Welcome to the next edition of our 2006 Newsletter.
We hope you find the following information of benefit to you and your Organisation.
ACCOUNTING AND TAXATION MATTERS
COMPUTER AND SOFTWARE UPDATE
FINANCIAL PLANNING
- Investor Focus Newsletter - October 2006
FINANCE AND LENDING
HUMAN RESOURCES
ARM TEAM AND OFFICE MATTERS
P r a c t i c e U p d a t e - October 2006
Simplified superannuation – new transitional arrangements
After the Government proposed to ‘Simplify and Streamline Superannuation’ as part of the May Budget, it consulted with the broader community to obtain feedback about these proposals.
The Treasurer has now confirmed that the Government will proceed with the main proposals which were announced in the Budget, including:
- the removal of tax on superannuation benefits (lump sums and pensions) from 1 July 2007 for Australians aged 60 and over;
- the abolition of reasonable benefit limits and age-based contribution limits; and
- allowing the self-employed to claim a full deduction for their superannuation contributions, and to be eligible for the Government co-contribution for their personal post-tax contributions.
Also, transitional arrangements will be put in place which include:
- between 10 May 2006 and 30 June 2007, people will generally be able to make up to $1 million of ‘post-tax contributions’ into their superannuation;
- from 1 July 2007, there will normally be a $150,000 annual limit on post-tax contributions; and
- in addition to that annual cap, people will be able to contribute a lifetime limit of $1 million from the sale of small business assets which have been held for 15 years, as well as any settlements for injuries resulting in permanent disablement.
Editor: These superannuation changes create many tax planning opportunities, so please contact us for more information or specific planning advice.
GIC for December 2006 quarter
The general interest charge (GIC) for the December 2006 quarter is 13.19%, up from 12.87% for the September 2006 quarter.
SIC for December 2006 quarter
The shortfall interest charge (SIC) for the September 2006 quarter is 9.19%, up from 8.87% for the September 2006 quarter.
Tax Office Data Matching Projects
The Australian Taxation Office (ATO) has announced that it will be requesting and collecting details about millions of taxpayers with respect to the following:
- land sales and title transfers from State and territory authorities;
- property title transfers by non-residents and their names and addresses from the Foreign Investment Review Board;
- names and address details of people with rental properties from the Queensland, New South Wales, and Victorian Residential Tenancies Authorities;
- details of shares, etc, bought and sold from the Australian ASX;
- horse trainers, owners, jockeys, stable-hands and track-riders from the Stakes Payment System of the NSW Thoroughbred racing Board in respect of the 2003/04 and 2004/05 financial years; and
- individuals or entities who have purchased or acquired an aircraft.
These details will be electronically matched with certain sections of ATO data holdings to identify non-compliance with lodgment and payment obligations under taxation law.
Laptop computer upgrades can be exempt from FBT
The ATO has confirmed that where an employer reimburses their employee for the purchase of a laptop computer which is upgraded with built-in internal components (such as additional memory, bigger hard drive, internal modem or wireless LAN module) at the time of purchase, the cost of the upgrades will also be exempt from FBT.
The purchase of additional software (i.e., additional to any computer software forming part of the overall laptop purchase price, for which there is a clearly identifiable separate cost) may also be exempt if it is an item of computer software for use (at least partly) in the employee’s employment.
However, where the employee requests peripheral items such as cables, modems or cradles, or an extension to the warranty that is offered, and these come at an additional cost, these will not be exempt from FBT.
Small business tax debt
The Minister for Revenue and Assistant Treasurer recently stated that, at the end of 2006, there were approximately 914,000 small business tax debts owed to, and collectable by, the ATO valued at $8.11 billion.
The Minister provided an assurance that the ATO wants to see viable businesses continue to trade. In particular:
- Businesses are encouraged to approach the ATO where they face difficulties in making payments;
- Correspondence and phone contact are made before firmer action strategies are applied; and
- Legal action is generally only taken after appropriate warnings are given. However, where necessary, the ATO will take action leading to bankruptcy or company wind-up where debts are not addressed.
