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  • 01Mar2021

    Everyone Wins When We Ask Questions About Your Tax Returns

    Everyone Wins When We Ask Questions About Your Tax Returns - Person writing in book with calculator

    Everyone Wins When We Ask Questions About Your Tax Returns

    When using the services of an experienced tax professional, many people are surprised by the number of detailed questions asked and documentation requested. Put simply, a professionally qualified tax agent has a duty of care and a legal obligation to ensure the tax laws have been correctly applied to every return they lodge.

    Upholding this obligation involves asking appropriate questions and, in some cases, sighting documentation that backs up the income reported and deductions claimed on your returns. In many cases, asking these questions can arrive at identifying more deductions and a better tax outcome. But sometimes it does mean informing clients that a particular expense is not deductible.

    Either way, the outcome should be a high level of comfort that the final lodged tax return is correct and defendable if ever questioned by the ATO.

    A recent case decided by the Administrative Appeals Tribunal (S & T Income Tax Aid Specialists Pty Ltd Trading as Alpha Tax Aid and Tax Practitioners Board [2021] AATA 161) supported and confirmed the Tax Practitioner Board’s decision to terminate the registration of a tax agent due to claiming inflated, unsubstantiated, and/or non-deductible work-related expenses for their clients. This is in addition to the termination of the registration of one of the directors of that firm for threatening an ATO officer.

    In this case, the ATO had conducted an audit of eight of the firm’s clients. All eight of the clients audited had work-related expense claims reduced and/or disallowed. On average, the ATO allowed only 18% of the work-related expense deductions claimed. Following the ATO’s complaint to the TPB the firm’s registration was terminated.

    Although the list of specific deduction claims and the issues raised is very extensive, briefly the AAT commented in relation to the firm’s conduct:

    “The conduct of the applicant in respect to the preparation and lodgement of the ITRs for the eight taxpayers, as detailed above, demonstrates that in 2016, the applicant failed to ensure that a tax agent service it provided, or that was provided on its behalf, was provided competently. The applicant repeatedly claimed work-related expense deductions without first obtaining or satisfying itself that there was appropriate evidence to support the claims; the applicant failed to properly ascertain through its own enquiries and failed to obtain sufficient evidence to support the required nexus between the expense claimed and earning assessable income, and the applicant incorrectly applied the relevant tax law with respect to several of the taxpayers.”

    The AAT also indicated that the tax agent had essentially relied solely on the client’s verbal claims and often estimated expenses when receipts were not available.

    Further, the evidence provided by the tax agent at the hearing was that even on occasions when he was not convinced an expense was deductible, he would claim it anyway, often with some small reduction “for protection”. The agent seemed to take the position that if the client was happy to take the risk, then he would claim the deduction.

    This case should serve as a reminder that tax agents are required to take reasonable care to competently provide their services, including taking steps to verify claims made by clients in relation to deductible expenses and push clients to provide appropriate evidence to support the claims. Tax agents are also obliged to take appropriate steps to ensure that the tax law is being applied correctly.

    The Code of Professional Conduct for tax agents includes the following principles:

    •  You must ensure that a tax agent service that you provide, or that is provided on your behalf, is provided competently.
    •  You must maintain knowledge and skills relevant to the tax agent services that you provide.
    •  You must take reasonable care in ascertaining a client’s state of affairs, to the extent that ascertaining the state of those affairs is relevant to a statement you are making or a thing you are doing on behalf of a client.
    •  You must take reasonable care to ensure that taxation laws are applied correctly to the circumstances in relation to which you are providing advice to a client.” The question that often arises is whether tax agents are required to effectively ‘audit’ their clients before providing tax agent services. The Tax Practitioners Board makes it clear that this is not a requirement, but tax agents are expected to ask clients appropriate questions, based on the registered agent’s professional knowledge and experience, and to obtain supporting documents and evidence where this is appropriate. Cases like this suggest that the threshold is reasonably high and that this is to protect the general public. 

     

    Contact Affinitas Accounting on or 07 33595244.

    (Source: Knowledge Shop Pty Ltd The Round Up February 2021)


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  • 11Feb2021

    Are Your Business Numbers Up To Date?

    are your business numbers up tp date laptop and notebook

    Are Your Business Numbers Up To Date?

    If you don’t know where you are, how can you plot where you are going?

     

    Those who leave completing their end of year accounts and tax returns until the last possible minute are doing themselves a disservice – particularly if you run a business.

     

    The 2020 financial year finished more than 7 months ago – and there are less than five months to go before the end of the 2021 tax year. By now you should have your annual 2020 returns completed, or at the very least your tax accountant should be contacting you to get them finalised ASAP.

     

    We realise that completing annual accounts and tax returns is not the most exciting job for most – but it is an absolutely critical part of running a business.

     

    The following are 10 very important reasons that you should move quickly to complete your 2020 accounting and tax.

