2011 Simeoni Spring Newsletter

Inside this issue:

- Paul's Introduction
- Tax changes - Expansions of Director Liability 
  Provisions
- Cooking Classes with Candice
- The Rule of 72 - Magical Power of Compounding
 

 

 Latest Company News 

 

Paul's Introdusction

With three quarters of the year behind us, we are now on the home stretch to Christmas, now that's scary!

The 2012 Financial Year has started with a big bang at Simeoni. On the 1st July our real estate audit season began and I'm happy to announce a record number of trust account audits were performed by the 30th September deadline. Thank you to the Simeoni team and our clients for their cooperation in the last 3 months, we were able to manage the work load with plenty in reserve.

We also have great news to share with Michelle Pearce announcing she is expecting her second child. The sad news is that she will be leaving us in October to prepare for her expanding family of two children under the age of 2 come February next year when her baby is due. We wish Michelle and her husband Darren the very best and hope to have Michelle when her children have reached a certain age. If you have any queries, please do not hesitate to contact me.

In July 2011 we embarked on an intern program with Carrick University, where we had six casual interns work with us for 12 weeks. We were able to give them "real life experience" in areas of audit, tax and accounting. This allows them to better understand what the "real working world" is all about. The interns have proven to be a great injection of enthusiasm and feedback from my team reveals they all have great potential.

We would like to welcome Rita to the Simeoni team, we were so impressed with her internship that we have offered her a full time position with our firm when she completes her studies in November.

The footy tipping competition has now come to an end and based on the feedback received from our tipping competitors it was a lot of fun. We would like to thank our major sponsor: "The House of Cerrone" for contributing to our first prize, which was a $1,500 voucher. Our first prize winner (alias: speedy) has already visited one of the stores and has raved about the beautiful jewelery his wife now proudly owns. We would also like to thank our others sponsors: Lido Group Travel and in particular our other sponsors who contributed towards the value allowing us to offer such great prizes; Laboratorio di Santo (multi award winning pasta manufacturer) and Lemair Refrigerators.

We look forward to doing it all again next year, bigger and better!

We hope you enjoy this spring edition of our newsletter; there are some very important topics that must be read, especially changes to the liabilities of company director's.

Our aim is to provide high quality and relevant newsletters to you, so please give us your feedback so we can work towards meeting your expectations and topics of interest.

 

Tax Changes - Expansion of director Liability Provisions

In the May 2011 Federal Government budget, the Government
announced further measures to strengthen the Taxation Legislation to counter "fraudulent corporate phoenix activity". The Government describes this activity as involving:

"a company intentionally accumulating debts to improve cashflow or wealth and then liquidating the company to avoid paying the debt. The business is then continued as another corporate entity, controlled by the same person or group and free of their previous debts and liabilities."

The Taxation Administration Act, 1953 ("TAA53") is expected to change as follows:

- Extending Director Penalty Notice to include SGC

The provisions governing Director Penalty Notices ("DPN"), will extend to Superannuation Guarantee Charges ("SGC") amounts. As you would be aware, SGC amounts are only due to be reported and paid to the Commitioner when the employer has not paid the superannuation amounts to a complaint superannuation fund within twenty-eight (28) days of the end of each quarter;

- Automatic liability for a director

Where PAYG tax withheld and SGC amounts are unreported (and unpaid) for more than three (3) months after the returns/activity statements were due for lodgement, the Commissioner will be given the power to commence recovery action against company directors personally without prior notice.

This change is significant as it will mean that company directors will no longer need to be served with a DPN to be personally liable. Under the automated liability provisions, once the three (3) month window has passed ( for the lodging of returns), appointing a Liquidator or Administrator to a company will not extinguish the directors' personal liability.

- Refusal to allow PAYG credits

The Commissioner will also have the discretion to prevent directors and their associates* from obtaining taxation credits for PAYG withheld amounts in their personal taxation returns where the directors' companies have failed to pay the withheld amounts to the Commissioner.

