Author Archives: dekretser

Term Deposits explained

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How do term deposits work?

Term deposits are a way to invest your money and earn a fixed rate of interest.

 

Your money is locked away in an account, for the time that you choose (the term), usually between one month and five years. You need a minimum amount to open a term deposit, for example, $5,000.

Advantages of term deposits

Higher interest rates

Term deposits offer a higher interest rate than most transaction and saving accounts. Generally, the more money you put in, or the longer you invest, the higher the interest rate. Currently, interest rates on term deposits are high in Australia.

Protected by the Australian Government Financial Claims Scheme

The financial claims scheme (FCS) protects deposits made with Australian banks, building societies and credit unions. This guarantees to pay you up to $250,000 to replace deposits in the unlikely event your bank, credit union or building society fails. The safety net only applies to authorised deposit taking institutions regulated by APRA.

The Financial Claims Scheme (FCS) applies to a wide range of deposit accounts held with banks, building societies and credit unions (also known as authorised deposit-taking institutions or ADIs) that are incorporated in Australia, but only applies to deposit accounts with funds in Australian dollars. Under the FCS, deposits are protected up to a limit of $250,000 per account holder per ADI.

The list of banks, building societies and credit unions covered by the FCS is available here.

Under the FCS an account holder can be:

  • an individual
  • a body corporate (including companies)
  • a body politic
  • a partnership
  • any other unincorporated association or body of persons
  • the trustee(s) of a trust
  • the trustee(s) of a superannuation fund (including a self-managed superannuation fund)
  • the trustee(s) of an approved deposit fund.

An account holder can be an Australian resident/citizen or non-resident/non-citizen. In other words, the citizenship or residency status of an account holder does not have an impact on whether a deposit account is covered under the FCS. A group of individual trustees of a trust, superannuation fund or approved deposit fund are treated as a single account holder.

In the case of superannuation, an ADI deposit account held by the trustee of a superannuation fund on behalf of fund members is covered under the FCS up to the limit of $250,000. However, in most cases the $250,000 FCS limit would be applied to the whole fund, not each individual member.

The FCS applies to the following types of deposit accounts:

  1. savings accounts
  2. call accounts
  3. term deposits
  4. current accounts
  5. cheque accounts
  6. debit card accounts
  7. transaction accounts
  8. personal basic accounts
  9. cash management accounts
  10. farm management deposit accounts
  11. pensioner deeming accounts
  12. mortgage offset accounts (either 100 per cent or partial offset) that are separate deposit accounts
  13. trustee accounts
  14. retirement savings accounts

The FCS does not apply to the following accounts:

  • accounts with funds that are not in Australian dollars
  • accounts kept at overseas branches of Australian banks
  • credit balances on credit card facilities or other loans
  • pre-paid card facilities or similar products
  • ‘nostro’ accounts and ‘vostro’ accounts of foreign corporations that carry on banking business or otherwise provide financial services in a foreign country

Compare the features of term deposits

Always shop around for the highest interest rate and best features before you choose a term deposit. Be sure to compare products across different financial institutions. It’s important to check:

Interest ratewhat is the interest rate?
when interest is paid — monthly, annually or at maturity?
Time framehow long you can invest for?
how will interest rates change with different investment time frames?
Amount investedhow much you need to open a term deposit?
how will the interest rate changes the more you invest?
Feesis there are any set-up or account fees?
how big the penalty fee is if you need your money early?

Early withdrawal penalties

To earn interest on your term deposit, your money is locked away for a chosen period of time. If you need your money before the term ends, you may have to pay a penalty fee. You may only receive a proportion of the interest earnt, or none at all.

What to do when your term deposit matures

Term deposits are not a ‘set and forget’ investment. When your term deposit matures, your provider will contact you. They’ll tell you how much interest you’ve earned and what your options are.

If you do nothing, your term deposit may roll over into a new term deposit. There may be a fee to get your money out of the new term deposit. It could also have a lower interest rate than before.

Review your term deposit a month before it matures. Compare it with other products to make sure you’re getting the best deal.

