MAKE THE MOVE TO myGovIDand RAM

The ATO have advised that from 1 April 2020, you’ll no longer be able to useAUSkeyor Manage ABN connections (yourmyGovaccount linked to your ABN) to access government online services.

These credentials will be replaced with two new digital services:

myGovID: the Australian government’s digital identity provider which makes it easy to prove who you are online…

Relationship Authorisation Manager (RAM): allows you to link yourmyGovIDto an Australian Business Number (ABN) and act on behalf of a fund online.

Together,myGovIDand RAM provide a quick, easy and secure way to access government online services.

Before you start

There are a few things you can do to get ready before you make the move, including checking and updating your:

ABN details in the Australian Business Register (https://www.abr.gov.au/)

AUSkeydetails in AUSkey Manager (https://www.abr.gov.au/auskey/managing-auskeys)

Get started

If you are listed as an eligible individual associate on the ABR, you can kick start the move for your fund. Set up yourmyGovIDand link it to the fund’s ABN using RAM. You can then authorise others to act on behalf of your fund if required.

Entities with non-individual associates External Link, (such as corporate trustees, incorporated and unincorporated companies, government employees and not for profits) will be able to commence linking their business in RAM from early December. Information for these entities will be available on the RAM website External Link in the coming weeks.

POTENTIAL EXPLOITATION OF BLUEKEEP VULNERABILITY

Thousands of Australian businesses using older Windows systems should immediately install a patch to avoid being compromised.

The Australian Signals Directorate (ASD) is aware of malicious activity that indicates potential widespread abuse of theBlueKeepvulnerability known as CVE-2019-0708, affecting older versions of Windows operating systems including the Windows Vista, Windows 7, Windows XP, Server 2003 and Server 2008 operating systems.

A security researcher under the Twitter handle @zerosum0x0 has recently disclosed his Remote Desktop Protocol (RDP) exploit for the Blue Keep vulnerability to Metasploit. The disclosure, once made available to the public, is anticipated to increase the amount of RDP scanning actively, increasing the chances of attempted exploitation of unpatched systems.

The Head of ASD’s Australian Cyber Security Centre (ACSC), Rachel Noble, estimated that up to 50,000 devices of Australian entities could be affected. “Any organisation or business that relies on the older Microsoft systems is at risk,” Ms Noble said. “The compromise of an unpatched system could increase the chance that your network could be exploited.”

The ACSC has already notified governments and critical infrastructure operators across Australia.

“ASD’s ACSC is determined to ensure Australia is the safest place to connect online,” Ms Noble said. “In simple terms, an unpatched system gives criminals a front door to break into your network and steal your corporate and customer information.”

“Patching may require you to restart your computers, but this is a small price to pay when the risk of a compromise occurring could harm your business and its customers.”

The ACSC is acutely aware of the escalating scale and impact of cybercrime. Australian businesses need to be aware of the threat and we encourage them to follow our advice on how to strengthen their cyber defences and improve their resilience.

The threat is real but there is something you can do about it.

DEDUCTIONS FOR PAYMENTS TO WORKERS

The ATO has again reminded employers that they cannot claim deductions for payments to workers if they have not met their pay as you go (PAYG) withholding obligations.

This applies to income tax returns lodged for the 2020 income year onwards.

If the PAYG withholding rules require an amount to be withheld, to claim a deduction for a payment to a worker, your client must:

withhold the amount from the payment before they pay their worker

report that amount to the ATO.

If you make a mistake and withholds or reports an incorrect amount, you will not lose your deduction. You should correct the mistake as soon as possible to minimise penalties.

You will only lose a tax deduction if no PAYG amount is withheld (and was meant to be) or reported to the ATO. You will not lose the deduction if you voluntarily disclose this to the ATO before they tell you the ATO has commenced an audit or other compliance activity involving PAYG withholding obligations or deduction claims. The appropriate method to make a voluntary disclosure will depend on whether you failed to withhold or report.

