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[av_heading heading=’The News Brief_20200916′ tag=’h1′ style=’blockquote modern-quote modern-centered’ subheading_active=’subheading_below’ show_icon=” icon=’ue800′ font=” size=’6vw’ av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’20’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=’custom-color-heading’ custom_font=’#000000′ icon_color=” margin=’0′ margin_sync=’true’ padding=’0′ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kf3kagyk’ admin_preview_bg=’rgb(34, 34, 34)’][/av_heading]

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[av_heading heading=’Tax changes for 2019-20′ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kf3kleh1′ admin_preview_bg=”][/av_heading]

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Some of the 2019-20 tax changes for small businesses include:

Instant asset write-off

As discussed in the June 2020 edition of TaxWise News, the instant asset write-off (IAWO) for depreciating assets has been expanded. Since then, the IAWO has been extended by 6 months to 31 December 2020.

The cost caps for small and medium businesses (total annual turnover under $50m) are:

Date asset first used or installed ready for use by a small or medium business            Cap (asset must cost less than)
1 July 2019 – 11 March 2020 $30,000
12 March 2020 – 31 December 2020 $150,000

You should note that:

The cost caps for larger businesses (total annual turnover $50m or more and under $500m) are:

Date asset first used or installed ready for use by a large business Cap (asset must cost less than)
12 March 2020 – 31 December 2020 $150,000

You should note that:

Accelerated depreciation

The June 2020 edition of TaxWise News also discussed the accelerated rate of depreciation. This applies to new depreciating assets first held on or after 12 March 2020 and first used or installed ready for use on or after 12 March 2020 and before 1 July 2021. The asset must be used principally in a business in Australia or located in Australia.

The accelerated rate for small businesses is 57.5% (instead of 15%). The accelerated rate does not apply if you deduct immediately the cost of the asset using the instant asset write-off.

Failure to comply with PAYG withholding obligations

If your business fails to comply with a PAYG withholding obligation, eg failing to withhold an amount from an employee’s salary or wages or failing to report the withheld amount to the ATO, your business won’t get a deduction for the relevant amount (eg the amount not withheld or the amount not paid to the ATO).

You may be able to reinstate the lost deduction by making a voluntary disclosure to the ATO. 

Restructuring a small business

If you are a small business owner and you restructure the business, capital gains or losses that would arise from transferring the business assets to another entity are deferred where there is no change in the ultimate economic ownership of the asset. This is called the small business restructure roll-over. It may apply where, for example, you are a sole trader and you transfer the business to a company you control.

Roll-over relief can apply to an asset used in a business carried on by your affiliate or a connected entity (that is also a small business).

A legislative amendment in 2020 fixed up a drafting error which incorrectly set the turnover threshold for an affiliate or entity connected with a small business at $2 million instead of $10 million. The change to set the threshold at $10 million goes back to 1 July 2016, which is when this roll-over commenced.

Bushfire payments

Government payments and non-cash benefits (including local government payments and benefits) made directly as a result of bushfires in Australia in 2019-20 are not taxable (they are what is called non-assessable non-exempt income).

Director penalties

The director penalty regime has been extended to cover unpaid GST, luxury car tax and wine equalisation tax owed by a company, in relation to GST instalment quarters and tax periods (as appropriate) that start on or after 1 April 2020. The ATO has issued guidelines (PCG 2020/2) explaining how it intends to administer these changes.

Closely held trusts

A “closely held trust” is a discretionary trust or a trust where 20 or fewer individuals have between them, directly or indirectly, and for their own benefit, fixed entitlements to 75% or more of the income or capital of the trust.

Family trusts and trusts that are interposed entities are now classified as closely held trusts (from the 2019-20 tax year) for the purposes of applying a set of complex integrity rules.

The effect of the change is that the trustee of a closely held trust may be liable to pay trustee beneficiary non-disclosure tax (TBNT) in relation to a “circular trust distribution”. This is where a share of the net income of a trust is included in the assessable income of a trustee beneficiary, the trustee of the closely held trust becomes presently entitled to an amount that is reasonably attributable to the whole or a part of the untaxed part of that share and TBNT has not previously been payable in respect of that share, and that pattern continues through a chain or trusts. This is not a common arrangement.

