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For any Law Practitioner, the Law Society requires an audit of the trust records at 31^st March each year under the Law Professional Uniform Law (NSW).

The Law Society website sets this out as follows:

Appointing an external examiner

Your law practice must appoint an external examiner to complete a written external examiner’s report on your trust records, which the examiner then forwards to the Law Society by 31^st May each year.

Notification

Law practices are required to notify the Law Society of the person appointed as their external examiner and must also notify the Law Society when they terminate an appointment.

To notify the Law Society complete the Notification of appointment or cessation of external examiner form and return it completed to the Trust Accounts Department. Further, prior to terminating the appointment of an external examiner the law practice is required to seek the approval of the designated local regulatory authority – the Law Society. To request approval, complete the Request for Approval for Termination of External Examiner form.

If you require an audit of a Trust account prior to the date of 31 May 2019, please notify our office as we are currently conducting the audit for practitioners.

“Superannuation guarantee” (SG) contributions are the minimum superannuation contributions that employers must make for their employees. The SG rate is currently 9.5%, which means employers must make contributions equal to 9.5% of the employee’s salary or wages.

SG contributions are capped for high-income earners. Effectively, an employer is only required to make SG contributions to the extent the employee earns up to $216,120 per annum (indexed); earnings above this threshold don’t attract SG contributions.

In line with long-term government policy to help Australians build retirement savings, the SG rate is scheduled to gradually rise to 12% over several years, as shown in the following table:

Financial year	SG percentage
2018–2019	9.5%
2019–2020	9.5%
2020–2021	9.5%
2021–2022	10%
2022–2023	10.5%
2023–2024	11%
2024–2025	11.50%
2025–2026 onwards	12%

But while this timetable is currently set down in legislation, it’s possible these rate increases could take a different path in coming years – either to slow down, speed up or stall indefinitely. Ongoing differences between the two major political parties mean there is significant disagreement about the optimal SG rate, with the Coalition tending to slow SG increases down (having twice passed laws to delay the previous Labor government’s planned increases) and Labor pushing towards a higher rate (with an official long-term goal of increasing the rate not only to 12% but eventually to 15%). There is also a diverse range of opinions among policy researchers and interest groups, adding to the complexity of this issue.

What should Australian workers make of this? Politics around the SG rate may be beyond our control, but individually, workers can help themselves by looking for additional ways to boost their savings, regardless of their income status. As each person has different financial circumstances, retirement plans, lifestyle needs and capacity to make extra contributions, it makes sense to seek professional advice to identify ways to build your savings that are appropriate for your situation.

Some ways that workers can boost their retirement savings might include:

• Super co-contributions: Workers aged under 71 years with an income of $52,697 or less may be eligible for a government “co-contribution” when they make their own extra after-tax contributions to super.

If you earn $37,697 or less, the government will match your own contributions by 50% (up to a maximum government contribution of $500 for your $1,000 personal contribution). The matching rate then tapers down for incomes up to $52,697.

• Salary-sacrificed contributions: If you can handle a reduction in your take-home pay, arranging for your employer to pay part of your salary as an extra superannuation contribution can both boost your superannuation and save you tax; you will not pay personal income tax on the amount as it will instead be taxed at 15% when received by your superannuation fund. Just remember that both your SG contributions and salary-sacrificed amounts count towards your $25,000 annual concessional contributions (CC) cap, and exceeding this cap can result in penalty taxes.

• Deductible personal contributions: If your employer does not offer a salary-sacrifice program, you can make extra contributions from your own after-tax income and then deduct these amounts in your tax return, provided you complete some extra paperwork. These amounts also count towards your CC cap, so take care.

Take control of your super

Talk to us today about building your retirement savings. As well as the tips above, we can help you explore the full range of measures available, including strategies to boost your spouse’s super (through “splitting” and other arrangements), “downsizer” contributions (relating to proceeds from the sale of your home) and more.

 

While the concessional and non-concessional contributions caps will remain unchanged for the 2019-20 financial year, certain other important superannuation thresholds are set to increase from 1 July 2019.

The “CGT cap amount” for non-concessional contributions will increase by $35,000 to $1.515 million for 2019-20, up from $1.480 million for 2018-19. The CGT cap amount is an important concession that allows people to make a personal contribution to super from the disposal of small business assets that qualify for the CGT small business concessions.

The CGT cap is not counted towards the non-concessional cap so it enables further contributions above the $1.6 million total superannuation balance limit. The increase in the CGT cap means that eligible individuals will be able to squeeze an extra $35,000 per person into their superannuation from 1 July 2019.

