SME Communicator - July 2011
SME Communicator - July 2011
This month the SME Tax Forum has focused on a number of major issues for small-to-medium enterprises (SMEs) including the federal budget and how the taxation system might be improved for business.
A discussion and live chat were run on the outcomes of the 2011 budget. Business-as-usual seemed to be the main response with a vote of confidence by some for the proposed changes to fringe benefits tax (FBT) and motor vehicle arrangements.
Off the back of this commentary, a live chat was held with Assistant Commissioner Michael Hardy who shared his views on the budget.
Besides his own analysis, Michael had the opportunity to hear the views of members on how they felt the budget and current economic climate is impacting on their business.
Superannuation is a big ticket item for many SMEs, so the forum hosted a webinar on this topic with over 50 participants attending this educational session.
Finally, a recent research paper that received media coverage looked at the relationship between banks and SMEs. The research explores the disconnect between the good job banks believe they are doing as opposed to some of the harsher realities experienced by SMEs. The forum ran a discussion on this research which lead to some heated debate between members.
All forum activities including live chats, webinars and discussions are now available online for member viewing.
New withholding tax tables for 2011-12 are now available on our website. These tables include the flood levy.
Some payees may be exempt from paying the flood levy. If a payee is entitled to an exemption they will need to complete the Flood levy exemption declaration.
Tax tables for payees who are exempt from paying the flood levy are also available on our website.
Paper copies of the tax tables and declaration are available:
- from most newsagents
- from our shopfronts
- by phoning 1300 720 092.
From 1 July 2011, the government will remove the ability of minors (children under 18 years of age) to claim the low income tax offset to reduce tax payable on their unearned income, such as distributions from discretionary trusts, interest, dividends, rent and royalties. The changes will affect tax returns completed for the 2011-12 income year.
Income that is earned by a minor through work, such as salary and wages, will still be eligible for the low income tax offset. Unearned income of minors who are disabled or orphans, as well as compensation payments and inheritances received by minors will not be affected by the changes.
Dea is 17 years old, she has earned $10,000 and received a trust distribution of $2,000. The $10,000 Dea earned from part-time employment is subject to normal income tax rates and the trust distribution is taxed at the highest marginal rate of 45%.
The table below shows Dea can no longer claim the low income tax offset to reduce her tax payable on unearned income in the 2011-12 income year.
Source of income
Low income tax offset
The government has introduced legislation to reduce the gross domestic product (GDP) adjustment factor for pay as you go (PAYG) instalment taxpayers who use the GDP adjustment method. This method bases instalment amounts on business and investment income from the latest income tax return, uplifted by a GDP adjustment factor to reflect likely income growth.
Under existing law the GDP uplift factor for the 2011-12 year would have been 8%.
The government's new legislation will reduce the uplift factor to 4% for the 2011-12 income year. This provides a significant cash flow benefit to businesses and investors. It also smoothes the transition from the 2% GDP adjustment that has applied for the last two years as the economy recovered from the global financial crisis.
Most small businesses and small superannuation funds use the GDP adjustment method when calculating their instalment amounts. The GDP uplift factor does not apply to taxpayers who use the 'rate' method - where the taxpayer calculates their own instalment based on their actual income.
For eligible goods and services tax (GST) payers, the GDP adjustment factor that will apply in the 2011-12 income year will also be 4%.
From 1 July 2011, the fuel tax credit rate for heavy vehicles that use fuel such as diesel or petrol and travel on public roads has reduced to 15.043 cents per litre. This rate change is due to an increase in the road user charge.
A heavy vehicle is:
- a vehicle with a gross vehicle mass (GVM) greater than 4.5 tonne, or
- a diesel vehicle acquired before 1 July 2006 with a GVM equal to 4.5 tonne or more.
We will send letters in mid-July to monthly business activity statement fuel tax credit claimants or their tax agents advising of the new rate and again in mid-September for the quarterly and annual activity statement lodgers.