For detailed information regarding tax implications regarding your term deposits please contact us the de Kretser team –

T: +61 3 9550 6900

E:admin@dekretser.com.au

To stay informed and connected, follow us on LinkedIn


How to claim your homework.

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What’s changed?

The ATO stated that you always had to have a dedicated home office in order to claim any working from home expenses.

After 1 July 2022

Now the ATO have said that you no longer need a home office to claim deductions for working from home. Setting up the laptop on the kitchen table is now acceptable.

Fixed Rate method

This method involves using the hours actually worked from home to cover a variety of costs.

Pre 1 July 2022 – 52c/hour

The fixed rate covered:

  • electricity & gas
  • home office depreciation
  • cleaning of the dedicated home office

In addition to this, you could also claim the work use portion of your:

  • data & internet
  • mobile & home phone usage
  • computer consumables
  • stationery
  • depreciation of work related items such as computers

This was the method most accountants used, as it’s easier than calculating the home office electricity usage. You were required to keep a diary for 4 weeks of the year to prove how you came to your total hours.

After 1 July 2022 – 67c/hour

This method now includes:

  • data & internet
  • mobile & home phone usage
  • electricity & gas
  • computer consumables
  • stationery

In addition to this you can claim:

  • decline in assets such as computers and office furniture
  • repairs and maintenance of said assets
  • cleaning (if you have a dedicated office)

You are required, from 1 March 2023, to keep a diary all year to now substantiate the hours you claim.

Shortcut Method – 80c/hour

This was introduced in recognition of everyone working from home during COVID-19. It was available for use from March 2020 until 30 June 2022.

It covered everything! Which meant it wasn’t always the most tax effective – unless the boss was paying for your mobile phone bill and supplying your equipment and furniture.

  • data & internet
  • mobile & home phone usage
  • electricity & gas
  • computer consumables
  • stationery
  • decline in assets such as computers and office furniture
  • repairs and maintenance of said assets
  • cleaning (if you have a dedicated office)

Actual Method – always available

A lot more record keeping is required for this method – but it’s absolutely worth it.

This involves keeping a record of what actual hours you work from home. The ATO requires you keep a 4 week diary every year to substantiate your claim (they didn’t increase this to a whole year, unlike the fixed rate method from 1 March 2023). Using this, you can claim the business/work use of everything.

  • data & internet
  • mobile & home phone usage
  • electricity & gas
  • computer consumables
  • stationery
  • decline in assets such as computers and office furniture
  • repairs and maintenance of said assets
  • cleaning (if you have a dedicated office)

This is now the accountants preferred method as it results in the highest deduction. But if you don’t have good records, we will use the Fixed Rate Method – be warned!

Keeping Records

No matter what method you use, you have to be able to prove it. Keep a diary on you desk for 4 weeks of the year (or the whole year if you’re using fixed rate) and write down your start and finish times, go through your phone bill for a month and compare private vs business calls to determine your deductible percentage. Try and record your Facebook scrolling vs work research on your phone or home computer for internet deductible percentage. And last but not least, don’t be afraid to make a claim – if you’re actually using these things to generate an income, you can claim it!

Make use of the ATO myDeductions App to help you out with recording your expenses too, especially the big purchases like a computer or phone.

This only a short guide on how to maximise your homework – please contact us for a more tailored approach to your specific needs.

To stay and informed and connected, follow us on LinkedIn

Should you need assistance, please do not hesitate to contact us.
T: +61 3 9550 6900 E:admin@dekretser.com.au

How to claim an early tax deduction on SG contributions

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    Are you an employer who needs to make superannuation guarantee (SG) contributions for your employees? If so, it may be worthwhile bringing forward these SG contributions to before 1 July to benefit from a tax deduction this financial year. However the timing of when SG contributions are deductible to an employer can be tricky if employers pay SG contributions for their employees via a superannuation clearing house (SCH).

    RECAP – WHAT IS A SCH?

    The ATO’s free Small Business Superannuation Clearing House (SBSCH) is the only ‘approved’ clearing house – none of the many commercial clearing houses have this status. The SBSCH is a free service that small businesses with 19 or fewer employees, or an annual aggregated turnover of less than $10 million, may use to make superannuation contributions to employees.The SBSCH aims to reduce compliance costs for small business employers by simplifying and streamlining the process of making employee superannuation contributions, by allowing employers to make a single lump payment of their contributions to the SBSCH each quarter. That lump sum payment is broken into individual payments by the SBSCH, and then contributed to each employee’s respective super fund or RSA superannuation account.

