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December Edition 2010
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UPA Newsletter


In this issue:
Contact UPA


If you have any queries or comments in relation to this newsletter, please contact us. Any information that you submit to us or speak with us about is strictly confidential.
Phone: +61 7 5591 1661
Fax: +61 7 5591 1772
Email: newsletter@upa.com.au
ATO Target High Risk Industries
Section1 The ATO is currently targeting three sub-industries at high risk of not complying with their super obligations:
  • Accommodation – e.g. housekeepers & hotel staff
  • Accounting – e.g. accountants & accounting clerks
  • Computer system design & related services – e.g. software & application programmers
Generally, employers must pay super for an employee if they’re between 18 and 69 years old and they’re paid $450 or more (before tax) in salary or wages in a month. The employees can be on a full time, part time or casual basis. In some circumstances, employees under the age of 18 years, temporary residents of Australia and labourers may also be entitled to superannuation.

The minimum super payable for each employee is 9% of the amount they earn for their ordinary hours of work. Generally these contributions are tax deductable and must be paid quarterly.

Employers must keep records to show that:
  • The amount of super that was paid for each employee and how it was calculated
  • That the eligible employees were offered a choice of super fund
  • How any reportable employer super contributions were calculated
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Cash Economy
Section1 The cash economy occurs when people in business deliberately use cash transactions to hide income and evade tax obligations. The ATO is currently making it harder to get away without reporting cash income. The cash economy reduces the amount of money available to fund community services such as health, education and other much needed government programs. The ATO has several elaborate strategies that they are using to identify businesses that may be participating in the cash economy. For example:
  • Plastering businesses; doing work off the books in order to avoid tax obligations are being reviewed by data obtained from major plasterboard suppliers in NSW for sales made between 1 July 2007 and 30 June 2009 (Boral Limited, CSR Limited & Lafarge Plasterboard Pty Ltd)
  • Motor vehicle purchases by taxpayers whose expenditure is in excess of their reported income, as well as businesses selling vehicles, that don’t report or under report the sales, are being reviewed by data obtained from state and territory motor vehicle registering bodies (RTA, QLD Transport, Vic Roads etc)
  • Credit and debit card sales made by Australian businesses are being matched against taxpayer records to identify those skimming some or all of cash earnings or operating underground and not participating in the tax system, and to establish benchmark ratios. Data has been obtained by several banks such as CBA, Westpac, ANZ, NAB and BOQ.
Businesses who have under-reported their income can contact the ATO to a make voluntary disclosure of any under-reported amounts. Data matching projects help protect honest taxpayers by deterring, detecting and dealing with those who have not complied.

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Dealing with Employees who Misuse Facebook
Section4 If you are not sure what you would do about an employee who wrote negative things about you or your business on the internet, then you are not alone. It is becoming increasingly common for employees to post complaints about their employers, working conditions and co-workers on social networking sites such as Facebook and Twitter.
A recent case shows just how carefully you need to respond to employees who make employment related complaints on social networking sites:

A Melbourne hairdresser was dismissed after she posted a sarcastic complaint about not receiving adequate holiday and bonus pay on Facebook. According to the employer, the employee was dismissed for creating a “public display of dissatisfaction with employment.” However, Fair Work Australia found that this was not a valid reason for termination and awarded the employee $2,340.48. Why? Because:

  • The comment didn’t name the employer specifically
  • The employee’s Facebook page was set to private and only her friends should have been able to read the comment (the employer was alerted to the post by a third party)
  • The employee’s comment hadn’t damaged the business
Disciplining an employee who complains about you, or the company, on Facebook is one thing, but dismissing them without careful consideration is another.

