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2022 NSW Budget: What’s in it for you?

The 2022-23 NSW Budget has been handed down and as the final Budget before the State election, it is perhaps no surprise that the government is spending lavishly in a bid to shore up votes. Prominent measures targeting families and first home buyers have been announced. The current Budget deficit for NSW sits around $11.3bn and is projected to decrease to around $2.5bn in 2023-24.

While the NSW Treasurer has an optimistic economic outlook, with the State on track to return to a Budget surplus by the 2024-25 financial year, there remain significant economic and fiscal pressures, such as inflation and interest rate increases, which will increase the State’s cost of borrowing.

Families

The government has announced a new Back to School Program, which is set to provide $150 to every NSW school child to be used towards to the cost of school supplies in 2023, including uniforms, shoes, bags, learning resources, and other stationery.

Other continuing programs for school-aged children include Active Kids, and Creative Kids, which provide vouchers to families to get children involved in physical and creative/cultural activities. Also making a return appearance is the First Lap voucher specifically for swimming and water safety.

For families with pre-school aged children, the government has committed to expand the Affordable Preschool program, which will provide families with $2,000 per child per year for preschool in long day care settings, and up to $4,000 per child per year in community and mobile preschools. The projected cost of this measure will be $1.3bn.

In addition to the fee relief, the government has also committed another $5.8bn in the Budget over 10 years as an investment to make pre-kindergarten available to all children in the year before school by 2030.

First home buyers

The NSW government has committed $780.4m to a 2-year trial of a shared equity scheme for up to 6,000 eligible participants purchase a home. Those eligible include a single parent of child/children under 18 years of age, a single person 50 years of age or above, or first home buyer key workers who are nurses, teachers, or police. The gross income of the household must not be more than $90,000 for singles and $120,000 for couples, and a minimum deposit of 2% is required for purchasers.

Under the scheme, the NSW government will contribute up to 40% of the purchase price of a new dwelling or up to 30% of the purchase price of an existing dwelling. No repayments will be required on the equity contribution and no rent or interest will be charged while the purchaser remains eligible. However, voluntary payments can be made in order to progress to full ownership of the property.

The property price must be less than $950,000 in Sydney and major regional centres such as Newcastle, or less than $600,000 in other  regional areas. Those wishing to participate in the scheme should be aware that an annual review is required each year to ensure continued eligibility. Those that no longer meet the eligibility criteria may be required to begin repayment of the government equity contribution, although no details on the form and method of repayment are available at the present time.

Participants are also required to maintain their property and keep things in good working order. In addition, the government must approve certain modifications/renovations so that the value changes can be factored into the eventual sale price of the property.  

In addition to the shared equity scheme, the government will also set aside $728.6m in order to introduce an option for first home buyers purchasing a home for up to $1.5m to pay an annual property tax instead of upfront stamp duty. The annual property tax payments will be based on the land value of the purchased property and the proposed rates for 2022-23 will be $400 plus 0.3% of land value for principle places of residence or $1,500 plus 1.1% of land value for investment properties.  

Want to find out more?

If you would like to know about how to benefit from the NSW Budget or fully understand other measures relating to infrastructure or business, we have the expertise to go beyond the headlines and explain how these measures will affect you. Contact us today.

Single Touch Payroll: Phase 2

Single touch payroll (STP) has now entered into Phase 2, although most employers may not yet be reporting under this phase as many digital service providers (DSP) have obtained deferrals to help get their software ready and help their customers transition. Essentially, STP works by sending tax and super information from an STP-enabled payroll or accounting solution directly to the ATO when the payroll is run.

Entering Phase 2 means that additional information which may not be currently stored in some employers’ payroll systems will need to be reported through the payroll software. A salient example is the start date of employees. While many newer businesses may have that handy, older businesses may have trouble finding an exact start date, particularly for long serving employees. In those instances, the ATO notes that a default commencement date of 01/01/1800 can be reported for STP Phase 2 purposes.

Employers will also be required to report either a TFN or an ABN for each payee included in STP Phase 2 reports. Where a TFN is not available for an employee, a TFN exemption code must be used. If a payee is a contractor and employee within the same financial year, both their ABN and TFN must be reported.

