I am from the old school whereby Christmas was a time for Midnight Mass, friends, family, presents, a hot baked dinner, too much to eat, swimming, sunburn and a generally great time. These days it seems that to be politically correct we must stay out of the sun, leave Christ out of Christmas and wish everyone a Happy Holiday, well that is not me and it is not Australian. So have a very Merry and Holy Christmas.

The Christmas holiday season is also a wonderful time for us to remember the friends and customers who help our business grow and make our jobs a pleasure all year long. Our business would not be possible without your continued support. 

We will be closing on the 22nd of December at 12.00 pm, and will re-open on the 9th of January at 8.00 am.

So have a safe and happy Christmas, enjoy the break (if you get one), and safely see in the New Year, which, by the way is 2012.

 Boy, 2012, I remember celebrating the bi-centenary in 1988, what a party that was. I remember seeing in 2000 when the Y2K bug was supposed to destroy the world, now we have 2012 when global warming will melt the polar ice caps and we will all be flooded out. Way back in 2010 I commented on Teflon Kev’s policy on ETS which was to tax people out of existence in order to stop every one spending so manufacturing would cease and the world would cool down. Imagine, we now have the Greens in power with a female Prime Minister who whacked on a Carbon Dioxide tax to discourage spending. 

Next stop 2020 and we can revisit the hot spots of today. Y2K failed and so may ETS.

In closing we’d like to take this moment to again say thank you and send our best wishes to you and your families. May your new year be filled with all the success and happiness you deserve.

Merry Christmas from everyone at

Coulcher’s Personal Accounting & Taxation Services

What is refund fraud?

Refund fraud is the attempt to obtain a tax refund dishonestly by deception or other means. A variety of offences including non-lodgement of forms or receiving a fee for preparing an income tax return on behalf of a taxpayer while not being a registered tax agent.

Common types of refund fraud include deliberately over-claiming deductions, offsets, or expenses, by providing false or misleading information understating income and/or fictitious payment summary details. Intermediaries deliberately lodging false claims on behalf of clients (with and without client knowledge)

For example, A NSW plumbing company was convicted and fined $22,000 for 16 offences for failing to comply with court orders to lodge 4 income tax returns and 4 GST returns. So what is your situation?

An ACT bus driver was convicted and fined a total of $6,600 for 3 offences for failing to comply with court orders to lodge income tax returns.

A NSW concreting business owner was convicted and fined $17,000 for 21 offences for failure to comply with court orders to lodge quarterly business activity statements.

A NSW cleaner was sentenced to two and a half years in jail for making fraudulent BAS claims. She used forged documents in an attempt to obtain a financial advantage by deception.

 The current tax system is highly weighted against the single income family such that if you earn $30,000 you pay $2,550 tax yet if you were part of a married couple earning $15,000 each than no tax would be payable. Of course the politicians who set the rules listen to bureaucrats that get paid no matter how little work they do and have no idea how hard life is in the real world. Apparently their role is to identify tax savings without understanding the implications or collateral damage caused by those changes.

 Where am I going with this? Well I have a 55 year old client who currently earns $55,000 per annum. He has a stay at home wife. I cannot say that she is a non-working wife because she tells me she works harder than John. Now on the $55,000 he earns, John pays $10,375.00 in tax. As Joan does not have an income John is entitled to a spouse rebate of $2,286 meaning he only pays $8,089.00 Now, if both John and Joan worked and earned $27,500 each, the tax payable would be around $2,137.50 each or a total of $4,275.00, some $3,814 less than poor Johnny currently pays. Well the dingbats in Canberra have decided that John does not pay enough tax and, from 1 July 2012, have increased his tax bill by $43.96 per week or $2,286.00 per annum by abolishing the spouse rebate to which he is currently entitled. This means he now pays $6,100.00 more than a couple earning the same income. In fact a couple could earn a combined income in excess of $80,000 before they pay the same tax as John. Our mate Swanny thinks that if you were born after 1^st July 1952 then you should have a job. It’s great that we now have a government that looks after the workers.