The concessional contributions cap of $25,000 will remain unchanged for 2019-20. This cap is now only indexed in $2,500 increments. At this current rate of wages growth, the concessional cap is not expected to increase to $27,500 until 2023.

The non-concessional contributions cap is also unchanged at $100,000 for 2019-20 (or $300,000 over 3 years, subject to transitional rules).

While the super guarantee is frozen at 9.5% until 1 July 2021, the “maximum contribution base” will rise to $55,270 per quarter from 2019-20, up from $54,030 for 2018-19. An employer is not required to provide the minimum super guarantee support for that part of an employee’s ordinary time earnings (OTE) above the quarterly maximum contribution base. This quarterly maximum represents a per annum equivalent of $221,080 for 2019-20.

The Government co-contribution “lower income threshold” is set to increase to $38,564 for 2019-20, while the “higher income threshold” is $53,564. A maximum co-contribution of $500 is payable for people with incomes up to the lower income threshold, phasing down for incomes up to the higher income threshold. That is, a Government co-contribution up to a maximum of $500 is payable for a $1,000 personal super contribution.

The “lump sum low rate cap” will increase to $210,000 for 2019-20 (up from $205,000). This is an individual’s lifetime cap on the amount of taxable components of any lump sums they receive that are eligible for a lower, concessional tax rate. Another cap affecting how much tax you pay on lump sum benefits, the concessionally taxed “untaxed plan cap”, will increase to $1.515 million.

The “ETP cap”, which allows concessional tax treatment of part of an employment termination payment, will increase to $210,000 for 2019-20 (up from $205,000). The tax-free amount for a genuine redundancy will increase to $10,638 (base amount) for 2019-20 plus $5,320 for each whole year of service.

The general transfer balance cap will remain at $1.6 million for 2019-20. This also means that the “defined benefit income cap” of $100,000 pa is unchanged.

The recent Full Federal Court decision of Harding v Commissioner of Taxation is an important tax case for Australian expatriates living and working overseas. The Court analysed two of the tests for when an individual will continue to be a tax resident of Australia.

What happened in Mr Harding’s case?

Mr Harding permanently departed Australia in 2009. He started living in an apartment in Bahrain and commuted across the causeway to his permanent position in Saudi Arabia. The plan was that Mr Harding’s wife and youngest son would join Mr Harding in Bahrain at the end of 2011, when their second son finished high school in Australia. Until then, Mr Harding’s wife would continue to live in the family home on the Sunshine Coast. Mr Harding bought a car in Bahrain for his wife, enrolled his youngest son in school in Bahrain and looked for a family house in Bahrain when she visited. But Mrs Harding never moved to Bahrain, and they subsequently separated, and then divorced.

The ATO assessed Mr Harding on the basis that he was a tax resident of Australia for the 2011 income year.

Tests for Australian tax residency

Under the domestic tax law in Australia, an individual will be a tax resident if they meet any one of the following four tests

1. The person ‘resides’ in Australia – based on the ordinary meaning of the word ‘resides’.
2. The person’s domicile is in Australia, unless the Commissioner is satisfied the person’s ‘permanent place of abode’ is outside Australia.
3. The person has actually been in Australia 183 days or more in the tax year (subject to one exception).
4. The person is either a member of the superannuation scheme established by the Superannuation Act 1990 or an eligible employee for the purpose of the Superannuation Act 1976 – or the spouse or child under 16 of that person. This test often applies to commonwealth government employees.

The decision in Harding concentrated on the first two tests.

How does the decision in Harding help Australian expatriates?

Two aspects of the decision should provide some comfort to Australians living and working overseas.

First, the ATO argued that Mr Harding did not have a ‘permanent place of abode’ outside Australia because his first apartment was only ‘temporary’ while he waited for his wife and youngest son to join him in Bahrain. The ATO also pointed out that Mr Harding could move by packing his belongings in two suitcases and moving to an apartment on a different floor.

The Full Federal Court rejected the ATO’s argument, and concluded that the relevant consideration was whether Mr Harding had abandoned his residence in Australia.

This conclusion may help Australian expatriates living in serviced apartments or hotels on long‑term arrangements, where they can show they have abandoned their residence in Australia.

Second, the ATO argued that a person’s subjective intention should not trump objective ‘connections’ with Australia. The ATO pointed to a list of objective connections Mr Harding continued to have with Australia.

The Full Federal Court concluded that the taxpayer’s intention is relevant. In fact, in Mr Harding’s case, some of the objective connections supported the conclusion that Mr Harding was not a resident of Australia.

What key risks remain for Australian expatriates living and working overseas?

Australian expatriates who maintain a family home in Australia will continue to be high risk and will need to review their circumstances carefully.

