Chartered Accountants
Three- quarter FBT year compliance check-up
As the FBT year runs from 1 April to 31 March, the months of October to December mark the “third quarter” of the FBT year, and so, as an early fix before year’s end, here is an overview of the FBT elements that can attract the ATO’s attention.
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In Australia, there are currently around 7.7m ABNs with over 860,000 new ABNs issued in 2017-18. The ABN system was originally introduced in 2000 as a way to provide businesses with a unique identifier when dealing with the government and to support the introduction and administration of GST. Over the years, the ABN has become a de facto licence to do business and a key business credential used by other businesses and consumers in general. Despite this expanded role, the ABN system has not changed substantially since 2000, ABNs can still be obtained easily and quickly using intentionally simple processes to facilitate small businesses. There is concern that this ease of application has led the ABN system to being used for nefarious purposes by operators in the black economy. This view was affirmed by Black Economy Taskforce which found that ABNs were being used to provide a false sense of legitimacy to dodgy businesses with the potential to deceive consumers and other businesses. As a way to tackle this issue, the government has proposed changes to the ABN system to ensure that it remains fit to support the expanded range of purposes it is used for. It is currently consulting on changes including adjusting ABN entitlement rules, imposing conditions on ABN holders, and introducing a renewal process including a renewal fee. The potential changes to ABN entitlement rules stem from the Taskforce finding that not everyone obtaining an ABN is entitled. This includes: inappropriate use of ABNs in phoenixing schemes; individuals working as employees but applying for ABNs as independent contractors; individuals incorrectly obtaining ABNs to avoid “no ABN withholding”, and individuals fraudulently claiming GST input tax credits. In terms of potentially imposing conditions on ABN holders, the Taskforce had initially recommended that ABN holders should only be allowed to continue to hold their ABN if they comply with government obligations (ie tax obligations). Which would allow businesses and individuals to better identify compliant businesses and act as a deterrent to those wanting to engage in black economy behaviour. However, the government emphasised that the design of the ABN cancellation process would need to be fair and transparent and only occur where the business had not taken appropriate steps of rectify issues. The government is also consulting on the proposal to make ABNs subject to periodic renewal for a fee. While a renewal process would not directly address those who use the ABN system to engage in fraudulent behaviour, it would indirectly address fraudulent behaviour by prompting ABN holders to have a closer engagement with the ABN system. The fee would also assist the ABR to better support data needs and discourage people from holding an ABN when they do not need one or are not entitled to one. Contact us today to get details on how this measure will affect your business.
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A garnish is an enhancer, something to dress up a plate – think of a sprig of parsley. A garnishee is something entirely different, although it can enhance an otherwise dire situation for a creditor and bring home the bacon. It’s a third party who is ordered by the court to release money to remedy a personal debt owed to the creditor by the debtor. This could be the debtor’s bank, their employer or their own creditor.
Issuing a garnishee order is a cheap and easy way to claw back some of your debt, but there are a few matters to consider first.
Once a court has given you a judgment against your judgment debtor, and they have failed to satisfy the judgment, you can apply to the court for a garnishee order. This allows you to bypass the recalcitrant debtor and it sets up a relationship in the form of a triangle between you as creditor, the debtor and the third party. This third-party garnishee acts as a kind of proxy for the debtor and the order will require them to pay the debt to you in a lump sum or in instalments.
A garnishee order can be directed straight to the debtor’s bank or their employer. In the latter case, you will be able to access the debtor’s pay packet before they do. You do not have to tell the debtor you have applied for a garnishee order and they may only find out when they see their bank statement or pay slip. However, the local and district courts instruct that the amounts claimed in total under the garnishee orders must not reduce the judgment debtor’s net weekly wage or salary received to less than $500.60.
This is known as the weekly compensation amount and is adjusted in April and October each year. When issuing a garnishee order, it must include an instruction to the garnishee about the amount that a judgment debtor is entitled to keep.
Garnishee orders can also be made against those who owe money to the debtor, for example a real estate agent who is collecting the rent from the debtor’s tenanted property.
One of the benefits of a garnishee order is that there is no filing fee, although a service fee may be payable. There is also no extensive research on the debtor required before the order is issued, the debtor’s name may be enough. And if the order fails to recover all or some of the money, the order can be reissued on the same garnishee several times.