In addition to reporting TFNs and commencement dates for employees, employers are now also required to report the basis of employment according to work type. That is, whether an individual is Full-time, part-time, Casual, Labour hire, voluntary agreement (contractor with own ABN but in a voluntary agreement with business to bring payments into the PAYG system), death beneficiary, or non-employee (i.e., not in the scope of STP but included for voluntary reporting of super liabilities).

The report generated from STP Phase 2 will also include a 6-character tax treatment code for each employee, which is a shortened way of indicating to the ATO how much should be withheld from payments to employees. Most STP solutions will automatically report these codes, but employers should still understand what the codes are to ensure that they are correct. For example, RTSXXX refers to regular (R) employees with a tax-free threshold (T), who have study and training support loans (S), who have not asked for a variation of amount withheld due to Medicare levy surcharge (X) or Medicare levy exemption (X), or Medicare levy reduction (X).

The income and allowance details attributed to employees will also be further drilled down in Phase 2. For example, instead of reporting a single gross amount of income, employers need to separately report on gross, paid leave, allowances, overtime, bonuses, directors’ fees, return to work payment (lump sum W) and salary sacrifice amounts.  

While STP Phase 2 commenced on 1 January 2022, most DSPs have obtained deferrals which cover their customers. This means that if your DSP has a deferral in place, you do not need to apply for your own deferral and will only need to start reporting Phase 2 information from your next pay run after your DSP’s deferral expires. However, if your business needs more time in addition to your DSP’s deferral, you can apply for your own deferral online.

Need help to comply with Phase 2?

Payroll is complicated, and if your business needs more help to understand the extra information required for Phase 2 reporting, we can help. If your DSP is ready for Phase 2 reporting but you need more time, we can also help you to apply for a deferral to give you more time to get ready.

ASIC Focus Areas for 2022 Reporting

As COVID-19 begins to lose its place in the public consciousness, the uncertainty felt during the pandemic has been replaced by the economic challenges presented by high inflation, an increase in energy costs and higher interest rates. ASIC has reminded directors and preparers of financial statements for the year ended 30 June 2022 to review and be aware of the impact of these uncertainties.

For the 30 June 2022 reporting period, ASIC will be focusing on areas of concern. One of these is uncertainties and risks which may affect asset values, liabilities, and assessments of solvency and going concern. This includes factors such as COVID-19 conditions and restrictions during the period, the discontinuation of financial and other support from governments/parent companies/lenders etc., and the impact of rising interest rates on future cash flows and on discount rates used in valuing assets and liabilities.

Other considerations also include the increased likelihood of ongoing geopolitical risks, such as the Ukraine/Russia conflict and the flow-on effects for the broader Australian economy and the industry the business is in. This is compounded by the difficulty in obtaining sufficiently skilled staff and expertise due to the slow ramping up of migration activity after COVID-19.

It is perhaps no surprise then that ASIC considers industries that may be particularly affected this year to include the construction industry, owners of commercial properties and large carbon emitters.

Flowing on from these uncertainties, one of the other important areas that ASIC will be focusing on will be asset values, which encompasses the following:

  • impairment of non-financial assets – including goodwill, indefinite useful life intangible assets and intangible assets not yet available for use. The appropriateness of key assumptions and disclosure of estimation of uncertainties will need to be reviewed and justified.
  • value of property assets – factors that could adversely affect commercial and residential property values should be considered, including levels of migration, changes in shopping habits and future economic or industry impacts on tenants.
  • expected credit losses on loans and receivables – key assumptions used in determining expected credit losses should be reasonable and supportable.
  • value of other assets – including the value of investments in unlisted entities, whether deferred tax assets will be realised, and the net realisable value of inventories.

According to ASIC, financial report preparers and directors should also pay close attention to disclosures. It notes that when considering what information should be provided in the financial report, those responsible should consider what their backers and potential investors would want to know. Salient changes from the prior year should also be disclosed.

Given the challenging economic conditions, the adequacy of provisions for such things as onerous contracts, leased property make good, financial guarantees and restructuring need to be carefully considered. In addition, subsequent events after the reporting period which may affect assets, liabilities, income, expenses or disclosures also need to be reviewed and disclosed.

While companies may experience differences depending on their industry, where they operate and how their suppliers and customers are affected, what remains consistent is that all companies will face some level of uncertainty about future economic and market conditions. ASIC encourages companies to ensure that impacts on the business are appropriately disclosed, and that underlying estimates and assessments for financial reporting purposes be reasonable and supportable.  

Need help preparing your financial statement?

