Re:     2011 Income Tax Returns

 This is a general letter we forward and email to our clients each year to assist them with gathering their tax information for the year ahead.

Changes in the 2011 financial year

• Same Sex Couples – For the 2010 and future years, the definition of spouse has changed so that your spouse includes another person (whether of the same sex or opposite sex) who you were in a relationship that was registered under a prescribed state or territory law; and although not legally married to you, lived with you on a genuine domestic relationship as a couple.

• For the 2010 and future years, discounts on shares and rights you acquire under an employee share scheme will generally be included in your assessable income in the income year in which you acquire the shares or rights. You will be required to provide an Employee Share Scheme: Employee Summary from your employer
• Income Tests – The information here assesses your tax liability including Medicare Levy Surcharge, HELP or SFSS repayments you may have. Information needed to be provided is reportable fringe benefits and reportable superannuation contribution as per your payment summary, tax free pensions from Centrelink or DVA, family payments, child care benefits, child support payments, target foreign income, net financial, investment, and rental losses.

Assessable Income

·        PAYG payment summaries and any ETP/termination or employer lump sum statements for year ended 30 June 2011, from employers, superannuation funds, Annuities, and Superannuation Income Streams, (together with UPP rebate information if applicable) etc.

·        PAYG instalments paid on annual or quarterly Instalment Activity Statements/Business Activity Statements (if not prepared through us, a copy of these statements is required for matching purposes).

·        Centrelink Pensions, unemployment benefits, social security, Taxable Parenting Payments, Sole Parenting Payments, Other Government Allowances, Austudy or HECS statements and Financial Supplement Loan statements (statements will be required to be provided).

·        Allowances, benefits, earnings, tips, directors fees etc.

·        Interest and dividend income, including imputation credits and TFN withholding tax (Provide dividend payment slips, and bank statements). This also includes Dividend Reinvestment Plans, and Employee Share Schemes.

·        Trust distributions received (2011 annual tax statements from Managed Funds etc. to be provided – These statements are traditionally not available until after 30 September. Please contact your fund.).

·        Where shares or units in companies and managed funds are sold/redeemed during the year, details of the purchase dates and costs (including dividend reinvestment statements) and sale dates and sale price are all needed, for capital gains tax (CGT) calculation purposes (Copies of all buy and sell contracts are needed).

·        If you run and own a business, regardless of which tax structure you use: records of income and expenses are needed (copy of manual cash book kept, monthly erecord income and expenses, back up disk of MYOB or Quickbooks, together with invoices issued and receipts are needed), plus inventory (stock held on hand at 30/06/11 excluding GST), debtors (monies owed to you / receivables) and creditors (money you owe / payables) as at 30 June 2011 and prepaid expenses if the relevant service is to be provided over more than a year. Copies of BAS statements, are also required to be provided for matching purposes. If new assets have been purchased during the year, a copy of the purchase contract and the finance documents are also required.

·        Rental income and expenses for all commercial, and residential rental properties (Agent Statements/Tax Invoices/Loan Statements)

·        Income from foreign investments, overseas salary or overseas pensions together with any foreign tax deducted and UPP for foreign pensions. In most cases your foreign employment income will be included as a part of your assessable income, and you may be entitled to a tax offset for the foreign tax you paid. Your foreign employment income is exempt only if you earned income as an aid worker, as a charitable worker, under certain types of government employment or on projects that are in the national interest

Deductions     (Note: receipts and tax invoices are required to be cited for claims)

·        Work-related expenses such as union fees, subscriptions, work related travel expenses, self-education costs in relation to your current employment, uniform costs, dry cleaning and laundry, and protective clothing and footwear, purchases of computer equipment, as well as general computer consumables, stationery and diaries etc.  Note: These costs should be GST-inclusive. (Even if you are unsure of the tax deduction, please include the invoice, and we can determine its deductibility – deductibility will depend upon the relationship between the deduction and the income earned)

·        Motor vehicle expenses (total costs of fuel, registration, insurances, repairs, etc from 1/7/10 – 30/6/11 – receipts needed), business kilometres traveled, logbook details (Note: Logbooks must be renewed every five years, or if a new car is purchased, and reviewed annually to ensure the business percentage use is accurate). We will determine which motor vehicle claim method is best for you as a taxpayer and which will result in the greatest legitimate deduction for you.

·        Other deductions such as interest on share investment loans, bank charges, postage, telephone, incurred in earning income from activities as described above.

·        Tax-deductible donations, and tax agent fees. Note that school building fund levies are not necessarily deductible. If they are a compulsory levy they are not deductible. If they are a voluntary donation, they are deductible.

·          If Self Employed - Deductible Superannuation Contributions - Prior to 1 July 2007, deductions for personal contributions were limited to $5,000 + 75% of the excess contributions over $5,000 (up to the individual’s age-based deduction limit). Age-based deduction limits were abolished from 1 July 2007, as part of the superannuation reforms. Therefore, eligible individuals will be able to claim a tax deduction for the full amount of any personal contributions made on or after 1 July 2007. However, the amount of deductible personal contributions that are eligible to be taxed at 15% in the fund are generally limited to $25,000 p.a. (subject to transitional rules that exist for individuals aged 50 or over). excess of the cap amount. (Required to cite confirmation from your Superannuation Fund in order to claim the deduction)

 ·          Please note that if you receive employment income, you cannot claim your superannuation contributions as a tax deduction unless your total employment income is less than 10% of other business assessable income.