We are continuing to expand our ability to identify non-lodgers and detect businesses that over claim entitlements, deliberately under report or omit income and use cash transactions to hide income. Our lodgment enforcement work is focused on identifying and bringing to account taxpayers who are not lodging business activity statements and often ignore repeated requests from us to get their affairs in order.
We encourage you to review your activity statement obligations and check you are lodging correctly, and on time. We may contact you if your lodgment is not up to date.
We're also expanding our capability to data match information provided in activity statements with a variety of third-party sources such as property sales and Centrelink data.
If you know you will be lodging or paying late, phone us on 13 28 66 to check if alternative arrangements can be made.
Remember, if you have made a mistake with your tax affairs, and let us know before you are reviewed or audited, penalties and interest may be reduced.
From 1 December 2011, gaseous fuels used in transport will be subject to excise and customs duty in most instances. Gaseous fuels are liquefied petroleum gas (LPG), liquefied natural gas (LNG) and compressed natural gas (CNG).
The duty rates will be phased in from 1 December 2011 starting at 2.5 cents per litre for LPG and 5.22 cents per kilogram for LNG and CNG. A final rate of 12.5 cents per litre for LPG and 26.13 cents per kilogram for LNG and CNG will apply from 1 July 2015.
If you manufacture, import or acquire gaseous fuels you:
- may need to get a licence to do so
- need to get permission from us to move your fuel to other licensed premises
- may need to change your systems to support new notice requirements where duty is not paid on LPG.
If your business uses gaseous fuels in eligible business activities, you may be entitled to a fuel tax credit provided you meet the relevant eligibility criteria.
The Tax Laws Amendment (2010 Measures No. 5) Act 2011 received royal assent on 29 June 2011. This has made clarifications to goods and services tax (GST) legislation that may impact on you.
From 1 July 2011 non-profit sub-entities will be able to access the same GST concessions available to their parent entity.
What it means
Under the GST law, if you are an endorsed charitable institution or an endorsed trustee of a charitable fund, you are entitled to access GST tax concessions. A non-profit sub-entity is not entitled to be separately endorsed.
The amendments clarify that a non-profit sub-entity can access the same GST concessions as its endorsed parent entity.
To date, we have interpreted the law to allow non-profit sub-entities to access the same GST tax concessions as their parent entity.
Running balance account
From 1 July 2011, it will no longer be mandatory for us to apply a payment, credit or running balance account surplus against a tax debt, that is, a business activity statement amount unless that amount is due and payable - this can include a number of business tax liabilities (for example, GST, wine equalisation tax, luxury car tax and fuel tax credits).
What it means
When you lodge an activity statement it generally includes a number of business tax liabilities (for example, GST, wine equalisation tax, luxury car tax and fuel tax credits).
Previously, it was mandatory for us to apply payments, credits or running balance account surpluses against a tax debt that is an activity statement amount even if it is due but not yet payable.
As a result, you do not need to change or alter the way you lodge or pay your activity statement.
The Tax Laws Amendment (2011 Measures No. 3) Act 2011 was enacted on 27 June 2011, amending goods and services tax (GST) law to allow eligible boats to be sold GST-free.
If you enter into a contract on or after 1 July 2011 and your boat is eligible, the GST-free period for exporting your boat is now 12 months. This is an increase from 60 days.
In order for the supply of a boat to be treated as a GST-free supply, the boat will need to be:
- exported by the purchaser or supplier within 12 months
- used only for recreational or non-commercial purposes while it is in Australia.
The supplier will need to obtain and retain documentary evidence in relation to proof of export and a purchaser declaration for proof of recreational or non-commercial use.
Documentary evidence may include:
- the Customs Export Declaration
- customs clearance documents
- shipping documents
- a statement from the purchaser regarding their use of the boat while in Australia.
