Star & Associates General Update: October 2022

Welcome to the new and improved Star & Associates. Over the past few months we have given our website and online branding a complete refresh, as well as revamped our office space for our staff and clients to enjoy.

As we look forward to the next exciting chapter of our advisory business, we’ll continue to deliver regular updates that cover all the latest news around taxation, general accounting, superannuation, and broader advisory.

We hope you enjoy it!

Key information for company directors

If you are already a company director or plan on becoming one, you must have an official Director ID from the Australian Business Registry Services. According to the ABRS, you need a Director ID if you’re an eligible officer of:

• a company, registered Australian body, or registered foreign company under the Corporations Act 2001 (Corporations Act); or
• an Aboriginal and Torres Strait Islander corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act).

An eligible officer is a person who is appointed as either:

• a director; or
• an alternate director who is acting in that capacity.

If you were a director on or before 31 October 2021 then you only have until 30 November 2022 to apply. Make sure you apply for your Director ID here.

Focus area for ATO audits: Working from home

The Australian Taxation Office recently announced it would be focusing on four key areas during its tax audits in 2022:

1. Record-keeping
2. Work-related expenses
3. Rental property income and deductions
4. Capital gains from crypto assets, property, and shares

Of greatest significance to many Australians is the impact of working from home during the pandemic and a nationwide transition to hybrid work. As Assistant Commissioner Tim Loh explains:

“Some people have changed to a hybrid working environment since the start of the pandemic, which saw one in three Aussies claiming working from home expenses in their tax return last year. If you have continued to work from home, we would expect to see a corresponding reduction in car, clothing and other work-related expenses such as parking and tolls.

“Each individual’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.”

Make sure you pay close attention to your deductions for the most recent financial year, and speak to your tax agent if you are in any doubt about the specifics of your working situation.

Director Penalty Notices (DPN)

Directors are responsible for ensuring all their company’s tax and superannuation obligations are reported and paid on time. Fail to do so and the ATO will serve you with a Director Penalty Notice.

DPNs first arrive with a 21-day notice period (i.e. a warning). You will have 21 days to act to avoid personal liability, and you can either:

• pay the debt; or
• place the company into liquidation or voluntary administration; or
• appoint a small business restructuring practitioner (available for companies with a total debt under $1 million); or
• take steps to wind up the company.

If PAYG or super amounts remain unpaid beyond this period and company returns are not provided within three months, you will be served a Lockdown Penalty Notice. In this case, you must pay the debt in full and you cannot avoid liability by liquidating the company or placing it into voluntary administration.

Queensland land tax dumped

The controversial land tax proposed by Queensland Premier Annastacia Palaszczuk has been killed off after other state leaders refused to cooperate with proposed laws that would require them to share the personal data of their own constituents to the Queensland government.

As the AFR reported: “The decision to scrap the change, which was due to raise only $20 million a year and would affect 10,000 landholders, was welcomed by investors who described it as a ‘victory for common sense’.”

Big changes for franking credits

The Labor Government has confirmed it will be pursuing changes to franking credits, but the extent of those changes has yet to be announced. Earlier last month, the AFR reported that the government planned to “retrospectively stop companies paying shareholders fully franked dividends that are funded by capital raisings”.

The term ‘retrospective’ is what created the most commotion, with economics editor John Kehoe stating: “The government has proposed backdating the ‘integrity measure’ to 2016 to ensure that only distributions equivalent to realised profits can be franked, alarming investors in companies that have paid special dividends or issued new shares in the past six years”.

Ultimately, this could mean that some investors receive a ‘surprise’ tax bill for any special dividends they have received since as far back as December 2016.

Watch this space for more updates on the franking credits issue.

Key information on reimbursement agreements through trusts

Another key focus area for the ATO this year is in respect of trust distributions surrounding Section 100A of the Income Tax Assessment Act 1936 (‘Reimbursement Agreements’).

Trustees of trusts now need to be more mindful of distributing to adult children and wider family members where they have not received the benefit of the distribution – in other words, where one person receives a benefit from the trust but another person is made presently entitled to income and assessed.

Don’t get caught short by super changes

Finally, remember to pay the right amount of super for all your eligible employees by the quarterly due date. Note that the Super Guarantee (SG) recently rose to 10.5% and the $450 per month eligibility threshold when paying SG has been removed.

These super changes apply to all salary and wages you pay from 1 July 2022 onwards, even if a portion of someone’s pay period was before 1 July.

The ATO advises that you ensure:

• your payroll and accounting systems are up to date and include the recent changes to SG;
• you’ve calculated and paid the right amount of SG for all your eligible employees; and
• you pay SG amounts in full by the due date.

If you don’t meet your SG obligations, you’ll have to pay the Super Guarantee Charge. You’ll need to lodge an SGC statement and pay the SGC to the ATO. Be aware that this will cost you more than paying the correct SG on time, and the SGC is not tax-deductible.

Other news and advice from the industry

• Empty pockets no excuse to show up to budget empty-handed: With Federal Government facing serious budget constraints, CPA Australia has made its own budget submissions, recommending a range of low-cost measures. These include funding for an advertising campaign to attract international students and assessing the impact on climate change.
   
• End of Jobs Summit heralds start of decade long program of work: The general consensus is that the jobs and skills shortage affecting Australia – and the wider world – could take a decade to fully resolve. The good news is that the recent Jobs Summit has delivered quick wins which could provide relief for businesses crippled by employee shortages.
   
• Governments urged to follow Victoria’s lead on advice scheme: Both Victoria and Tasmania are leading the way in offering financial incentives for business to seek professional advice. Victoria’s Specialist Advice Pathways Program offers up to $2,000 for eligible businesses to seek advice from accountants, bookkeepers or lawyers. Industry experts are calling on other state and territory governments to give business similar access to professional advice.

As always, feel free to get in touch for further insight and detail – we’re always happy to chat.  You can also find regular news on our website and contact us on 1300 308 460 for all your tax planning, accounting and advisory needs.