Author: Glance Consultants

 

 

The ATO has sent out a warning to those employers who have offered incentives to their employees during the pandemic. They might be drawn into the FBT net for the first time, so be prepared.

Examples include pets, gym memberships, event tickets or non-cash vaccination incentives or rewards are some of the areas highlighted, as is allowing your employees to use a company car for private use. 

If you have paid for items that ultimately allowed your staff to work effectively from home then the ATO assistant commissioner Michelle Allen says that it might be worth checking in to see whether these are identified as a fringe benefit. 

If you are unsure or a little concerned about FBT, then do not hesitate to get in touch with the us at Glance Consultants. We can look through the details to ensure that you are compliant and safe from any complications that may come through unintentional tax evasion with the ATO. 

We know that you likely have a lot on your plate, so the last thing you will be wanting is penalties imposed on you for FBT non-compliance or incorrect/late FBT returns. The ATO do have third-party data sources that they use to identify fringe benefit acquisitions in a business and have come out to claim that they will be cracking down on non-compliance this year. 

Know that you can claim deductions for the cost of providing fringe benefits in most cases and can claim GST credits for items provided. It’s a matter of knowing what you need to declare and how you should go about making these claims. 

If you believe that you might be liable for FBT this year for the first time, then you will need to register before reporting, lodging and paying your tax. 

You have until the 27th June 2022 if lodging these through a tax professional such as ourselves, otherwise return dates have passed for those lodging their own returns, back on the 23rd May 2022. 

By understanding what is identified as a fringe benefit and determining whether or not the incentives or rewards that you have provided your employees qualify as such, then you are able to make informed decisions. Get in touch with us at Glance Consultants to learn more about FBT.

 

A recent Xero study has found that many small businesses in Australia are facing a host of challenges as we lead up to the federal election. Some of the most concerning included digital adoption and tech struggles, supply chain pressures and shortages in staff. 

79% of those who responded to the survey noted that technology adoption was an issue. Either they were concerned about their ability to integrate beneficial technology in their business or simply didn’t believe it to be of use to them. 

In addition to this, a further 40% said that they were unprepared to use certain technology, such as using e-invoicing.

Small businesses have adapted to the disruptions of the pandemic, however must now find ways to help them thrive.

Internal processes can be simplified through technology uptake and this makes it easier for any business to quickly and easily do what needs to be done so that they can focus on connecting with clients and growing their business. 

Looking deeper into the study, a third of those who responded believed that a cash rebate or a grant solely for use on necessary technological upgrades and adoption would be of great help to their business and help them make more use of the digital tools that are available. 

Small business is at the heart of Australia’s economy and central to our communities. It’s critical that we take the needs of these businesses into account and do what we can to ensure their survival into the future. 

We can be confident knowing that the digitization of processes will continue to occur as the years go on. Therefore, technology adoption is one element that we can work on together, knowing it will have great benefit to a business in the future. 

With the COVID-19 recovery still a big priority to small business owners, supply chain shortages, wages and staff shortages remain huge factors of concern.

The knock on effect of the talent drought and the inability for small businesses to obtain the tech skills that they have needed to remain on point with digital adoption has now come to light.

Contact our friendly team of trusted advisors at Glance Consultants on 03 98859793 or at enquiries@glanceconsultants.com.au to discuss your needs and our full service offering. 

30 June Tax Planning

As we move towards the end of the 2021/22 financial year, there are a number of year-end income tax planning opportunities that may be available to optimise your tax position.

 

 

Temporary full expensing

Are you contemplating asset and equipment purchases? If so, consider getting in before 1 July to take advantage of temporary full expensing (TFE). TFE supports businesses and encourages investment, as eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year it is first used or installed ready for use for a taxable purpose in your business (rather than depreciation deductions being spread out over a number of years). This improves cashflow which can be a big problem for small businesses in particular.

Eligible assets include most business-related assets including new or second-hand equipment, furniture, computers, machinery, vehicles etc. (note however that vehicle claims may be capped by the car limit).

Ineligible assets include certain primary production assets and buildings or other capital works.

You’ll be able to claim in 2021/22 if the asset is first used or installed ready for use between 7.30pm AEDT on 6 October 2020 and 30 June 2022. This has now been extended to 30 June 2023 (FY 2022/23). Any business with an aggregated turnover of less than $5 billion is eligible to use TFE.

 

Crystalise capital losses

Have you made capital gains in 2021/22? If so, in consultation with your advisors, it may be worth considering crystalising any capital losses you are currently sitting on. For background, if you have made a capital gain from your investments, it will be added to your other income and taxed at your marginal tax rate which could be as high as 45% if you hold the asset personally.