With the end of financial year drawing closer, we can assist in preparing financial statements and ensuring that all estimates and assessments are reasonable. Contact us today for help and advice.

Rising interest rates: what Australian SMEs need to know

Key Points:

  • The RBA expects underlying inflation to rise to 4.75 per cent, while the Consumer Price Index (CPI) has already risen to 5.1 per cent annually
  • Most small businesses have outstanding loans in one form or another, and an increase in interest rates will essentially result in more expensive loan repayments for them

The world has changed a lot since the global financial crisis of 2008, but one thing has remained constant: record low interest rates. No matter what turbulence they faced, Australian businesses could rely on the fact that borrowing remained cheap.

Now, we are finally coming to the end of the cheap lending cycle. Inflation is rising globally, spurred by pandemic-induced supply chain shortages, rising commodity prices, including oil and gas, thanks to Russia’s recent invasion of Ukraine.

In the US, inflation hit 7.9 per cent in March, causing the Federal Reserve to raise rates for the first time since 2018. This has, rightly, put Aussie businesses on notice to expect a rise in interest rates, with Commonwealth Bank already tipping that cash rates will increase in June.

While Australia is far behind the US on inflation, pressure will likely increase. The RBA expects underlying inflation to rise to 4.75 per cent, while the Consumer Price Index (CPI) has already risen to 5.1 per cent annually. Just this week the RBA has increased the cash rate target by 25 basis points, which was swiftly passed on by the major banks, despite there being some abnormal economic factors caused by COVID over the last two years.

But what does all this mean for small businesses? Many business owners, particularly those running high-growth, eCommerce companies, will be focused on supply chain issues that will negatively impact their ability to secure stock, which in turn will restrict their cashflow. The rising interest rate environment is only going to further impact on a business’s freedom to operate.

The end of cheap money

Until this point, businesses have enjoyed record low borrowing rates from traditional banks due to the all-time low cash rate and fierce competition from non-bank lenders, enabling them to fund their growth cheaply.

This has meant it has often been considered ‘best practice’ to borrow to fund growth. Most small businesses, therefore, have outstanding loans in one form or another, and an increase in interest rates will essentially result in more expensive loan repayments for them. Since these are often long-term debts that will take years to repay, this will mean carrying the debt for longer, incurring more interest.

For those businesses looking to obtain shorter-term funding to invest in growth or cover them until more cash arrives, this funding will become more expensive. Banks and other lenders that require physical assets to secure finance to, will likely set more stringent terms. As any business owner who has taken out a bank loan knows, the prospect of losing your house because you can’t make payments really ups the pressure.

Borrowing to stay ahead

The issue is that, now more than ever, businesses need to have cash to get ahead. Competition in the supply chain is fierce, with suppliers, particularly those in Asia, able to select which buyers they want to sell to. Australian businesses are also facing record high container prices, with shipping operators preferring to focus on larger markets, such as the US.

All this means that Australian businesses may not be getting the best terms from suppliers, meaning that stock is slower to arrive, and margins are cut (or costs are passed onto customers).

Companies that have emerged cashflow-positive from the pandemic are in an excellent position to get ahead of competitors by buying stock more quickly and in greater volume from suppliers, in order to secure themselves better rates and more immediate availability. But those companies that can’t fund this may fall behind.

Finance, for supply chains

There are a range of so-called ‘non-bank lending’ products out there which businesses can turn to that will be much more flexible to the needs of smaller, high-growth businesses across a range of industries.

Many non-bank lenders won’t require a business to specify a physical asset to secure lending to, making them more suitable for eCommerce or other similar businesses. Plus, funding types such as Debtor Finance (sometimes known as invoice finance) mean that companies can receive cash from unpaid invoices early, without waiting for the usual 30, 60 or 90 days to pass. An innovative supply chain financier, such as Octet, can provide the facility for this, and will take a small fee, but ultimately that funding is still yours from your own sales, and, therefore, is less prone to interest rate rises.

Take advantage of any available early payment discounts, whilst receiving your goods quicker than the competition. The next few years are going to be uncertain and challenging, but savvy businesses shouldn’t settle for high-interest bank funding to see them through, without at least considering the alternatives. For more information, book a consultation with us today.

Disclaimer: The content of this summary is general by nature. We therefore accept no responsibility to persons acting on the information herein without consulting with DSV Partners. Liability limited by a scheme approved under Professional Standards Legislation.

