April 2021 Newsletter
April’s beginning of an Easter break was welcomed here at King & Whittle. It was nice to spend some time with family and friends and only slightly overindulge – okay some of us really overindulged! However, we are all back on deck and looking forward to knuckle down to finish this of this financial year.
There was a raft of positive economic news in March, which should make the Federal Treasurer’s job a little easier when he hands down the Budget on May 11. The Australian economy staged a remarkable V-shaped recovery in 2020, growing 3.1% in the December quarter and 3.4% the previous quarter – the biggest 6-month lift on record - after plunging into recession in the first half year. The main contributor was iron ore, which has doubled in price since March last year.
As the vaccine rollout began and restrictions eased, business and consumer confidence rebounded. The NAB Business Confidence Index rose to an 11-year high of +16.4 points in February while the ANZ-Roy Morgan Consumer Confidence rating hit a 7-year high of 124 points in March, up 30% over the year.
Confidence was reflected in a recent surge in new vehicle sales, housing construction and property values. It was also boosted by a fall in unemployment from 6.4% to an 11-month low of 5.8% in February. Company profits have also remained strong, with 86% of ASX200 companies reporting a profit in the December half year. Although aggregate earnings fell 17%, dividends were up 5% on a year ago with an estimated $26 billion currently flowing to shareholders.
It’s not all plain sailing though. Temporary coronavirus JobSeeker and JobKeeper payments ended on March 31, and fuel prices are rising just as everyone fills up for Easter road trips. The strengthening economy saw the Aussie dollar shed 2c to US76c in March.
As ever, if you know of anyone that could benefit from our superior Taxation, Accounting or Wealth Management advice we would be honoured if you referred them to us.
Until next month,
Your King & Whittle Team
Good records the best defence when the Tax Man knocks
As the Australian Taxation Office (ATO) turns its attention to businesses and individuals who have used COVID-related support programs, many taxpayers are likely to find themselves on the tax man’s radar.
There are a number of red flags that can spark the ATO’s interest in your business or personal tax affairs. At present though, having applied for early release of your super, or receiving government support through JobKeeper, definitely puts you at a higher chance of an audit.
The ATO has identified a number of concerning and fraudulent behaviours with both these programs and is auditing taxpayer applications, so it’s worth understanding the regulator’s powers and the importance of good records when it comes to your tax.
ATO’s authority to audit
When it comes to the tax audit process, the ATO has significant powers. It has the authority to gather information about you and your personal circumstances from a range of sources, including other government agencies such as Services Australia. The ATO can also seek information about your business from financial institutions including your bank and insurers.
Generally, the ATO’s preferred strategy is to request information from you using a cooperative approach. If you fail to respond appropriately, however, the tax office may decide to use its statutory or ‘coercive powers’. This involves issuing legal notices seeking information from you and your advisers.
It’s sensible to act cooperatively with the ATO from the outset, rather than force the regulator into coercing you into compliance.
If you do receive an ATO request for information, we can help prepare the necessary documents and your initial responses. We can also be a useful guide through the process if you receive notification of an upcoming audit.
Why good records matter
As a taxpayer, if you want to object to a tax assessment or question an audit decision made by the ATO, you need to prove the decision was incorrect or excessive.
In the event of an Administrative Appeals Tribunal review or Federal Court appeal about your tax assessment or audit, the statutory burden of proof rests with you. This means you must prove the assessment is excessive or otherwise incorrect.
There is a legal presumption the ATO’s assessment is correct, unless you can produce evidence to prove what the assessment should have been. That’s why it’s essential to keep good records to substantiate your overall tax affairs and any deductions you claim in your annual return.
Tips for good recordkeeping
The golden rule of good recordkeeping is that you must keep records that are relevant to your tax and super affairs for five years.
For businesses, your records must be safely stored in a way that protects them from being changed or damaged, and you must be able to show them to the ATO if requested. The records must be kept in English or be easily converted into English.
Your business records need to include the quarterly Super Guarantee (SG) contributions paid to your employees and how they were calculated, wages records (including directors’ fees), a list of creditors and debtors, stocktake records, tax invoices for purchases over $82.50, and your BPAY or PayPal records.
Common record-keeping errors
According to the ATO, common business recordkeeping errors are failing to keep accurate records of all your cash and electronic transactions, and not regularly reconciling sales into your business accounting software.
Many businesses and individuals also fail to accurately split the private and business portions of an expense and don’t ensure they have sufficient records to substantiate their claims for tax deductions.
The ATO can seek information or documents at any time – either before starting a compliance activity or during a review or audit – so it’s best to be prepared. An easy first step to assessing if your business records are up to scratch could be checking out the ATO’s online Recordkeeping Evaluation Tool.
If you would like help with an information request or audit notification from the ATO, call our office today.
Extending that holiday feeling
Like trees losing their leaves in autumn, why not take a leaf out of their book and choose this time of year to shed some of your own financial baggage.
In the style of Marie Kondo, the Japanese organising whizz who has inspired millions to clean out their cupboards, decluttering your finances can bring many benefits.