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Trustees must comply with reporting obligations to avoid penalties from the ATO.
The following trustee reporting checklist to make sure you are stress-free at tax-time.
- Value the funds’ assets at their market value at 30 June
- Pay any minimum annual income stream payments required under super laws
- Get an actuarial certificate if required
- Prepare the fund’s end of year financial accounts and statements
- Appoint and approve a SMSF auditor not more than 45 days before the SMSF annual return is due
- Lodge your SMSF annual return by the due date
- Lodge your transfer balance account reports if required
- Review the fund’s investment strategy and document the review
- Maintain all the fund’s records as required under super law
Businesses that fail to keep accurate records may struggle to remain compliant at tax time and incur financial penalties from the ATO.
Follow the ATO’s record keeping guidelines to stay organised.
Basic organisation tips:
- Keep records electronically (if possible)
- Keep evidence of all transactions
- Take photos of paper receipts to avoid faded records
- Keep all business records including income, expenses and bank records- you generally need to keep them for five years
- Keep your business records separate from your personal records
- Make sure business records include cash, online, EFTPOS, bank statements, credit and debit card transactions
- Records should be kept of sales and other business income and business expenses which can be claimed as a deduction
- Keep records showing when you use business purchases for private purposes, which will help you work out the business portion you can claim as a deduction
- Use the ATO record keeping evaluation tool to review your record-keeping practices from time to time and see if you’re still on the right track
Setting up an SMSF can be complex, which is why a checklist is useful to streamline your process. Before you set up your SMSF, first determine if having an SMSF is a commercially viable option.
Once a decision is reached and you are about to start your SMSF, here are the basic steps to get things started:.
- Determine which members will be in your fund?
- Decide if you will you seek professional help to assist your set up?
- Decide whether the fund should have individual trustees or a corporate trustee
- Establish a suitable trust and trust deed
- Register your fund with the ATO
- Set up a bank account
- Prepare an exit strategy
- Get an electronic service address so the fund can receive contributions from employers
Tax exemptions may apply to small businesses going through a restructure provided they meet certain criteria.
Typically when a business is sold, you would have to pay income tax due to transferring assets. However, when a business is restructuring, the ownership of assets remains unchanged, and there is instead a rollover. This allows you to transfer assets as a part of the restructure without having to pay income tax on that transfer.
Your business may be eligible for the small business restructure rollover provided that:
- The change is a genuine restructure as opposed to an artificial or inappropriately tax-driven scheme
- There is no change to ultimate economic ownership in the sense that the economic owners of an asset are not changed or transferred, including if there is more than one owner of that asset
The commissioner’s remedial power has repealed laws that incurred tax consequences on depreciating assets during a business restructure. When transferring depreciating assets, like cars during a business restructure, the commissioner’s remedial power will automatically apply, and there is nothing different you need to do to qualify for this tax exemption.
The ATO’s new data revealed that although the total amount of lost and unclaimed super reduced by $420 million in 2017-2018, there is still $17.5 billion left to be found.
The ATO has prioritised reuniting people with their lost super spread across over 6.2 million accounts. In the past financial year, the ATO was successful in merging $3 billion into active super accounts across the country.
Typically people lose contact with their super funds when they change jobs, move house or forget to update their details. Although some people may intentionally maintain multiple accounts, those who are unaware they have an inactive account may not realise that fees are possibly eroding their super. You should remain engaged with your super fund throughout all stages of your career so you can maximise your retirement nest egg.
You can view your super account details, including lost or forgotten accounts, by linking your myGov account to ATO online services. If you are unsure whether consolidating your super is the best option your super fund can advise you on issues such as insurance that may be attached to your accounts.
A default assessment is an assessment of taxable income for overdue tax returns or the net amount or assessable amount-for late activity statements. Although the ATO’s preferred approach is to work with taxpayers to help them meet their lodgement obligations, a default assessment will be issued if this collaborative approach fails.
The administrative penalty of 75% of the tax-related liability will be applied for each default assessment issued by the ATO. The penalty increases by 20% for taxpayers who have a pattern of non-compliance and the ATO may also apply for another penalty for failing to lodge on time.
Assessment notice warnings
A warning letter will be sent by the ATO including the details of the default assessment and the date the overdue obligation needs to be lodged by to avoid a default assessment. If you do not receive notice of your default assessment, it will be if there is a risk of:
- Dilution of assets
- Movement of funds outside Australia
What you should do if you receive a warning letter
If you receive a warning letter, ensure all overdue obligations are lodged by the date advised in the warning letter. If you are a tax agent, notify your client, immediately, remove the client from your client list if you no longer represent the taxpayer and provide new contact details of the client to the ATO if you possess them.
