What's Happening at DSR in August?

In this issue:

• eBay and the Tax Office
• Are you on this year's ATO's tax hit list?
• Don't let your company share structure trip you up
• Why your June BAS is an audit trigger
• Client Secure Sites - now available
• Banklink - A solution for the new tax year
• Tax Tip -  Tax Assessments & Refunds
• Important Dates
• Client Testimonial

 

Welcome Note Welcome to What's Happening at DSR in August. Each month we aim to bring you interesting and tax effective ideas for saving you money, growing your business and ultimately building a successful retirement plan. Remember, whatever your financial and accounting needs we can work with you to find a solution.

eBay entrepreneurs in ATO sights The Tax Office has successfully obtained records from eBay and The Trading Post that will enable them to data match income declared by taxpayers to their income generated online.  Targeting those with earnings of $20,000 or more in any of the last three financial years, the ATO crackdown is looking for online operators who are effectively running a business but not declaring the income.  The Tax Office also expects to catch existing businesses that are generating additional income through the trading sites but not declaring or understating the income. The Tax Office will match data from the trading sites to Tax File Numbers, ABNs, addresses and dates of birth. The data matching program identifies a list of taxpayers 'of interest' to the Tax Office who are then contacted for review or audit. For many, sites like eBay offer a distribution channel for home or start up businesses without the expense of a shop front or developing a retail network where margins can be squeezed and profits reduced.  It’s a way of ‘dipping your toe’ in the retail market to gauge a product lines appeal without many of the overhead costs associated with traditional business.  The Tax Office focus means that they suspect there are a host of eBay business entrepreneurs who are not declaring income earned. So, at what point do you have to declare income you have earned to the Tax Office? The Tax Office will be looking to see if your activity online could be deemed to be a business.  There is no one test for what qualifies you as a business versus a hobby but factors such as the regularity of your transactions, whether or not you are promoting yourself as business (developing a brand name etc), if you engage in marketing activities, whether you intend to develop a business and make a profit (or have the capacity to generate a profit over time), the size, scale and permanency of your activities, and whether you operate in a business-like manner, all go toward determining whether what you are doing is a business or merely a hobby.  If your activities are just a hobby then the income is not assessable, and the expenses are not deductible.  If you are a business then you need to declare the income earned but you also get to claim deductions for the cost of the business activities.  If you think you might be affected by the ATO's data matching program, contact us today. The ATO is offering reduced penalties to taxpayers who voluntarily disclose income earned from the online trading sites.

Are you on this year's tax hit list...? The ATO are fairly upfront. Every year they tell you what they are targeting and why.  That’s why when the Tax Commissioner released his compliance program for 2010/2011, we took a keen interest in what he had to say.  The way the tax office catch tax evasion is more sophisticated and far reaching than ever.  Last year, they utilised over 500 million transaction records from third parties.  That is, bank details, international transactions, investments, welfare data, super fund information, luxury car and boat purchases, employee share scheme details, property data, are all used to make sure that the income you declare on your tax return is an honest assessment. Individuals - details of employee share schemes - Executive salaries and access to executive perks - Lifestyles that don't match income declared - Claims for home office expenses - Claims for business travel (particulary mistaken claims for travel between home and office) Investors - Claims for rental and share investment expenses not entitled to or can't be substantiated - Breach of superannuation caps Business - International transactions - Project Wikenby is credited with reducing the flow of cash to international tax havens - Vanuatu, Switzerland, Lichtenstein - by 20 - 30%! - Transfer pricing issues - High level of GST credits If you have concerns about your tax situation speak with your accountant today.

 

Is your company share structure right for you? Many companies have different classes of shares but when it comes time to sell, this share structure might be an impediment. There are a number of reasons why differential share structures are used - the ability to provide different rights to equity holders and allowing dividends to be paid to one class of shareholder in preference to another are common reasons.  Much of this comes down to the way the company is managed and the arrangements between shareholders.  Having different share classes can provide an additional level of flexibility in the ownership of a company. There is however one occasion where different share classes can work against you;  more...