    TAX DEDUCTION AVAILABLE FOR EMPLOYERS

    Employers can claim income tax deductions for SG contributions made to a superannuation fund on behalf of their employees, subject to certain conditions being met. As the income tax deduction is available in the financial year the contribution is made, some employers may wish to improve their current year tax position by bringing forward the June quarter SG contributions to before 1 July, even though these SG contributions are not due until 28 July 2023.

    TAKE CARE IF YOU USE A SCH

    As mentioned above, SG contributions are tax deductible in the year in which they are made. That said, a contribution is not made until it is received by the fund, and when that happens depends on the way in which the contribution is made. This is clear cut where an employer pays SG contributions directly to an employee’s nominated superannuation fund. That is, the contribution will be made when it is received by the fund.

    However, the timing of the tax deduction and when the contribution counts towards the employee’s contribution cap is not as straightforward where SG contributions are made to a SCH for all employees. Here, the SCH electronically transfers SG contributions to employees’ funds on the employer’s behalf. In this situation, the contribution is not made at the time the clearing house is credited with the funds from the employer. Rather, the contribution is made and therefore deductible when the funds are credited to the respective employee’s superannuation fund (following an electronic transfer of money from the clearing house) and then allocated to the employee.

    BEWARE OF TIMING DELAYS

    The ATO is aware that there may be a period of time between an employer’s payment to the SBSCH and superannuation fund receiving the contribution. Further, the SBSCH may be unavailable over a weekend close to the end of the financial year for scheduled system maintenance. This means that payments made towards the end of a financial year may not be received by an employee’s superannuation fund in the same financial year. This may therefore impact when an employer is entitled to an income tax deduction for the SG contributions

    ACTION ITEMS FOR EMPLOYERS

    For those employers who do not use the SBSCH but instead use commercial clearing houses, for the contributions to be deductible in 2022/23, it is recommended that it be made up to 21 days before the end of the financial year.

    For employers who make contributions directly to their employees’ superannuation funds, the contributions should be made a few days before the end of the financial year to ensure they are received before 1 July and therefore deductible in the current financial year.

    If you have any questions regarding these coming changes – de Kretser is here for you.

    Need more information? Please contact us quickly so that we can help you ensure all entitlements are finalised – and you do not miss out.

    We look forward to working with you.

    T: +61 3 9550 6900

    E:admin@dekretser.com.au

    To stay informed and connected, please follow us on LinkedIn and Facebook


    Temporary Full Expensing: get in quick!

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      Temporary Full Expensing (TFE) encourages and supports businesses by allowing an immediate deduction for the business portion of the cost of a depreciating asset.

      There is no cost threshold – the whole cost of the asset can be written off in the relevant year. However, cars can only be depreciated up to the car limit which is currently $64,741. The car limit does not, however, apply to vehicles fitted out for use by people with a disability. For background, a ‘car’ is defined as a motor vehicle designed to carry a load of less than one tonne and fewer than nine passengers (excluding motorcycles and similar). Therefore, for those vehicles, the car limit has no application, and full depreciation is available.

      Benefits

      The principal benefit of TFE is cashflow. TFE enables businesses to bring forward their depreciation claims, and therefore their deductions upfront, into a single year rather than having them spread out over multiple future years. Ultimately, this assists cashflow which itself is one of the main challenges faced by businesses.

      Eligibility

      The vast majority of businesses including sole traders, will be eligible for TFE as their aggregated, annual turnover will be less than $5 billion. Until 30 June, 2023, under TFE, businesses can claim both new and second-hand depreciating assets where those assets are used or installed ready for use for a taxable purpose.

      From a timing standpoint, this means you will not be eligible for TFE in this financial year if you merely order or pay for an eligible asset before 1 July, 2023 – rather, the asset must be used or installed ready for use in your business before this date.