Mr Harding’s case was described by the learned primary judge as ‘unusual’, and it is worth noting that the ATO did not assess the income years after Mr Harding and his wife were separated.

The number of days that a person is physically present in Australia (even if well under 183 days) will continue to be a risk indicator that the ATO will consider.

If a taxpayer is a tax resident of the country where they are living and working, there may be a double tax agreement that applies. The effect of the residency article in double tax agreements is generally to deem the individual to be solely a tax resident of one country rather than another. This is based on a series of ‘tie-breaker’ tests. The ‘tie-breaker’ tests vary between the double tax agreements. Care needs to be taken in interpreting double tax agreements, as the rules of interpretation are different to interpreting Australian domestic law.

How to substantiate being a non-resident

The taxpayer’s evidence will always be critical to persuading either the ATO, or a court or tribunal, that the person has stopped ‘residing’ in Australia and has established a ‘permanent place of abode’ outside Australia.

The non-resident taxpayer must make sure they keep relevant, contemporaneous evidence so that they can support their position in any ATO audit.

Logan J gave an important reminder in the Harding decision – that the facts of a particular case should not be elevated to matters of principle. The law has to be applied to ‘the overall circumstances of a given case’.

The critical task for the taxpayer is to ensure that they have sufficient evidence of their ‘overall circumstances’ so that the legislation can be applied to those particular circumstances.

Source : https://www.cgw.com.au/publication/tax-residency-rules-reassessed-in-recent-full-federal-court-decision-how-does-harding-affect-you/.

Claims for rental property tax deductions contain errors in 90 per cent of cases, the Australian Taxation Office reports. It is planning a blitz on what it calls ‘its next big area of focus’.

The ATO says it recently completed investigations of 300 rental property claims and found errors in almost nine out of 10.

Errors include incorrect interest claims for the entire investment loan where it has been refinanced for private purposes, incorrect classification of capital works as repairs and maintenance, and taxpayers not apportioning deductions for holiday homes when they are not genuinely available for rent.

“When you consider that rentals include over 2.1 million taxpayers claiming $47.4 billion in deductions, against $44.4 billion in reported income, you get a sense of the potential revenue at risk,” the ATO says.

This is the ATO’s next big area of focus when it comes to individual taxpayers. Eighty-five per cent of taxpayers with rental properties are represented by an agent, so that ATO will be targeting tax agents with clients claiming rental property deductions.

The ATO provides guidance to help rental property owners avoid common tax mistakes.

Make sure the property is available for rent. The property must be genuinely available for rent before the owner can claim a tax deduction. The owner must be able to show a clear intention to rent the property, such as advertising the property. The rent should be in line with similar properties in its area and there should not be unreasonable rental conditions.

Portioning expenses. If your rental property is rented out to family or friends below market rate, you can only claim a deduction for that period in proportion to the amount of rent. You can’t claim any deductions for periods when friends or family stay in the property free of charge, or for periods of personal use.

If you own a rental property with someone else, you must declare rental income and claim expenses according to your legal ownership of the property.

Mortgage interest. You can claim interest as a deduction if you borrow to purchase a rental property. If you use some of the borrowing for personal use, such as going on holiday, you cannot claim that interest cost incurred during that period. You can only claim the part of the interest that relates to the rental property.

Borrowing expenses. Borrowing expenses include loan establishment fees, title search fees and the cost of preparing and filing mortgage documents. If your expenses are more than $100, the deduction has to be spread over five years. If they are less than $100, you can claim the full amount in the same year you incurred the expense.

Purchase costs. You can’t claim any deductions for the costs of buying your property. These costs, which include conveyancing fees and stamp duty, are added to the cost base of the property, which is used to work out any capital gains tax liability.

Repairs, improvements and construction costs. Ongoing repairs that relate directly to wear and tear or damage that happened as a result of renting out the property, such as fixing a hot water system, can be claimed in full in the same income year you incurred the expense.

Initial repairs for damage that existed when the property was purchased are not immediately deductible. These costs are added to the cost base and used to work out the capital gain when the property is sold.

Work such as replacing a roof or renovating a bathroom is classified as an improvement and not immediately deductible. These can be claimed at 2.5 per cent each year for 40 years from the date of completion. Likewise, capital works, such as extensions and alterations, can be claimed at 2.5 per cent of the cost over 40 years from the date the construction is completed.

Capital gains. If you make a capital gain on the sale of the property, you will need to include the gain in your tax return for that financial year. If you make a capital loss, you can carry the loss forward and deduct it from capital gains in later years.

 

Source: https://therub.com.au/rub-featured/tax-man-warns-get-your-rental-property-claims-right/