From 1 July 2016, the audit rules for clubs and associations in WA have changed.

Do you need help understanding the rules?

From 1 July 2016, smaller incorporated associations – that is, clubs and associations with less than $250,000 revenue per annum – will have no requirement to undertake a review or audit of their current accounts.

Not for profits with a turnover between $250,000 to $1,000,000 will need their financial statements either reviewed or audited by a Chartered Accountant or a Certified Practising Accountant.

Associations with a turnover of more than $1,000,000 cannot select a review and must have an audit, and their financials must be audited by a Chartered Accountant or Certified Practising Accountant with a public practice certificate, or a Registered Company Auditor.

It may seem like additional time, effort and expense to have an annual audit, but there are a number of reasons and benefits for having an audit conducted –

• an audit of the financial records of the association ensures greater accountability to the members
• the audit gives assurance that all funds received by the organisation have been correctly collected, documented and banked. It shows that all monies spent by the organisation were for the purpose of the association, approved by the management committee, and documented. Apart from anything else, this helps to protect management committee members against unfounded allegations of misconduct;
• the audit provides an account of the assets of the association and verifies that records and registers are properly maintained;
• the audit functions as a check and balance. It requires that the financial statements of the association be kept to a standard in order for the audit to occur and will indicate areas that may require improvement;

The FAJ Auditing team can complete your club’s audit quickly, professionally and at competitive cost.

For additional information about the new audit rules for clubs and associations, please refer to the Department of Mines, Industry Regulation and Safety website which contains questions and answers in relation to the new association law.

 

Author: Daniel Papaphotis
Email: daniel@faj.com.au

 

 

Change of plans? A move overseas may be around the corner! But what does that mean for your Self-Managed Super Fund (SMSF)?

You must ensure your SMSF retains its status of an Australian Super Fund to avoid substantial penalties. To do this, there are three residency conditions to meet:

1. The fund was established in Australia or at least one of its assets is located in Australia.
2. The central management and control of the fund is ordinarily in Australia.
   • This requires the decision making, high level duties and activities to be performed in Australia, for example making investments and reviewing performance.
   • Generally, your fund will meet this requirement if the absence is intended to be temporary (defined as not more than two year) even if the central management of the fund is temporarily outside of Australia.
3. The fund must either have no active members (i.e. no one making contributions or rollovers into the fund), or alternatively at least 50% of the assets must be owned by active members that reside in Australia.

Failure to meet these conditions may result in being classified as a non-complying fund, which can consequently result in the whole of the SMSF assets being taxed at 45%.

Pro tips:

• Plan ahead if you are moving overseas to avoid significant penalties. Options include move your SMSF investments to an industry super fund, appointing further trustees such as adult children or advisors.
• Consider suspending contributions to your fund while you are overseas. Contributions can be made into an alternate fund during this period an then rolled into the SMSF upon your return.

Follow this link for a checklist.

https://www.ato.gov.au/Super/Self-managed-super-funds/Setting-up/Check-your-fund-is-an-Australian-super-fund/

Other related blogs:

TBAR – what it means for an SMSF trustee
You need to act soon with collectables in your super fund
Access super before retirement

Author: Lachlan Hunn
Email: lachlan@faj.com.au

 

 

 

 

 

Holding costs are expenses associated with the continuing ownership of an asset like real estate or share investments. These costs help to reduce the amount of any taxable capital gain when the asset is eventually sold.

Examples of expenses that may be considered as holding costs include:

• Council rates
• Interest on loans used to finance the investment
• Insurance
• Land tax
• Repairs & Maintenance

But holding costs do not include costs previously claimed as a tax deduction. So if you have a rental property and normally claim council rates as a tax deduction against rental income, the rates cannot form part of the cost base. However if you incur council rates on vacant land, you are not entitled to a tax deduction and could therefore record these as holding costs.

Importantly, to be eligible to add holding costs to the cost base of a CGT asset, the asset must have been acquired after the 21^st of August 1991.

The concept of holding costs and their significant effects can be better understood through an example.

Mr and Mrs Smith purchased a holiday home in Margaret River on 1 July 2012 for $500,000. The property is considered a CGT asset as their main residence exemption is being utilised on a separate property in Perth. The holiday home was sold on 30 June 2017 for $800,000 which would ordinarily result in a $300,000 capital gain.

Mr and Mrs Smith incurred the following holding costs over the 5 years of ownership.

