Newsletter - March 2020 Edition
Cents & Sensibility | Tax News | Views | Clues
Making sense of it all by Ali Roshan - The Coronavirus and Investors
The coronavirus has scared some investors which can affect economies and businesses. The recent coronavirus outbreak has shut down airports, frozen trade, and led to the rapid construction of new hospitals in China.
While at this point it will be difficult to predict what the impacts the coronavirus will ultimately deliver, the famous Mark Twain saying of “History doesn't repeat itself, but it often rhymes” is particularly relevant here. We cannot say with certainty what will happen, but you could assume this recent outbreak will be much like the preceding public health outbreaks and epidemics.
The risk is this virus may push China's economy into a period of slower growth. With stocks trading lower, some investors may begin looking to protect their investments. However, long-term investing is often best disconnected from short-term economic reactions.
Please seek professional guidance to assist you in meeting your ultimate goals and objectives.
Ali Roshan is an Authorised Representative (ASIC No. 000378611) of Lifespan Financial Planning. ABN 23 005 921 735 AFSL Number 229892
No Advice Warning / General Advice
The purpose of this article is to provide general information only and the contents of this website do not purport to provide personal financial advice. knp Solutions strongly recommends that investors consult a financial adviser prior to making any investment decision.
The contents of this knp Solutions article does not take into account the investment objectives, financial situation or particular needs of any person and should not be used as the basis for making any financial or other decisions.
The information is selective and may not be complete or accurate for your purposes and should not be construed as a recommendation to invest in any particular product, investment or security. The information provided on this website is given in good faith and is believed to be accurate at the time of compilation.
THE BLACK ECONOMY - By Genevieve Rajakulendran
The black economy refers to what is more commonly known as the ‘cash economy’. The black economy describes those taxpayers who operate outside the tax and regulatory system and do not correctly report their tax obligations. It is called the black economy as transactions are conducted ‘in the dark’, out of the sight of the law.
Those who participate in this economy disadvantage other taxpayers who operate fairly and honestly.
As a consumer, you can stop supporting this hidden economy by always ensuring you request written documentation for your purchased goods i.e. written contracts and tax invoices. Apart from contributing to a fair society, it also protects your rights in relation to insurances, warranties and claiming refunds in relation to faulty products.
To combat the black economy, the Australian Government have made some recent changes. These include the establishment of a Black Economy Taskforce (which was established by the Government) and arming the Australian Taxation Office (ATO) with stronger powers.
The ATO have several tools to track cash activities within businesses. Through data matching of electronic payment facilities and gathering of information from institutions such as banks, government agencies and suppliers, the ATO compare the gathered information to the income and expenses reported by businesses.
Benchmarking is also used by the ATO, where financial ratios of businesses are compared to those businesses operating in a similar industry. They are often referred to as the ‘small business benchmarks’. Those performing outside these benchmarks are then identified for possible ATO reviews and audit. If there is a good reason for the difference no further action is taken. However, where the ATO finds a clear indication of businesses engaging in fraudulent behavior, harsh penalties and prosecution can apply.
International Women’s Day
International Women’s Day (IWD) is held throughout the world on 8 March to celebrate the social, economic, cultural and political achievements of women. It is a day to highlight the great progress women have made towards gender equality. It also marks a call to action for accelerating gender equality to create a world where women and girls everywhere have equal rights and opportunities.
knp celebrated IWD by hosting a lunch for the ladies on Friday 6 March. A select number of knp gents cooked and served a delicious lunch for the ladies. A guest speaker attended the lunch, Sandy Cohen. It was inspiring to hear Sandy speak about the challenges she faced throughout her career.
Andrew Freeman, spoke about women equality and how we, as a society are still a long way off, especially when it comes to domestic violence towards women.
The effort that was put in by the gents was ten out of ten and a wonderful afternoon was had by all.
The knp ladies who attended would like to say a very Big thank you to Andrew Freeman, Sean Myles, Ali Roshan, Ronald Cheng, Jaimie Ruberto and to Norman Same and Mei Wu.
Clients should not act solely on the basis of the material contained in Cents & Sensibility. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. Cents & Sensibility is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval. Please contact us if you wish to discuss how the points raised in this edition specifically affect you.
The knp Team
Court confirms ATO's position on foreign income tax offsets
The ATO has welcomed the decision of the High Court to basically uphold the decision of the Full Federal Court in a case which the ATO won, in relation to foreign income tax offsets ('FITO').
An Australian tax resident had sold some US investments and paid US tax on the gains.
The taxpayer was then basically taxed on half of those gains in his assessable Australian income (i.e., the gains were eligible for the CGT discount in Australia).
The taxpayer included the whole of the US tax paid in his FITO to offset against his Australian income tax.
However, when determining the FITO available, the ATO only allowed the proportion of the US tax paid that related to the capital gain included in his
Australian assessable income.
The Full Federal Court affirmed the ATO’s position.
“This decision reminds taxpayers that they can only claim the foreign income tax offset to the extent that the capital gain is assessable in Australia, rather than the full amount assessed in a foreign jurisdiction,” Deputy Commissioner Tim Dyce said.
“We believe that others may have similarly incorrectly claimed the foreign income tax offset. Now is the time to review any claim and make any necessary voluntary amendments as we intend to commence compliance activity on this issue in the near future.”
Employer's requirements and the deductibility of WREs
Some employees may wonder whether a work-related expense (or 'WRE') becomes deductible merely because their employer specifically requires the employee to incur the expense.
Importantly, the ATO's recent draft ruling on the deductibility of work-related expenses reiterates that an employer’s requirements do not determine the question of deductibility.
Specifically, a number of examples contained in the draft ruling confirm that a WRE expense may be deductible without an employer requiring the expenditure. For example, a taxpayer incurring expenditure in relation to a course directly connected to their current employment (without their employer’s specific support) may still be in a position to claim self-education deductions.
Alternatively, expenses may be non-deductible despite an employer’s specific directions, such as a restaurant requiring its waiters to dress in ‘black and whites’, or support such as where an employer encourages a dental practice receptionist to undertake a ‘Certificate in Dental Assisting’ so as to open up a new career opportunity.