Stock taken for private use
The ATO has set out the amounts that it will accept as estimates of the value of goods taken from trading stock for private use by taxpayers in certain industries for the 2006/07 income year.
These values are as follows:
Amount (excluding GST) Adult/Child ChildType of business over 16 years 4-16 years $ $Bakery 980 490 Butcher 660 330 Restaurant/cafe (licensed) 3,380 1,340 Restaurant/cafe (unlicensed) 2,680 1,340 Caterer 2,930 1,465 Delicatessen 2,680 1,340 Fruiterer/greengrocer 710 355 Takeaway food shop 2,550 1,275 Mixed business (includes milk bar, general store, and convenience store) 3,220 1,610
Editor: These figures basically apply for sole traders and individual partners in partnerships – different rules apply for companies and trusts operating such businesses. In addition, if you think these should not apply to you, we may be able to self-assess different amounts for you.
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information's applicability to their particular circumstances.
If you require further information regarding the above please contact Dennis Malcolm, Michael Ryan, Greg Cusack Marita James or David Perry on (03) 9551 2822 for their expert advise.
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November |
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11th |
- Quarterly Activity Statement – quarter 1 2006-07 – due date for lodgement and payment |
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14th |
- Reasonable Benefits Limits (RBL) – due date to report to ATO all RBL reportable benefits paid in October |
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21st |
- October 2006 Monthly Activity Statement – due date for lodgement and payment |
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25th |
- Quarterly Activity Statement |
Windows Vista - Coming Soon
Next Year Microsoft will release its latest Operating System; Windows Vista (http://www.microsoft.com/windowsvista). This is the most significant change in PC operating systems since the release of Windows XP. Microsoft claims that Vista will be the most secure and stable operating system to date.
So what will Windows Vista offer? Different versions of Vista will include some of the following:
- A slicker interface such as translucent windows and a 3D interface; this is the new Aero interface. Also when you switch between tasks (the old Alt-Tab combination) you will be given a preview of the task and a description rather than a non-descript icon as in Windows XP.
- Improved Internet Explorer (see the article on Internet Explorer 7) with increased security
- Find information on your computer easier. Microsoft claims that Vista will find files on your computer easier and quicker than Windows XP. The ability to search for files on your computer will always only be a couple of mouse clicks away.
- Improved Multimedia features such as Photo Gallery, improved Movie Maker, DVD Maker and Media Player 11.
- Improved Security and user account control. Vista will include Windows Defender, Microsoft’s answer to combat spyware. This will scan files as you download them.
- New tools for users who use notebooks. Vista will also improves the security when a notebook is connected to a network.
So what versions of Vista will be available? In the past we have generally had two choices with the Windows XP Operating System, XP Home or XP Professional. Microsoft seems intent on confusing consumers with a number of different versions of Vista. The versions available in Australia will be:
- Home Basic – the most basic version of Windows Vista. It will not include any of the enhanced desktop features such as Aero or the enhanced multimedia or business features
- Home Premium – this is will likely be the version marketed to a majority of home users. It will include all the enhanced desktop and multimedia features. It does not include any of the advanced “business” features such as enhanced networking
- Business – this will be the version aimed for use in a businesses environment. It will include the enhanced desktop features but not the enhanced multimedia features. It will however include advanced features for the business user such as remote desktop, faxing, improved backup and networking utilities
- Enterprise – this version will be aimed at the business market and will only be available in bulk corporate licensing where there are hundreds or thousands of installations.
- Ultimate – this is the version with all the bells and whistles. It includes all the features found in all versions of Vista. This will likely be aimed at the power user or the enthusiast
To see if you current PC is capable of running Windows Vista please download the Windows Vista Upgrade Advisor from http://www.microsoft.com/windowsvista/getready/upgradeadvisor/default.mspx. This will scan your computer to determine which version of Vista you will be able to run and make suggestions on hardware changes you could make to allow you to run Vista or to gain some of the advanced features of Vista.
