Figures from the Australian Taxation Office (ATO) have revealed that only half of all eligible Australian families have lodged a claim, leaving more than $500 million in unclaimed benefits.

The Government is encouraging Australian families to keep their receipts from education related expenses so they can take advantage of the Education Tax Refund (ETR).

The Government introduced the $4.4 billion Education Tax Refund to take some of that pressure off family budgets but the take up has been far less than anticipated.

The Education Tax Refund provides  up to $375 per primary school student and $750 per secondary school student.

That means a family with two kids in high school and one in primary school could potentially get a refund of almost $2000 on eligible education expenses.
 
According to the ATO, as at 13 November 2009, 794,720 claims for the Education Tax Refund have been processed for 1,375,167 children of an estimated 2,669,000 eligible children.

Of the 1,375,167 eligible children, approximately 740,000 are primary school children and 635,000 are secondary school children.

Only $488 million of the projected $1.02 billion cost has been claimed in tax refunds.

Of the 794,720 ETR claims processed, 259,150 claims (32.6 per cent) were for the maximum entitlement and 535,570 claims (67.4 per cent) were for a proportion of the maximum entitlement.

The average amount claimed for primary school students was $246.99 while the average for secondary school students is $495.73.

Back to school expenses that parents can claim include the cost of buying, establishing, repairing and maintaining any of the following items:

• school textbooks and other printed learning material, including prescribed textbooks, associated learning materials, study guides and stationery;
• prescribed trade tools for secondary school trade courses;
• laptop computers and home computers;
• computer-related equipment such as printers, USB flash drives, as well as disability aids to assist in the use of computer equipment for students with special needs;
• home internet connections; and
• computer software for educational use.

Families can claim the ETR if they have eligible education expenses and received Family Tax Benefit (FTB) Part A for the child that the expenses relate to.

Families are also eligible if they have children in primary or secondary school who would be eligible for FTB Part A purposes, but for the fact that the child receives certain payments or allowances, including:

• Youth Allowance;
• Disability Support Pension;
• ABSTUDY Living Allowance;
• the Veterans’ Children Education Scheme;
• Student Financial Supplement Scheme; and
• the scheme to provide education and training under s258 of the Military Rehabilitation and Compensation Act 2004.

Taxpayers still have until March-April 2010 to claim out of pocket education expenses for the 2009 school year, if they lodge their individual tax returns through a tax agent.

  More information about the Education Tax Refund is available at: www.educationtaxrefund.gov.au

If you have a net loss from a business activity you carry on as an individual, either as a sole trader or in partnership, the non-commercial loss rules will apply. These rules determine whether you can use your business loss to offset income from other sources.   

Changes to the operation of the non-commercial loss rules apply for the 2009-10 and later income years.

The key changes include:

• The introduction of an income requirement to further restrict the circumstances where a business loss can offset other income. You will meet the income requirement where your income for non-commercial loss purposes is less than $250,000.
• A new exception for business losses solely caused by deductions claimed for the small business and general business tax break.
• A new Commissioner’s discretion for individuals who do not meet the income requirement but whose business activity is subject to a lead time.
• Ensuring existing Commissioner’s discretions continue to apply.

The new rules became law on 14 December 2009

For income years prior to 2009-10, you can only offset your loss against assessable income from other sources if:

• one of the exceptions for primary production or professional arts businesses apply
• your business activity passes one of four tests (profits test, assessable income test, other assets test, real property test), or
• the Commissioner of Taxation (the Commissioner) exercises a discretion to allow the loss to be offset against other income.

For the 2009-10 and later income years, you can only offset your loss against assessable income from other sources if:

• one of the exceptions for primary production or professional arts businesses apply
• you meet the income requirement and one of the four tests is satisfied (profits test, assessable income test, other assets test, real property test)
• the Commissioner has exercised his discretion to allow you to claim the loss, or
• the loss is solely due to a deduction claimed under the small business and general business tax break.

In every year that your business activity makes a net loss, you must consider whether:

• you can deduct the loss in the current year, or
• you must defer the loss.

Details of the four tests can be found in the ATO fact sheet

I have always been extremely skeptical when ever a politician promises to cut red tape. I met with the former NSW premier John Fahey about this way back before he even became premier, and he has been retired for ages now. And little has really changed.

However, I do think that a lot of what The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen MP released for discussion are very worthwhile reforms. I how they can successfully pull it off.