However, capital losses can offset capital gains and in doing so reduce your tax liability. This strategy may be considered for example where you are holding underperforming CGT assets which you and your advisors consider have little prospect of growth moving forward.

By contrast, if an underperforming asset has good potential for future growth, then you may not be inclined to sell it. Each scenario should be judged
on its own merits in consultation with your advisors.

By no means should tax be the sole driver of your investment decisions. Keep in mind that for CGT purposes a capital gain/loss generally occurs on the date you sign a contract, not when you settle on a property purchase.

If there is no contract of sale, the gain or loss occurs usually when you stop being the asset’s owner. For example, if you sell shares, the gain or loss happens on the date of sale. Knowing which financial year the gain/loss will be attributed to is important when tax planning.

 

Write-off bad debts

Businesses should review their aged debtors to determine if any debts are not recoverable. If so, by writing them off as bad debts before 1 July 2022, you may be able to claim a tax deduction for the full amount of the debt in 2021/22. For a debt to qualify as ‘bad’, there must be little or no likelihood of recovery. Records should be kept to demonstrate that you have taken reasonable steps to recover the debt prior to writing it off.

 

ATO warning of fake ABN and TFN scams

The ATO has just recently reported an increase in fake websites offering to provide tax file numbers (TFNs) and Australian Business Numbers (ABNs) for a fee, but then failing to provide the service – leaving taxpayers out of pocket.

The fake TFN and ABN services are typically advertised on social media platforms like Facebook, Twitter, and Instagram.

The advertisements offer to obtain your TFN or ABN for a fee. Instead of delivering this service, the scammer uses these fraudulent websites to steal both money and personal information.

It is free, quick and easy to use government services to apply for a TFN through the ATO, or apply for an ABN through the Australian Business Register (ABR).

ATO Assistant Commissioner Tim Loh said: “Scammers are constantly developing new ways to target the community, and we expect to see more of these malicious attempts to steal identity details in the lead up to tax time.”

In 2021, more than 50,000 people reported ATO impersonation scams with victims losing a total of more than $800,000.

“We are concerned about a recent increase in the number of victims reporting scams around TFN and ABN applications. We are also still seeing scammers impersonating the ATO, making threats, demanding the payment of fake tax debts or claiming a TFN has been ‘suspended’ due to fraud. Those who apply for a TFN or ABN through a tax agent should always check that the tax agent is registered with the Tax Practitioners Board. We are encouraging everyone to be on alert and take the time to remind family and friends to be on the lookout and stay safe online, so you don’t fall victim to a scam this tax time.”

 

Tips to protect yourself from scammers:

• Know your tax affairs – You will be notified about your tax debt before it is due. Check if you have a legitimate debt owed by logging into your myGov account via an independent search or by calling your tax agent if you have one (on a number sourced independently).
• Guard your personal and financial information – Be careful when clicking on links, downloading files or opening attachments. Only give your personal information to people you trust and don’t share it on social media.
• If you are unsure, don’t engage – If a call, SMS or email leaves you wondering if it is genuine, don’t reply. Instead, you should phone the ATO’s dedicated scam line 1800 008 540 to check if the communication is legitimate. You can also verify or report a scam online at ato.gov.au/scams. You can also visit ScamWatchExternal Link to get information about scams (not just tax scams).
• Know legitimate ways to make payments – Scammers may use threatening tactics to trick their victims into paying fake debts via unusual methods. For example, they might demand pre-paid gift cards or transfers to non-ATO bank accounts. To check that a payment method is legitimate, visit ato.gov.au/howtopay.
• Talk to your family and friends about scams – If you or someone you know has fallen victim to a tax-related scam, call the ATO as soon as you can.

 

 

Six super strategies to consider before 30 June

With the end of financial year (EOFY) fast approaching, now is a great time to boost your superannuation savings and potentially save on tax. Below are six superannuation strategies to consider before 30 June 2022.

 

Tip 1 – Use the carry forward concessional contribution rules

If you want to make up for lost time and make extra contributions to top up your superannuation balance, you may be able to use the carry forward concessional contribution rules (otherwise known as “catch-up concessional” rules) to make large concessional contributions this year without exceeding your concessional contribution cap.

This strategy can allow you to carry forward any unused concessional contribution cap amounts that have accrued since 2018/19 for up to five financial years and use them to make concessional contributions in excess of the general annual concessional contribution cap (currently $27,500 in 2021/22).