    1. How did your business perform overall in FY2020 compared with FY2019?
    2. Which areas of income have improved and which are in the decline?
    3. What expense items have increased and why? Where they planned for or unexpected?
    4. What is your tax position for 2020 – remember your bookkeeping software will only tell you part of the story because there are many things that are done only in the end-of-year accounts like bad debt write-offs, asset depreciation and Division 7A loan repayments?
    5. If you have a tax bill you have time to plan. If you owe the ATO some money, then you can often delay the lodgement and give yourself time to plan for the payment.
    6. If you are due a refund, then it is better back in your bank account as working capital.
    7. Where there any one-off effects (positive of negative) that impacted on the 2020 result (Covid downturn? Stimulus payments?)
    8. Your final 2020 results will establish a base by which you can assess the year-to-date (YTD) performance for 2021.
    9. The 2020 results compared with your 2021 YTD will provide you with the opportunity to conduct projections and tax planning for your 2021 result.
    10. If you are planning to purchase business assets to write off for 2021, then you need to plan this before the end of March, because there can be significant delays in supply of the assets and also delays in obtaining finance to purchase the assets.

    So when you receive those reminder calls and emails from your accountants with requests for outstanding information needed to complete returns, remember it is going to be in your (and your businesses) best interest to put aside some time to answer those queries and get your numbers finalised. And if you are concerned that your tax agent or accountant has not been in touch, then find out why and make sure you get things moving.

     

    If your needs cannot be met in a timely manner, then you may need to contact a firm with the capacity to complete the work for you as soon as possible.

     

    For enquiries about new client onboarding, contact the Affinitas Accounting at or 07 3359 5244.


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  • 01Feb2021

    CountPlus Annual Report 2020

    chartered accountancy firm

    Why Count Financial was the best partner for Affinitas Financial Planning

    Choosing a licensee is a decision to never be taken lightly. Affinitas Financial Planning recently travelled down that road and explain what impacted their decision to choose Count Financial. Brad Peters, Director, and Senior Financial Planner at Affinitas Financial Planning, took a lot of care and time to decide. “Starting with a matrix of assessment factors, I divided licensees into three general categories – Must, Preferable and Nice (but not necessary). Then, with the help of a consultant, I met with about 14 potential licensees. It then came down to a final three – where we went into a lot more depth.”

    “Of all of the licensees, Count Financial was always ahead in terms of financial backing and potential long term stability.” Brad spent time getting to know people like Matthew Rowe and Andrew Kennedy – and spoke with some of the key people he would be working with on a daily basis to better understand the service offerings, cost structures, and cultural alignment. Brad also spoke with some existing Count Financial advisor firms and was made aware of how they were going to be remoulded and reinvigorated under CountPlus ownership.

    “In the end, I felt Count Financial understood who we were, could provide what we needed, and valued what we offered,” explains Brad. “Count Financial provided a clear outline of the steps required, helped us prepare, and was always there to assist with advice and practical help at each step. Count Financial delivered on everything they promised as far as pricing and levels of support were concerned during the changeover process.”

    As a result of transferring to Count Financial, Brad feels that Affinitas Financial Planning now has the right levels of support in key areas to ensure they can continue to service existing clients, write new business, and remain compliant.

    “We have been able to contact key decision-makers/support people when needed, and have received real value from having ongoing access to a dedicated Practice Development Manager,” Brad explains. “Affinitas Financial Planning firm has operated as part of an overall business structure that includes an accounting practice. Support for accounting qualified financial planners has always been part of Count’s DNA. Therefore, practice development will always be mindful of how changes in the tax/accounting landscape will impact our overall business.”

    In addition to support, Brad says the Australia-wide network of Count Financial firms and the CountPlus ownership model provides some potentially exciting succession planning opportunities.

    “Businesses don’t change licensees for fun – because it is a labour intensive, time-consuming and potentially costly process.” However, Brad explains that it is going to be a necessary reality for many advisory firms who want to secure their long term future in the financial planning industry. Choosing the right licensee makes all the difference.

    Operating for 20 years, Affinitas Financial Planning is part of the wider Affinitas group, a Brisbane-based business that provides individual and small business clients with a holistic offering covering accounting, tax, finance, investment, and personal insurance advice. The accounting practice services about 1400 clients, of which about 400 are an investment and/or insurance clients.

    Article taken from CountPlus Annual Report 2020. For the full article, click here.


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  • 22Jan2021

    Sorting Out Late Tax Returns – It’s Easier Than You Think

    Sorting Out Late Tax Returns - It's Easier Than You Think

    Sorting Out Late Tax Returns 

    It’s Easier Than You Think

    In 30 years of preparing tax returns, some of the most relieved and happy clients you come across are those whom we have helped “catch up” and lodge late tax returns. Apart from straight out forgetfulness, failure to lodge a return can happen for a variety of reasons, including illness or any other adverse change in personal circumstances.

    Sometimes people move overseas for a time period and don’t realise they still have obligations to lodge an Australian tax return. For most, the obligation to lodge a tax return will not go away despite how many years you delay and/or the reasons for the delay. The Tax Office will eventually catch up with you.

    All you achieve by delaying your lodgements is cause yourself worry, risk late fees, and the potential that your records – particularly legitimate deductions – may be lost or destroyed. But putting yourself in the hands of an experienced tax professional can make the journey can be a lot less painful than you imagine.

    Consider the following testimonial we have recently received from a client, who was four years behind with their returns.