If you supply premises or accommodation for residential occupation - whether on a permanent or temporary basis - you should consider Draft Goods and Services Tax Ruling GSTR 2011/D2 which was released on 22 June 2011.
Once finalised, the ruling will replace Goods and Services Tax Ruling GSTR 2000/20.
The draft ruling explains the goods and services tax (GST) treatment of residential premises and commercial residential premises providing numerous examples of relevant accommodation types.
The draft ruling changes the view in GSTR 2000/20 in a number of areas including:
- Employee accommodation provided on a 'fly-in fly-out' basis (or similar) will now become either commercial residential premises or residential premises, depending on circumstances.
- The ruling sets out the circumstances under which strata-titled premises may come within the definition of commercial residential premises.
- Where continuous physical occupation of commercial residential premises is no longer considered necessary for there to be a supply of long term accommodation. Accommodation will be long-term accommodation if it is provided in commercial residential premises for a continuous period of 28 days or more.
- GSTR 2011/D2 - Goods and services tax: residential premises and commercial residential premises
- GSTR 2000/20 - Goods and Services Tax: commercial residential premises.
We have some helpful calculators and information to help you understand and meet your superannuation obligations.
Working out how much to pay
Employers must use ordinary time earnings (OTE) to calculate the minimum super contributions required for their eligible employees. This ensures all eligible employees are treated the same way for superannuation guarantee purposes.
OTE is generally what your employees earn for their ordinary hours of work, including:
- over-award payments
- shift loading
Generally, payments for work performed outside an employee's ordinary hours of work are not OTE.
Paying on time
Compulsory superannuation guarantee contributions are due by the quarterly cut-off dates - 28 October, 28 January, 28 April and 28 July.
If employers don't pay enough super contributions by the cut-off date they must lodge a Superannuation guarantee charge statement - quarterly and pay the superannuation guarantee charge (SGC) to us.
Any super contributions employers make are tax deductible for the financial year in which they are made - however, the SGC is not.
You can use the Superannuation guarantee charge statement and calculator tool to calculate your SGC liability and prepare the SGC statement to be lodged with us.
You can now find all our website information about trusts in the one place.
People who want to know about their tax obligations in relation to trusts will find information on:
- types of trusts
- taxation of trust income and capital gains
- registering, reporting and paying tax.
You can even link to the latest information on changes to trusts legislation and track the progress of new legislation from announcement to royal assent.
Over the next few months we will be adding more information to the 'In detail' section as we review existing trust information and consult with our audiences to determine their information needs.
The new Guide to completing Schedule 25A will help you to determine:
- whether you have international transactions or relationships requiring you to complete a Schedule 25A
- which sections of the schedule you need to complete
- what information is required for each label.
The guide contains a flowchart designed to help you understand when and how to complete the schedule.
We use the schedule to obtain details about international transactions that may have tax implications. The information helps us to administer international tax (for example, developing policies and risk assessment processes).
The schedule must be lodged with tax returns for all companies, trusts and partnerships that have either:
- international dealings with related parties where the aggregate amount of the dealings or transactions (on capital or revenue account) is greater than $1 million, including transferred property or services, or the balance of any loan
- an overseas branch, a direct or indirect interest in a foreign company, trust or foreign life policy.
From 1 July 2011, if you have an employee who works temporarily in the Czech Republic, you may be covered by a bilateral social security agreement. This agreement removes the issue of double superannuation coverage, provided you obtain a Certificate of coverage from us.
Double super coverage occurs when an employee works temporarily in another country and that country, as well as Australia, requires superannuation guarantee (or equivalent) contributions to be made for the same work undertaken by the employee.
Under the new agreement, you will not have to make compulsory super (or equivalent) contributions in the Czech Republic, provided you continue making compulsory super contributions under Australia's superannuation guarantee law.
Australia also has social security agreements with many other countries.
For more information which may help your business, visit our Businesses home page.
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Last Modified: Thursday, 21 July 2011