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It's all about money - Specialised Forensic Accounting Services
Newsletter – June 2010
Welcome to the fourteenth edition of the Flint Forensics Pty Ltd semi-annual newsletter. This newsletter is to help keep you informed of the latest developments or topical issues for further discussion and consideration. It is a free service provided by Flint Forensics Pty Ltd.
Index
The Australian Taxation Office (ATO) has expanded there range of small business benchmarks and have now published benchmarks for more than 100 different types of businesses. These small business benchmarks provide key business ratios for a wide range of different businesses. By comparing a claimant's business to the benchmarks, you can be more informed and the risk management strategy refined and further supported. The benefits of using the benchmarks as a tool can be the efficient and effective use of time by the claims assessors, consulting professionals and result in an enhanced claims experience for the claimant.
The ATO state:
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Small business benchmarks are designed to help business meet their tax obligations by enabling them to track their performance against the rest of their industry. (However, these can be used as a claims risk management tool to benchmark a claimants business to the rest of their industry.)
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they have benchmarked the key business ratios for high medium and low turnover businesses for more than 100 industries. By comparing a business to the benchmarks for the same industry, a person can assess the business’s performance.(The ATO will continue to expand the industry benchmarks over time.)
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they use these benchmarks to identify businesses that may be avoiding their tax obligations by not reporting some or all of their income.
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they use small business benchmarks during audits to make default assessments, where insufficient or unreliable information has been provided.
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that by developing benchmarks for small businesses they are making it clear about what is expected from businesses in an industry. This makes it harder for dishonest operators to get away with not reporting cash income – and makes it fairer for everyone else.
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businesses reporting outside the benchmarks may attract there attention. There may be good reasons for this disparity, but taxpayers who find they are outside the benchmarks for their industry should determine whether they have correctly recorded and reported their income and deductions.
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- performance benchmarks which are based on information small businesses report to us on income tax returns and business activity statements
- input benchmarks, which are based on information industry participants and trade associations provide to us.
- the small business benchmarks are grouped into categories based on the Business industry codes. These codes are used by taxpayers to describe the activity from which their business derived the highest gross income or incurred the smallest loss.
Categories include:
I believe that these benchmarks maybe able to be used in some instances to reinforce a proposed risk management strategy and is another tool that can be used from the claims risk management toolkit.
No Offset of Losses Against Income Protection Insurance
How many times has this scenario passed over one's desk?
The Full Federal Court (Dowsett, Stone and Bennett JJ) has dismissed the taxpayer's appeal, finding that payments received under a personal income protection insurance (PIP) policy were not income from his business activity as a financial planner for the 2003-04 year. Thus the payments could not be used to offset the loss from his financial planning business, which was deferred under Division 35 of the ITAA 1997 - i.e., the provisions on the deferral of losses from non-commercial business activities.
The partial disability payments received by Mr Watson under the PIP policy commenced in 1996 when he became partially incapacitated for work.
The court focused on the meaning of "from" the business activity in s 35-10(2) of the ITAA 1997, concluding that Mr Watson's loss from the financial planning business could not be offset against the assessable income from the PIP policy in the relevant year. In summary, the court found that "[the policy income was received because he was unable to undertake the full range of business activity which he would have undertaken had he not fallen ill. It was derived from his incapacity to conduct business activity, not from the activity which he actually undertook".
Further details on the case can be downloaded from Austlii- Watson v Deputy Commissioner of Taxation (includes corrigendum dated 4 March 2010) [2010] FCAFC 17
I have available a series of instruction forms under downloads which also have guidelines as to what information may be required for specific tasks. This is a valuable resource and I can only stress the importance of requesting the right information the first time to make the financial assessment the most efficient and effective as possible and make the claims experience more enjoyable. Please feel free to review these at your leisure.
You can either print them out or simply unprotect the document by using the password "FLINTFORENSICS" and save the document to your desktop.
If you need to expand on your instruction, when you refer matters, simply delete from page 2 and details further.
The last six months some templates have been added to downloads to make life easier in the claims assessment process. Here is the latest addition to the list which is a new form designed by the ATO which will be helpful:
- ATO Lodged Tax Return and Other Request (PDF, 75 KB)
The template list will continue to be updated, but if you would like to make a suggestion, please forward an email. At the end of the day, we are all working on the same team.
I have been recently profiled by the Institute of Chartered Accountants, so if you interested you can download the member profile.
In the next edition, look forward to more.
Talk to you soon,
Bruce Flint
Managing Director
FLINT FORENSICS PTY LIMITED - Assessment of Economic Loss, Expert Witness, Financial and Other Investigations, Income Protection Risk Management, Regulatory Investigation and Assessment, Training and Valuations
PH: 02 9584 1474 FAX: 02 9584 1475 MOBILE: 0409 18 4598
VISIT OUR WEBSITE: http://www.flintforensics.com.au/
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