    “We were recommended to use Affinitas Accounting by a friend. From the first contact, Debbie was friendly, professional, very efficient, and extremely knowledgeable in her field. She took us on as expats needing to complete our last four years’ worth of income tax returns and was so patient and helpful when we had to get all our documents sorted and what she needed to complete the return. Even though the timeframe had us close to the Christmas break, she worked overtime to have it complete for us and ready to submit before the new year. We cannot recommend her company enough and will definitely be using her services each year from now on.”

    So if you are late with your tax returns (or you know someone who is) then make getting up to date your New Year’s resolution. Contact us on 07 3359 5244 or

     


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  • 16Dec2020

    All We Want for Xmas is a Good Vaccine

    Christmas Affinitas Accounting

    All We Want for Xmas is a Good Vaccine

    After a year like no other, 2020 Christmas wish lists are likely to include a lot of non-material requests for Santa to fulfill.

    The usual wish-list of bright shiny new things could be replaced by hopes for:

     

    • an effective COVID-19 vaccine,
    • a safe environment for my friends and family,
    • the opportunity for every person to use their abilities and make a genuine contribution to the greater good, and
    • a return to the days when leadership was about the capacity to bring people together and push forward rather than conquer and divide.

     

    This Christmas list is reflective of 2020 – the year has taught us resilience and patience.

    We have all had a stark reminder of what is really important in life. We have learned some painful lessons that life is not always a constant, consistent path.

    Maybe the takeout from 2020 is to approach life like an optimist, but plan like a pessimist – personally and professionally.

    Planning like a pessimist does not mean succumbing to disaster, but rather the opposite. Planning like a pessimist is about always making sure you have capital, capacity and personal reserves to get through an unexpected shock.

     So, here is to a fresh start with renewed energy and vigour in 2021. Stay safe, stay well and we will look forward to working with you again in the New Year to make the most of the opportunities available to you on your pathway.

    To read more about some of the opportunities and challenges for 2021, click on the following link:

     2021 – Risks & Opportunities Emerging From 2020

     

    Office closure

    Our office will be closed for Christmas from 5pm Tuesday, 22 December and will reopen from 8am on Wednesday 6 January 2021.

    Meanwhile, a few reminders about things you might wish to attend to before you start your Christmas break.

     

    Extended dates for December JobKeeper figures

    The ATO has extended the JobKeeper monthly business declaration deadline for the month of December until 28 January 2021 (from 14 Jan 2021).  This applies to the JobKeeper fortnights ending on 6 December 2020 and 20 December 2020.

     The deadline for meeting the minimum wage condition for the JobKeeper fortnight ending on 3 January 2021 has been extended to Monday, 4 January 2021.

     NB: Remember, even if you have not qualified for JobKeeper in the past, you may still be able to qualify based on your latest business results.

     

    First JobMaker Deadlines Looms

    Currently, 6 January 2021 is the final day of the first JobMaker Hiring Credit period and the deadline for enrolling in the scheme to access payments for this period.

     While the ATO has the ability to extend this deadline, there has not been any advice on this to date. Enrolments are not open as yet, but because of the tight turnaround times, if your business would like to access JobMaker for the first period, it will be important to assess eligibility.

    NB: If you think there is any chance whatsoever that you might qualify for JobMaker, make sure to register online for the scheme by 6 January 2021. There are no penalties if you register, but do not end up using the scheme.

     Also, it is worth noting that Federal Government incentives generally do not overlap.

     That is, your business cannot receive incentives for BOTH JobKeeper and JobMaker, or  BOTH JobMaker and an apprenticeship subsidy.

     

    Last Chance to Access: COVID-19 Early Access to Super

    For anyone still considering accessing superannuation early under the COVID-19 early access measures, 31 December 2020 is the last day you can apply. Those wanting to access their superannuation pre-Christmas needed to have completed the application by 11 December 2020.

     The ability to access up to $10,000 of your super is available to those that have been made redundant, have had their working hours reduced by more than 20%, and have been adversely financially impacted by COVID-19.

     If you are not in financial hardship you should not access your superannuation. The application process through myGov is a self-assessment process that you are responsible for. Penalties of up to $12,000 may apply for providing false or misleading information.

     Source; Knowledge Shop Newsletter Dec 2020. NB: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.


    Affinitas Accounting offers all your financial needs under the one roof

     

    Contact Us If you Need Help

    For help with tax debt payment plans and JobKeeper, contact 07 3359 5244 or email

    Office closure

    Our office will be closed for Christmas from 5 pm Tuesday, 22 December and will reopen from 8 am on Wednesday 6 January 2021.

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  • 16Dec2020

    2021 – Risks & Opportunities Emerging From 2020

    2021 - Risks & Opportunities Emerging From 2020

    2021 – Risks & Opportunities Emerging From 2020

    All social and economic disruptions come with their own unique set of related risks and opportunities.

     After weathering Australia’s Covid 19 experience, the borders between the states and territories are now all-but open. The year 2021 is in sight and there is a hunger for a return to ‘normal’. The recent Westpac-Melbourne Institute Index of Consumer Sentiment articulates this desire to ‘get on with things’; sentiment reached its highest level since November 2013 and Christmas spending is expected to be consistent with previous years.