In relation to DPN's being extended to cover unpaid SGC amounts, for directors to avoid a penalty and personal liability, they must first ensure the SGC is reported to the Commissioner, otherwise they will be at risk of the automatic liability provisions. Once a debt has been reported, the only way a director will attract personal liability is if he fails to respond to a DPN. Readers will recall that those directors who are served a DPN must, within twenty-one (21) days of issue of the DPN (not service) either:

(a) Pay the debt;
(b) Appoint an Administrator to the company; or
(c) Appoint a Liquidator to the company.

Where a director appoints a liquidator or voluntary administrator after the three (3) months elapses, the director is taken as not having remitted their director penalty. In these circumstances, even where the company is in liquidation or voluntary administration, the only way the director may extinguish their penalty is to pay the penalty themselves.

It is expected the above changes to the law may be in effect by November 2011.

There are transitional provisions. The proposed transitional provisions provide that automated recovery provisions apply to director penalties in existence before commencement of the new law if those penalties were not extinguished before commencement.

For example, if Company A has PAYG unreported for more than three (3) months (after due date for reporting) at the time the new legislation commences, Company A's directors will be automatically liable for the PAYG at the date the new law commences. In this scenario, to avoid automatic liability applying to the directors for unpaid PAYG at the commencement of these changes, directors must either:

(a) Pay the outstanding PAYG; or
(b) Lodge outstanding BAS returns so that unpaid PAYG is at least reported (thus avoiding the automatic liability provision); or
(c) Place the company into liquidation or voluntary administration before the amendments commence.

The amendments extending the penalty regime to SGC only apply to SGC lodgements occurring on or after the commencement of the amendments.

Once the proposed changes are in place directors will be under even more pressure attempting to manage their taxation liabilities. To avoid personal liability it is important for directors of companies with any taxation liabilities to act early and seek advice where there are cashflow concerns in meeting a company's taxation and superannuation obligations.   

Cooking Classes with Candice

STICKY DATE PUDDING

- 250gm pitted dates - 250mls water - 1 teaspoon bi-carb soda 
- 60mgs butter - 2eggs - 185gms sugar - 185gms SR flour
- 1/4 teaspoon vanilla essence.

Sauce:
150gms brown sugar - 1/2 cup butter - 150mls cream - 1/2 teaspoon vanilla essence.

Method:

Pre-heat oven to 180 degrees celsius. Cook dates in water till jam-like consistency.
Fold in remaining ingredients and mix well. Grease and line a square cake tin and pour in mixture. Bake approx. 35mins or until cooked (check frequently as it can burn).

Place all ingredients for sauce in small saucepan. Bring to boil, turn down heat and cook 5 mins. Serve in with extra dollop cream. 

Interesting Tips 

 

The rule of 72 - Magical Power of Compounding 

Ever wondered how long it will take for your home to double in value? Have you heard of the magical Rule of 72?  Well, it is a simple rule that will answer the above question. And there's more! You don't need to be a Maths genius to understand or calculate this Rule.

The Rule of 72 goes like this:

Divide the number 72 by the expected rate of return. The answer is the number of years it will take for a given sum to double at the expected compound rate of return.
Let's demonstrate by a simple example:

For a 10% per annum rate of return, it will take 7 years to double the value of a given sum. Divide 72 by 10(%) = 7

House Value today $   500,000
 
In 7 years                 $ 1,000,000
 
In 14 years               $  2,000,000
 
In 21 years               $  4,000,000
 

Replace the house with Savings in the Bank, say $ 100,000 with an annual interest of 6%.

Divide 72 by 6(%) = 12 years

Savings Value today  $ 100,000
 
In 12 years                   $ 200,000
 
In 24 years                   $ 400,000
 
In 36 years                   $ 800,000
 

This simple Rule of 72 demonstrates why we should save and start saving when we are young. Such is the Magical Benefits of Compounding Interest!  

Suites 101-104, 118 Great North Road, Five Dock, NSW, 2046
PO Box 725, Five Dock, NSW, 2046
P: (02) 9370 0400 | F: (02) 9370 0444 | E: simeonico@simeoni.com.au
 

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