 

Why your June BAS is an audit trigger Most businesses will be finalising their June BAS at the moment. Extra care needs to be taken with this BAS to ensure that you have everything correctly recorded for the year. Increasingly, the ATO are matching data provided in your income tax return with the total of information returned in your business activity statements over the same year. Where they find material differences in the key numbers these differences can trigger an audit.   Final revenue figures and inter-entity charges are key risk areas. Decisions about these charges and reconciled numbers should have been made by June 30. You don’t have the luxury to wait until you finalise your tax return for the year.   When you lodge your June BAS you have provided the ATO with a summary of your business income and expenses for the year. Make sure that your combined BAS for the year reconcile to your financial statements. If you want to know more talk to your accountant today.

 

Secure Client Sites DSR Secure Client Sites.....available now for business clients.  Managed through our website, your secure area can provide you with exclusive access to reports and documents that we hold in our files that you may wish to access and you can print, download or view at your convenience.  It is highly mobile and you can log in whilst meeting with your bank manager for direct access to information such as your financial statements and tax returns. No more worry about finding your information in a pile of papers at home, this is a one stop library for your tax information. Your secure site is also an excellent way to transfer your tax information files to us.   Wondering how to get your MYOB or other data file to us because it is 'too big' to email, through your Secure Site you can upload files to send to us (up to 200MB).   If you want to know more about this complimentary service talk to your accountant today.

 

Banklink - A solution for the new tax year As we enter into a new tax year it is a good time to evaluate the last 12 months and work out for the time ahead what changes we can make whilst saving us time and money. The one thing that comes to mind for most business owners is how can they make preparing their accounts simpler and time efficient? Banklink could be your solution. The Banklink System allows us to complete your accounts efficiently and accurately, whilst saving you precious time and money. Your financial institution can simply provide our office with your bank statement data electronically and securely encrypted. From here we can process all your transactions with minimal input from you. It is that SIMPLE. No more worry over missing bank statements or spending hours at your computer doing your monthly book work. Banklink frees up your time so you can focus on important matters like running your business or doing the things you like to do. The number of  clients now using Banklink is increasingly rapidly and they are discovering that the hours they spent preparing their accounts each month, has now turned into just minutes. To view a short demonstration on the benefits of Banklink - Banklink Service Presentation So do yourself a favour and make sure the time you have left at the end of the week isn't wasted on writing up your books or data entry.  Call us today to discuss how Banklink will work for you.

 

Tax Tips Are there delays in the ATO processing 2010 Tax Returns? Our office has been experiencing slower response times from the Australian Taxation Office in relation to the processing of tax returns and issuing of refunds. The ATO has released a progress report as at 6 August 2010 which advises: 'the regular flow of assessments and refunds has not been as consistent during our first four weeks of processing as we would have liked and we are taking steps to smooth out these fluctuations" To read more on this article Click Here Our office is forwarding to clients their  tax assessments and refunds on the same day of receipt from the ATO.

 

Important Dates 14 August 2010 -    Annual PAYG Payment Summary lodged with the ATO. Penalties apply for late lodgement. 23 August 2010 -    Monthly activity statement July 10 - paper or ECI lodgment 25 August 2010 -    Quarterly activity statement April - June 2010 – secure electronic lodgment (via your Tax Agent). 28 August 2010 -    Superannuation guarantee charge (SGC) statement – quarterly for quarter 4, 2009–10 (if required contributions were not made by the due date).

 

Client Testimonial Davis Stewart Rowland has been my business advisor & accountant for over 35 years. During this time their in-depth knowledge and valuable input has helped me make informative and accurate decisions both personally and in my various business ventures. Their expertise on capital gains issues and how to get the most out of my super has also assisted me greatly when planning for my future retirement. Pam Littlefield Dunleith Tourist Park

   

About Davis Stewart Rowland Davis Stewart Rowland is a three partner firm located at The Entrance on the NSW Central Coast. With over 50 years experience we have an in-depth knowledge of what the business owner and investor needs to embark and stay on the path of growth and wealth creation. We have a unique appreciation of the issues business owners and investors face, which makes us an integral part of our client's advisory team. Our comprehensive approach includes: - Benchmarks - Tax minimisation plans - Cash flow forecasting - Business information processing - Management & strategic advice Whatever your needs we can help find a solution.  Contact us today