     However, the Reserve Bank of Australia cautions that the post-2020 recovery will be uneven and drawn out and GDP is not expected to return to pre-pandemic levels until the end of 2021. The risks are not limited to the pandemic but Australia’s geopolitical relationships, notably with our largest trading partner, China.

     Here is a list of key risks and opportunities as we head into 2021: 

    Opportunities

    Employers & Job Building

    Reducing unemployment is a national priority. While the unemployment rate is expected to decline in 2021, further rises are expected as businesses restructure in response to the pandemic. Wage growth will also be subdued with excess capacity in the market.

     New analysis from the Reserve Bank of Australia suggests one in five jobs were saved by JobKeeper.  The RBA November 2020 analysis states: “One in five employees who received JobKeeper (and, thus, remained employed) would not have remained employed during this period had it not been for the JobKeeper Payment. Given that 3.5 million individuals were receiving the payment over the period from April to July 2020, this implies that JobKeeper reduced total employment losses by at least 700,000 over the same period.”

    The number of businesses accessing JobKeeper reduced by around 450,000 in October 2020, with the transition to more stringent eligibility requirements.

    In 2021, the focus will be on creating jobs, not just keeping them. To this end, there are a number of incentives for employers to grow employment and skills:

    • JobMaker – A 12 month “hiring credit” available for jobs created from 7 October 2020 until 6 October 2021 that provides a payment to employers of $200 per week for eligible new employees aged between 16 and 29, and $100 per week for eligible employees aged between 30 to 35 years. Eligibility restrictions apply to the business and the employee. Employees need to have been out of work and receiving Government support for at least one month within the three months before they were hired.
    • Apprenticeship subsidies – subsidies of 50% of an apprentice’s wage (up to $7,000) are available for new and existing apprentices to keep them employed. The schemes apply to the wages of new apprentices from 5 October 2020 and 30 September 2021, and existing apprentices from 1 January 2020 to 31 March 2021. Eligibility requirements apply to the business and the apprentice.

     

    In addition, subsidies are available for employers engaging apprentices in key industries with skills shortages including carpenters and joiners, plumbers, hairdressers, plasterers, bakers and pastrycooks, vehicle painters, wall and floor tilers, arborists, bricklayers and stonemasons and air-conditioning and refrigeration mechanics.

    There is also additional support for adults reskilling and undertaking an apprenticeship and for apprentices with a disability.

    •  State based incentives – Tax breaks to encourage employers to employ more workers are big right now. The Victorian government recently announced a New Jobs Tax Credit for SMEs of ten cents for every dollar of increased taxable Victorian wages. NSW has reduced payroll tax to 4.85% from 5.45% from 1 July 2020. There also are many incentives targeted to specific areas and economic sectors. WA has an Employer Incentive Scheme with a base payment of $8500 for employing apprentices. It is worth seeing what is available in your region and in your industry.

     

    NB: It is worth noting that Federal Government incentives generally do not overlap. That is, your business cannot receive incentives for BOTH JobKeeper and JobMaker;  or BOTH JobMaker and an apprenticeship subsidy.

     

    First JobMaker deadline looms

     

    6 January 2021 is the final day of the first JobMaker Hiring Credit period and the deadline for enrolling in the scheme to access payments for this period. While the ATO has the ability to extend this deadline, there has not been any advice on this to date. Enrolments are not yet open, but because of the tight turnaround times, if your business would potentially like to access JobMaker for this first period, it will be important to at least get your business registered by 6 January. There is no penalty if you register and do not use the scheme.

     

     

    For individuals, the JobTrainer programme provides those aged between 17 and 24 the ability to upskill or reskill, at minimal cost.

     

    HomeBuilder & the Housing Industry

    The HomeBuilder scheme provides a tax-free grant to those building a new home or renovating. To date, around 27,000 homes are expected to be covered by the scheme. The highest number of applications so far have come from Victoria (7636), followed by Queensland with 5954. New South Wales property prices mean that many homes exceed the eligibility threshold (4350).

    The Assistant Treasurer recently announced an extension of the HomeBuilder scheme from 1 January 2021 to 31 March 2021.  For all new build contracts signed between 1 January 2021 and 31 March 2021:

     

    • Eligible owner-occupier purchasers will receive a $15,000 HomeBuilder grant (down from $25,000); and
    • The property price caps for new builds in New South Wales and Victoria will be increased to $950,000 and $850,000 respectively (from $750,000).

     

    In addition, the construction commencement deadline will be extended from three months to six months for all eligible contracts signed on or after 4 June 2020 (applications for HomeBuilder can be submitted up to 14 April 2020).

    There is also a change in the licensing requirements and registration for builders and developers:

     

    • Where an eligible contract is signed on or after 29 November 2020, the builder or developer must have a valid licence or registration before 29 November 2020
    • Where an eligible contract is signed before 29 November 2020, the builder or developer must have a valid licence or registration before 4 June 2020

     

    The eligibility criteria to access HomeBuilder remains the same. To be eligible you need to be an individual owner-occupier, 18 years of age or more, an Australian citizen, and pass the income test. The income test for individuals is $125,000 and $200,000 for couples (based on your 2018-19 or later tax return).

