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The Englishman's Holiday


We might take a look at cryptocurrencies soon. This is a complicated subject about which I have many questions but as yet not many answers. It can be difficult to identify the risks and weaknesses in any financial system, much less complicated ones. To demonstrate, let's consider, not for the first time, the case of The Englishman's Holiday. This is a problem involving a very simple set of facts, much simpler than cryptocurrency facts, yet it  still manages to intrigue. It demonstrates that in economics nothing is simple.  Here is the problem.

There once was a very upright and very proper Englishman who regularly took his summer vacation on a tiny agreeable Aegean island. The Englishman had returned to the island so many times that his credit worthiness had been established beyond any possible doubt. There was absolutely no chance that this Englishman's bank would fail to honour his cheques and indeed all of them had always been honoured promptly.

Since the Englishman's credit was so sound the islanders were totally happy to allow him to pay by cheque with the certain knowledge that they were good cheques. Indeed, so well-known and trusted was the Englishman on this tiny island that the islanders were happy to accept the Englishman's cheques from each other. For example, if the restaurateur wished to pay the grocer partly with a cheque he had received from the Englishman in payment for a meal, the grocer was happy to accept the cheque. The grocer was then able to buy fuel with the cheque and so on. In this way the cheques circulated around the island forever and were thus never returned to the Englishman's bank for collection.

Who paid for the Englishman's holiday?

I will allow a little time in case any reader wants to offer his or her answer to the question. Then I will say a few words about cryptocurrencies.

 


Fake tax agent scam alert

Currently scammers are coercing victims into parting with money by pretending to be the victim's tax agent. 

The scammer tries to convince the victim that he or she owes money to the ATO which must be paid immediately to avoid the issue of an arrest warrant. The ATO has warned taxpayers that it "will never demand immediate payments, threaten with arrest or request payment by unusual means such as iTunes vouchers, store gift cards or Bitcoin cryptocurrency".

You would think that no-one would fall for such an obvious scam but people do. Last month (November 2018) the ATO received 37000 reports of scam attempts. 

The total money scammed for the month has not been reported yet but one person was conned out of  $236,000.  I have received calls from scammers who were very convincing. 

If you receive any call placing undue pressure on you to make immediate payment, contact your tax agent before you part with any money.                  

 

Innocent V Not Guilty

Innocent and not guilty are different beasts when it comes to tax. This has been highlighted recently in the case of Ward v FC of T  in the Administrative Appeals Tribunal (AAT). Mr Ward was levied $209,250 excess contributions tax which virtually obliterated his superannuation savings over his lifetime. Deputy President Gary Humphreys made this closing comment.

The strict application of the law to Mr Ward's situation produces an outcome which is harsh and unfair. Setting out only to protect his and his wife's superannuation nest egg after a lifetime in low paid employment, and acting in good faith with professional advice, Mr Ward has unwittingly forfeited to the Tax Office the entire proceeds of his superannuation savings. Had the original investment in BT Super for Life been made just days earlier than it was, no excess contributions tax would have been payable. As it transpired, he has suffered a penalty of 19,527 percent of any "tax advantage" (his advisers' calculation), an outcome which cannot be regarded as conscionable.

Mr Humphreys could not change the law but he went so far as to urge the Commissioner to reconsider the fairness of enforcing the penalty. He also made a commendation to the Minister for Finance to consider an act of grace payment.

This case demonstrates once again that a taxpayer cannot rely on the fact that he is free of guilt. The full 84 page decision (which is quite interesting) can be found at Ward and Commissioner of Taxation (Taxation) (2018) AATA 1519 (7 June 2018).  

 

 

It's landed!

The Brand new App from WALSH ACCOUNTING 

As a firm we are constantly looking for ways we can improve the service we offer our customers and we are proud to announce the launch of our brand new WALSH ACCOUNTING App.  It's completely free of charge and it's available for iPhones, iPads and Android devices.

So the next time you need to look up a tax rate or work out a GST calculation, our new App can help.  It provides you with up to date, important accountancy data at your fingertips.  Click to download

PLUS: Read more…


Never work with animals or small children…….

Anyone involved in junior sports knows that it can be sometimes frustrating, occasionally frightening, but most of the time lots of fun.  A few of us were recently sharing stories on the sidelines of some of the funny things that the kids will say to us, and thought it was worth sharing.  To protect the innocent, names of children and adults have been withheld.  One advantage of dealing with kids is you can get instant and very direct feedback.  Maybe there are some lessons in communication here…

  • At junior cricket, while doing a bowling demonstration to a group of 7-8 year olds, on how to hold the ball with correct seam position etc.  At the end of the demonstration the kids were asked if there were any questions.  Everyone just looked around blankly, and then one said "excuse me,….. can you live without a soul?"….

  • At junior tennis, we were discussing with the kids the importance of being safe and responsible, finishing with letting them know we want them all to have fun but we don't want anyone getting hurt.  One voice piped up from the back "yeah, too much paperwork".

  • At the mini-trains, a 3 year old announced to the other kids there "my dad drives the train, and when my Mum grows up to be an adult, she can drive it too"

  • At junior tennis, in the middle of giving a demonstration to a group of 3-5 year olds, one of the kids knelt down and started stroking the coach's shin. "Wow, look at your legs.  You have the hairiest legs I've ever seen".

  • At tennis, the session sometimes finishes the session with a hardest hit contest.  One of the boys was trying to swing so hard he was throwing himself off his feet and missing everything.  I told him he was trying to swing too hard. He stopped and said very deliberately "do you realise this is a hardest hit contest.  How is it possible to swing too hard in a HARDEST HIT CONTEST?"