• Insurance $10,000
• Council Rates $15,000
• Interest $75,000

As the residence was a holiday home (Purchased after 21 August 1991) and a deduction was not allowed during the time of ownership, these costs are eligible to be included in the cost base of the property. Therefore, the cost base will increase to $600,000 and the capital gain will reduce to $200,000.

Pro tips:

• holding costs cannot be used to increase a capital loss
• ensure that records of these costs are kept in the form of receipts, bank statements etc.

Other related blogs:

Capital Gains Tax and Building a House
Capital Gains Tax – Main Residence Series: Rent out your House
CGT Main Residence Exemption and Moving Overseas
Subdividing you main residence and selling the ‘backyard’

 

Author: Georgia Burgess
Email: georgia@faj.com.au

 

 

 

 

It is a commonly held belief that if an employer provides a ‘Ute’ or similar commercial vehicle to an employee, that it is 100% tax deductible and will not attract Fringe Benefits Tax (FBT).

However most people are not aware that in this situation the ATO has always required that the employee’s private usage must be ‘minor and infrequent’ and the vehicle must be an ‘eligible vehicle’ for that exemption to apply.

In an attempt to clarify the rules around FBT exempt motor vehicles, the ATO has released new guidelines that provide ‘safe harbour’ to those employers that work within the ATO’s guidelines.

In a nutshell:

Eligible vehicles include either:

1. A road vehicle designed to carry a load of at least 1 tonne (other than a vehicle designed for the principle purpose of carrying passengers) or more than eight passengers; or
2. The vehicle has a designated load capacity of less than 1 tonne but is not designed for the principle purposes of carrying passengers

To meet the ATO’s safe harbour relief the conditions below must be met:

1. The Employer provides an ‘eligible’ vehicle to a current employee;
2. The vehicle is provided to the employee for business use to perform their work duties;
3. The employer has a policy in place that limits private use of the vehicle and obtains assurance from the employee that their use is limited to that
   described below;
4. The GST inclusive value of the motor vehicle is less than the luxury car tax threshold when acquired;
5. The vehicle is not provided as part of a salary packaging arrangement and the employee cannot elect to receive additional remuneration in lieu of the
   use of the vehicle;
6. Employees must provide written assurance each year that private use of the motor vehicle provided is limited to travel:
   a. Between their home and their place of work and any diversion adds no more than two kilometers to the ordinary length of that trip;
   b. No more than 1,000 kilometers in total for each FBT year for multiple journeys taken for a wholly private purpose; and
   c. No single, return journey for a wholly private purpose exceeds 200 kilometers.

If you are an employer and would like some assistance to reduce you potential FBT exposure in this area, please us on (08) 93355211 to make an appointment.

Other related blogs:

Reducing FBT with the otherwise deductible rule

Author: Heather Cox
Email:heather@faj.com.au

The 2017/18 federal budget introduced a downsizing superannuation contribution scheme starting from 1 July 2018. It may be available to you if you’re over 65, your downsizing your home and you choose to contribute some of the proceeds from the sale into your super fund. The contribution is capped at $300,000 per person (so $600,000 for a couple).

The Government’s aim is to encourage the older population to downsize their larger than needed homes to free them up for the younger generation looking to buy their family home.

The eligibility requirements are:

– You must be 65 or over (there is no maximum age limit)
– The sale contract of the property must be dated on or after 1 July 2018
– You (or your spouse) must have owned the property for 10 years or more prior to sale
– The home must have been your main residence for at least 10 years
– The downsizer contribution must be contributed to the super fund within 90 days of receiving the sale proceeds (usually 90 days from settlement)

The good thing about the downsizing contribution is that it does not count towards any of your yearly contribution limits and can be made by anyone over the age of 65. Moreover, the work test is ignored for this contribution, so it is a great way for someone who is over 65 and fully retired to put more money into their super fund where they otherwise could not.

The downside is that it could affect your eligibility to receive the age pension. Age pension eligibility takes into account all financial assets including money in super, but the family home is exempt from age pension eligibility calculations. So by shifting value from a non-assessable home to an assessable super investment you may exceed the age pension asset or income thresholds and reduce your pension eligibility.

Before considering using the downsizing contribution it is highly recommended that you speak to your accountant or financial planner. This way you can confirm your eligibility for the contribution and whether it will affect your age pension.

Other related blogs:

Contributing to super – options for employees
What are the benefits of super salary sacrifice?
Allowing catch up concessional contributions

Author: Rhys Frewin
Email: rhys@faj.com.au