     The grants are available if you build a new home where the value of the house and land does not exceed the threshold ($750,000 to $950,000 depending on when the contract was signed and the State you live in), or a renovation where the value of the property is $1.5m or less.

     

    Extended rules for writing off assets: Australian subsidiaries of global companies to benefit

    In the 2020-21 Federal Budget, the Government introduced a measure that allows businesses with turnover under $5bn* to immediately deduct the cost of new depreciable assets and the cost of improvements to existing assets in the first year of use. This means that an asset’s cost will be fully deductible in the year it is installed ready for use, rather than being claimed over the asset’s life. And, there is no cap on the cost of the asset.

    Last month the Government announced it will modify the rules again enabling a broader range of businesses to access the instant write-off.

    The amended rules will enable businesses with an aggregated annual turnover of $5bn or more (the current maximum threshold) to access the measures if they can satisfy an alternative test. Entities are able to pass this test if they have:

    • Less than $5 billion in total statutory and ordinary income in either the 2019 or 2020 income year; and
    • Incurred more than $100 million in expenditure on tangible depreciating assets between the 2017 and 2019 income years.

    This will allow some Australian businesses that are connected with large global groups to access the measure. In addition, the Government will enable businesses to opt-out of using the new instant asset write-off and accelerated depreciation rules on an asset by asset basis.

    Currently, the rules apply automatically if certain conditions are met, which for some businesses is not an effective use of the deduction. However, at this stage, it appears the choice to opt out of the instant asset write-off might not be available to small business entities that choose to apply the simplified depreciation rules.

    Discussing the best use of these new depreciation rules should be part of the annual tax planning conversation you have with your tax accountant.

     

    *Aggregated turnover. Aggregated turnover is your turnover plus the annual turnover of any business connected with you or that is your affiliate.

     

    The Risks

    COVID-19 rules and regulations

    Despite feeling like we are emerging from the pandemic, the promise of a widely available vaccine is still over the horizon and the risk of another wave remains very real. For business, it will be essential to ensure that COVID-19 safe conditions are maintained.

    Aside from the obvious health risks of not maintaining a safe environment, a lockdown risks your business’s survival, and the fines for breaching public health orders are hefty. According to an ABC report, “more than $5.2 million has been raked in (in fines) nationwide since pandemic laws came into effect in March this year.”

    In most regions, fines of around $1,000 apply to individuals and $5,000 for businesses and in Queensland, fines of up to $13,345 and prison might apply to individuals and business operators flagrantly defying the heath order.

    Cashflow crunch

    Australian economists are united in the view that there are a number of “zombie businesses”, only being kept alive by JobKeeper. These are the businesses that are only surviving because salary and wages are propped up by the subsidy.

    The danger with these businesses is that they are continuing to take on debt. JobKeeper ends in March 2021, which coincides with one of the traditionally worst cashflow months of the year.

    It will be important to ensure that your business stays on top of its debtors and does not become a bank for your customers. It will also be important to understand your cashflow position.  Do not over-commit and stay on top of labour costs.

     

    Reach Out For Help

    As accountants, we cannot run your business for you. But we are professionals who have skills in cashflow management and can help you analyse the numbers that can assist you to review and predict the performance of your business. Contact Affinitas Accounting on 07 3359 5244 or

      

    Australia’s relationship with China

    At Christmas time, many people re-watch the film Love Actually. Apart from all the feelgood rom-com moments, there is a scene where the British Prime Minister (played by Hugh Grant) is asked about his views on the Britain-US relationship following a particularly disappointing trade negotiation:

    “I love that word ‘relationship’; covers all manners of sins, doesn’t it? I fear this has become a bad relationship. A relationship based on the President taking exactly what he wants, and casually ignoring all those things that really matter to Britain.

    “We may be a small country, but we’re a great one too. A country of Shakespeare, Churchill, The Beatles, Sean Connery, Harry Potter, David Beckham’s right foot, David Beckham’s left foot.

    “A friend who bullies us is no longer a friend. And since bullies only respond to strength, from now onward I will be prepared to be much stronger. And the President should be prepared for that.”

    In the movie, the only reaction from the US was a stern look from the President (played by Billy Bob Thornton). However, the reality of megaphone diplomacy is very different.

    Regardless of whether or not we support the stand taken by our government, non-compliance with China’s political will comes at a cost. In response to Australia’s public positioning, China has flexed its economic muscle through the disruption of Australian exports. Consider the following:

     

    • April – Australia pushes for a formal WHO inquiry into the origins of COVID-19.
    • May – 80.5% tariff on Australian barley on the basis that barley is undervalued and subsidised. China imports approximately 70% of Australia’s barley crop.
    • May – Suspension of beef exports from four Australian processing plants relating to a 2019 investigation regarding inconsistencies with labelling and consignment certificates for some frozen and chilled beef products. China is the largest importer of Australian beef at 24%. Japan is second at 23% and the USA at 20%.
    • September – China states that Australian exports of wheat will face “enhanced inspection.” At the same time, wheat imports from the US to China have increased.
    • October – Chinese importers unofficially instructed to stop buying seven types of Australian exports – coal, barley, copper ore and concentrate, sugar, timber, wine, and lobster. Goods in transit at the time the ban was imposed have been in limbo – $2m of rock lobsters were left on the tarmac unable to clear customs at Shanghai Airport.
    • November – 107% to 212% “provisional” tariff imposed on Australian wine on the accusation that Australian wine is being dumped on the Chinese market causing “substantial” damage to Chinese wine manufacturers. Treasury Wine Estate, which makes Penfolds, and represents an estimated 40% of the total annual wine export market to China, went into a trading halt after China’s announcement.

