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Advice

July 2014 Client Bulletin

As we begin the 2014/15 financial year, a number of tax and compliance changes are coming into effect. Some changes remain announced but unlegislated while the Government is unable to get some measures through the Senate. In particular, the amendments to small business depreciation rules remain in limbo while we wait for the legislation to be reintroduced into the new Senate. The fuel tax credits rates are also subject to adjustment depending on whether the carbon charge is abolished as announced. We have prepared the overview of the main changes that come into effect from 1 July 2014 as well as the upcoming compliance obligations to help you prepare for the new financial year. Some of these changes have long been anticipated but many have received little publicity and may have slipped under the radar. Employers most particularly need to ensure they comply with all the new requirements.

Award rates of pay increased by 3%

The Fair Work Commission has recently approved a 3% increase in the award rates of pay across all classification levels. This increase is effective from the first full pay period commencing on or after 1 July 2014.

No adjustments are required part way through a pay period - for example, if your pay period is weekly starting on a Monday, you will not have to pay the increase until the pay period commencing on Monday 7 July 2014.

If you are covered by an enterprise agreement you have to make sure that your employees are not paid less under the agreement than if they were covered by the relevant award.

Superannuation guarantee increase from 9.25% to 9.5%

From 1 July 2014 the superannuation guarantee rate at which mandatory employer contributions are made has increased from 9.25% to 9.5%. The Government has indicated that the superannuation guarantee rate will be frozen at 9.5% until 30 June 2018 at which time it will increase by 0.5% each year until it reaches 12% in the 2022/23 income year.

Medicare levy increase from 1.5% to 2%

As previously announced and legislated by the former Labor Government, from 1 July 2014 the Medicare Levy has increased to 2% to fund the National Disability Insurance Scheme.

Budget repair levy on incomes over $180,000

The “budget repair levy” is technically a temporary 2% increase in the top marginal tax rate from 1 July 2014 for the next 3 years until 30 June 2017. The levy will only be payable by those individuals earning over $180,000 p.a., and only on that part of their income that exceeds $180,000.

Taking into account the increased Medicare Levy, the effective tax rate for high income earners will be 49%. The table below demonstrates the effect of these measures in dollar terms:

Taxable Income

2013/14 Current Tax & 1.5% Medicare

2014/15 Tax & 2% Medicare

Increase p.a.

$180,000

$57,247

$58,147

$900

$200,000

$66,547

$67,947

$1,400

$250,000

$89,797

$92,447

$2,650

$300,000

$113,047

$116,947

$3,900

TAX TIP: You should check that the tax tables in your payroll systems have been updated to reflect the increase in the top marginal tax rate, superannuation guarantee and Medicare Levy to ensure that you withhold correct amounts of tax from your employees’ wages and pay the correct amount of superannuation for them.

Lodgement of PAYG Payment Summaries with the ATO

The PAYG Payment Summaries should be lodged with the ATO by employers by 14 August 2014 if you are preparing and lodging the Summaries yourself, or by 30 September 2014 if you lodge through us and have unrelated employees. If all your employees are related individuals, then you do not need to lodge the Payment Summaries until the due date of your 2014 tax return.

The ATO have recently issued letters advising of a change in their process of accepting PAYG Payment Summaries and related information, in particular to those employers who previously lodged by sending in files stored on USB drives, CDs or DVDs.

We have clarified the new lodgement arrangements with the ATO and have been advised the following:

  • The ATO is closing down its Magnetic Media department and will no longer accept USB drives, CDs or DVDs with the files. However we have been advised by the ATO that a grace period is being given this year, despite the change technically applying from 1 July 2014. You may therefore take advantage of the grace period and still send in your USB drives, CDs or DVDs with the electronic files this year;
  • From 1 July 2015, the ATO will also close off its ECI (Electronic Commerce Interface) channel;
  • The paper lodgement will continue to be accepted by the ATO so those who send in paper copies on approved ATO stationery will continue to be able to do so;
  • You can lodge the payroll information directly from your accounting system if it is Standard Business Reporting (‘SBR’) enabled;
  • You can lodge the files through a Business Portal file transfer function once you have registered for and obtained an AUSkey from www.auskey.abr.gov.au;
  • You can also send your payroll files extracted from your accounting systems (e.g. EMPDUPE files from MYOB) to us which we can submit on your behalf via the ATO Tax Agent Portal.

TAX TIP: If you want to submit your PAYG Payment Summaries electronically but don’t know where to start, call your Ruddicks adviser and we will guide you through the process.

Building & construction industry reporting

The Taxable Payments Annual Report is due for lodgement by 21 July 2014 by taxpayers who meet all of the following criteria:

  • You are a business that is primarily in the building and construction industry; and
  • You make payments to contractors for building and construction services; and
  • You have an Australian business number (ABN).

In relation to the first point above, you are considered to be a business that is primarily in the building and construction industry if any of the following apply to you:

  • in the 2014 financial year, 50% or more of your business income is derived from providing building and construction services; or
  • in the 2014 financial year, 50% or more of your business activity relates to building and construction services; or
  • in the 2013 financial year, 50% or more of your business income was derived from providing building and construction services.