      Eligible assets

      • Computers, laptops and tablets, printers
      • Wireless routers and Wi-Fi mesh and extenders
      • Tools and equipment
      • Cash registers/POS systems
      • Machinery
      • Security Systems
      • Office Furniture (free standing) and business equipment

      There are however some ineligible assets as follows:

      ■ buildings and other capital works for which a deduction can be claimed under the capital works provisions in division 43 of the Income Tax Assessment Act 1997

      ■ trading stock

      ■ CGT assets

      ■ assets not used or located in Australia

      ■ where a balancing adjustment event occurs to the asset in the year of purchase (e.g. the asset is sold, lost or destroyed)

      ■ assets not used for the principal purpose of carrying on a business

      ■ assets that sit within a low-value pool or software development pool, and

      ■ certain primary production assets under the primary production depreciation rules (including facilities used to conserve or convey water, fencing assets, fodder storage assets, and horticultural plants (including grapevines)).

      Business plan

      Because under TFE you cannot claim any extra depreciation deductions than under the standard depreciation rules, you should stick to your business plan and only continue to buy assets that align with that plan and that you were contemplating buying anyway…and then enjoy the cashflow benefits of TFE.

      If you have any questions about TFE – especially around asset eligibility and timing leading up to 30 June please call us immediately – and we will help you to obtain your maximum amounts.

      de Kretser is here for you – your time is precious, we will make it count.

      T: +61 3 9550 6900

      E: admin@dekretser.com.au

      To stay informed and connected, please follow us on LinkedIn and Facebook


      STP Information

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      What is STP?

      STP (Single Touch Payroll) works by sending tax and super information from your STP-enabled payroll or accounting software to the ATO as you run your payroll.

      You will:

      • run your payroll
      • pay your employees as normal
      • give them a payslip.

      Your pay cycle does not need to change. You can continue to pay your employees weekly, fortnightly or monthly.

      Your STP-enabled payroll software will send a report to the ATO which includes the information, such as:

      • salaries and wages
      • pay as you go (PAYG) withholding
      • super liability information.

      If you have 20 or more employees, you should be reporting closely-held (related) payees each pay day along with arms-length employees. The finalisation due date for closely-held payees is 30 September each year. A ”closely-held (related) payee” is an individual directly related to the entity from which they receive payments (for example, family members of a business, directors or shareholders of a company, or beneficiaries of a trust).

      For small employers (19 or fewer employees) who only have closely-held payees, the due date for end-of-year STP finalisation will be the payee’s income tax return due date.

      For an employer with a mixture of both closely-held payees and arms-length employees, the due date for end-of-year STP finalisation for closely-held payees is 30 September each year.

      All other employees are due 14 July each year.

      Before making your finalisation declaration, make sure your STP information is correct. If you can’t make a finalisation declaration by the due date, you will need to apply for a deferral.

      If you have any requirements here – de Kretser can take them up for you.

      You may finalise your data earlier if it’s ready. The sooner you finalise your employees’ information, the sooner they will be able to lodge their tax returns for 2021/22.

      This finalisation process is explained in detail in the STP employer reporting guidelines, including amendments for current and previous financial years. As noted, we can assist you in this process. When you have reported and finalised your employees’ information through STP, you are exempt from:

      ■ providing payment summaries to your employees

      ■ lodging a payment summary annual report.

      For payments to your employees that were not reported through STP, you still need to:

      ■ give a payment summary to your employees

      ■ provide the ATO with a payment summary annual report for these payment summaries.

      If you identify that you need to make an amendment after you have submitted a finalisation declaration, you’ll need to submit these as soon as possible.

      You can make the amendments to finalised STP data in your STP solution. The ATO recommend you tell your employees when you make an adjustment that will be reflected in their income statement. If they have already lodged their tax return they may need to lodge an amendment.

      You will need to tell your employees:

      ■ you are no longer required to provide them with a payment summary for the information you’ve reported and finalised through STP

      ■ they can access their year-to-date and end-of-year income statement online through myGov or talk to their registered tax agent

      ■ ‘income statement’ is the new term for their payment summary (if they don’t already know this from last year)

      ■ to wait until their income statement is ‘Tax ready’ before lodging their tax return

      ■ to check their personal details and if necessary, update with both you and the ATO (incorrect personal details may prevent them from seeing their STP information). If an employee does not have a myGov account, they can easily create one online.