Rebates

·        Provide annual statements from Medicare, private health funds and other receipts for pharmaceutical, dental, hospital, optical expenses etc., where the total of such expenses exceeds $2,000 out of pocket, and after reimbursement from Medicare/private health funds. (These can be obtained on line from your finds)

·        Superannuation contributions made during the year on behalf of your spouse, together with your spouse’s income details.

·        If you do not normally lodge an income tax return but received franked dividends or trust distributions, you are now eligible to claim back from the Australian Taxation Office any excess imputation credits. Please contact us should you require further details.

·        A refundable rebate is now available for eligible education expenses. In order to claim these, a copy of the Centrelink statement for the person in the family who received Family Tax Benefit A is needed. Also to be provided are the tax receipts for the eligible education expenses. These expenses include internet fees, purchases of computer equipment and consumables and software costs, as well as school text books, associated learning materials and study guides and stationery purchased. Also included are tools of trade which are required if a school based apprenticeship is being completed. School fees and building levies, uniform costs, school excursions, tutoring, musical and sporting instruments and library fees are not eligible expenses. Please refer our website at www.time4tax.com.au for further details and eligibility about this refund.

What is Family tax assistance and Are you entitled to it?

Two major forms of family assistance, administered by the Family Assistance Office (FAO), which may be available to taxpayers include:

1. Family Tax Benefit Part A (Part A) – designed to help with the cost of raising children; and

2. Family Tax Benefit Part B (Part B) – designed to provide extra help for families with one main income earner, including sole parent families.

 You may be eligible for family tax benefit (FTB) Part A or Part B or both.

FTB Part A

Part A is paid for each dependent child under 21 years of age which the taxpayer cares for. It is also paid for each dependent child aged 21 to 25 who is studying full-time. The amount of Part A received depends on your family adjusted taxable income (ATI). Family ATI is calculated as the combined taxable income of you and your spouse (as recorded by Centrelink), including your reportable fringe benefits, net rental property losses, tax-free pensions or benefits and any foreign income not taxed in Australia.

 FTB Part B

Part B is paid for one child until the youngest child turns 16 years of age, or until the end of the calendar year in which the youngest child turns 18 years of age – provided the child is studying full-time and is not receiving a social security payment (e.g., youth allowance) or an education allowance (e.g., ABSTUDY). Part B replaced the former sole parent and dependent spouse (with child) tax offsets. If you are a sole parent, your entitlement to Part B is not affected by your income (i.e., there

is no income test). If you are a member of a couple, only the lower earner’s ATI is taken into account when determining your entitlement for Part B.

Claiming FTB

FTB may be claimed directly through the FAO, either as a lump sum or direct payments You do have up to two years after the end of the claim year (financial year) to lodge a lump sum FTB claim. For example, the 2010 FTB claim must be lodged with the FAO or 30 June 2012.

Please contact Centrelink to verify your entitlement.

Medicare Levy and the Medicare Levy Surcharge

• All Australians are subject to pay a Medicare Levy of 1.5% of their taxable income unless they qualify for a reduction or an exemption. Having private health insurance does not exempt you from this levy.
• The Medicare Levy s based on your taxable income + any reportable fringe benefits. The Medicare Levy exemption is based on specific categories, such as your total family income, senior Australian tax offsets, and other rebates.
• The Medicare Levy Surcharge is in addition to the general Medicare Levy. It is an additional 1% extra charged based on your taxable income.
• For the 2010-2011 year, if you do not have Private Health Insurance with hospital cover, and if your taxable income + reportable fringe benefits is in excess of $77,000 (as an individual) and $154,000 (as a family), you will be required to pay the 1.5% Medicare Levy + the 1% Medicare levy Surcharge, totaling 2.5% of your taxable income.

• In the 2011/12 income year, the Flood levy will impose an additional 0.5% levy on taxable incomes from $50,001 to $100,000 and 1% above $100,000.

 Record-keeping

Please note that the Australian Taxation Office is continuing to audit the tax returns of individuals and businesses on a regular basis. Considering the Federal Government has increased its budget to the ATO. As a result, the ATO will be increasing its audit capacity. As your return will be assessed on the information contained therein, care should be taken to ensure that details of income and deductions supplied are correct. Substantial penalties may be imposed where errors or omissions occur. Note that it is the responsibility of the taxpayer to ensure the information in the return is correct. Where any errors or omissions are detected, please inform us immediately so that we can amend the return for you.

For the 2010/2011 financial year, the ATO is targeting chefs, teachers, nurses, salespeople, and medical practitioners and professionals. Also under scrutiny this year are all tradespeople. The ATO is specifically looking at under declared income for these taxpayers, and potential cash income not declared, based on ATO calculated benchmarks. These along with all taxpayers should make sure they have all receipts and supporting documentation for 2010-2011.