There is also little the garnishee can do to stop the order unless they apply to the court or they repay the debt. If you have received a judgment and have an outstanding debt you are trying to recover from your judgment debtor, we can help take the lead on it for you and take you straight to the debtor’s funds.
Sustainability of tax revenue is key to any government’s fiscal sustainability, that is, the ability to meet both current and future financial obligations (including debt servicing obligations) without major policy adjustment. A recent report examining broad trends within the Commonwealth tax system has identified some significant changes in tax receipts and therefore risks to the sustainability of tax revenue.
The report noted that since the early 2000s, the most significant overall changes in tax receipts as a share of GDP have been in the areas of fuel excise, customs receipts, and company tax. While some of changes can be explained by innovation and globalisation such as a fall in fuel excise receipts being attributed to improvements in fuel efficiency of cars, and the fall in custom receipts being attributed to free trade agreements.
Other changes such as the fall in company receipts may be more concerning for the future government policy. The report indicates that the fall in company receipts is a result of investment becoming more concentrated in capital intensive industries which generally have higher losses that are carried forward. Although as the carried forward losses are used up, there could be a counteracting positive effect.
Another worrying trend in the coming decade is the increase in personal income tax receipts due to ongoing bracket creep, notwithstanding the government’s recent implementation of lower personal tax rates as an attempt to prevent such an occurrence. A further challenge identified in the report is the ongoing decreases in various consumption tax receipts, in particular GST, mostly driven by consumer behaviours and technological change.
The overall effect of these trends indicates that in the future, tax receipts from consumption taxes such as the GST will continue its downward trend, while taxes on capital will either trend downwards or remain flat. Further, an increasing proportion of income will be taxed concessionally through the superannuation system due to the increase in compulsory super contributions substituting for wages growth.
Beyond these identified tax trends, the report also identifies other risks to tax receipts including:
To avoid increasing reliance on personal tax receipts in the future to achieve fiscal sustainability, whichever party is in power will have to tackle the unpopular issue of tax reform which could include broadening the GST base, wholesale changes to the rules around the sharing economy, or potential changes to how superannuation is taxed. Want to get on the front foot? We can help you plan ahead and future proof you or your business’s tax affairs. Contact us today for more information on 9489 3399.
You may have heard all about the small business tax concessions, but do you know how you qualify for them and whether you’re making the most of the tax concessions available to you? Generally, your business would qualify as a “small business entity” if you have, or is likely to have an aggregated turnover in the current income year of less than $10m. It may also apply if you’ve had an aggregated turnover in the previous income year of less than $10m.
If your business qualifies as a small business entity then you may be able to access a range of tax concessions including lower tax rates, capital allowance concession, trading stock concession, as well as FBT and GST concessions.
Lower Tax Rates
Tax rate for small businesses are generally 27.5% rather than the 30% rate for other businesses. If your business is a non-corporate small business entity then instead of the lower tax rate you will be entitled to a tax discount in the form of a tax offset.
Capital Allowance Concession
Small business entities will be allowed an immediate deduction for depreciating assets costing less than $20,000 in relation to assets first acquired on or after 12 May 2015 and first used, or installed ready for use before 1 July 2019 (depending on the passage of legislation). If you acquired the asset outside of the specified period above, the immediate deduction limit is $1,000.
Trading Stock Concession
Businesses are generally required to account for changes in the value of trading stock for the income year as the difference between the opening value of trading stock on hand and the value of trading stock at the end of the year. However, small business entities may choose not to account for changes in the value of trading stock if the opening value and a reasonable estimate of the GST-exclusive value of trading stock on hand at the end of the year does not exceed $5,000.
FBT & GST Concessions
Car parking benefits provided by small business entities on its own premises is an exempt parking benefit for the purposes of FBT. This means that the car parking benefit provided to employees by small business entities may not have to be included in the calculation of any taxable fringe benefits amounts.
Small business entities may also choose to account for GST on a cash basis. It means you can account for GST on the BAS that covers the period in which you receive or make payments for your sales or purchases. The advantage is that the money flowing through your business is better aligned with your BAS liabilities and hence better for your overall cash flow.
Contact us today on 9489 3399 if you would like to take advantage of the tax concessions offered.