      They can also talk to the de Kretser team who can easily access your required statement information, and assist you will all you need to satisfy this business necessity.

      To stay and informed and connected, follow us on LinkedIn and Facebook

      This is a de Kretser Client Information Newsletter keeping you on top of the issues, news and changes you need to
      know. Should you require further information on any of the topics covered, please contact us via the details below.
      T: +61 3 9550 6900 E:admin@dekretser.com.au

      Superannuation simplified for your business – in 2022/23

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      Here at de Kretser – our team have compiled a simple guide to help your business with it’s Super responsibilities in the new Financial year.

      You will have heard by now that business Superannuation contribution in Australia has increased to 10.5%  

      The Superannuation Guarantee (SG) rate will rise from 10% to 10.5% on 1 July 2022 and will then steadily increase by 0.5% each year until it reaches 12% on 1 July 2025 – the following numbers tell the story –

      PeriodSG rate (%)
      1 July 2015 – 30 June 20169.5%
      1 July 2016 – 30 June 20179.5%
      1 July 2017 – 30 June 20189.5%
      1 July 2018 – 30 June 20199.5%
      1 July 2019 – 30 June 20209.5%
      1 July 2020 – 30 June 20219.5%
      1 July 2021 – 30 June 202210%
      1 July 2022 – 30 June 202310.5%
      1 July 2023 – 30 June 202411%
      1 July 2024 – 30 June 202511.5%
      1 July 2025 onwards12%

      The increase to the superannuation guarantee (SG) rate begins from 1 July 2022 and will see more employees (and certain contractors) entitled to additional SG contributions on their pay.

      If you have employees, what this will mean depends on your employment agreements.

      If the employment agreement states the employee is paid on a ‘total remuneration’ basis (base plus SG and any other allowances), their take home pay might be reduced by 0.5%. That is, a greater percentage of their total remuneration will be directed to their superannuation fund.

      For employees paid a rate plus superannuation, then their take home pay will remain the same and the 0.5% increase will be added to their SG payments.

      But what happens when income earned before 30 June is paid after 30 June 2022 – will employees be entitled to the higher SG rate of 10.5%?

      SG based on when an employee is paid

      On 1 July 2022, the SG rate increased from 10% to 10.5%. In some cases, an employee’s pay period will cross over between June and July when the rate changes.

      However, the percentage employers are required to apply is determined based on when the employee is paid, not when the income is earned.

      The rate of 10.5% will need to be applied for all salary and wages that are paid on and after 1 July 2022, even if some or all of the pay period it relates to is before 1 July 2022.

      This means if the pay period ends on or before 30 June, but the pay date falls on or after 1 July, the 10.5% SG rate applies on those salary and wages. The date of the salary and wage payment determines the rate of SG payable, regardless of when the work was performed.

      EXAMPLE

      Nicholas is an employee of ABC Pty Ltd.

      If Nicholas performed work:

      • In June (or partly in June and partly in July) but he was paid in July, the SG rate is 10.5% on his entire payment and contributions totalling 10.5% of his ordinary time earnings for the September 2022 quarter must be made to his superannuation fund by 28 October.
      • In July but was paid in advance (before 1 July), the SG rate is 10% and contributions totalling 10% of
        his ordinary time earnings for the June 2022 quarter must be made to his superannuation fund by 28 July.

      Please also note the following changes to the SG Threshold

      $450 super guarantee threshold removed
      From 1 July 2022, the $450 threshold test will be removed and all employees aged 18 or over will need to be paid superannuation guarantee regardless of how much they earn.
      It is important to ensure that your payroll system accommodates this change so you do not inadvertently underpay superannuation.
      For employees under the age of 18, super guarantee is only paid if the employee works more than 30 hours per week.

      If you have any questions regarding your Super obligations – de Kretser is here for you.

      Need more information?
      There are many factors to consider regarding the information shown above. Please contact us if you would like more information, we are happy to explain and action your requirements.

      We look forward to working with you.