If the ATO select you for an audit or other compliance activity, they will be in touch with the contact on the client’s account. They will inform on the scope of the audit and the period(s) under review. You may be contacted by telephone, in person or in writing.

PROPERTY FLIPPER THE NEW KID ON THE JAIL BLOCK

A Victorian woman has today been sentenced to two years and ten months in jail for Goods and Services Tax (GST) fraud of $1.7 million.

Between 2005 and 2011, Ms Simone Semmens, a former TV presenter and beauty queen, purchased, developed and sold ten luxury properties in Toorak, Portsea and Caulfield North.

Ms Semmens carried out extensive work on the properties, developing and subdividing them before selling them for a profit. She sold these properties for more than $20 million and made a total profit of more than $4.4 million.

She claimed the properties were for personal use, but she was carrying on a business and should have been registered for GST, lodging Business Activity Statements (BAS) and reporting the property sales.

By choosing not to, she evaded paying $1,738,636 in tax.

The ATO is using this as an opportunity to remind people that flipping properties for profit can count as running a business, requiring you to register for GST and lodge BAS.

“If you are buying, selling or developing a property that isn’t your primary residence, you have tax obligations,” Assistant Commissioner and head of the ATO’s Criminal Law Program Ian Read said.

“There are many TV shows that make flipping properties look like a fun and lucrative thing to do. People also need to be aware of their tax obligations.”

You are required to register for GST if the turnover from your property transactions is more than the GST registration threshold of $75,000 and if you buy land or property with the intention of developing it for resale at a profit.

“We know most people try to do the right thing, and we will support people who do. But to ensure the community doesn’t miss out on essential funding and to protect the integrity of the system, we have to crack down on those who deliberately do the wrong thing,” Mr Read said.

In the case of Ms Semmens, this is someone who was knowingly carrying on an enterprise. She set up Semco Developments Pty Ltd as a property development company to purchase, renovate and sell houses. She was aware of her tax obligations and chose to dishonestly evade paying over $1.7 million in GST.

“This wasn’t a one-off property sale; this is a case of someone deliberately carrying on an enterprise without meeting their tax obligations.

“People like this are obtaining an unfair advantage over Australians who are doing the right thing and robbing the Australian economy of revenue that could have been spent on essential services. Tax crime is not victimless, and we will not tolerate when people try to cheat the tax system.”

Ms Semmens was convicted of 10 offences of dishonestly causing a loss to the Commonwealth contrary to section 135.1 (5) of the Criminal Code (Commonwealth).

CHARTER BOATS

For leisure craft those trying to make the boat you are purchasing “tax effective” means you could be running the gauntlet with the ATO.

You need to satisfy the business test as laid down in Charter Boat Ruling TR 2003/4 Income Tax “Boat Hire Arrangements”.

This would be contrary to you having the boat for your own personal use.

In the event you did do some charter under a “hobby-based business”, charter boat owners are permitted to claim deductions through depreciation and interest expenses (if applicable) up to the level of the boat’s net income.

This means it nets out to nil – commonly people have sought to make a loss on charter boats and offset this against other income to reduce tax – this is the arrangement that the ATO does not like.

The focus should be on asset protection meaning we build a “fire wall” between ownership of the boat and business risk.

If we can assist in this regard, please contact us.

INDEXATION OF THE GENERAL TRANSFER BALANCE CAP

In November, the ATO released this advice regarding a likely increase in the near future.

The general transfer balance cap is currently $1.6 million, and all individuals have a personal transfer balance cap of $1.6 million.

When the general transfer balance cap is indexed to $1.7 million there will be no single cap that applies to all individuals. Every individual will have their own personal transfer balance cap, somewhere between $1.6 and $1.7 million, depending on their circumstances.

If you start a retirement phase income stream for the first time after indexation occurs, you will have a personal transfer balance cap of $1.7 million.