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Christmas Party Headaches
Section5 The festive season is not far off and whilst enjoying work Christmas parties, employers need to be mindful of a few things. Under OHS law, employers still have a responsibility to provide a safe environment for employees and guests at out of hours work functions. If an employee suffers an injury at a work-related event, or engages in sexual harassment or another form of undesirable behaviour, then the employer could be held liable.
A few steps you can take to avoid potential headaches:
  • Make it clear to employees exactly when workplace behaviour rules will apply outside the usual workplace or working hours
  • Ensure that employees are trained about the policies and procedures that are in place to make complaints
  • If alcohol is being served:
    • Make sure employees have adequate transport options
    • Serve sufficient food
    • Have plenty of water readily available
  • Pick a location where you can control the crowd, e.g. if your staff end up in an altercation with an outside party and get injured, you could be responsible
With harassment claims costing Australian businesses $10 billion a year, a little more attention to the detail is well worth it.
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Warning!! – Do You have a Line of Credit?
Section5 A Line of Credit (LOC) is a loan product that works similar to an overdraft or credit card; you have a limit available and you only pay interest on the amount of loan funds outstanding. If you have an asset (e.g. property) financed by an LOC, you need to be extremely careful about making deposits to the LOC.
The Tax Office regards deposits to an LOC as repayments of loan principal and subsequent withdrawals are considered to be new loans. If you are receiving a large sum of money don’t temporarily put it into your LOC if you intend to redraw it shortly. For example, when a couple sell their home and put the proceeds into their LOC for only a week or so, until the settlement on their new home occurs, they will be deemed to have repaid the loan on their investment property; meaning that the couple have now effectively changed tax deductible debt to non-deductible debt. However, there are other options available. For example the use of a mortgage offset account could achieve the objective of saving interest and preserve the tax deductible investment loan.

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GST and Property Adjustments
Section3 An adjustment is a change that increases or decreases your Net GST liability for a reporting period. You may need to make an adjustment on your activity statement if you have recently bought, sold or rented a property and you have:
  • Changed how you have intended to use the property, e.g. you rent out rather than sell new residential premises – this is known as a change in creditable purpose
  • Purchased a property as part of a business sold to you as a GST-free going concern
  • Purchased GST-free farmland
When you cancel your GST registration, you may still hold some business assets, such as property, for which you previously claimed GST credits. If so, you may need to repay some of those credits by making an increasing adjustment.

New Residential Premises and a Change in Creditable Purpose

If you build new premises for sale you can claim GST credits for the construction. If you rent the new premises while you are planning to sell them, you will need to adjust part of the GST credits you claimed. You must show you intend to sell the premises; actively marketing the premises for sale is one way of showing this. Changing the intended use from selling the new residential premises to renting out whilst trying to sell the premises is what is known as a change in creditable purpose, therefore making the owner not entitled to the full GST credit.

Selling Property as part of a Going Concern

If you sell property that is part of a GST-free sale, of a going concern, you are not liable for GST on the income, and the seller and the purchaser may be able to claim GST on other expenses that relate to selling and buying the property, e.g. the GST included in solicitors’ fees. Property that is part of a sale of a going concern can include:

  • Premises when it is sold together with the assets and operating structure of the business
  • A fully tenanted building where the property and all leases, agreements and covenants are included in the sale
  • The sale of a partially tenanted building where the vacant part of the building is either being actively marketed for lease or undergoing repairs or refurbishment and all leases, agreements & covenants are included in the sale
Farmland

Farmland can be sold as GST-free if the land has been used for a farming business for at least the five years preceding the sale and the purchaser intends to carry on a farming business on the land. If a residence is used as part of the seller’s faming business, then the sale of the residence will form part of the GST-free sale of a going concern. For example, if the residence is leased to a manger of the entity operating the farm business. If the seller continues to lease the residence to the manager or use the premises for their own private residence then a GST adjustment will need to be made. If residential premises were not sold as part of a GST-free going concern, you do not need to make an adjustment.

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Iconic Registered Training Organisation For Sale
Section7 A highly respected RTO, arguable one of Australia’s largest and best operated, is being offered for sale for the first time in 17 years. The owners built a sound operation, by reinvesting capital into both training and business management systems, to enable a new owner to commence operation without having to invest, either time or capital to improve the operation of the RTO. Training is delivered from four permanent locations, as well as many other locations, on an “as needs” basis, with the main office located in Brisbane.

Highlights of the business are:
  • Turnover above $3.6 million for 2010 and growing annually
  • EBITDA average for the last three years in excess of $1 million
  • Excellent compliance history
  • Several Government and commercial contracts in place
  • Qualified staff in place
  • Great website
  • Online training available
  • NEIS, User Choice, Productivity Places and Small Business online contracts
  • 100 students enrolled across two campus locations
Enquiries around $3,800,000 WIWO – Contact Peter Geary of UPA Business Brokers

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Postal Address: PO Box 3360 Australia Fair, Southport QLD 4215
Phone: (07) 5591 1661
Fax: (07) 5591 1772
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