      T: +61 3 9550 6900

      E:admin@dekretser.com.au

      This is a de Kretser Client Information Newsletter keeping you on top of the issues, news and changes you need to
      know.

      To stay informed and connected, follow us on LinkedIn and Facebook


      Prepare Now with de Kretser – EOFY 2021/22

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      As we collectively near the end of one of the most challenging financial years to date, the de Kretser team are here to assist in every aspect of your business.

      We are gearing up and readying strategies we can implement together to reduce your taxable business, and personal, income for the 2021/22 period. 

      Guiding you to your Greatest Return.

      We have created a list pertinent to your individual and business situations – please consider each of them for maximum gain at the end of your financial year:

      PRE-PAYING EXPENSESFor businesses with less than $50m turnover prepaid expenses (not exceeding 12 months) are deductible under  the prepayment rules, Please start thinking about prepaying rent, subscriptions, insurance, interest etc should cashflow permit
      STOCK ON HANDIf you have a business that holds stock, ensure you complete a stock take at 30 June and keep a record of the market, cost and replacement values or assets which are obsolete.
      ASSET ACQUISITIONS AND DEPRECIATIONA business with less than $50m turnover is entitled to claim an outright deduction for any plant and equipment you purchase (regardless of cost) from 6 October 2020 to 30 June 2023. If you plan on purchasing any assets please ensure they are purchased and installed prior to June 30, 2022, to obtain the tax deduction for the 2022 financial year. *Subject to the Motor vehicle depreciation limit of $60,733
      COMPANY TAX RATE DIVIDENDS Provided the company is a trading entity, any dividends paid throughout the 2022 financial year will be paid out with a 25% franking credit. Any dividends paid out during the 2023 financial year will also be paid out with a 25% franking credit.

      It is time now to also consider the following –

      • SUPER – It is time to ensure you pay all your employee’s JUN-22 quarter superannuation before June 30, 2022 to ensure a tax deduction for the  2021/22 tax year
      • REVIEWING THOSE THAT OWE –  It is time to review your list of customers and determine whether any bad debt can be written off prior to June 30, 2022 in order to claim a bad debt deduction
      • CRYPTOCURRENCY – The ATO is data matching all cryptocurrency transactions. Please ensure you keep accurate complete records and can provide details of cost, quantities and dates of acquisitions and sales
      • WORKING FROM HOME – If you work from home you are able to claim an expense for your hours worked, please keep record of this for the shortcut method. If you want to utilise the actual method – please keep receipts for Telephone, Internet, Gas, Electricity, Stationery etc.

      Begin the process now with de Kretser –

      We have many tools for you to ready your EOFY, to explore please click here.

      Once you have gathered all required documentation, please contact our team to book an appointment to discuss your requirements, online or Face to face. Please contact us regarding any questions you may have.

      T: +61 3 9550 6900 E:admin@dekretser.com.au

      This is a de Kretser Client Information Newsletter keeping you on top of the issues, news and changes you need to
      know.

      To stay informed and connected, follow us on LinkedIn and Facebook


      New Developments on Trust Distributions

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      For the many business owners who operate their affairs through discretionary trusts, there have been further developments on the ATO’s planned crackdown on certain distributions. The ATO in February updated its guidance around trust distributions made to adult children, corporate beneficiaries and entities that are carrying losses. Depending on the structure of these arrangements, there is a potential that the ATO may take an unfavourable view on what were previously understood to be legitimate distribution arrangements.

      A Recap from Recent Months

      The ATO is chiefly targeting arrangements under section 100A of the Tax Act, specifically where trust distributions are made to a low-rate tax beneficiary but the real benefit of the distribution is transferred or paid to another beneficiary usually with a higher tax rate. In this regard, the ATO’s new Taxpayer Alert (TA 2022/1) illustrates how section 100A can apply to the quite common scenario where a parent benefits from a trust distribution to their adult children. Released at the same time, the ATO’s new draft ruling states that for the new guidance to potentially apply, one or more of the parties to the agreement must have entered into it for a purpose (not necessarily a sole, dominant purpose) of securing a tax benefit. This sets the bar quite low and may capture a number of arrangements previously thought to be within the law. 