How to take advantage of the Government’s digitalisation incentives this financial year

Key Points:

  • $1 billion is being provided to support small businesses digitalise their operations with a new bonus tax deduction
  • For every $100 a business spends on digital economy technologies, they get a $120 tax deduction

As part of the Australian Government’s Digital Economy Strategy, $1 billion is being provided to support small businesses digitalise their operations with a new bonus tax deduction. 

SMEs with an aggregated turnover below $50 million per annum will be able to deduct an additional 20 per cent of the cost incurred on business expenses and depreciating assets that support their digitalisation. So, for every $100 a business spends on digital economy technologies such as flexible work solutions, cyber security, cloud adoption, e-commerce, or new software services, they get a $120 tax deduction.

This is a huge win for SMEs as it will help fund their digital transformation for the future. And yet most business owners are unaware of the current digitalisation incentives, whether it applies to them or how they can benefit. As the tax incentive is only available until 30 June 2023, it is simply a wasted opportunity to not capitalise on the investment boost being offered. It’s time to do your research and analysis, identify the areas within your business that would benefit from digitalisation, prioritise those needs and choose the right partners to leverage.

Senior leadership involvement in software purchasing was up 7 per cent since the start of the pandemic, and over the last two years, demands have caused IT budgets to skyrocket. Yet these budget increases cannot continue, so one critical solution is for SMEs to focus on optimising their tech stack. The question is, how do you get started?

1. Conduct a full business evaluation and digital audit

Analyse all pillars of your business to work out what can be done more efficiently and effectively and how can technology be the enabler. Assess the tech stack you already have and see if there’re ways to consolidate and optimise for performance.  Based on the known gap, research the digital tools, platforms, or solutions that will complement and enhance your current tech stack and enable you to increase productivity, profitability, and assist in improving the way of working for the future.

2. Prioritise your digital requirements

In Frost & Sullivan’s research, the top five selection criteria for businesses choosing a new IT solution were:

  • supporting IT processes automation 28 per cent
  • improving employee productivity 25 per cent
  • ensuring performance & reliability 25 per cent
  • value for money 23 per cent
  • improving IT administration/management 22 per cent.

The research also found that one of the most important digital solutions to invest in, is one which ensures the business can successfully run from anywhere. Yet SMBs are often lacking in a simple, reliable and scalable solution for the hybrid and remote working world in which we now live in and is here to stay.

3. Do your research

Decide which provider is the right fit for your business now and in the future. Conduct online research, talk to peers, and seek out expert advice to identify a shortlist of providers. Choose a solution that is suitable and cost effective for SMEs, yet with the capability and capacity to grow as the business scales, with on-demand support as and when required. For example, GoTo provides flexible work software that enables businesses to achieve a sustainable, resilient, and future-proof work-from-anywhere strategy. Significantly, it provides enterprise-grade technology specifically designed for SMEs, combining unified communications and collaboration as well as IT management and support solutions in one affordable application that can scale to facilitate future growth.

4. Invest

Don’t wait. The market is constantly transforming, and you don’t want to be left behind. The bonus deduction applies for qualifying expenditures up to $100,000 per annum incurred between 29 March 2022 until 30 June 2023. Consult us for advice on how to maximise this tax incentive today.

Disclaimer: The content of this summary is general by nature. We therefore accept no responsibility to persons acting on the information herein without consulting with DSV Partners. Liability limited by a scheme approved under Professional Standards Legislation.

More ATO Action on Super Guarantee Non-compliance

The Australian National Audit Office (ANAO) has recently issued a report on the results of an audit conducted on the effectiveness of ATO activities in addressing super guarantee (SG) non-compliance. While ANAO notes that the SG system operates largely without regulatory intervention as employers make contributions directly to super funds or through clearing houses, the ATO does have a role as the regulator to encourage voluntary compliance and enforce penalties for non-compliance.

To measure this non-compliance, the ATO uses a measure called the SG gap, which is an estimate of the difference between the amount the ATO collects and what would have been collected if every taxpayer was fully compliant. The most recent data from the ATO was published in 2021 and indicated that the net SG gap in 2018-19 was around $2.5bn.

Overall, the ANAO report found that ATO activities addressing super guarantee non-compliance were only partly effective. This also held true for the risk-based SG compliance framework in which the ATO operates. It noted that while there was some evidence that the ATO’s compliance activities were improving employer compliance, the extent of improvement could not be reliably assessed.