Tip!  Contact your tax adviser to find out about all the tax changes in 2019-20 that might affect your business.
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[av_heading heading=’Victorian Treasurer hints at easing real estate restrictions’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kf3kbbkp’ admin_preview_bg=”][/av_heading]

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Victorian Treasurer Tim Pallas has offered hope to his state’s shuttered real estate industry, hinting at an easing in the restrictions that have put the business of buying and selling homes on ice.

The government was relying on hard data to assess whether the targets it had set in the road map last Sunday were “exactly as we would like them to operate,” but there was wriggle room to tweak the rules, Mr Pallas told a Property Council of Australia audience on Thursday.

Last weekend’s announcement took the residential property sector by surprise and left agents fuming, it allowed only a narrow window in the industry’s busiest season of the year – spring – for agents and their clients to run typical four-week sales campaigns before the Christmas shutdown.

Mr Pallas, who spoke at the same time as Premier Daniel Andrews separately said regional restrictions could come off next week if the number of cases continued to fall, also offered hope that Victoria would follow the lead of NSW and offer concessions that would make commercial build-to-rent projects more viable as part of a state stimulus package.

Mr Pallas also announced two relief measures – worth a combined $36 million – with a waiver of vacant residential land tax next year for all homeowners and a 25 per cent exemption for car park owners on congestion levies. The vacancy tax waiver is worth $6 million in total and the congestion levy waiver $30 million.

“We know that with our borders closed travel restricted and inspections limited there are many properties that will be vacant this year that never would have been vacant without coronavirus,” Mr Pallas said.
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[av_heading heading=’How to avoid getting your loan application declined’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kf3khdcm’ admin_preview_bg=”][/av_heading]

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One of the most frustrating things that could happen to a homebuyer is getting your application for finance declined.

By this stage, you’ve already likely been to dozens of home opens, organised all your paperwork and potentially even put an offer in on a house. Falling over at the last hurdle is not only frustrating, but it can also feel like your dreams are over.

But they don’t have to be, and more importantly, there are a few things you can do to make sure your loan application doesn’t get declined.

Borrowing Amount

The more you’re looking to borrow from a lender, the more risk it presents to them. If you want to borrow more than 95%, that can be a red flag for a lender.

Most banks like to see you come up with a 20% deposit, which means an 80% LVR. While this might not be possible, there are other options you can look at like a higher LVR and paying Lenders Mortgage Insurance.

If you do need to borrow with a higher LVR and only have a small deposit, you might want to look at a guarantor loan or even taking advantage of a Government program such as the First Home Loan Deposit Scheme.

Stable Employment

In a perfect world, when you apply for a loan, the lender would like to see that you’ve got a long-term stable job with a regular paycheck.

Unfortunately, things are not always that simple and these days, many people have very unique work situations. If you’re self-employed or haven’t been in your current job for at least six months, then lenders might not look favourably on your application.

Fortunately, there are lenders that understand your situation and therefore it is important that you work with a mortgage broker who can match your employment situation with the right lender.

If you’re unemployed, you’re going to have a very tough time getting finance of any kind. These days, even if you’re asset rich, you still need to be able to show how you intend to service the debt.

Credit History

Having bad credit is often a red flag to a lender and it is not always one that is easy to overcome. If there is an error that has been made on your credit file, then that is something you can sort out. However, if you’ve been bankrupt in the past, you might need to work with a specialist lender.

Spending Habits

Banks and lenders like to see that you’re able to manage money effectively. If you’re spending habits aren’t great, then that’s likely a sign that you might not be able to manage a mortgage. Putting together a few months where you keep your spending habits under control is important. But it’s also more important to not have a host of debts that need paying each month, such as car loans or personal loans. Lenders don’t look favourably on these types of costs as they are fixed costs, unlike your discretionary spending.

Buying an Unusual Property

If you’re looking to buy a property that might be tricky to sell in the future, banks won’t like the look of it. That might mean a holiday home or even a rural block of land. Banks will always consider the worst-case scenario, and if they need to sell the property because you can’t make the payments, they want something that will be able to sell quickly and easily.