      ATO’s Clarification

      No doubt reluctant to upset small business voters during an election campaign, the government has recently tried to take the heat out of this issue by having the ATO ‘clarify’ that its new guidance material will not apply retrospectively and that “ordinary advice services” for afee will not be subject to the promoter penalty rules. If necessary, the government has indicated it will change the law “should any adverse retrospective impacts arise”. While this is very welcome news, it only focuses on the application date of the guidance material. It changes nothing going forward, including issues around adult beneficiaries and the limited scope (in the ATO’s view) of the “ordinary family dealing” exception.”

      Given the government’s announcement, there is now no need to revisit pre-1 July 2022 distributions to confirm that section 100A does not apply. For its part, Labor’s Stephen Jones has been reported as supporting the government’s approach on retrospectivity.

      Moving Forward
      Click here for business insight and assistance

      A conservative approach would be to adopt the“beneficiaries must benefit” approach that underpins the guidance material, as much as that might be a worry for controlling individuals who have in the past benefited from tax optimisation without actually giving their adult children beneficiaries access to their present entitlements. This means the days of controlling individuals taking loans from the trust as they go along and squaring them off through the trust accounts after year-end might soon be over. Alternatively, one could continue to deal with 2021/22 trust distributions in exactly the same way as in the past.

      The law has not been changed and the draft ruling is at odds with a recent Federal Court decision. Such an approach would reflect the view that the Commissioner is wrong in his narrow interpretation of what constitutes ordinary family dealings. That could be a brave strategy, however, as we do not know when or how the draft guidance material will be finalised, while the above Federal Court appeal decision is unlikely to be handed down this side of 30 June 2022.

      To stay and informed and connected, follow us on LinkedIn

      This is a de Kretser Client Information Newsletter keeping you on top of the issues, news and changes you need to
      know. Should you require further information on any of the topics covered, please contact us via the details below.
      T: +61 3 9550 6900 E:admin@dekretser.com.au

      A Guide to Record Keeping: ATO Requirements and Best Practices

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      Keeping good business records is a crucial part of running your business. Records can help evaluate and assess business growth and progress over a specific period of time. Tracking records may also indicate how well a business is performing or what changes can be made to increase business success. Keeping good records can help you:

      • Comply with your tax and superannuation obligations
      • Gain a greater insight into the financial health of your business, enabling you to make informed decisions
      • Manage your cashflow
      • Demonstrate your financial position to prospective lenders, and also potential buyers of your business
      ATO REQUIREMENTS

      The ATO requires that business owners:

      • Keep most records for five years from when you obtained the records, or completed the transactions or acts that they relate to – whichever is the later
      • Be able to show the ATO records if needed or on demand
      • Have their records in English or be able to be easily converted to English.
      DIGITAL RECORDS

      The ATO is reminding business owners that you can keep your records (paper/hard copies) digitally. The ATO accepts images of business paper records saved on a digital storage medium, provided the digital copies are true and clear reproductions of the original paper records and meet the standard record keeping requirements. Once you have saved an image of your original paper records, you don’t have to keep the paper records unless a particular law or regulation requires you to.

      However, if you enter information (for example, supplier information, date, amount and GST) from digital or paper records into your accounting software, you still need to keep a copy of the actual record, either digitally or on paper. Some accounting software packages may do both your accounting as well as your record keeping.

      STORAGE OPTIONS

      1. Cloud

      If you use cloud storage, either through your accounting software or through a separate service provider, eg, Google Drive, Microsoft Onedrive or Dropbox, ensure:

      • The record storage meets the record-keeping requirements
      • To download a complete copy of any records stored in the cloud before you change software provider and lose access to them.

      2. E-invoicing

      Regardless of your E-Invoicing software or system, your business is responsible for determining the best option for storing business transaction data.