 I have previously mentioned the imposition on employers by having to pay extra superannuation for their staff, well the mini-budget emphasised the Governments view on saving for retirement, they are against it. I have been a strong supporter of the Superannuation co-contribution scheme whereby low income earners could contribute to their super fund and, because they were saving for their retirement, the Government would assist by conbtributing$1.50 per $1. The Labor Government thought this was too generous and had already reduced the co-contribution to $1 per $1. Now they have totally stuffed the system and put out the message loud and clear, saving for retirement is not a good idea. They have virtually abolished the co-contribution scheme by limiting the amount you can contribute to your own super to $500 in order to qualify for a co-contribution amount of $250. Now with the way fund managers are managing superannuation funds what is the incentive to add extra to your super? For some strange reason the Association of Superannuation Funds of Australia think this is a good idea. Have a great day, more next week.

• Five years; non-Company records, generally individuals and non-company entities that do not have employees.
• Individual tax payers should keep records for five years. If you have a rental property then you should keep all records for a further five years after the rental property is sold.
• Seven years; financial records for companies, most employee records and all records of fringe benefits and capital gains.
• If you store financial records electronically you must be able to produce a hard copy if required.
• Employee records may need to be kept longer to comply with Workers Compensation Act.

• For depreciating assets, you must keep records for the entire period over which you claim deductions for the decline in value of those assets. You must keep your records for a further five/seven years from the date of your last claim.

If you organise your records weekly including updating your registers and filing the documents away you will reduce stress and stay on top of the task. It also allows you to find documents easily when needed.

Following is a list of ‘typical’ information required to be kept for between five & seven years, although the list is typical information used by business’ not every business will use every one.

Further information is available from the Tax Office website.

 Compulsory Uniforms

As stated by the ATO ‘You can claim the cost of buying, renting, repairing and cleaning occupation-specific clothing, protective clothing and certain work uniforms.

You cannot claim the cost of purchasing or cleaning a plain uniform or clothes you bought to wear for work that are not protective or specific to your occupation even if your employer tells you to wear them – for example, a bartender’s black trousers and white shirt or a manager’s suit or stockings.’

A deduction is allowable where the wearing of uniform or specific clothing is compulsory and the clothing readily identifies a particular organisation with the use of such things as logos, initials, insignias on buttons or pockets. These should be of a sufficient size to be clearly visible to the observer. Clothing is unique when it has been designed and made for only one employer and is not available to the public. You may be able to claim a deduction for shoes, socks and stockings where they are compulsory and an essential part of the distinctive uniform which is specified in your employer’s uniform policy.

Specific Clothing

This is clothing that is specific to your occupation and would allow the public to easily recognise your occupation – for example, the checked pants a chef wears.

Protective clothing

Clothing that provides a sufficient degree of protection against risk of injury or illness that may be encountered during your duties at work are claimable. Examples of these include steel capped boots, gloves, safety coloured vests, fire resistant and sun protection clothing, non-slip nurse’s shoes, heavy duty shirts and trousers.

Overalls, aprons and other clothing worn so as not to damage or soil your normal clothes is also considered protective. Keep in mind jeans and other clothing that offer no extra protective qualities are not considered protective clothing.

 Non Compulsory Work Clothes

You cannot claim expenses incurred for non-compulsory work uniforms unless your employer has registered the design with AusIndustry – if you are unsure check with your employer or go to www.ausindustry.gov.au.

Remember shoes, socks and stockings or single items of clothing can never form part of a non-compulsory work uniform.

 Laundry

Where a deduction for work clothing is allowable you will generally be able to claim the cost of laundry. You may use a reasonable basis to work out your claim if it does not exceed $150. The ATO considers reasonable $1 per load, including washing, drying and ironing if no other clothes are included in the wash. Where other clothes are in the wash the rate is reduced to 50 cents.

 Allowances

You cannot automatically claim a deduction simply because you received a uniform, clothing, laundry or dry-cleaning allowance from your employer.

 n a recent news report the Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, said “As a result of strong representations from members of the Labor caucus and cross-bench, including Yvette D’Ath, Shayne Neumann, Deb O’Neill, Michelle Rowland, Rob Oakeshott and Tony Windsor, I have decided there will be no age limit for superannuation guarantee contributions. These changes will start on 1 July 2013,”

 These policies will be delivered through amendments to the Superannuation Guarantee (Administration) Act 1992. “Together with the low income superannuation contribution and Stronger Super package of reforms previously announced, the increase in the superannuation guarantee will improve the adequacy of retirement incomes and deliver a comfortable and secure retirement for current and future generations of Australian workers”

Depending on the regulations surrounding the new legislation this may be great for our Grey Nomads. As it stands now, once you turn 70 your employer can not contribute to your super fund. As all the details are not yet known, we can but speculate on what will be available but if the employer is allowed to contribute to super for a 75 year old, then it may be that the 75 year old can also contribute to super, which is now limited under current legislation. This opens the door for some very effective tax planning and would certainly encourage our civic elders to maintain their contacts at work so that by putting in that weeks work every year they may be in a position to top up their super and reduce their exposure to income tax.