Vista will ship on DVD, so if your computer only has a CD drive you will either have to install a DVD drive into your computer or order a copy of Vista on CD from Microsoft. Another feature of the Vista DVD will be that it contains all the information necessary to install any of the versions of Vista. If you wish to upgrade from say the Home Basic to Ultimate you will only be required to order an installation code from Microsoft; there will be no need to purchase a new disc.
At this stage Windows Vista is planned for release early next year. The pricing for Windows Vista should be available shortly before it is released.
Internet Explorer Version 7 – almost here!
With the upcoming release of Windows Vista Microsoft has been releasing beta versions of some of the components that will ship with Windows Vista. Beta versions are like a draft version of the program; they are released to test the program in a wider environment. Beta versions will often resemble how the final product will look and behave but may still contain a number of bugs or issues.
A few months ago Microsoft released a beta version of their upcoming version of Internet Explorer, Internet Explorer 7 (IE7). This latest version is being optimised for Windows Vista but it will still run on Windows XP; but without a few features design for Vista (the Vista version will be referred to as IE 7+). It gives you a feel as to where Microsoft seems to be heading with Windows Vista. IE 7 includes the following features:
- Increased security (or so Microsoft claims)
- Phishing Filter – this is where you are alerted to a website that could be masquerading as another website; such as a bank. The address bar turns a very noticeable red when you visit a suspect website. Sites you have listed as trusted will show as green in the address bar.
- Tabbed Browsing – this is the most notable change. No longer will you have multiple internet sessions open on the taskbar – one single Internet Explorer with a tab for each Internet session. Alternative to Internet Explorer have used tabs for some time.
- More economic desktop – buttons and toolbars are kept to a minimum to increase the space used for actually viewing websites
- Improved Printing
- Built in RSS Feeder
- Improved History Deletion – stop people from seeing what websites you are visiting
If you want to have a look at Internet Explorer 7 or even download it to test it head on over to http://www.microsoft.com/windows/ie/ie7/about/default.mspx. Please remember that if you do install Internet Explorer 7 it is still not the final product and support provided by Microsoft is limited. Internet Explorer is also an integral part of Windows, installing the beta version could cause other applications to behave unexpectedly. Before installing it be sure you know exactly what you are doing and how to roll back to your previous version of Internet Explorer if problems arise. I would refrain from installing it in critical environment such as your work PC.
In this issue....
For many Australians, their only form of life insurance is held within super. The attractions are that premiums are funded by superannuation contributions rather than their own pocket.....
Insurance in or out of Super at claim time
& however the benefits pale against the potential for the delays in the payment process in the event of a claim. The proactive role trustees play in ensuring benefits end up in the right hands mean the settlement of claims may take longer than claims made for insurance held outside super.
In or out?
For ordinary life insurance the payout process is relatively straightforward as there is a defined person to whom to pay the benefit. Only the owner of the policy or, in the case of the self-insured, the estate of the life insured can receive the benefit. The proceeds can be paid as quickly as one week after all the relevant evidence is received. Often this comes at a time when grieving beneficiaries require cash flow for the funeral and other associated costs.
The payout process for term life in super is substantially more complicated. There is a wider array of potential recipients, and trustee discretion may apply in relation to the payment of the benefit. In some instances, the process may get bogged down, leading to delays in making the payment and further distress for the already distraught family members.
Trustee Obligations
When it comes to paying out death benefits, super fund trustees have obligations under both the SIS Act and the fund trust deed. Under the SIS rules, benefits are required to be paid to dependants in order to meet the sole purpose test. The trustee is also obliged to ensure the benefits are paid out in accordance with the trust deed.
A valid binding nomination binds a trustee to pay a particular person. This mechanism helps speed up the process and ensures the benefit passes into the hands of the beneficiaries as quickly as possible. The process becomes more complex where there are preferred (non-binding) nominations or no valid binding nomination.
Exercising trustee discretion
Where there is no valid binding nomination, trustee discretion will be applied. This means determining who is an eligible beneficiary under both SIS and the trust deed, and what percentages of the benefit to pay them (where more than one is identified). Where there are complicated family structures, such as children and stepchildren from two or three marriages, trustees will need to exercise discretion to ensure the funds go to the appropriate people.