The Taxable Payments Annual Report requires you to provide the following details for each contractor you make payments to for provision of building and construction services:

  • ABN
  • name
  • address
  • the total amount paid in the 2014 income year, inclusive of GST
  • total GST included in the gross amount you paid.

Please contact your Ruddicks adviser if you need any assistance with the Taxable Payments Annual Report or if you are not sure if you have to lodge this report with the ATO.

Fuel tax credit rates

From 1 July 2014, some fuel tax credit rates have changed due to an increase in carbon charge amounts and an increase in duty rates for transport gaseous fuels. There is no change to the rate for fuels used in heavy vehicles for travelling on public roads.

The new rates are available on the ATO website: https://www.ato.gov.au/Business/Fuel-schemes/In-detail/Fuel-tax-credits---for-GST-registered-businesses/Overview/Fuel-tax-credits---changes-from-1-July-2014/

TAX TIP: Please note that the Government has proposed to remove the carbon charge for fuels acquired from 1 July 2014 and to index fuel excise duty rates for most fuels every six months from 1 August 2014. If these changes are legislated, the fuel tax credit rates will change again.

Private Health Insurance Rebate change

From 1 April 2014, the Government Private Health Insurance (‘PHI’) rebate has been reduced by a Rebate Adjustment Factor. This reflects the effect of the new law that requires the annual adjustment of the PHI Rebate so that from 1 April 2014, the increases in PHI premiums will only attract the rebate up to the CPI-adjusted amount.

As on average PHI premiums increase annually by a higher rate than the CPI (currently just under 3%), we expect that the PHI Rebate will keep decreasing every year with each 1 April adjustment.

Age, single/family income threshold

Rebate up to 31 March 2014

Rebate from 1 April 2014

Under 65, below $88,000 / $176,000

30%

29.04%

Under 65, below $102,000 / $204,000

20%

19.36%

Under 65, below $136,000 / $272,000

10%

9.68%

Age 65-69, below $88,000 / $176,000

35%

33.88%

Age 65-69, below $102,000 / $204,000

25%

24.20%

Age 65-69, below $136,000 / $272,000

15%

14.52%

Age 70+, below $88,000 / $176,000

40%

38.72%

Age 70+, below $102,000 / $204,000

30%

29.04%

Age 70+, $136,000 / $272,000

20%

19.36%

All ages, above $136,000 / $272,000

0%

0%

Shares suspended from ASX that can be written off

If you own any of the following shares, please advise your Ruddicks adviser. As the liquidators of these companies have issued appropriate declarations during the 2014 income year, these shares can be written off and capital losses crystallised in the 2014 income tax returns of the shareholders:

  • Apex Minerals NL
  • Arafura Pearls Holdings Limited
  • Australian Rural Group Limited
  • Forge Group Limited
  • Kagara Limited
  • Metal Storm Limited
  • Ultrapay Limited

ATO Project DO IT –  Disclose Offshore Income Today

The ATO has announced that it is obtaining information from various sources including overseas tax authorities and financial institutions and matching the data to Australian taxpayers to identify those who have undisclosed foreign income.

The initiative covers amounts not reported or incorrectly reported in tax returns, including:

  • foreign income or a transaction with an offshore structure
  • deductions relating to foreign income that have been claimed incorrectly
  • capital gains in respect of foreign assets or Australian assets transferred offshore
  • income from an offshore entity that is taxable in your hands.

Failing to disclose income can result in severe penalties of up to 75% of the tax shortfall on top of the tax payable on the omitted income, as well as penalty interest. Criminal charges may also be instigated. In cases of fraud and tax evasion there is no time limit to how far back the Commissioner can amend tax returns.

The ATO Project DO IT allows significant concessions for taxpayers who voluntarily disclose the income:

  • Assessment limited to the normal amendment periods (2 or 4 years depending on the circumstances);
  • Shortfall penalty capped at 10% maximum;
  • No criminal proceedings to be instigated by the ATO or being referred to any other agency or having your information provided to any other agency.

These benefits are available only to eligible taxpayers who come forward before 19 December 2014.

Please contact us if you wish to find out more about the Project DO IT. Further information is also available on the ATO website: https://www.ato.gov.au/General/Correct-a-mistake-or-dispute-a-decision/In-detail/Project-DO-IT/Project-DO-IT/

Reasonable travel and overtime meal allowance expense amounts for 2014 – 2015

The ATO have issued a Tax Determination that outlines the amounts that are considered reasonable  for the 2014-15 financial year in relation to claims made for:

  • Overtime meal allowance expenses;
  • Domestic travel allowance expenses;
  • Travel allowance expenses for employee truck drivers; and
  • Overseas travel allowance expenses.

Further information regarding these expense amounts is available on the ATO website: http://law.ato.gov.au/atolaw/view.htm?docid=TXD/TD201419/NAT/ATO/00001

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