Newsletter - March 2005

Tax Audits
Australian Taxation Office has now moved from educating taxpayers on GST issues to relentless revenue rising exercise. The ATO plan includes:

-Contacting more than 85 000 businesses whose financial performance is markedly different from their industry peers.

-600 ATO officers will be making visits to around 20 000 businesses. These officers specialise in detecting omitted income and businesses operating outside the tax system.

-Identification of cash economy issues by 2400 field officers through general compliance reviews.

-Checks undertaken since the start of the new tax system have also identified tens of thousands of businesses that appear to have been operating without lodging income tax returns. Most of these are micro-businesses, and the ATO is pursuing these also.

A number of high risk industries have been selected by the ATO for close scrutiny. These include:
-Building and construction
-Road freight service
-Restaurants and takeaway food outlets
-Hairdressing and beauty salons
-Cleaning services
-Clothing and textiles
-Pubs, clubs and taverns
-The security industry
-Second hand car dealers

Employers Beware
Recent changes in Industrial Law are going to be troublesome to unaware employers.  As from 1 January 2005 employers in State Awards will be gradually subjected to Federal Awards.  Most adversely affected will be those industries involved in after hourse and week end work.   Unless properly drawn and approved employment agreements are drawn up, the employers may become liable to back pay substantial shift and overtime penalties. 

End of Financial Year
We are now fast approaching the end of the financial year 2003. It is time to reveiew the year and complete all necessary steps to ensure smooth closure of financial accounts. The items that must be paid special attention are:
Any extra super contributions must be made and paid before 30/6/05. Be aware that this years Superannuation Gurantee Levy is 9% of gross wages. If you have short paid, it is time to make up the difference. Stock take will have to be done on 30/6/05. If the taxpayer is applying Simplified Tax System (ask us to find out if you are) then it is best to pay out all liabilities before 30/6/05. Review your wages records to ensure they are properly kept. The employee payment summaries will be issued in July 03 and it will be difficult to correct mistakes later on.

PSI Legislation
PSI (or Personal Services Income) provisions of the Act is now in force. 80/20 provisions are very important for professional taxpayers. Stated very simply, if you are a professional, earning income from your personal exertion, and if 80% or more of your income is earned from one source, then you may be caught by this legislation. If you operate as an individual taxpayer or trust, it basically requires that all income is directed to you personally. Same applies if you are operating through a Company. However, in a Company situation, you need to pay your PAYG witholding tax and super contributions properly. You MUST consult with us if you think this legislation affects you to ensure that you have complied with all requirements before 30 June 2005.

Self Managed Superannuation Funds
The legislative requirements on Self Managed funds are becoming very difficult to operate them. We strongly recommend that all small funds should be closed and transferred to an externally managed fund. Management of the larger funds should be handed over to specialised bodies. It is important to understand that we are no longer allowed to do the accounts and audit these funds at the same time. We can do one or the other. We recommend that every business with a self managed fund visit us to discuss this matter.

Simplified Tax System
This is the second year that the new STS can be applied. It basically means that small businesses with less than $1'000'000 turnover can use cash basis of accounting, ignore trading stocks up to $5'000 and use asset pooling method instead of depreciation. This is a great system for businesses with substantial trade debtors.

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