If you had a transfer balance account before indexation occurs, your personal transfer balance cap will be:

$1.6 million if, any at time between 1 July 2017 and indexation occurring, the balance of the account was $1.6 million or more

Between $1.6 and $1.7 million in all other cases, based on the highest ever balance of your transfer balance account.

Indexation of the general transfer balance cap may also change other caps and limits that apply to you, if you:

Make non-concessional contributions to your super

Make a non-concessional contribution to your super and may be eligible for a co-contribution

Make a concessional contribution to super on behalf of your spouse and want to claim a tax offset for that contribution.

Indexation of the general transfer balance cap from $1.6 to $1.7 million will occur on 1 July 2020 if the All Groups CPI figure for the December 2019 quarter is 116.9 or higher. If indexation does not occur on 1 July 2020, we anticipate it will occur on 1 July 2021.

INFRASTRUCTURE TAX CONCESSION TO BOOST GOVERNMENT’S RECORD INFRASTRUCTURE PLAN

The Federal Government is seeking to unlock billions of dollars in capital for nation building infrastructure through tax incentives for projects worth more than $500 million.

On 14.11.2019, the Government released a draft guidance note for the implementation of the new economic infrastructure staples tax concession (the concession) for consultation.

The concession allows the Treasurer to approve applications for a 15 per cent concessional withholding tax rate for economic infrastructure projects, instead of the 30 per cent that would otherwise apply.

To qualify, these major projects must have an estimated capital expenditure of $500 million or more and cover a diverse range of economic infrastructure projects in the areas of transport, energy, communications and water.

The application of this tax rate will apply to projects that are in the national interest and significantly enhance the long-term productive capacity of the economy.

This tax incentive will support the development of nationally significant infrastructure, whilst protecting the integrity of Australia’s corporate tax system help to maintain Australia’s international competitiveness.

INCREASED USE OF CONTRACTORS OVER THE HOLIDAYS MAY LEAD TO TPAR REPORTING

In the event you have used more courier or cleaning contractors over the Christmas period, it may be necessary to lodge a Taxable Payments Annual Report (TPAR) in August 2020.

We sometimes see businesses who provide mixed services making increased contractor payments to cleaning and courier services, especially:

building maintenance, property management and event management businesses engaging contractors to provide cleaning services

florists and other retail businesses engaging contractors to provide courier services.

It will be necessary to report if you:

have an Australian business number (ABN)

pay contractors to provide courier or cleaning services on their behalf

are providing cleaning or courier services, and the payments you receive for these services make up 10% or more of total GST turnover, even if the business is not registered for GST.

If you provide mixed services, check with us to ensure the right records are keptto helpwith reporting when TPARlodgmentis due in August 2020. This includes checking your contractors are working under a valid ABN.

CHECKLIST: 2019/20 TAX PLANNING OPPORTUNITIES FOR INDIVIDUALS

Use this checklist as a guide to 2019/20 year-end tax planning opportunities with a particular focus on superannuation.

Superannuation

Personal superannuation contributions

Individuals can now make a personal deductible superannuation contribution regardless of whether they are self-employed or not. Employed, individuals should be able to review their payroll reports to determine the difference between the concessional limits and the employer contributions.

Note the concessional contributions cap is $25,000 for the 2019/20 income year.

In addition, individuals earning over $250,000 in taxable income should be mindful thatDiv293 tax will apply to concessional superannuation contributions. These additional contributions are taxed at 15% on top of the 15% contributions tax paid by the superannuation fund. TheDiv293 tax may be paid from an individual’s own money or from their superannuation fund using a release authority.

Catch-up superannuation contributions

The current income year ending 30.06.2020 is the first year in which individuals can carry forward unused concessional contribution limits for future use.

In order to make a catch-up superannuation contribution in the following year, an individual must have a total superannuation balance under $500,000 at 30 June 2020. When considering a catch-up contribution always be mindful of Division 293 tax – see above

An eligible individual may delay a personal deductible contribution in 2019/20 if they expect taxable income to be under $250,000 in income in 2021/21 in order to avoid aDiv293 liability.