  • During a junior tennis tournament, the match was level at 3-3 and deuce in a first to four match.  The coach told the players this was now the most important point of the match.  The server thought for a moment and replied "We are having problems with Falcons at home"

  • When travelling away to do coaching remotely, I thought I would break the ice with the kids by asking whether anything interesting happened since I last saw them.  Without hesitation, one girl said quite cheerily, "I have, my finger fell off" (it was true – she had an infection and lost her finger).

  • Unperturbed, coach tried the same question again next visit – "did anything interesting happen since my last visit?"  This time a boy piped up from the back "excuse me, yes, my father doesn't live with my mother any more"

......Ok, probably won't ask that question again…

 

 


 

You are sitting in the shade today because someone planted a tree a long time ago….

Sometimes people ask us: "Do you work for the tax office or your clients?" 

And the answer is: "We work for our clients of course"

Walsh Accounting's driving purpose is to help our clients meet their business and family's goals – help build a strong  foundation for yourself and your families future.  Meeting your tax and compliance obligations is just one small part of that journey.  

'A goal without a plan is just a wish'

'Failing to plan is planning to fail'

'Forearmed is forewarned'

We have all heard these proverbs – but it does not take away that we know them to be true.  So why is it that we do not heed  their message?

Read more…

Ahead in the Cloud


Small businesses and community groups are formed because of their passion for what they do -- not to spend time managing paperwork. Taking the leap from traditional accounting practices to cloud-based accounting solutions enables you to reduce time spent managing information and improve overall operational efficiency. 

What is Cloud Accounting? Data is sent into "the cloud," (which is a remote computer) where it is processed and returned to the user. All application functions are performed off-site, not on the user's desktop. In cloud computing, users access software applications remotely through the Internet or other networks via a cloud application service provider. Using cloud accounting software frees you from having to install and maintain software on individual desktop computers.

Cloud Accounting is a wise choice and is becoming increasingly popular. Here are just some of the many benefits of Cloud Accounting:

Accessibility - information stored in the cloud can be added or accessed from anywhere; you and your team can quickly and easily complete their work no matter where they are.  Accounting data can be accessed on any device with an internet connection, rather than on a few select on-premises computers.  You can send an invoice when out of the office or check a payment on the run. 

Accuracy - financial information is updated automatically and facilitates financial reporting in real-time. Data can feed direct from your bank which mean account balances are always accurate and fewer errors occur than with manual data entry.  

Collaboration – other team members, your bookkeeper and/or accountant/auditor can, with your approval, access your file to enter transactions, fix mistakes, access information etc.  For community clubs this means transitioning from one treasurer to the next is far easier. 

Read more…

Let Them Prove It

I sometimes hear pub talk to the effect "Let them prove it". If a taxpayer takes this attitude with tax law, he or she might have a problem.

The principle "innocent until proven guilty" does not always apply when it comes to tax law.  In some cases the law is "guilty until proven innocent". This was reinforced, not for the first time, in the case of Zappia v Commissioner of Taxation in a judgment issued in the Federal Court of Australia on 19 April 2017. $2 million was deposited into the account of the taxpayer on 30 June 2010. She did not include this amount as income for the 2010 year. The Commissioner issued a default assessment to the effect that the $2 million was income. The Judge found in favour of the Commissioner. Part of the judgment contained the following words (bold emphases added by me).

"The issue is not whether the Commissioner made an error nor, perhaps a little surprisingly, even whether the $2 million is assessable income. Rather, it is whether Mrs Zappia has proven that the $2 million is not assessable income. It is implicit in that statement, which is about who bears the burden of proof, that the Commissioner is under no obligation to prove that the $2 million was income. The onus lies, rather, on Mrs Zappia to prove that it was not.

The judgment is long but interesting if you enjoy a bit of forensic detective analysis. Here is the link [2017] FCA 390

There is an important lesson here.  if you have a dispute with the ATO, try to negotiate and settle before default assessments are issued because your task is going to be so much more difficult once that happens. Hoping the issue goes away rarely leads to the most favourable result. 

 

Then and Now


On the day that I started work (3 February 1959) I wonder how I would have reacted to a man from the future explaining to me how things would work in 2017.

In 1959 an office worker's main tools of trade were paper, pen, ink and mental arithmetic. If a customer bought ten items at 3 pounds 17 shillings and 11 pence each the shopkeeper would get out his trusty pen and paper and mutter to himself as he scribbled "10 times 11 equals 110. 12 goes into 110 nine times with 2 left over. Put down the 2 and carry over the 9. 10 times 17 equals 170 plus the 9 carried over equals 179. 20 goes into 179 8 times with 19 left over. Put down the 19 and carry over the 8. 10 times 3 equals 30 plus the 8 carried over equals 38. Put down 38. Madam, that will be 38 pounds 19 shillings and tuppence".

We were thrilled when we received our first adding machine. It was correctly named. It did not subtract, multiply or divide. It just added. You punched in a number and pulled the handle. Then you punched in another number and pulled the handle again. You could do this as many times as you liked and it would still give you the correct total at the end. What a wonder.

Imagine my reaction if in 1959 the man from the future says to me "In fifty years' time the shopkeeper will merely show the item to a tiny machine which will instantly calculate the price".

Unbelievable.

 "There's more", says the man, "This tiny machine can be in two places at once because while it is serving you it is instantaneously at the bank not only depositing your money from the sale but also taking the place of the bank clerk by entering it on your bank statement". 

Read more…

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