Get Pre-Approved

To avoid getting into a situation where you might get declined, it’s vital that you go and speak to a mortgage broker before you even start looking for properties. That way, they’ll be able to assess your personal situation and also give you some guidance around the types of properties you’re going to be able to afford.
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[av_heading heading=’ATO kicks off ‘soft’ debt collection restart’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kf3kcf91′ admin_preview_bg=”][/av_heading]

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Apart from Victoria, where businesses are working towards a staged reopening plan, the ATO has begun reaching out to businesses in other parts of the country as part of its debt intervention activity restart after such compliance work took a back seat in light of the pandemic.

“We are just starting to re-engage with debt clients,” said ATO assistant commissioner Sylvia Gallagher at the Accountants Daily Strategy Week.

“As you would know, we haven’t really done a lot in terms of debt, and not in Victoria but for the rest of Australia, we want to make sure that people are starting to get back on track and we don’t want people to be in a worse position later on.

“We are starting a really soft re-engagement on debt to make sure we are just talking to people to understand where they are at, what their situation is, and just offering support is essentially what we’re doing so that people understand the support that is available to them.”

The confirmation comes after the ATO flagged the restart in early July, with the profession urging the Tax Office not to go “too hard, too early”.

The restart also follows an indication from the ATO that it would recommence audit activity by October, having previously redeployed its auditors to help with the rollout of COVID-19 stimulus measures.

Ms Gallagher also re-emphasised the ATO’s commitment to adopting a sympathetic and understanding approach to its compliance activities, confirming that it would not look to claw back stimulus payments where an honest mistake had been made.

“We are not going to claw back money where someone has made an honest mistake and there is no malice.

Ms Gallagher also noted that JobKeeper behaviours that will attract the ATO’s attention include payments to people who don’t meet eligibility requirements, falsifying records or revisiting activity statements to meet the fall in turnover test, applying for JobKeeper where there is no evidence of carrying on a business or there is no assessable income, employers failing to pass on the full payment to eligible employees, multiple eligible business participant claims and employees being incorrectly excluded under the “one in, all in” rule.
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[av_heading heading=’New report justifies compulsory super system’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kf3kcf91′ admin_preview_bg=”][/av_heading]

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The combination of the superannuation guarantee with a means-tested age pension incurs a significantly lower budget cost than providing retirement income through a more generous publicly funded age pension, according to a recent Rice Warner report.

Recent analysis conducted by Rice Warner Actuaries has found that the superannuation guarantee will save the budget $17.3 billion this year, rising to $98.6 billion, in current dollars, by 2058.

The report, which was commissioned by Industry Super Australia, assessed various policy scenarios using a comprehensive group-based fiscal model that considered all relevant variables including the impact of the super guarantee on the age pension, personal wealth, income and company taxes.

The analysis considered the full fiscal impact of effectively abandoning the super guarantee and all associated tax benefits and reverting to a more generous, but means-tested, publicly funded pension that would deliver broadly equivalent retirement benefits.

In the scenario, the maximum rate of age pension was increased by 50 per cent to deliver the same outcome as the current age pension and the SG for a median wage earner.

In effect, Rice Warner said this replicates the path other countries have taken when they don’t have compulsory privately funded retirement schemes.

The report stated that replacing the SG with a higher age pension would result in a significant and immediate increase in age pension outlays, that accelerates over time.

“By 2058, expenditure on the age pension [would be] doubled in real terms, demonstrating the importance of the SG in preventing a high fiscal cost as the population ages into the future,” the report said.

The report found that revoking the legislated 12 per cent SG rate and freezing it at 9.5 per cent would have a modest budget benefit in the short-term through higher taxation.

However, it found that the short-term budget benefit will be offset over time by lower superannuation earnings and increased age pension expenditure, with a net negative budget impact evident after 25 years.

Industry Super Australia deputy chief executive Matt Linden said the findings of the report lay bare claims that super costs the budget more than it saves and strengthens the case for proceeding with the legislated rise in SG.

 “Superannuation saves Australia from the budgetary, economic and social unrest evident in parts of Europe who have long struggled to grapple with unsustainable publicly funded pensions.”
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Sources: The Australian Financial Review, MacroBusiness, SMSF Advisor and CFH Partners
Disclaimer: This is general information only and is subject to change at any time. Your complete financial situation will need to be assessed before acceptance of any proposal or product. The Content provided herein has been prepared for informational purposes only. The Content does not constitute tax, legal or accounting advice and should not be relied upon as such. You should seek tax, legal or accounting advice before acting or relying on any Content.

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