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TIMES OF CHANGE
Set out below are a range of statistics that put in perspective the change of dynamics of world economies and society generally.
Change is Germany’s population over the age of 75 from 2005 to 2015: 33%
Increase in tax burden needed to maintain current benefit levels for Germany’s future generation: 90%
Change in Japan’s population over the age of 75 from 2005 to 2015: 36%
Change in Japan’s population under the age of 5 from 2005 to 2015: -13%
Increase in tax burden need to maintain current benefit levels for Japan’s future generation: 175%
Computational capability of an Intel processor, as measured in instructions per second 1971: 60,000
2005:108,000,000
Number of coal-fired power plants China plans to build by 2012: 562
As is so often said quoting Charles Darwin:
“It is not the strongest of the species who survive, or the most
intelligent, but those who are most adaptive to change”.
In preparing your business for the future and taking advantage of the opportunities that future changes may bring, you may wish to reflect on how your competitors may adapt to changes in your industry or to their peril, not adapt with sufficient haste to such challenges.
Often sitting down for a one hour brainstorming session with one of our directors is a great way to start a process of adapting your business for change and harnessing the opportunities such change invariably brings. If this interests you, just let us know.
TAX WATCH - More general anti-avoidance (Part IVA) guidance .
The ATO recently issued a release stating that:
• The Commissioner has discontinued his husband and wife partnership test cases, now conceding that Part IVA will not apply to such partnerships.
• It is generally OK for the parties to share profits and losses, even though one party might contribute more work and labour to the partnership than the other.
• As regards personal services businesses, the commissioner has concluded that Part IVA will not apply “if the individual providing the personal services is fairly remunerated for his or her services – having regard to the net personal services income earned by the individual’s private company or trust”.
• If appropriate remuneration is absent, an appropriate distribution of dividends or trust income to the individual doing the work is acceptable.
• The ATO still believes that Part IVA may apply where a company operating a personal services business retains profits “where it is apparent from the scheme that the purposes of profit retention is to avoid or defer tax”. How successful the ATO would be if it litigated this point remains to be seen.
The ATO also advised that the test case program will now focus on the following:
• Partnerships which are disguised employment relationships.
• The use of trusts to distribute personal services income (as opposed to business income) to beneficiaries who make no contribution to the earning of that income.
• The use of more than one entity to facilitate the splitting of personal service income.
• Profit retention arrangements where there is a contrived variation of salary from year to year depending on whether the main service provider has other taxable income; where the main service provider has other taxable income; where the main service provider gains access to the retained profits; and where profits are retained so that they can be paid to an associate.
But, the above does not apply to partnerships which are disguised employment arrangements.
If any of this commentary concerns you, please speak to your usual contact in the firm.
Repayment of Superannuation Incorrectly Contributed
In a recent case, the NSW supreme court has held that where superannuation has been incorrectly paid on behalf of a contractor, such amount can be refunded by the superannuation fund to which it was paid.
Where payments have been made in respect of independent contractors, it is often the case (as established in Vabu v FCT) that it is not necessary to fund superannuation contributions in respect of contractors. If you have incorrectly paid superannuation in respect of a contractor it may be possible to obtain a refund.
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Random Tax Checks on Self-run Superfunds
The trustees of self-managed superannuation funds will be randomly quizzed by the tax office to check they are doing their job properly. The correct operation of the growing number of funds has been identified by the tax office as its No.1 goal next year.
The ATO have said an increased focus would be placed on the lodgement of tax returns after it was found trustees of funds were becoming lazy.
In the next year, the tax office will start to cold-call trustees with random queries. The trustees will also be asked to fax the tax office documents relating to their latest tax return.
The ATO state there will be real-time reviews, usually focused on current or recent events, and will be quite specific in nature. To quote the ATO, “It allows us to identify problems as they emerge and minimises compliance costs for the trustee and agent.”
Discrepancies between tax returns, the level of contributions into the fund and the amount of interest earned would also be examined. Trustees face regulatory action if they do not meet the tax office’s requirements.
Self-managed trustees are considered conservative investors with most of their funds invested in cash and term deposits. However, the ATO expects that all rules and legal requirements are adhered to and are increasing these reviews to ensure that trustees are both eligible to be trustees and are fit and proper persons.
Upgrading your accounting software
MYOB and QuickBooks products were widely purchased by many clients at the time GST was introduced. The software companies continuously improve their products with upgrades. Failure to upgrade your software from time to time can result in total loss of data or lead to an inability to re-install.
MYOB & QuickBooks generally no longer provide replacement software or emergency recover for software that is older than 2 years.
We encourage and recommend you consider upgrading your software product to a current supported version to protect against critical data loss and recommend you to ALWAYS KEEP BACKUPS!
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