream, the new requirements are intended to improve the process of receiving contributions and processing rollovers, and cut the associated administrative costs, while also reducing the number of lost and/or unclaimed accounts. All super funds, including Self-Managed Superannuation Funds (SMSFs), were to be ready to receive superannuation contributions by electronic means only by 1st July 2014.

This deadline for implementation has now been extended to 1st July 2015 to allow more time for employers and trustees to get ready for the change.

Under the proposed SuperStream system, employers are required to submit contributions electronically and provide a minimum set of data with each contribution. Employers with 20 employees or more now have until the 1st July 2015 deadline to make their systems compliant, while smaller employers have until 1st July 2016.

On other side of the contribution transaction, trustees of superannuation funds will be required to receive contributions in the appropriate electronic form, and will also need to establish an electronic service address with an approved provider.

We'll keep you up to date with more information and if we look after your SMSF work, we'll make sure that you are fully compliant in time for the deadline for implementation, including establishing a compliant electronic service address for you. In the meantime, if you have any questions, please contact us.

If you're a Dewings client you'll know that we pride ourselves on making sure our advice is sound and our work is as accurate as possible.

Unfortunately, even in cases where everything is perfect, the cost in accounting fees of responding to an audit query and providing substantiation can be significant. If there are matters that require further investigation and discussion, the costs can escalate even further.

This has always been the case in the event of an audit. In recent years, however, the risk of being audited has increased significantly as the Tax Office continues to increases audit activity. This makes audit insurance more important than ever before. The Tax Office continues to develop and deploy more and more sophisticated data matching technologies which enable detailed cross-referencing of information from government departments. This in turn increases the frequency and scope of audits, reviews and investigations.

In addition, the Tax Office continues to increase audit activity simply to ensure better compliance and, we suspect, increase Government revenue. For example, the Tax Office recently signalled its intention to increase audit activity for Self-Managed Superannuation Funds by 78%. This alone means that the chances of being the subject of a review have increased substantially, even if you're not doing anything that might attract attention.

Audit insurance won't cover any additional tax or interest that may need to be paid in the event that an audit finds discrepancies. However it does cover any accounting fees incurred for all enquiries, reviews and investigations - from the very first dollar (up to a prescribed limit). There is no excess, and it covers the activity of most State and Federal bodies, including WorkCover, Payroll Tax, ASIC and the Tax Office (which covers Income Tax as well as Fringe Benefits Tax and BAS/GST). In addition, it covers the costs of engaging additional legal opinion in the case of preparing a defence.

The cost is tax deductible and covers the taxpayer and his or her spouse (where applicable), as well as entities in which they have a significant interest (e.g. companies, trusts etc. - self-managed superannuation funds need to be insured separately, however, due to their more complicated nature).

We encourage you to consider the offer of audit insurance carefully, and please contact us if you would like any further information.

 

The Federal Treasurer Joe Hockey handed down his first Federal Budget on Tuesday night. Read out take on the tax and business highlights. In accordance with standard practice over recent years, there were very few surprises when the Budget was actually delivered - particularly from a tax and business point of view. But we would like to have have seen a lot more attention given to addressing desperately needed tax reform in Australia.

Read our full summary of the tax and business highlights here.