     

    China is Australia’s largest trading partner by a margin that dwarfs trade with any other single nation (Europe $118bn, ASEAN $110bn and Japan $77bn). The value of exports to China has doubled in the five years since the signing of the China-Australia Free Trade Agreement from $75b in 2014-15 to $150b in 2019-20; imports have also grown significantly up 42% over the same period.

    Iron ore remains Australia’s top export to China (in 2019-20, exports of iron ore accounted for 56% of all Australian goods exported to China) and a high demand resource to fuel the expansion of China’s economy – China is the world’s largest steel producer. The South China Morning Post reports that Australian iron ore makes up 60% of China’s supply.

    It is not the first time China has undertaken a concerted campaign to use its economic might to secure its policy goals. Canada, India, the UK and New Zealand have all faced some form of retribution in the past. During a speech to the Press Club in August, Minister Wang Xining stated that any long term relationship is based on “mutual respect”. Australia’s perceived lack of respect was highlighted by the 14 grievances leaked by a Chinese diplomat to television station Channel Nine.

    These grievances, according to this leaked document, are wide-ranging –  from the banning of Huawei from Australia’s 5G networks on “unfounded” national security concerns, foreign interference laws (initiated with the establishment of the Counter Foreign Interference Taskforce focussed on democratic institutions, education and research, media and communications, diverse communities, and infrastructure), calls for an inquiry into COVID-19 and siding with the US anti-China campaign, speaking out on the contested South China sea territories and “thinly veiled” allegations against Chinese cyberattacks.

    So, what does 2021 hold for our Australia-China relationship?

    There is conciliatory language from the Australian Government with both the Prime Minister and the Defence Minister acknowledging China’s economic success lifting millions out of poverty and our strong ‘people to people’ relationship. But Australia has not publicly backed down or been any less vocal with the announcement of a new defence pact with Japan and a continued pro-democracy stance on Hong Kong.

    There is likely to be more pain to come for Australian exports to China and no short-term resolution or conciliation.  Watch this space – as the old Chinese proverb goes: “We live in interesting times”.

    Source; Knowledge Shop Newsletter Dec 2020. NB: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

     


    Affinitas Accounting offers all your financial needs under the one roof

     

    Contact Us If you Need Help

    For help with tax debt payment plans and JobKeeper, contact 07 3359 5244 or email

    Office closure

    Our office will be closed for Christmas from 5 pm Tuesday, 22 December and will reopen from 8 am on Wednesday 6 January 2021.

    2021 - Risks & Opportunities Emerging From 2020
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  • 11Nov2020

    Get Ready for ATO Payment Plans – with Strings Attached!!!

    Get Ready for ATO Payment Plans – with Strings Attached!!!

     Taxpayers will need to prepare for tougher rules around tax debt payment plans and justifying historical JobKeeper payments.

    In a recently published article in the accounting press, a newly appointed tax controversy partner at Holding Redlich, Sue Williamson FCPA, warned that accountants and their clients were going to need to work together to prepare for new ATO compliance measures.

    Ms. Williamson, who is also a member of CPA Australia’s Taxation Centre of Excellence, said that the first frontier was likely to be businesses needing to prove their JobKeeper entitlements were justified if they were selected for audit. To substantiate that they received the right amount under JobKeeper, companies must have records on how it was estimated and proof that the money was passed on to employees.

    “The issues we’re starting to see come through around JobKeeper claims typically relate to calculations around turnover,” Ms. Williamson said.

    The ATO is warning,  that while it remains sympathetic to the plight of struggling businesses, there will come a day soon where new tax payment plans will require businesses to provide a plan for repayment of the monies.  

    Senior tax advisers throughout the country have been told that the ATO will soon be wanting greater clarity and understanding of why businesses cannot pay their current tax obligations and a future business plan showing how and when they expect to get out of debt.

    And while it is unlikely to be this year, at some not too distant point Williamson said she expected the ATO to become far less patient with repayments unless there were good grounds to have them delayed. Simply requesting a delay would not be enough. Taxpayers would need to provide proof of why they need extra time to start paying and where the money would be coming from.

    Ms. Williamson said the key to preparing for this tougher ATO compliance regime, was the ability for accountants and clients to have frank discussions about these issues and put solid plans in place.

    It is understood the ATO has no intention of clawing back money where honest mistakes have been made with JobKeeper but will crack down heavily where they uncover deliberately fraudulent behaviour.

    It is worth noting that the ATO has redeployed 3000 staff to focus on audit activities. 


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  • 05Nov2020

    Refunds for Tax Losses

    2019 tax cuts

    Refunds for Tax Losses

    If your company has made a loss, you may be able to claim a tax refund for tax previously paid on profits.