As it is, every worker over the age of 55 should be looking at their superannuation in two ways, one as a retirement benefit and two, as a very effective tax saving tool. Under the right circumstances you can increase the balance of your superannuation by several thousand dollars per year with no contribution from you, just by commencing a transition to retirement pension through your super fund. The benefits available depend upon the balance of your super fund and the length of time before retirement. This strategy requires you to start drawing a pension from your super and salary sacrificing an amount back to super such that your take home pay remains the same but your tax bill is reduced and a saving in tax of $50 per week is $2,600 per year and over 10 years, with interest, this would amount to over $30,000 providing a nice increase in your super fund. Talk to your tax adviser to determine if the benefits to be derived from a transition to retirement pension suit your circumstances. Talk to your financial adviser for a second opinion but remember they cannot give advice as to the taxation implications associated with their recommendations or your choice.

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  The positive spin put on this legislation, which is great for the employee , states that in the biggest change to superannuation in 20 years, around 8.4 million Australians will have their superannuation savings boosted as a result of the superannuation guarantee rate legislation introduced into the Parliament.  The Superannuation Guarantee (Administration) Amendment Bill 2011 increases the superannuation guarantee (SG) rate from nine per cent to 12 per cent.  The Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, said “This is an historic reform. Today, the Gillard Labor Government has taken another important step towards increasing the adequacy and fairness of retirement incomes for Australian workers.”

“Australians should not have to work hard and retire poor. Nine per cent super is simply not enough.” For example: An employee aged 30 earning around $70,000 today will retire with an extra $108,000 in superannuation under these reforms. 

The increase in the SG will boost the superannuation savings of Australian workers by around $500 billion by 2035. A proportion of these savings will be channelled back into the Australian economy to fund jobs and nation-building infrastructure. 

Big business have no problem in finding the extra cash, they just put up prices. Small business is not so lucky as they have to manage their budget a lost closer just to stay competitive. When the Superannuation Guarantee Levy was first introduced, it was supposed to be in place of a pay increase for the workers. They were to get a 9% pay increase which was to be put aside for their retirement. Well this “benefit” has long been forgotten and now with the 9% being increased to 12%, albeit over several years, the employees do not see this as a pay increase but a deserved benefit, even if unearned.

This increase, although some see it as being tiny, is still a hefty impost on small business, no wonder there are many small businesses out there having trouble paying the Super Contribution for their staff.  Not only does this Super increase cost small business but other costs tied to Super also increase such as payroll tax and that other State Government tax known as Workers Compensation Insurance. To call it workers comp insurance is a misnomer as it is not insurance, it is a Government tax that assists workers injured at work and is a great idea. The trouble with workers comp is that if an employer has a worker injured, the worker receives the benefit but the employer’s premium is increased such that the payment to the employee is recouped from the employer. The other problem here is that the premium for Workers Comp includes the Super paid by the employer but when the employee receives his payout from the Insurance Company no payment is made to the employee’s super fund. 

More on the changes to Superannuation next week.

 The funeral was a sad/happy affair where the life of the departed was celebrated. The attendants from Macarthur Lady Funerals were an absolute treat and if any of your loved ones leave this earth I would suggest you give Macarthur Lady a call as their professionalism is beyond words.

 The other thing I would suggest is that you ensure you, and your loved ones, have a will in place. I recently had a client whose affairs were, to say the least, tangled. He died without a will and the business partner managed to squander the estate such that the children ended up with nothing.

Even if you do have a will in place, the Tax Man may still try and get an uneven share of what is not his.