Downsizing contributions

A person aged 65 years or older is able to make a contribution into superannuation of up to $300,000 from the proceeds of selling their main residence. This contribution is outside of non- concessional contribution rules.

To be eligible to make the contribution, they must have owned their main residence for at least 10 years. Also, the contribution is exempt from the age test, work test and the $1.6m total superannuation balance test.

First Home Super Saver Scheme

Voluntary contributions up to $15,000 can be made by an individual who has yet to purchase their first home into their superannuation account. The scheme allows the individual to withdraw this contribution plus earnings in order to be used for a first home deposit.

Voluntary contributions made after 1 July 2018 may be used for withdrawal in the Scheme.

Spouse contribution

A $540 tax offset is available for after-tax contributions (up to $3,000) to a complying superannuation fund on behalf of a spouse (married or de facto) where the spouse’s annual taxable income is less than $37,000. A reduction of the maximum offset is available where spouse’s income is between $37,000 and $40,000.

Note that from 1.7.2020 the age limit for spouse contributions will increase from 69 to 74 years. The work test still it has to be satisfied to be eligible for this measure.

Superannuation government co-contribution

For low income earners, subject to certain conditions, the government makes a co-contribution of up to $500 if a taxpayer makes after-tax contributions of at least $1,000. The co-contribution begins to phase-out at a taxable income of $38,564 and is not available for taxable income above $53,564.

Individuals could also take advantage on increasing the amount that can be withdrawn under the First Home Super Saver Scheme. However, the co-contribution itself would not be included.

Insurance policies in super to become “opt-in”

From 1.7.2019, Superannuation members who are inactive need to “opt-in” with their life insurance and TPD providers to retain their current policies.

Inactive members are individuals who have not had a contribution or roll-over into their account for 16 months. As at 1 July 2019, this applies for accounts without a contribution or roll-over since 1 March 2018.

Prepayments

Subject to cash flow considerations, consider making deductible purchases by year’s end in order to accelerate deductions. This applies particularly if the income in the following year is expected to be lower than in the current year.

In certain circumstances, an immediate deduction can be available for prepaid expenditure (e.g. interest on a loan relating to a rental property).

Nearing retirement

A taxpayer who is considering retiring near year end may find it worthwhile to defer discretionary income until after 30 June. In that subsequent year, their income will normally be smaller, and the marginal rate may therefore be less.

When considering the timing of retirement, keep in mind the restrictions on the concessional treatment of employment termination payments that apply.

CHANGING RESIDENCY

If you become an Australian resident, or stop being one, the range of assets on which you pay CGT in Australia changes.

Becoming an Australian resident

When you become an Australian resident (other than a temporary resident), you’re taken to have acquired certain assets at the time you became a resident for their market value at that time.

This does not apply to assets you acquired before 20 September 1985 (pre-CGT assets) and assets that were taxable Australian property.

If you became a resident, the general cost base rules apply to any capital gains tax assets that are taxable Australian property.

Ceasing to be an Australian resident

If you cease being an Australian resident, or cease being a resident trust for capital gains tax (CGT) purposes, you’re taken to have disposed of assets that are not taxable Australian property for their market value at the time you ceased being a resident.

If you have any indirect Australian real property interests, or options or rights to acquire such interests, you’re taken to have immediately re-acquired these assets for their market value.

Choosing to disregard capital gains and losses

If you’re an individual, you can choose to disregard all capital gains and losses you made when you stop being a resident.

If you cease being a resident and you make this choice, those assets are taken to be taxable Australian property until the earlier of:

a CGT event happening to the assets (for example, their sale or disposal), or

you again becoming an Australian resident.

The effect of making this choice is that the increase or decrease in the value of the assets from the time you cease being a resident to the time of the next CGT event, or of you again becoming a resident, is also taken into account in working out your capital gains or losses on those assets. The way you prepare your tax return is generally sufficient evidence of your choice.