The report made three recommendations to improve ATO compliance activities in relation to SG non-compliance. The first was that the ATO implement a preventative approach to SG compliance. The second was that the ATO assess its performance measures against the Public Governance Performance and Accountability Rule 2014 and enhance its public SG performance information. This includes setting targets for measures such as the SG gap and having explanations for performance results, as well as changes over time.

While the first two recommendations will have a negligible practical impact on day-to-day operations for employers in general, ANAO’s third and final recommendation may be a different story. Among other things, ANAO recommended that the ATO maximise the benefit to employee’s super funds by making more use of its enforcement and debt recovery powers, and to consider the merit of incorporating debtors holding the majority of debt into prioritisation of debt recovery actions.

In its reply, the ATO agreed with this recommendation and stated that while it paused much of its firmer super guarantee related recovery actions through the COVID-19 pandemic, those have now recommenced. With the recommencement of recovery actions, its focus will generally be on taxpayers with higher debts, although it will be prioritising taxpayers with super guarantee debts irrespective of value.

The ATO also agreed with the first two recommendations in whole or part. It says that it has already begun implementing a preventative compliance strategy using data sources such as Single Touch Payroll and regular reporting from super funds. It expects to continuing prioritising a preventative approach while also strengthening its data capability.

In addition, the ATO have indicated that they will continue to investigate every complaint received in relation to the non-payment of SG, taking action where non-payment is identified. These actions include the imposition of tax and super penalties, as well as the recovery and back payment of super to employees. In addition, it will be increasing transparency of compliance activities and employer payment plans so that affected employees are aware of the expected timing of back payments of super.

Need help with SG payments?

Employers should take note that the ATO is now back to its pre-COVID-19 setting in relation to late or unpaid SG. If you have issues with paying super guarantee or would like to make a voluntary disclosure before a potential ATO audit, we have the expertise to help. Contact us today.

Disclaimer: The content of this summary is general by nature. We therefore accept no responsibility to persons acting on the information herein without consulting with DSV Partners. Liability limited by a scheme approved under Professional Standards Legislation.

Employees vs. Contractors: More Clarity Coming

The High Court recently handed down a significant decision dealing with the distinction between employees and independent contractors. The case concerned an “independent contractor” and a labour hire company. Although the ATO was not a party to either case, it has since released a decision impact statement as the High Court’s decisions impact on the ordinary meaning of the term “employee”.

In the case, a labourer had signed an Administrative Services Agreement (ASA) with a labour hire company to work as a “self-employed contractor” on various construction sites. The Full Court had initially held that the labourer was an independent contractor after applying a “multifactorial” approach by reference to the terms of the ASA, among other things. The High Court however, overturned the Full Federal Court’s decision and held that the labourer was an employee of the labour hire company.

The majority of the High Court stated that where the parties have comprehensively committed to the terms of the relationship to a written contract, and no party is disputing the validity of that contract, the characterisation must proceed based on the legal rights and responsibilities established in that written contract. It thus concluded that a multifactorial approach examining the relationship between the parties over the entire history of their dealings was unnecessary and inappropriate. In certain circumstances however, an examination of post-contractual conduct may be permissible, such as when the contract is not in writing, is oral/partly oral, being challenged or varied.

The minority view of two of the Judges considered the multifactorial test to be a well-established principle for characterising the totality of the legal relationship and that they were permitted to look at the whole employment relationship and not be restricted to the written contract. Even though there were different approaches taken in the judgement, the High Court agreed that the critical question in these circumstances was whether the supposed employee performed work while working in the business of the engaging entity.

“That is, whether the worker performed their work in the engaging entity’s business (i.e. the labour hire firm) or in an enterprise or business of their own.”

In its decision impact statement, the ATO noted that the High Court has not disturbed the well-established practice of examining the totality of the relationship. While the multifactorial test was rejected by a majority, there are still instances where it could be applied

In addition, the ATO noted that the decision recognised that long-established employment indicia are still relevant, although they must now be viewed through the focusing question of whether the supposed employee is working in the business of the employer. This, according to the ATO, reflects its current understanding of the application of the business integration test that the High Court has now elevated as one of the primary aspects of contractual examination.