“The reforms will reduce unnecessary reporting obligations on companies and implement a number of other important refinements to our corporate regulatory framework.” Mr Bowen said

The key measures to reduce red-tape include:

• significantly reducing the regulatory burden on companies limited by guarantee (which typically have a not-for-profit purpose), by introducing a three tiered differential reporting framework;
• streamlining parent-entity reporting;
• providing greater flexibility for companies to pay dividends, by replacing the profits test with a solvency-type test; and
• allowing companies to more easily change their year-end date to minimise the burden on companies and their auditors during peak reporting periods.

The reforms will also implement refinements to the regulatory framework, including:

• improving disclosure of non-financial information in the directors’ report;
• protecting solicitors’ representation letters from disclosure to enable auditors to properly verify a company’s contingent liabilities;
• refining the statement of compliance with International Financial Reporting Standards contained in the directors’ declaration; and
• clarifying the circumstances in which a company can cancel its share capital.

Copies of draft amendments, the explanatory material and the regulation impact statement can be obtained from the Treasury website: www.treasury.gov.au.

The closing date for submissions is 3 February 2010.

A FEDERAL Government scheme requiring retirees with modest superannuation nest eggs to ”buy” a pension would be the most efficient way of ensuring self-funded retirees do not run out of money during their old age, research for the Henry tax review says.

Modelling commissioned by the Henry panel found a $100,000 lump sum could ”buy” a single retiree a lifetime annuity or pension ranging from $5444 to $10,225 a year, depending several assumptions.

The University of NSW research found these pensions would be larger if they were provided by the Government rather than by the private sector and if retirees were required by law to invest a slice of their lump sums in a lifetime annuity.

As I understand from my days as a financial planner, the problem for companies providing lifetime annuities is that the only people who consder buying them are those who expect to live a very long time. The actuaries have to work out how much the company needs to charge for then, to ensure that the company can fulfil its obligation to make the contracted payments for life. They can’t, however, use normal life expectancy tables as only people who believe that they have a higher than average life expectancy are interested in buying the annuities. As a result, annuities tend to be very expectancy. This reduces the pool of potential buyers even more.    

This is the reverse of the normal problem for life insurance companies. For annuities,they would, of the face of it, rather have more unhealthy customers and less healthy ones.

The UNSW researchers appear to be trying to reduce the price of annuities by using compulsion to everyone covered.

The Minister for Superannuation, Chris Bowen MP, and Minister for Small Business, Craig Emerson MP, last week announced that the Government will deliver its free superannuation clearing house service for small business through Medicare Australia.

The clearing house service will be available for small businesses with less than 20 employees from July 2010.

“To meet their choice of fund obligations, small businesses currently face the time and paperwork burden of paying contributions into numerous funds. The super clearing house will cut this red tape burden by enabling small businesses to pay their superannuation contributions electronically to a single location,” Minister Bowen said.

“Medicare Australia is well placed as one of the Commonwealth Government’s key service delivery agencies – with significant electronic and payment processing capacity whilst ensuring the privacy of information and the security of funds.”

Key features of the superannuation clearing house for participating small businesses include:

• Superannuation contributions made to numerous funds will be electronically paid to a single location (the clearing house) which will process the transactions;
• Small businesses that choose to use the clearing house service will have their legal obligation to make superannuation contributions discharged when payment of the correct amount is made to the clearing house;
• The clearing house facility will be offered free of charge to small businesses with less than 20 employees; and
• The clearing house will manage employers’ choice of fund obligations.

Source: Media Release from Minister for Financial Services, Superannuation and Corporate Law

Nick Connell, Taxation Manager of the National Tax & Accountants Association has expressed concerns about recent reports pre-empting what may be in the Henry Review of Australia’s taxation system.

Is not convinced that those aspects of the Henry proposal that have been leaked will simplify the tax system for the benefit of Australian taxpayers.
Softening up taxpayers
He says that the NTAA is concerned that, rather than having an open and robust public discussion, the Henry
Review of the taxation system seems to have entered the phase of softening up the Australian
taxpayer.
It’s an old tactic. Leak a part of the story, wait for a response then pounce. Dr Henry
has already started flexing his muscles by saying that he is fully prepared for “scare campaigns”.
So, presumably, any unfavourable response will be labeled a scare campaign. A little harsh given the
fact that he has chosen to only release a tidbit and not release the whole document.
That said, the Henry proposal, to be released in December, is expected to recommend that taxpayers
will receive a one-page summary “income tax return” which will include a “standard” deduction for work
related expenses. Taxpayers will be able to ‘tick’ a 1 page document issued by the ATO and sit back
and wait for their refund.
The refund will be based on a ‘standard’ deduction for work related expenses and a figure of $500 has
been floated. (
Now taxpayers have a right to be scared!