The most common mistakes by people in these occupations include:

• insufficient documentation to support motor vehicle and travel expenses
• incorrectly claiming motor vehicle expenses on the basis that they are carrying bulky equipment
• incorrectly claiming travel or motor vehicle expenses when they are required to travel from home to work more than once per day, and
• incorrectly claiming home office, mobile phone and internet expenses

The ATO will also be increasing vigilance of fraudulent returns and have implemented new risk filters that better detect returns that require further scrutiny.

Most deductions claimed for income tax returns are required to be substantiated by receipts or other records. Without such records, claims will be disallowed by the ATO and penalties may also be imposed.

Similarly, appropriate records must also be maintained for capital gains tax (CGT) purposes, in respect of assets acquired after 19 September 1985. If such records are not currently available, we recommend that you contact us to discuss your options as, on the sale of an asset, it can be a time-consuming and costly process to obtain the required information. Please note that we are also able to provide an investment register service to help in eliminating any future problems.

To minimise the time involved (and cost to you), we ask that you review the information above that applies to your situation, and include all relevant details when you send your information in to us. If you have any questions at all please contact us.

All information is required to be kept by the taxpayer for 5 years (business) and 3 years (individual). As we provide a full copy of the return and any related information to you, we do not hold physical copies of these on file. Any additional copies of these returns required will incur a fee for retrieval and copying/faxing at $55.00 per return per entity. Please ensure you keep copies of these returns in a safe place.

We have provided a tax information/collection envelope again this year to assist in the retention of this tax information for you. Please call into the office to collect your free tax envelope.

Cost of Tax Preparation

Please note that our fee for the preparation of a salary and wage income tax return (drop off) has remained the same this year for the 4th year running. To drop your information off, and allow us to prepare the return as soon as possible is $99.00 (including GST). If you would like our tax preparation fee deducted from your refund, an additional processing cost of $22.00 will be charged. If all the information is available for us to complete the return, these returns are able to be prepared within a few days for your convenience.

**If an appointment is required to prepare your salary and wage income tax return, a minimum fee of $220.00 (including GST) will apply. Please call us for our schedule of fees for rental properties (starting from $275.00 including GST), businesses, and other tax entities such as partnerships, trusts, companies and super funds. We are happy to quote on the above services in order to ensure the cost of our fees is understood and agreed upon for the services that will be provided.

Fee Payment

Please be aware that we do have a strict payment policy in place. As the work required has been prepared, no returns will be lodged or issued and no copies will be handed to you, unless the fee for the service has been paid in full. Payment by cheque is not accepted. We do have Eftpos and credit card facilities available, and you are able to make payment via a direct deposit into our nominated bank account, which is listed on all invoices. The signing of an authority to deduct your fee from your refund will be seen as full payment, provided there are no other insinuating circumstances such as child support, to which we would largely be unaware. We are reasonable and, should you not be able to pay in full, do prefer that payment plans be arranged, provided these are done immediately. In the unfortunate circumstance that you fail to settle your account in full or enter into a payment arrangement, this will result in debt collection proceedings commencing without any further notice to you. We would much prefer to avoid this situation arising.

In order to help us help you we would ask:

·        That you give us clear instructions as to what you require from us and what needs to be done.

·        Advise us if you have important time constraints or required lodgment dates as set independently by the ATO that we would not or may not be aware of.

·        Ask plenty of questions – that way we can ensure we understand each other correctly and can also advise why we have had to prepare information certain ways.

·        Deal with all important matters that arise immediately. We cannot help you if the time limits to prepare ATO forms are unreasonable.

·        Please keep in regular touch. Do not hesitate to ask for a progress report if you are worried about anything or if you have not heard from us within a specified time frame.

·        Should your contact details change at all during the financial year, please ensure you contact us to provide us with these changes addresses and phone numbers. At times the ATO forwards information to us which we are required to forward to the taxpayer. However, without the correct contact details, we are unable to forward these to you.

·        If the end tax result is not what you have hoped for or “calculated” please ask us why it is different to your anticipated estimate. We are more than happy to clarify all the underlying tax issues that you would not be aware of that may affect your tax refund.

·        Tell us if the service you have received is not what you had hoped for. We need to know if you are concerned about the way your matter is being dealt with. We can try to correct it promptly and thoroughly.

Opening Times and Appointments:

Our office is open daily from 9.00am – 6.00pm Monday to Friday. during the peak tax season, from 1 July 2010 – 31^st October, 2010. Please note that these extended hours may be subject to change based on demand.

We would also ask that to guarantee the quality of our service and advice, that appointments are made for all attendances to our office unless otherwise instructed by us. We ask this so that we are able to ensure that someone is available to answer your query immediately. We would not want you to be disappointed or waste your valuable time as we may be in appointment with other clients or dealing with other matters and would not be able to see you when you “pop” in.

Should you have any queries regarding these matters, please do not hesitate to contact us. We trust the enclosed information has assisted you in the gathering of your 2011 tax information. Looking forward to assisting you in the near future.

Yours faithfully

Nadia Linnane  CPA  FNTAA.

Small Business and Taxation Services