 If someone dies whist at work then the payment of unused annual leave, leave loading and long service leave to the beneficiaries is not taxed and is not included on a Group Certificate. This is a win for the taxpayer, although it is once off opportunity to get that last payout tax free and a tax break I am in no hurry to benefit from.

 On death, the payment of monies held in a Superannuation Fund are tax free if paid to a dependant but may be taxed at the top marginal rate if paid to other family members.  A dependant is identified at the time of death and, according to the Tax Office, would be the taxpayer’s spouse or defacto spouse, a former spouse or former defacto spouse, a child of the deceased under 18 years of age or someone who relied on the deceased for financial maintenance at the time of death, or any other person with whom the deceased had an interdependency relationship just before death.

An interdependency relationship exists between two people where they have a close personal relationship, and they live together even if they are not related by family, and one or each of them provides the other with financial and domestic support and personal care.

What this all means is that if Dad has $1m in super, and this is made up of Employer super contributions, then when he kicks the bucket, if he leaves this money to his kids, and they are all aged over 18, then tax will be payable by the children on that payout. Now, is it possible to beat the taxman? Of course, where there is a WILL, there is a way. If the balance of the Super fund is left to Mum, then as a dependant, no tax is payable and she can then give the money to the children without anyone having to pay tax. If there is no Mum, then Dad has to play a smarter game and draw down on his super , tax free, over the years so that when his time is up, the Fund is empty and no Tax is payable.

 There are a couple of other options which depend on age and work status but these tend to be more specific to the individual rather than generic and it may be to your benefit to talk to your Accountant as to the taxation implications associated with the dispersal of your estate.

So what happens if the party is held at a local restaurant? Well this again depends upon the generosity of the boss. If he is too generous then the cost of the party can increase significantly because of the addition of fringe benefits tax.

 Christmas party held off business premises

 The costs associated with Christmas parties held off your business premises (for example, a restaurant) will give rise to a taxable fringe benefit for employees and their associates unless the benefits are exempt minor benefits.

* Where the benefits are indicated as qualifying for the minor benefits exemption, it is on the basis that the necessary conditions have been satisfied.

Now what if the Boss also gives you a pressie?

 Gifts provided to employees at a Christmas party

 The provision of a gift to an employee at Christmas time may be a minor benefit that is an exempt benefit where the value of the gift is less than $300.

 Where a Christmas gift is provided to an employee at a Christmas party that is also provided by the employer, the benefits are associated benefits, but each benefit needs to be considered separately to determine if they are less than $300 in value. If both the Christmas party and the gift are less than $300 in value and the other conditions of a minor benefit are met, they will both be exempt benefits.

Confused? Well this is why you need an accountant to advise on how various types of expenses are recorded and reported to the ATO. 

A good Public Relations exercise for the small business is to give a bottle of wine or spirits to their best customers or suppliers at Christmas time. As a marketing tool you get a tax deduction for the purchase and maybe more sales as a thank you.

Sorry to put this boring stuff in my column but I have to cater for a multitude of readers and with the penalties that can apply if you get it wrong, it is always good to know what traps are put in place to catch the unwary.

As an employer I try to ensure a safe and happy work environment for my staff. One of the benefits provided is a thank you at Christmas time. Of course if the staff turn up to the “thank you” party then I can be taxed (a second time) on what I spend on my staff. This applies to all employers so be easy on them if they cut back a bit more this year, after all they are saving to pay for the carbon dioxide tax.

For the benefit of employers we will give a brief review of information provided by the ATO in relation to Christmas parties.

Tax deductibility of a Christmas party

The cost of providing a Christmas party is income tax deductible only to the extent that it is subject to FBT. Therefore, any costs that are exempt from FBT (that is, exempt minor benefits and exempt property benefits) cannot be claimed as an income tax deduction.

The costs of entertaining clients are not subject to FBT and are not income tax deductible.

Christmas party held on the business premises

A Christmas party provided to current employees on your business premises or worksite on a working day may be an exempt benefit. The cost of associates attending the Christmas party is not exempt, unless it is a minor benefit. This is all calculated on the cost per head to attend.

       Where the benefits are indicated as qualifying for the minor benefits exemption, it is on the basis that the necessary conditions have been satisfied. 

This is a brief introduction to Christmas Parties held on business premises, next week we will look at Christmas parties held at a restaurant, function centre or somewhere else not on the business premises.