      Business owners should:

      • Ensure that your process meets the record-keeping requirements
      • Discuss your options with your software provider
      • Talk to your business adviser, if necessary.
      DIGITAL ADVANTAGES

      As the ATO point out, there are many advantages to keeping your records digitally. If, for example, you use a commercially-available software package, it may help you:

      1. Keep track of business income, expenses and assets as well as calculate depreciation
      2. Streamline your accounting practices and save time so you can focus on your business
      3. Automatically calculate wages, tax, super and other amounts, including:
      • Develop summaries and reports for GST, income tax, fringe benefits tax (FBT) and taxable payments reporting system (TPRS), as required
      • Be prepared to lodge your tax and super obligations, including your tax return, business activity statements (BAS) and taxable payments annual report (TPAR) if you are a business that is required to
      • Send some information to the ATO online (if the package meets ATO requirements), for example, your activity statement
      • Meet your legal Single Touch Payroll (STP) reporting obligations 

      Most importantly, the ATO recommends to back up records using cloud storage to keep your records safe from flood, fire or theft.

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      This is a de Kretser Client Information Newsletter keeping you on top of the issues, news and changes you need to
      know. Should you require further information on any of the topics covered, please contact us via the details below.
      T: +61 3 9550 6900 E:admin@dekretser.com.au

      The Tax Office Takes Disciplinary Action on Discretionary Trusts

      Posted on by

      The ATO has just updated its guidance around trust distributions made to adult children, corporate beneficiaries and entities that are carrying losses. Depending on the structure of these arrangements, there is a potential that the ATO may take an unfavourable view on what were previously understood to be legitimate arrangements.

      Background

      For various reasons, including legal tax minimisation and asset protection, many business owners operate their affairs through a trust structure. While trust structures are legitimate, the ATO has become increasingly sceptical of the motivations behind the use of trusts which it believes in many cases are motivated chiefly by tax minimisation. In February 2022, the ATO updated its guidance directly focusing on how trusts distribute income, and to whom! Consequently practices which may have once been previously accepted may now not be. This may result in higher taxes for family groups in particular – both going forward, and potentially retrospectively.

      Target

      The ATO is chiefly targeting arrangements under s100A of the Tax Act, specifically where trust distributions are made to a low rate tax beneficiary but the real benefit of the distribution is transferred or paid to another beneficiary usually with a higher tax rate. In this regard, the ATO’s new Taxpayer Alert (TA 2022/1) illustrates how s100A can apply to the quite common scenario where a parent benefits from a trust distribution to their adult children. Released at the same time, the ATO’s new draft ruling states that for the new guidance to potentially apply, one or more of the parties to the agreement must have entered into it for a purpose (not necessarily a sole, dominant purpose) of securing a tax benefit. This sets the bar quite low and may capture a number of arrangements.

      Assessing the risk

      The ATO released an accompanying guideline providing taxpayers with a risk assessment framework for them to work through with their accountants to assess the level of risk involved in current and past distribution arrangements. In the guideline, the ATO has provided a number of examples of high-risk arrangements that are actually quite common and include:

      • Arrangements where the presently entitled beneficiary lends or gifts some or all of their entitlement to another party and there is a tax benefit obtained under the arrangement.
      • Arrangements where trust income is returned to the trust by the corporate beneficiary in the form of assessable income and the trust obtains a tax benefit.
      • Arrangements where the presently entitled beneficiary is issued units by the trustee (or related trust) and the amount owed for the units is set-off against the beneficiary’s entitlement.
      • Arrangements where the share of net income included in a beneficiary’s assessable income is significantly more than the beneficiary’s entitlement.
      • Arrangements where the presently entitled beneficiary has losses.

      For arrangements that fall into the high-risk category, the ATO advises that it will conduct further analysis on the facts and circumstances of the arrangement as a matter of priority. If further analysis confirms the facts and circumstances of your arrangement are high risk, they may proceed to audit where appropriate.

      What next?

      The ATO’s new ruling and guidelines are still in draft form, and are expected to be finalised soon. Once finalised, they are intended to apply both prospectively and retrospectively. However, for entitlements conferred before 1 July 2022, the ATO has indicated it will stand by any administrative position reflected in its prior website guidance before the new material was released.

      To stay connected and informed, follow us on LinkedIn

      This is a de Kretser Client Information Newsletter keeping you on top of the issues, news and changes you need to
      know. Should you require further information on any of the topics covered, please contact us via the details below.
      T: +61 3 9550 6900 E:admin@dekretser.com.au