As a result of the decision, the ATO will review relevant rulings that may be impacted by the High Court’s decision in the case, including super guarantee rulings on work arranged by intermediaries and who is an employee, as well as income tax rulings in the areas of PAYG withholding and the identification of employer for tax treaties.

Need help?

If you run a business and have dealings with contractors, we can help you understand how this decision will affect you. If you would like to keep up to date with any developments or changes to ATO’s rulings impacted by the High Court’s decision, contact our office today.

Disclaimer: The content of this summary is general by nature. We therefore accept no responsibility to persons acting on the information herein without consulting with DSV Partners. Liability limited by a scheme approved under Professional Standards Legislation.

Operation Protego: Detecting GST Fraud

  • May 31, 2022
  • by:  DSV 
  • note:  0 Comments 

The ATO has lifted the lid on its most recent operation to stamp out GST fraud, Operation Protego, in order to warn the business community to not engage with fraudulent behaviour and encourage those who have fallen into the trap to voluntarily disclose, before the application of tougher penalties.

According to the ATO, Operation Protego was initiated when its risk models, coupled with intelligence received from the banks, AUSTRAC-led Fintel Alliance, and the Reserve Bank of Australia (RBA), identified escalation of suspicious refunds. The Operation itself is investigating taxpayers inventing fake businesses to obtain an Australian Business Number (ABN), which is then used to submit fictitious Business Activity Statements (BASs) in order to get a false GST refund.

The refund amounts involved in these schemes are significant, averaging at $20,000. The ATO are currently investigating around $850m in potentially fraudulent payments made to approximately 40,000 individuals, and is working with financial institutions that have frozen suspected fraudulent amounts in bank accounts. The ATO notes that while $850m in fraudulent payments is substantial, under the Operation, it stopped many more fraud attempts.

It may be the case that not all of the individuals involved in these refund schemes know that they are doing something illegal. For example, schemes promoting loans from the ATO or obtaining government disaster payments from the ATO have been on the rise on various social media platforms. These scheme promoters will also sometimes require the myGov details of the individual or business as a perquisite to obtain either the fictitious loan or government disaster payment.

“We are working with social media platforms to help remove content promoting this fraud, but if you see something that sounds too good to be true, it probably is…[t]he people who have participated in this fraud are not anonymous…[w]e know who they are, and we will be taking action.” – Will Day, ATO Deputy Commissioner and Chief of Serious Financial Crime Taskforce.

The ATO makes it clear that it does not offer loans or administer government disaster payment, and any advertisement indicating that they do is a rort. Government disaster payments are administered through Services Australia if they are federal government payments (eg. Australian Government Disaster Recovery Payments), or through various state government bodies if they are state government payments (eg. Disaster Relief Grants from the NSW government administered by Resilience NSW).

Another red flag the ATO is on the look-out for as a part of the Operation is backdating when a business is set up. It notes that backdating in conjunction with seeking a refund will flag the business as high risk and will subject it to more scrutiny as well as compliance action.

While Operation Protego is running, the ATO notes that legitimate taxpayers may be affected by the extra controls put in place to stop fraudulent refunds, these controls may require taxpayers to take extra steps to receive their legitimate refunds. Taxpayers that have shared myGov login details for themselves or their businesses with scheme operators are encouraged to contact the ATO for assistance.

Need Help?

If you think you’ve been inadvertently caught up in these GST refund schemes, we have the tools and expertise to help you. Or if you’re a legitimate business that’s been affected by the extra controls put into place, we can help you get your refund faster. Contact us today.

Disclaimer: The content of this summary is general by nature. We therefore accept no responsibility to persons acting on the information herein without consulting with DSV Partners. Liability limited by a scheme approved under Professional Standards Legislation.

COVID-Related Support for SMSFs Rental Relief

Your fund, or a related party of your fund, may have offered rental relief to a tenant due to the financial impacts of COVID-19.

If rent was reduced or waived, the ATO will not take any compliance action against your fund and/or ask your approved SMSF auditor to report any contraventions, as long as the relief is provided on comparable terms to relief offered by other landlords to unrelated tenants in similar circumstances. If rent was deferred, relief granted by the ATO will ensure that the deferral does not cause a loan or investment to be an in-house asset of the fund in 2019-20, 2020-21 or 2021-22, and future financial years, provided certain conditions are met.

Temporary changes to a lease agreement to provide for rental relief need to be properly documented, together with the reasons for those changes.

Please contact us as a formal variation of the lease may need to be executed.