In the case of preferred nominations, trustees are required to go through a thorough process of evaluation to determine whether the nominated beneficiary is entitled to receive the benefit, in accordance with the trust deed and the SIS definition of ‘dependant’.
Determining Dependants and payouts
The process of evaluating dependants can be an invasive one. Trustees will require evidence such as birth and death certificates, and the completion of an array of forms. Families can expect to be contacted by trustees and are encouraged to submit claims suggesting why they should be entitled to receive a benefit.
Trustees firstly determine who is a dependant under SIS. The extended definition includes:-
- Spouses (married or heterosexual de facto only)
- Children of any age (including adopted, step children and ex-nuptial children), or
- Any person in an interdependent relationship.
Delays in payment
If all the relevant documentation is submitted and it is a clear cut case, benefits can generally be paid out in as little as two weeks. However, if vital information is missing, or the trustee needs to seek statements from people, or there is no clarity around the dependants, the process could end up taking several months to pay out benefits.
Speeding up the process
A binding nomination will generally guarantee that the proceeds will be paid to the specified beneficiary in a timely manner. However in order for this to occur the nomination must be valid. This means the beneficiaries nominated must meet the SIS definition of dependant, the nomination must have been witnessed by two independent people and reviewed every three years.
The main traps with binding nominations are that they are not renewed and are no longer valid, or a member’s circumstances change and the nomination is not updated to reflect these changes. Where there is no valid nomination, the trustees discretionary powers will apply and the process of determining who might be entitled to receive the benefits will begin.
Summary
In straightforward cases, where there is a valid nomination, you would not experience delays and a payout is likely within a matter of weeks. However, where there are no valid binding nominations or there are complicated family structures, the trustee may spend more time making sure the money goes to the right dependants.
To avoid trustee discretion and delays with a payout you must ensure you have a valid binding nomination. Another option to be considered is the viability of holding a small amount of term life cover outside super. Holding a small amount outside of super will alleviate the immediate expenses following the death of a person, this will provide a certain level of comfort for the distraught family while the claims process is underway for the policy held in super.
For more information please contact Michael Ryan and the team at Focus Financial Planning.
Over the last month ARM Finance Pty Ltd has continued to increase the number of lenders that we can deal with. As a result of this we now have access to a lender that will provide finance to 106%. This allows the client to purchase their own owner occupier property onr investmen property with minimal outlay of funds.
Now we can provide a larger range of personal lending products. These products include consumer finance & car loans, which can be useful in providing to your own clients to provide funding for purchases.
Also available is insurance premium funding helping your business to free up some needed cash flow and allow for a better tax benefit. This is available over a period of 12 months.
If you would like to discuss these new options please contact our office on:
Phone (03) 9370 9811, Fax (03) 9370 9803 or Email info@armfinance.com.au
or alternatively you can contact one our consultants on:
Graham Lee 0417 115 611 (Commercial, Leasing, Residential) Jeff Messer 0409 217 002 (Commercial, Leasing, Residential) Shane McFarlane 0411 754 091 (Residential, Leasing)
Dust Busters (Source:BRW June-July 2006 by Kristen Le Mesurier)
Employers will come under fire for exposing workers to un safe workplaces, from the regulators and in the courts.
Thousands of workers are still being exposed to deadly dust in the workplace, according to a recent Senate inquiry leaving employers at risk of another round of multi-million-dollar personal injury claims.
The Senate community affairs committee, which investigates the claims that the number of workers with dust-related diseases is grossly under-reported and that those with injuries have not received adequate compensation, reported its findings on May 31.
Democrat Senator Lyn Allison, who pushed for the inquiry last June, says the cornmittee was alarmed to find that some employers in the mining, construction and forestry industries are still failing to protect workers from well-known hazards such as silica. In its report, titled Workplace Exposure to Toxic Dust, the Senate committee calls for an immediate clampdown on reckless businesses.
“It is really time that the ministers for employment and workplace relations in each state and territory got together and looked at enforcing their health and safety regulations. The risks being run by businesses are unacceptably high;’ Allison says.