The event-based reporting (EBR) framework for self-managed super funds (SMSFs) commenced on 1 July 2018. The initiative allows for the administration of the Transfer balance cap (TBC). Under the EBR framework, you need to report to the ATO, when the first member of your SMSF begins a retirement phase income stream.
The SMSF annual return is to be kept separate from the transfer balance account report. The TBAR enables the ATO to record and track an individual’s balance for their TBC and superannuation balance.
The ATO does not provide ‘special circumstances’ discretion for contraventions of the TBC which is why SMSF trustees and members self-monitor to ensure that members do not exceed their TBC.
Events to report
Your SMSF must report events affecting a member’s transfer balance including:
- Details of pre-existing income streams (including value and type) being received on 30 June 2017 that continued to be paid to them on or after 1 July 2017 or were in retirement phase on or after 1 July 2017
- Details of new retirement phase and death benefit income streams including value and type (when a death benefit income stream is reversionary, the start date will be the date on which the member died)
- Details of limited recourse borrowing arrangement (LRBA) payments (including the value and date of each relevant payment) if the LRBA was entered on or after 1 July 2017 and the payment results in an increase in the value of the member’s interest that supports their retirement phase income stream
- Compliance with a commutation authority issued by the Commissioner
- Details and value of personal injury (structured settlement) contributions
- Details and value of commutations of retirement phase income streams that occur on or after 1 July 2017
- Any pension payments, or investment earnings and losses made on or after 1 July 2017
- When an income stream ceases because the interest has been exhausted
- Death of a family member
- Information individuals report to the ATO using a Transfer balance event notification in the event of family law payment split, a debit event from fraud, dishonesty or bankruptcy and structured settlement contributions made before 1 July 2007
Fuel tax credit rates have increased on 1 August. The ATO reminds you to use the new rates to calculate claims on your next business activity statement (BAS).
How to simplify fuel tax credit claims
If you claim less than $10,000 in fuel tax credits each year, you can use the ATO’s simplified methods to keep records and calculate your claims. Keep in mind the following tips:
- Keep accurate business records to help you claim all fuel tax credits you are entitled to
- Use the ATO tax fuel credit calculator to work out your claim
- Registered tax agents and BAS agents can help you with your tax
Simplified record keeping strategies
Use the following records to substantiate claims of less than $10,000 per year:
- Contractor statements can be used where an amount for fuel used in performing services is deducted from the amount payable for the services
- Financial institution statements (business or personal credit/debit accounts)- where only the dollar amount is displayed on the statement
- Point-of-sale docket- where the docket either does not itemise the quantity of fuel dispensed or the quality is illegible
- Fuel supplier statement of invoice- where only the dollar amount is displayed on the statement
SMSFs provide the trustee autonomy and an increased opportunity to maximise your retirement savings. However, an investment strategy must be accompanied by a risk management plan should some of your investments come up short.
Consider the following risk management strategies:
Diversification reduces risk by investing in many different assets including property, annuities and equities. By spreading your earnings across several investments you minimise the risks to your retirement nest egg that can occur if one investment suffers a loss or a disappointing return. Organise your target returns according to your asset class and establish the accepted variation range from this target. This allows you to track your investment portfolio and whether it is setting you on the right financial path.
If you tie up your money in assets like property, then you may run short on cash. It is important that you have cash to cover the costs of running your SMSF and in the case of a member’s total and permanent disablement. If you’re also forced to sell an asset to get this cash the market conditions may not be ideal, and you could receive a disappointing return because you need cash in a rush.
The ATO has extended the $20,000 threshold to 30 June 2019.
If you buy an asset and it costs less than $20,000, you may write off the business portion in your tax return.
To be eligible to use the simplified depreciation rules and claim an immediate deduction for the business portion of each asset costing less than $20,000, you must:
- Have a business turnover less than $10 million (increased $2 million on 1 July 2016)
- The asset was first used or installed ready for use in the income year you are claiming it in.
If your asset costs more than $20,000, you are not eligible for immediate deduction. They will continue to be deducted over time using the general small business pool. You can write off the balance of this pool if the balance (before applying any other depreciation deduction) is less than $20,000 at the end of an income year.
The $20,000 threshold applies from 12 May 2015 to 30 June 2019 and reduces to $1,000 on 1 July 2019. Remember, registered tax agents and BAS agents can help you with your tax.