In-house Asset Relief

If the value of your fund’s in-house assets exceeds 5% of the fund’s total assets as at 30 June of an income year, you are required to prepare and execute a written plan to get below 5% by the end of the following income year.

However, if you have not been able to execute the plan because of the financial impacts of COVID-19:

  • the ATO will not take any compliance action against your fund; and
  • your approved SMSF auditor will not need to report any contravention of the in-house asset rules to the ATO.

Loan Repayment Relief

If your fund has offered loan repayment relief because the borrower was experiencing difficulty repaying the loan due to the financial impacts of COVID-19, the ATO will not take any compliance action and your approved SMSF auditor need report any contravention of the super laws provided:

  • the relief is offered on commercial terms; and
  • the changes to the loan agreement are properly documented.

Other Relief

SMSF residency relief – may be available where your fund no longer satisfies the residency rules because you were stranded overseas for an extended period.

Loan repayment relief – may be available if your fund offered loan repayment relief because the borrower was experiencing difficulty repaying the loan due to the financial impacts of COVID-19.

LRBA relief – may be available if your SMSF has a limited recourse borrowing arrangement (LRBA) in place with a related party lender and the lender have offered loan repayment relief to the fund due to the financial impacts of COVID-19.

Disclaimer: The content of this summary is general by nature. We therefore accept no responsibility to persons acting on the information herein without consulting with DSV Partners. Liability limited by a scheme approved under Professional Standards Legislation

Four priorities of the ATO this tax time

The Australian Taxation Office (ATO) has announced four key focus areas for Tax Time 2022.

The ATO will be focusing on:

  • record-keeping
  • work-related expenses
  • rental property income and deductions, and
  • capital gains from crypto assets, property, and shares.

These ATO priority areas will ensure that there is an appropriate level of scrutiny on correcting reporting of deductions and income, so that Australia continues to have a strong tax system that can support the Australian community. Taxpayers can take steps to lodge right the first time.

It is important to rethink your claims and ensure you satisfy the following golden rules:

  1. You must have spent the money yourself and weren’t reimbursed.
  2. If the expense is for a mix of income producing and private use, you can only claim the portion that relates to producing income.
  3. You must have record to prove it.

Record-keeping

We know there are still some weeks left until tax time, but if you start organizing the income and deductions records you’ve kept throughout the year, this will guarantee you a smoother tax time and ensure you claim the deductions you are entitled to.

For those people who deliberately try to increase their refund, falsify records or cannot substantiate their claims the ATO will be taking firm action to deal with these taxpayers who are gaining an unfair advantage over the rest of the Australian community who are doing the right thing.

Work-related expenses

To claim a deduction for your working from home expenses, there are three methods available depending on your circumstances. You can choose from the shortcut (all-inclusive), fixed rate and actual cost methods, so long as you meet the eligibility and record-keeping requirements.

Everyone’s work-related expenses are unique to their circumstances. If your working arrangements have changed, don’t just copy and paste your prior year’s claims. If your expense was used for both work-related and private use, you can only claim the work-related portion of the expense. For example, you can’t claim 100% of mobile phone expenses if you use your mobile phone to ring your family.

Rental income and deductions

If you are a rental property owner, make sure you include all the income you’ve received from your rental in your tax return, including short-term rental arrangements, insurance payouts and rental bond money you retain.

It is encouraged to keep good records, as all rental income and deductions need to be entered manually. You can ask us for assistance. If the ATO notices a discrepancy it may delay the processing of your refund as the ATO may contact you or your registered tax agent to correct your return. The ATO can also ask for supporting documentation for any claim that you make after your notice of assessment issues.

Capital gains from crypto assets, property and shares

If you dispose of an asset such as property, shares, or a crypto asset, including non-fungible tokens (NFTs) this financial year, you will need to calculate a capital gain or a capital loss and record it in your tax return.

Generally, a capital gain or capital loss is the difference between what an asset cost you and what you receive when you dispose of it.

Crypto is a popular type of asset and it is expected that more capital gains or capital losses will be reported in tax returns this year. Remember, you can’t offset your crypto losses against your salary and wages.

Through data collection processes, it is known that many Australians are buying, selling or exchanging digital coins and assets, so it’s imperative that people understand what this means for their tax obligations.

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The content of this summary is general by nature. We therefore accept no responsibility to persons acting on the information herein without consulting with DSV Partners.

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