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Important Information

SOURCE DOCUMENTS for BUSINESS CLIENTS

BE WARNED, THE ATO IS PICKING ON CLIENTS WITH POOR RECORD KEEPING

Please bring with you the following original documents.

  • All bank statements for all accounts
  • Your cash book (e.g. Zions 212) or computer printout of transactions.
  • Your stocktake.  I can supply forms if you need them
  • Copies of all loan, hire purchase, asset purchase or lease agreements
  • Details of all periodical payments made from your bank accounts
  • List of all amounts owed by you to your suppliers
  • List of all amounts you are owed by your customers
  • Details of work in progress as at 30 June
  • All payment summaries received during the year, or a list of people who deducted tax from a payment to you
  • A list of payments to contractors.  ATO requires a contractor payment list to be sent to them by 28th July.
  • Details of any receipts which are not income, e.g. inheritances, lottery wins, sale of personal assets
  • List of items of plant, from your depreciation schedule, which have been scrapped or traded in.
  • Your motor vehicle logbook, with odometer reading as at 30 June.
  • For farmers, the numbers of animals bought and sold, born and died during the year (Account Sales).

IN ADDITION

Carefully consider whether any of the following apply to you.

Repairs                        If an item needs repairing it may be better to pay for the repair before June 30 and make the
                                     claim in this tax return

Superannuation         If you have employees pay the 9% before 30 June to get the deduction in the right year

Bad Debts                   Check your slow payers and if any are now bad, write them off before June 30.
                                     Bring me the list of bad debts, showing when you previously declared the income

Capital Gains              If you are thinking of selling an asset, check the date of purchase.  If you have owned it for
                                     over a year there may be a discount available

Delaying Invoice        If your cash flow can afford it, consider not issuing invoices till after June 30.  For most 
                                    small businesses income is not recorded as income until actually received

PAYG Withholding    Make sure you have dealt with all these obligations

  • Issued the Payment Summary (nee Group Certificate), including your ABN
  • Completed the Annual Reconciliation
  • Recorded the Tax File Number and/or ABN for each payee
  • Sent the TFN Declarations to the Tax Office

Vouchers                     Check that all receipts, invoices and other documents contain the details the ATO wants.
                                     Check they are still legible, e.g. have not faded in bright light. Obtain replacements, if necessary.

Remember, tidying up your papers should be much easier now, as many of you should have been writing up your records each three months so you could complete your BAS.

If I have to chase up missing documents, then I will be charging extra, both for my time and any out of pockets.   Bank statements can cost up to $16.00 per lost sheet.

The ATO is benchmarking industries.  This means that if you fall outside the “range” for income versus expenditure, you are likely to have an ATO audit.  The ATO benchmarking is not accurate and is based on Sydney, Melbourne and Gold Coast incomes/hourly rates and not relevant to Tasmania.  If you receive an ATO benchmark audit letter, please contact this office.

The ATO has been sending “bluff” letters targeting business with carried forward losses.  If the letter worries you please ring us.

 

NOTES FOR BUSINESS CLIENTS

REGISTRATION of BUSINESS NAMES

The Australian Securities and Investments Commission (ASIC) has taken over the administration of Business Names.  Previously, this area was run by each state/territory and you might have paid fees to 8 different regimes, and at different rates and dates.  Now you will pay a single fee, which generally is less than previously.  You will in due course need to set up an on-line account with ASIC, through ASIC Connect.  All details about the Business Name will be available in a Public Register.  The address of the business will be shown, together with the name(s) of the holder of the Business Name.  You will have to visit this site to check the transfer from the old state registry occurred correctly, and each time any of the detail changes.  It seems that the only access will be on-line.  I am aware that some of my older clients do not have computers; we should be able to access that from my computer.

AUDITS  The ATO has been developing benchmarks on an industry by industry basis.  So far it has released over 110 sets of figures and aims to have a lot more released by during 2012.   Unfortunately, most of these figures were developed on the mainland of Australia, and in some cases are not relevant to Tasmania.  It may be however, that an auditor based in Sydney or Melbourne will start an audit because s/he does not know, for instance, that bricklaying is charged differently in Tasmania.  The material I have read about bricklaying talks about the bricklayer buying pallets of bricks, sand and cement.  From these purchases the ATO reckons it can calculate how much gross turnover the brickie should have.

If this approach interests you, go to the ATO website, www.ato.gov.au and have a look at the industries which have been benchmarked so far.

Under the new Tax Agent Services Act I am expected to look at the benchmark, if any, for your industry and counsel you if your figures/ratios are significantly different from the ATO’s expectations.  Given the very broad brush approach taken by the ATO, and its lack of understanding of regional differences in working arrangements, I am unlikely to spend much time on this.

The ATO has also been calculating ratios of credit card sales to cash sales and then asking your bank for the details of all credit card deposits.  It then extrapolates to arrive at a total turnover.  This approach has been proven to be flawed, and is (temporarily) withdrawn.  Nevertheless, it shows the strategies the ATO is using to catch taxpayers who cheat.

Another audit tactic involves examining personal living expenses.  Broadly, the ATO finds out as much as it can about your living costs, such as rent or mortgage payments, motor vehicle running, health insurance, superannuation contributions, negative gearing, schooling etc, adds them all up and then looks at the income declared in your tax return.  If your expenses are higher than your available income, you will be asked to explain the difference.  In some cases this may be easy, but in many it may prove quite awkward.  The ATO has access to details from Centrelink, knows your partner’s income from your return, knows where you live and can check the size of your mortgage, can search the motor vehicle registry, knows your private health insurer, knows about rental properties, bank balances, shareholdings and managed funds before it starts to examine you in detail!

One item the ATO cannot readily identify is a Superannuation Income Stream.  Where a taxpayer is aged over 60, income from most Super funds is tax free, and does not appear in a tax return.  Thus your lifestyle and spending can be well in excess of your obvious/declared income.  Some people may have inherited well and are spending capital to maintain a lifestyle.

The ATO estimated it would raise $1.3 billion from audits in 2003-04, for an outlay of about $300 million, ie a rate of return of well over 4 for 1.  In later years it predicted a return on investment ratio of over 7:1.

EMPLOYERS     If you are an employer you will almost certainly have obligations under the Superannuation Guarantee Levy Act.  Note that the rate, for 2012-13, is 9.00% of Ordinary Time Earnings.  The rate changes from 1 July 2013.  And you will have to tell each employee when you propose to make the payment.  Workplace Standards, a Tasmanian Government instrumentality, has issued its version of employee records, and the equivalent Federal law also imposes its version on those employers caught up in its web.   Both versions include a sheet about the employee, leave records, weekly time & wage record, a pay slip and some notes.  If you are an employer, I strongly recommend that you obtain a set and ensure that your records are at least as good as this model.  If not, you could be liable to a penalty.  The web address is www.wagenet.gov.au  I also have copies of the forms and notes.  Federal law also requires very detailed records to be kept, for 10 years, of each & every employee.  This includes people employed by their own company.  Please remember, your company is a separate legal entity from you.  A company must have Workers’ Compensation insurance for all its employees.

ACTIVITY STATEMENTS (AS)                   Your AS is sent direct to your nominated postal address.  You have a choice – you can do it yourself or ask me to complete it and lodge it with the ATO.  In 2012-3 the minimum fee for me to check it, key it and lodge with the ATO will be $85.00 per AS.  Clients who require significant help with their AS will pay a higher fee.