Like Christmas, the budget comes around every year and a great deal of drama and noise precedes it. But when the excitement of the big day subsides, the big question for tax advisors and accountants is: ‘how can I use it to my clients’ advantage?’
Daniel Wyner, Director of Tax & Accounting with Wolters Kluwer, says that tax and accounting professionals need to understand what’s new and then ensure their clients are aware of how the changes affect them.
Tax integrity
For example, in his budget night speech, Treasurer Scott Morrison addressed the Government’s need to live within its means and said tax integrity was a priority. He also said the Government was committed to its campaign against tax avoidance.
‘We will continue our crackdown on multinationals not paying their fair share of tax,’ he said.
The ATO has already raised $2.9 billion in tax liabilities this year from seven multinational companies and expects to raise more than $4 billion in total from large organisations before the financial year ends, according to Morrison.
Wyner says tax professionals must advise their clients appropriately:
‘As an advisor, the key thing you have to do is be aware that the ATO is really targeting this. If your clients are multinationals and have sophisticated tax structures they’re going to be looked at. Be aware and make sure you advise your clients accordingly.’
Small business
Advisors with small business clients should know that access to small business Capital Gains Tax (CGT) concessions will be tightened from 1 July 2017.
‘The ATO is going to be looking at whether or not assets are related to the small business. Be mindful of that if you know your client has assets that aren’t related and make sure they understand what is and isn’t eligible for concessions,’ says Wyner.
He also points out that the $20,000 instant asset write-off for small businesses will be extended by 12 months to 30 June 2018.
‘The instant write off has been extended for another year and can be an immediate deduction if it’s relevant. It also means there’s no longer a need to rush clients to get it done by the end of this financial year. After July 1 2018 it will revert to $1,000, so it’s important to help clients take advantage while they can.’
Property investment
Wyner says advisors with property investor clients should pay close attention to the new regulations designed to promote housing affordability. For example, the CGT discount for Australian resident individuals investing in qualifying affordable housing will be increased from 50% to 60% from 1 January 2018.
‘If your client is investing in property that provides access for low to moderate income tenants, there’s an opportunity to maximise the CGT discount,’ says Wyner.
He adds that those advising foreign and temporary tax residents should ensure their clients understand they will be denied access to the CGT main residence exemption.
It’s also important to note that the the foreign resident CGT withholding rate will be increased to 12.5% and will apply to Australian real property and related interests valued at $750,000 or more. In addition, an annual levy of at least $5,000 will be imposed on foreign owners of under-utilised residential property.
‘If you have foreign clients who aren’t Australian citizens, you need to proactively prepare them and let them know these things are happening. There’s nothing that can be done about it, but it’s important they’re aware,’ says Wyner.
Superannuation
Wyner says clients need to know that limited recourse borrowing arrangements (LRBA) will now be included in a member’s total superannuation balance and transfer balance cap from 1 July 2017.
He says professionals should use the budget as an opportunity to advise younger, as well as older, people about their superannuation.
‘If you have clients over the age of 65, they can make a non-concessional contribution to their super fund of up to $300,000 from the proceeds of the sale of their home. If you have clients preparing to buy their first home, there’s an opportunity to advise them to start increasing their super contributions because they can now access those funds at an attractive rate,’ he says.
Taking care of clients
Whether a budget is to a client’s advantage or disadvantage, it’s an advisor’s job to help them understand what’s new.
Wyner cites the increase in the Medicare levy from 2% to 2.5% as an example. Similarly, the minimum repayment threshold for HELP debts has been reduced to salaries of $41,999 and those earning more than $119,882 will have to repay at a rate of 10% of their salary each year.
‘As a trusted advisor of clients, it’s incumbent on us to make sure our clients are aware the money in their pockets will be reduced as a result of these changes,’ he says.
The value of relationship building
Wyner says the budget brings an opportunity for tax and accounting professionals to distinguish themselves from the competition and that it’s important to invest a little time and effort in the younger people who are the potential clients of the future.
‘A lot of current clients will be in the mature phase of their lives and are likely to have kids who’ve been to university, have HELP debts and are now thinking about buying their first home. If those young people know that their father’s accountant is proactively taking care of them, even when there are no high fees at stake, then they know they have someone they can rely on for the future.’
Budgets bring opportunities
Every budget creates opportunities for tax advisors, says Wyner.
‘The budget comes round every year and every single one of your clients will be thinking about it. It’s your opportunity to differentiate yourself, create value and, ultimately drive more revenue, he says. ‘Make sure you make the most of that.’
Budget debrief webinars
Find out more about the implications of this year’s budget at Wolters Kluwer’s webinars for tax and accounting professionals:
Source: http://www.budget.gov.au/2017-18/content/speech/html/index.htm
Daniel Wyner, Director | Tax & Accounting at Wolters Kluwer
daniel.wyner@wolterskluwer.com
Daniel is the Director, Tax & Accounting and is responsible for leading the execution of the go to market, product and editorial teams across Asia Pacific.
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Daniel has significant experience in the Accounting and software industries, having previously held the positions of General Manager of Global Product Management, General Manager of Sales, Head of Strategy as well as Segment Manager at Wolters Kluwer. He is also a former Accountant from Practice.
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Daniel has a passion to see accountants develop and prosper both personally and professionally; he is an early adopter by nature and is genuinely excited by disruption, change and the evolution of the accounting industry.
Daniel has significant experience in the Accounting and software industries, having previously held the positions of General Manager of Global Product Management, General Manager of Sales, Head of Strategy as well as Segment Manager at Wolters Kluwer. He is also a former Accountant from Practice.
Daniel has a passion to see accountants develop and prosper both personally and professionally; he is an early adopter by nature and is genuinely excited by disruption, change and the evolution of the accounting industry.
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