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ITP TAX & SMALL BUSINESS NEWS - MARCH 2110
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Minimising tax mainly comes down to being ahead of the game . . .
At ITP we try to encourage our clients to be organised and get ahead in all aspects of their business. When it comes to taxation, the best strategy for minimising what will be payable is to get a plan early on. It is at this time of year (March to June) that we want to help our clients complete a Tax Planning exercise.
Tax Planning
Tax Planning is where your ITP Accountant meets with you, having considered what your position with respect to taxation looks like, leading to the end of the financial year. The aim of the exercise is that by forward planning, action can be taken to ensure that tax is minimised and your capacity to pay that tax is planned.
ATO's New Tax Processing System
The ATO is currently introducing a new income tax processing system and there are many delays in the processing of income tax returns and other payments due back to clients from the ATO.
New Industrial Relations Rules
Business owners arriving back to work after the New Year’s break will be facing a brave new world of industrial relations.
The second leg of changes under the Rudd Government’s Fair Work industrial relations regime came into effect on January 1. These changes include the new National Employment Standards and the Modern Awards system.
The laws can be confusing and apply differently to businesses depending on size and industry.
National Employment Standards
Work Choices provided five minimum entitlements for employees. The new National Employment Standards however, contain 10 provisions:
• Maximum weekly hours of work
• The right to request flexible working arrangements
• Parental leave and related entitlements
• Annual leave
• Personal/carer’s leave and compassionate leave
• Community service leave
• Long service leave
• Public holidays
• Notice of termination and redundancy pay
• Provision of a Fair Work Information Statement
Most of the new legislation has been carried over from Work Choices. However, employers need to be aware of changes regarding flexible working arrangements.
Under the new laws, any employee who is a parent, or cares for a pre-school child and has had 12 months continuous employment, can request flexible working arrangements. That is provided that there is a reasonable expectation of continuing regular employment.
Employers that require employees to work reasonable additional hours must take into account the employee’s personal circumstances, the employee’s entitlement to overtime payment, the employee’s role and responsibilities, typical industry working patterns and the notice period given.
In relation to parental leave, employees can now request an additional 12 months parental leave, provided that it is requested at least four weeks before the end of the original leave period. An employer can only refuse that request on ‘reasonable business grounds.’
One of the more challenging aspects of the new rule is the use of the term ‘reasonable grounds.’ The Fair Work legislation says that reasonable grounds include the impact that employee's requests will have on the workplace and the ability to re-organise work with existing staff. The new laws mean that this definition is yet to be tested.
Annual leave entitlements have also changed, with four weeks of leave now given to employees. Shift workers become entitled to an additional week of annual leave for every year of service with their employer.
Notice of termination and redundancy pay has also been updated. Redundancy entitlements are now required by law for any company with 15 employees or more. The same applies for the application of unfair dismissal provisions.
Modern Awards - One of the other major changes comes in the form of new ‘Modern Awards.’ Many employees will now come under the new safety net which will provide new minimum conditions.
Many businesses will be unsure whether their employees are covered under certain awards, and whether the standards (which cover employees not covered by another modern award) apply to certain workers.
Employers should carefully consider whether they are actually award free or if one of the new Modern Awards apply.
ATO power to raid premises without Court issued warrant .
A recent Ombudsman report has confirmed the ATO is free to break into and raid homes, cars and workplaces where it believes documents are at risk of being destroyed. The visits, which may involve locksmiths do NOT need court-issued warrants.
The Ombudsman said the ATO Officers advise building occupiers that they are under no obligation to answer any questions other than those regarding the location of the documents.
This is the second Ombudsman investigation into the ATO's access without the notice powers in the past 10 years and it confirms that the ATO is exercising these powers in the manner in which it should.
A Senate report found that the ATO conducted as many as 280,000 raids without warrants yearly.
R&D tax credit - exposure draft legislation
The Rudd Government recently released draft legislation for the new R&D (research and development) Tax Credit. The draft legislation is intended to provide a more generous, more predictable, and less complex tax incentive by replacing the existing R&D Tax Concession.
Under the new R&D Tax Credit, companies will be able to invest with certainty, in the knowledge that they can claim a tax offset of at least 40 percent of their expenditure on R&D activities. This rises to 45 percent for companies turning over less than $20 million.
The R&D Tax Credit will allow small, innovative firms to get an immediate contribution towards their R&D expenditure despite not having yet turned a profit. For instance, a company with losses turning over $10 million and spending $1 million on eligible R&D activities will be eligible for a refund of $450,000 rather than adding $375,000 to its tax loss.
This will provide innovative start-ups with the certainty that they need to invest in growing their business.
Whilst the change seems like a positive one, the key factor impacting businesses is determining what actually qualifies as innovation under the new rules. Currently, companies have to demonstrate that R&D activities are innovative or technically risky. In the move forward, companies will have to demonstrate both features.
What this means is that the legislation now seeks evidence of considerable novelty and high levels of technical risk. This creates a lot of uncertainty for businesses and is particularly challenging for SMEs.
The legislation is expected to be introduced into Parliament in early 2010 to ensure that taxpayers are prepared well ahead of the proposed 1 July 2010 start date for the new scheme.
ITP:
The Income Tax Professionals
ITP
has more than 250 offices throughout Australia and
services almost 300,000 clients annually.