In this month’s newsletter, I want to make a few observations from the many conversations that I have had with clients so far this tax season:

Clients do not know how much they will need in retirement

Clients feel they need more clarity in those 10 -15 years before retirement

Clients who have properties are finding it difficult with cash flow even though they have owned some of their properties for up to 10 years

In response to these concerns I have asked Matthew Laird, our financial planner, to put together a presentation on planning for retirement entitled The 10 Years Before Retirement.

We will be holding presentations in Sydney (Sutherland and Neutral Bay), Brisbane (Morningside) and Melbourne (St Kilda) during the month of November.

These information evenings are designed for those wanting to learn how to prepare for their retirement and plan for a secure future.

Some of the issues that will be discussed on during the evening:

Have you got a plan to earn $70K to $100K per year in retirement? Do you understand the income and asset tests and the effect that investment properties have from a Centrelink point of view? Do you understand what income you can earn, tax free, both inside and outside of superannuation? Have you got a transition to retirement strategy in place? Why is it good to have a split of assets between superfund and non-superfund assets? What is your plan for exiting debt in retirement? We look forward to seeing many of you at these evenings during November.

Mining tax repeal & other notable tax changes

With the abolition of the mining tax from 1 October 2014, a number of other tax measures have come into force:

Abolition of the company loss carry-back concessions from 1 July 2013. Reduction of the instant asset write-off for small business entities from $6,500 to $1,000 – that applies from 1 January 2014. Abolition of accelerated depreciation (of up to $5,000) for motor vehicles from 1 January 2014. Note(*): It is important to note that the changes to the depreciation rules for small business entities (e.g., the immediate write-off threshold reducing to $1,000) applies to assets first 'used' or 'installed ready for use' from 1 January 2014.

Project DO IT – the ATO's amnesty for offshore tax avoiders

The ATO has advised that over 100 disclosures have already been received, with total additional income disclosed of over $12 million.

The ATO has also received almost 200 expressions of interest from taxpayers who intend to lodge a disclosure but are seeking more time to finalise the details.

The take-up of the disclosure offer has been slow and steady, but the ATO has anecdotal feedback that a lot of taxpayers are getting their affairs in order before filing, especially where their arrangements are complex.

The ATO is currently in the process of writing directly to taxpayers that may be in a position to avail themselves of the disclosure initiative to encourage disclosure.

How 'bitcoins' are treated for tax purposes

Editor: Bitcoin is a software-based online payment system, which the US Treasury has called a "decentralised virtual currency". The media often refers to Bitcoin as a crypto currency or digital currency.

The ATO has issued a guidance paper, basically stating that bitcoin transactions are treated as barter transactions with similar taxation consequences.

As far as record-keeping is concerned, the ATO says that businesses should keep records of:

the date of the transaction; the amount in Australian dollars; what the transaction was for; and who the other party was (even if it is just the bitcoin address). Tax scammer warning

The ATO has issued another warning to the community to be aware of fraudulent scammers as they target people lodging their income tax returns by the 31 October deadline.

Chief Technology Officer Todd Heather said that “People should also be aware of a nasty phone scam where taxpayers are threatened with arrest if they do not pay a fake tax debt over the phone."

Why it's sometimes worthwhile taking on the taxman

Editor: Where 'special circumstances' exist, taxpayers can get relief from the 'non-commercial loss' provisions in the income tax law.

Effectively, what this 'relief' means, is that a taxpayer can claim losses, (often) incurred in farming, in the year they are made, rather than having to wait until the venture turns a profit.

Case

For the 2010 to 2014 income years, the taxpayer applied to the Commissioner for relief from the 'non-commercial loss' provisions.

The ATO refused to accept that 'special circumstances' existed, even though:

the taxpayer's olive grove: was in a region that was drought declared for much of the time and it was plagued by the Olive Lace bug from 2000 onwards; and in late 2009, his wife, who had project management skills, an agribusiness education and extensive experience as an oil maker and blender, underwent major surgery and was only expected to be back working at 100% by 2014. Editor: Strangely, the AAT Member was not too complimentary to the tax officers who decided that none of these circumstances were 'special'. In fact, he found that they had taken a "regrettably inattentive approach".

Importantly, he found that drought and the pest infestation were special circumstances.

As to the taxpayer's wife, he found that as she was a highly qualified member of the team and an experienced oil maker and blender, her illness constituted a special circumstance.

On balance, the AAT Member decided the taxpayer should be granted the relief from the non-commercial loss provisions for the 2010 to 2013 income years, but not the 2014 income year, when the taxpayer's wife was finally expected to be back full-time.

Lost super climbs to $14 billion

New statistics released by the ATO reveal that more than $14 billion in lost super is waiting to be claimed.

“There’s over $6 billion of super, sitting in accounts where funds have not been kept up-to-date with changes to personal details,” said Mr Shepherd.

“It’s easy for this to happen because when people get married or move house, the last thing on their mind is updating their name and address details with a super fund.”

An additional $8 billion in super is sitting in accounts that have not received a contribution in five years or more.

Contact our office for an initial complimentary meeting with one of our superannuation specialists if you think you have lost super to claim.

GIC and SIC rates for the 2014 December quarter

The ATO has published the 2014 December quarter rates for the General Interest Charge (GIC) and the Shortfall Interest Charge (SIC) as follows:

GIC Annual Rate = 9.63% GIC Daily Rate = 0.02638356% SIC Annual Rate = 5.63% SIC Daily Rate = 0.01542466%

NB: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.