    In the 2020-21 Federal Budget, the Government announced that businesses with turnover under $5bn* will be able to offset any losses made between 2019-20 and 2021-22 against previously taxed profits between 2018-19 and 2020-21.

    The loss carry-back rules enable a company to offset tax losses against profits taxed in a previous year, generating a refundable tax offset. The amount carried back can be no more than the earlier taxed profits, limiting the refund to the company’s tax liabilities in the profitable years. The company can choose to carry-back a loss or carry it forward. That is, tax losses for 2019-20, 2020-21, or 2021-22 income years can either be:

    •  Carried forward and deducted against income derived in later income years; or
    • Carried back against income of earlier income years as far back as the 2018-19 income year to produce a refundable tax offset.

    Previously, tax losses could only be carried forward and deducted against income in later income years.

    This is not the first time that carry-back losses have been allowed. The loss carry-back rules were introduced some years ago by the Gillard government for the 2012-13 year, then repealed.

    The loss carry-back rules also interact with the Government’s Budget measure allowing immediate expensing of investments in capital assets (See Tax deductions for investing in your business). The new investment will generate significant tax losses in some cases which can then be carried back to generate cash refunds for eligible companies.

    What entities are eligible to carry-back losses?

    Corporate tax entities are eligible to carry-back losses – a company, a corporate limited partnership, or a public trading trust – BUT only if the entity has lodged an income tax return for the current year and each of the five years immediately preceding it. If your company has not kept up to date with its reporting obligations, it might not be able to use the new rules.

    Claiming the refundable tax offset

    Businesses will need to elect to utilise their carry-back losses when they lodge their 2020-21 and 2021-22 tax returns. That is, even if the company made a loss in the 2019-20 year, it cannot claim that loss until the 2020-21 tax return is lodged.

     For the 2020-21 income year, a loss carry-back tax offset may be available to a company if:

    •  It has a tax loss in the 2019-20 income year and/or the 2020-21 income year;
    • It has an income tax liability in the 2018-19 income year and/or the 2019-20 income year; and
    • For the 2020-21 income year and each of the previous five income years, either the entity has lodged an income tax return; the entity was not required to lodge a return, or the Commissioner has made an assessment of the entity’s income tax.

     The carry-back cannot generate a franking account deficit. That is, the refund is further limited by the company’s franking account balance.

     

    Source: Knowledge Shop Newsletter Oct 2020.


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  • 30Oct2020

    Latest Tax News and Budget Announcements

    Latest Tax News and Budget Announcements

    The 2020-21 Budget delivered a range of incentives for businesses to invest.

    If you would like us to review your position and the tax impact of any investments you are contemplating, please contact us at or 07 3359 5244  and we can assist you to get the best possible outcome.

    The following is a summary of where things are at with some of the big-ticket Budget items.

    JobMaker Hiring Credits: What We Know So Far

    The JobMaker hiring credit announced in the 2020-21 Federal Budget. The legislation enabling the JobMaker scheme has not passed Parliament as yet and until this occurs, the JobMaker rules are not certain and may change. More details should be available soon and we’ll let you know as soon as we have some certainty. Here is what has been announced so far:

    What is JobMaker?

    JobMaker is a credit available to eligible businesses for hiring additional employees (not if you are merely replacing someone who left). The hiring credit is available for jobs created from 7 October 2020 until 6 October 2021.

    The credit provides:

    • $200 per week for new employees between 16 to 29 years of age, and
    • $100 a week for new employees between 30 to 35 years of age.

    Payment is from the start date of the employee for 12 months.

    When do the credits start?

    Assuming the legislation passes Parliament and your business and the employee are eligible, and the ‘additionality’ test is passed, credits can be claimed for employees hired from 7 October 2020 until 6 October 2021. The credit will be claimed quarterly in arrears by the employer from the ATO from 1 February 2021. The credit is an incentive for the employer to support wage costs and not passed onto the employee.

    For an extended article on JobMaker, including frequently asked questions, visit our blog on JobMaker Hiring Credits.

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    Tax deductions for investing in your business

    Stimulating investment spending is high on the Government’s agenda. To encourage spending, the 2020-21 Budget introduced a measure that allows businesses with turnover under $5bn* to immediately deduct the cost of new depreciable assets and the cost of improvements to existing assets in the first year of use. This means that an asset’s cost will be fully deductible in the year it’s installed ready for use, rather than being claimed over the asset’s life. And, there is no cap on the cost of the asset.

    When it comes to second-hand assets the rules are a bit different depending on the size of the business. Businesses with an aggregated turnover under $50 million can claim an immediate deduction for the cost of second-hand assets under the new measures.

    Businesses with aggregated annual turnover between $50 million and $500 million can still deduct the full cost of eligible second-hand assets costing less than $150,000 that are purchased by 31 December 2020 under the existing enhanced instant asset write-off. Businesses that hold assets eligible for the enhanced $150,000 instant asset write-off will have an extra six months, until 30 June 2021, to first use or install those assets.

    For an extended article on Immediate Asset Write-offs for business, visit our blog on Tax Deductions.