Nick Connell, spokesperson for the NTAA said that “Treasury has for years been concerned at the
blow-out in work-related deductions and we believe that the concept of a ‘standard’ deduction may
well be the first step in controlling deductions for work-related expenditure.”
“We are concerned, and we believe justifiably concerned, that if taxpayers allow their claims for
work-related expenses to be “standardised” in any form at all, that they may end up losing them.”
“Millions of taxpayers are entitled to legitimately claim hundreds or thousands of dollars in
deductions that they incur in earning their income. This right is written into the law.”
“Most of us make claims for car expenses, travel and accommodation, home office, uniform,
protective clothing, laundry, telephone, computer, power, etc. The list goes on.”
“How long will these claims last,” he asked, “once we allow them to be standardised?”

Is the end-game the abolition of tax refunds?
“Australians love their income tax refunds. They rely on them as a, sort of, forced way of saving.
They are an institution and it is our right to be able to claim work-related deductions and receive
income tax refunds.
We urge taxpayers to not allow the government to standardise deductions that they are legally
entitled to. Make no mistake about it. Let them get their foot in the door and the refunds we love
to get will one day be wiped out.”
Leaking a tidbit from the proposals raises more questions than answers and the NTAA calls on Dr Henry
to have an open dialogue with the Australian people and not seemingly engage in a surreptitious
campaign to gauge public reaction.

From NTAA

To put the $500 standard deduction in perspective , most union members pay more than this in annual fees. The average amount of work related deductions claimed is $1,920. -SH

The government’s new tax agent laws, which are due to begin early next year will make tax agents more accountable and boost protection for consumers, according to Australia’s peak accounting bodies – the Institute of Chartered Accountants in Australia (ICAA), CPA Australia and the National Institute of Accountants.
 
Assistant treasurer Nick Sherry will today brief members of Australia’s tax profession on the implications of the new regime at an event hosted at the ICAA’s head office in Sydney.

The joint accounting bodies said the tax agent reform has been 15 years in the making and that consumers of tax agent services would finally have a better safety net under the new laws.

All three bodies have supported the government’s initiative of putting in place a national regulatory regime that encompasses a uniform code of conduct for all practitioners.

One of the benefits of the new regime will be to deliver to consumers a better ’safety net’ in respect of their dealings with tax practitioners.

As treasury secretary Dr Ken Henry will no doubt point to in the recommendations he makes as part of his current tax review, simplification of the tax system for all taxpayers – especially those that rely on tax agent services - is one of his key priorities. The joint accounting bodies believe that the introduction of the new tax agent services regime heralds the first significant step on the path towards reform of Australia’s tax system.

The joint accounting bodies will work closely with the soon-to-be-announced Tax Practitioner’s Board in order to support them in getting on with the task of educating and transitioning the tax profession into this new regulatory framework from around 1 January 2010.

NUMBER CRUNCHING

 125 the number of taxes in Australia

6000 the estimated number of pages in the Tax Act

16 the percentage of taxpayers using e-tax

9,429,732 taxpayers, almost 80 per cent, get a refund

$1998 the average refund

1,093,348 taxpayers negatively gear, costing $10 billion

7.6 million the number of people who claimed an average $1920 in deductions for work-related expenses last year

About three-quarters of individual taxpayers are estimated to use a tax agent

National Australia Bank’s recent fee cuts have received much positive media attention yet the moves mask a deeper strategy by the bank to access cheaper funding lines.
The media has generally portrayed the move as having the aim of keeping existing customers happy whereas it was more likely done as a move to attract new deposit customers.
NAB has performed the worst of the Big Four in attracting retail deposits throughout the rush into deposits sparked by the financial crisis. Even though NAB increased retail deposits by $13 billion to $56 billion from mid-2007 to August 2009 this was well below the  performance of its peers.

NAB’s banking rivals attracted somewhere in the range of $11 billion and $22 billion more of cheaper funding during the recent crisis, leaving NAB now scrambling for market share.It is easly to conclude that NAB’s latest round of fee cuts appear more like a desperate attempt to claw back some of the ground it has lost recently.

The move by NAB is set to cost the bank over $100 million a year.

But if it succeeds in boosting deposit levels, it will prove a cunning move.

If NAB can increase deposits quickly, it will provide a funding source for a potential spike in residential lending, as the newly acquired mortgage broker army from Challenger begins writing the bank’s loans.

The strategy at NAB seems to be a case of giving with one hand and while taking back with the other.

Thanks to www.burning-pants.com/ for the bringing this to our attention