Small businesses are the biggest regulation breakers, according to Allison, and should clean up their act. “Bigger businesses are better at complying because they have the resources and they make it their job to be aware of the risks,” she says.
Unions are demanding that state occupational health and safety authorities spend more on enforcing existing regulations. The assistant national secretary of cons-traction at the Construction, Forestry, Mining and Energy Union, Lindsay Fraser, says: “In building and construction, there is hardly a task that does it involve the release of dusts as deadly as crystalline silica. Yet there is no monitoring of regulations. Our guess is that thousands of workers are exposed to silica every day.”
Silica, fine particles of sand that scar, shrink and break down the lungs, has been known to cause deadly diseases since the 1920s. As with asbestos, it can take anywhere from weeks to 40 years before symptoms of the disease appear, and thousands of victims have either not been diagnosed properly or have been told that smoking, rather than dust, caused the disease.
Few Australians have been awarded compensation for silica—related diseases in Australia because of difficulties in proving that the workplace exposure caused the disease and statutes of limitations prevent many from lodging claims years after the exposure.
This is not the case in Britain or the United States. In the US more than 70,000 silica-related compensation cases are pending, and individual claims have grown to as much as $US7.6 million. Safety equipment - manufacturer 3M has set aside $US231 million to meet 54,000 claims. In Britain, the Government expects to pay out 7.5 billion -- ($18.5 billion) by 2009 for workers exposed to dust while coal mining.
The Senate committee is calling for an easier compensation system in Australia. “The compensation system is too unfair for many of the injured,” Allison says.
The committee recommends that all governments adopt nationally consistent identification, assessment and compensation mechanisms, using the New South Wales - Dust Diseases Act as the model, and scrap all statute of limitations legislation.
The cost of silica-related problems is likely to balloon because new injuries are being attributed to the dust. Airway diseases such as chronic obstructive pulmonary disease (COPD, also known as emphysema and bronchitis), and occupational asthma are now known to result front exposure to silica and other workplace dusts.
In June, the Woolcock Institute of Medical Research reported that almost 10% of cases of adult-onset asthma in NSW are caused by - occupational exposure to dust, more than five times the number previously thought.
Similarly, - a clearer link has been made between cancer and workplace exposure. In June, a study by the Queensland Cancer Fund and the University of Sydney reported that up to 1.5 million Australian are exposed to carcinogens at work; I 0% of male workers and 2% of female workers develop cancer every year as a result of this exposure.
Occupational hygiene consultant Jennings says few businesses are concerned about the risks posed by dust in the workplace. “Diseases just seem so far removed from their businesses. They will have to get concerned because it looks like the Government is finally going to start pushing the issue.”
Senator Allison is confident that state and territory governments will adopt the Senate committee’s recommendations. “Because the same people who make submissions advise governments, it is usually just a question of how soon, rather than when, they adopt the recommendations.”
Team Member News
- Please be aware that our Office will be closed on Monday 6 and Tuesday 7 October
ARM — Secure Client Access Area
As part of ARM’s commitment to providing excellent service we have developed our website to ensure an improved and secure means of electronic communication with your business.
Past practice has been to provide your accounting ledgers and reports, for ARM to review and update, via disk, CD, USB or by forwarding files via email transmission. These methods are outdated and with each instance you are running the risk that your files may either be corrupted or interfered Wth by virus.
Our “Secure Client Access” has been designed to provide the following benefits to you:
• The ability for you to upload your accounting data files, tiether it be MYOB, Quickbooks and also any other data files such as Excel and Word to ARM for review and update;
• Conversely, the ability for you then to download from ARM the updated accounting and data files;
• You will have 24/7 access to your financial reports and taxation returns. This WIl assist in obtaining timely information for your bankers & financiers as and when required
• Efficient and timely transmission of information
• Comfort and reassurance that transmission of all files are secure
There is an annual fee of $88 (Incl. GST) for this service.
If you are interested in registering for our new service please do not hesitate to contact Karen Maxwell on 9551 2822 or karen.maxwell@astonryan.com.au