    Refunds for Business Tax Losses

    If your company has made a loss, you may be able to claim a tax refund for tax previously paid on profits.

    In the 2020-21 Federal Budget, the Government announced that businesses with turnover under $5bn* will be able to offset any losses made between 2019-20 and 2021-22 against previously taxed profits between 2018-19 and 2020-21.

    The loss carry-back rules enable a company to offset tax losses against profits taxed in a previous year, generating a refundable tax offset. The amount carried back can be no more than the earlier taxed profits, limiting the refund to the company’s tax liabilities in the profitable years. The company can choose to carry-back a loss or carry it forward. That is, tax losses for 2019-20, 2020-21, or 2021-22 income years can either be:

    • Carried forward and deducted against income derived in later income years; or
    • Carried back against income of earlier income years as far back as the 2018-19 income year to produce a refundable tax offset.

    Previously, tax losses could only be carried forward and deducted against income in later income years.

    Tax table reminder

     The 2020-21 personal income tax cuts announced in the Federal are now law. Employers need to ensure that the tax withheld from employee salaries is correct. The ATO has published updated tax tables that apply from 13 October 2020. Employers have until 16 November 2020 to implement the changes.

    For an extended article on refunds and tax losses, visit our blog on refunds for tax losses.

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    JobKeeper Clawback Begins

    At the recent Senate Estimates hearing, Jeremy Hirschhorn, the ATO’s Second Commissioner, stated that $120 million in JobKeeper payments had been clawed back from those either deliberately seeking to rort the system or who had made reckless mistakes.

    Mr. Hirschhorn went on to say that there did not appear to be widespread fraud across the Government’s stimulus measures and most mistakes were honest. In the cases identified so far, JobKeeper had not been clawed back from employers making honest mistakes but these employers were prevented from making future claims.

    In September, the ATO noted that compliance checks had halted 55,000 JobKeeper applications at the very first stage, because they did not meet the eligibility criteria, and delayed $1bn in payments to more than 75,000 applicants for further review.

    Eleven matters have been referred to as Serious Financial Crime Taskforce operations and around 50 matters referred for criminal investigation. But overall, the Tax Commissioner stated, “the vast majority of Australians have done the right thing and only claimed the amounts they were entitled to.”

     Source: Knowledge Shop Newsletter October 2020


    Affinitas Accounting offers all your financial needs under the one roof

     

    Contact Us If you Need Help

    If you have any questions regarding the JobMaker hiring credits or scheme, you can contact 07 3359 5244 or email

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  • 30Oct2020

    Tax Deductions for Investing in Your Business

    Tax Deductions for Investing in Your Business

    Stimulating investment spending is high on the Government’s agenda. To encourage spending, the 2020-21 Budget introduced a measure that allows businesses with turnover under $5bn* to immediately deduct the cost of new depreciable assets and the cost of improvements to existing assets in the first year of use.  

    This means that an asset’s cost will be fully deductible in the year it is installed ready for use, rather than being claimed over the asset’s life. And, there is no cap on the cost of the asset.

    When it comes to second-hand assets, the rules are a bit different, depending on the size of the business. Businesses with an aggregated turnover under $50 million can claim an immediate deduction for the cost of second-hand assets under the new measures.

     

    Instant asset write-off thresholds

    Aggregated turnover under $10m

    Aggregated turnover under $50m

    Aggregated turnover under $500m

    Aggregated turnover under $5bn

    1 July 2018 – 28 January 2019

    $20,000

    29 January 2020 – 2 April 2020

    $25,000

    2 April 2020 – 11 March 2020

    $30,000

    $30,000

    12 March 2020 – 31 December 2020

    $150,000

    $150,000

    $150,000

    6 October 2020+ – 30 June 2022

    unlimited

    unlimited

    unlimited

    Unlimited

    Businesses with aggregated annual turnover between $50 million and $500 million can still deduct the full cost of eligible second-hand assets costing less than $150,000 that are purchased by 31 December 2020 under the existing enhanced instant asset write-off. Businesses that hold assets eligible for the enhanced $150,000 instant asset write-off will have an extra six months, until 30 June 2021, to first use or install those assets.

    For small business entities that have assets in a general pool, the changes seek to ensure that pool balances are completely written-off for tax purposes in the 2021 and 2022 income years.

    These super-charged immediate deduction rules tie into the existing instant asset write-off for businesses with a turnover under $500 million (summarised below).

    The instant asset write-off only applies to certain depreciable assets. There are some assets, like horticultural plants, capital works (building construction costs, etc.), and certain intangible assets that don’t qualify for the new rules.

    If your business will make a tax profit this year, this measure is likely to reduce the taxable income of the business for the year and it may be possible to vary upcoming PAYG installments to improve cash flow. If your business operates through a company and will make a tax loss, you might be able to use the loss to offset tax paid in previous years. Alternatively, tax losses can generally be carried forward to a future year.

     Source: Knowledge Shop Newsletter Oct 2020


    Affinitas Accounting offers all your financial needs under the one roof

     

    Contact Us If you Need Help

    If you have any questions regarding the JobMaker hiring credits or scheme, you can contact 07 3359 5244 or email

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