You can then make a concessional contribution using the unused carry forward amounts this financial year provided your total superannuation balance (TSB) at 30 June 2021 was below $500,000.

 

Tip 2 – Make a personal deductible contribution

Carry-forward contributions may also provide you with an opportunity to make higher amounts of personal deductible contributions in financial years where you may have a higher level of taxable income, for example, due to assessable capital gains.

But if you’re not eligible to use the carry forward rules to make a larger contribution, you can still boost your superannuation by making a personal deductible contribution up to the general concessional contribution cap.

It’s important to note that personal deductible contributions are only deductible if you meet all of the following conditions:

• You make the contribution to a complying superannuation fund
• You are at least age 18 when the contribution is made (unless you derived income from carrying on a business or from employment related activities)
• You make the contribution within 28 days after the month in which you turn 75
• You notify your superannuation fund trustee in writing of your intention to claim the deduction
• The notice must be given by the earlier of:> when you lodge your income tax return for the year the contributions were made, or
  > the end of the financial year following the year the contributions were made
• The trustee of your superannuation fund must acknowledge receipt of the notice, and you cannot deduct more than the amount stated in the notice.

 

Tip 3 – Spouse contribution splitting

You can split up to 85% of your 2020/21 concessional contributions before 30 June 2022 to your spouse’s superannuation account if your spouse is:

• Less than the preservation age, or
• Between preservation age and age 64 (and you must declare they do not satisfy the ‘retirement’ condition of release).

This is an effective way of building superannuation for your spouse and can assist to manage your TSB which can have several advantages, including:

• Equalising balances to make best use of both of your transfer balance caps (TBC), which can maximise the amount you both have invested in tax-free retirement phase income streams.
• Optimising both of your TSBs to:> Access a higher non-concessional contribution (NCC) cap
  > Allow access to use the carry-forward concessional contribution rules
  > Utilise the work test exemption
  > Qualify for a government co-contribution
  > Qualify for a tax offset for spouse contributions
• Boosting Centrelink entitlements by transferring funds into a younger spouse’s accumulation account if your spouse is under age pension age.

 

Tip 4 – Superannuation spouse tax offset

If your spouse is not working or earns a low income, you may want to consider making an NCC into their superannuation account.

This strategy could benefit you both by boosting your spouse’s superannuation account and allowing you to qualify for a tax offset of up to $540.

You may be able to get the full offset if you contribute $3,000 and your spouse earns $37,000 or less pa (including their assessable income, reportable fringe benefits and reportable employer superannuation contributions).

A lower tax offset may be available if you contribute less than $3,000, or your spouse earns between $37,000 and $40,000 pa.

– Need help? You’ll need to meet certain eligibility conditions before benefitting from any of these strategies. Contact us before 30 June if you’re thinking about investing more in superannuation so we can help you decide which strategies are most appropriate to your circumstances.

 

Tip 5 – Maximise non-concessional contributions

Another way to boost your superannuation is to make an NCC with some of your after-tax income or savings.

The general NCC cap for 2021/22 is $110,000 and eligibility to utilise the cap depends on your TSB.

Although NCCs don’t reduce your taxable income for the year, you can still benefit from the low tax rate of up to 15% that is paid in superannuation on investment earnings. This tax rate may be lower than what you might pay if you held the money in other investments outside superannuation.

 

Tip 6 – Receive the government co-contribution

If you’re a low or middle-income earner earning less than $56,112 in 2021/22 and at least 10% is from your job or a business, you may want to consider making an NCC to superannuation before 1 July 2022. If you do, the Government may make a ‘co-contribution’ of up to $500 into your superannuation account.

The maximum co-contribution is available if you contribute $1,000 and earn $41,112 pa or less. You may receive a lower amount if you contribute less than $1,000 and/or earn between $41,112 and $56,112 pa.

Like the superannuation spouse tax offset, the definition of ‘total income’ for the purposes of the co-contribution includes assessable income, reportable fringe benefits and reportable employer superannuation contributions.

 

 

2022 Election Washup

Following the election of the new Labor federal Government on 21 May, there are a number of tax and superannuation proposals that they have announced or existing measures they have committed to that may impact you and your business moving forward. Some of course are subject to the passage of enabling legislation through the new Parliament.

 

Tax cuts

The incoming government has committed to the so-called Stage 3 tax cuts that the former government passed into legislation in 2018.

This will see the 37% tax bracket abolished, the top 45% bracket will start from $200,000 and the 32.5% rate will be cut to 30% for all incomes between $45,000 and $200,000. This is legislated to commence from 1 July 2024.

 

Multinational tax crackdown

This will involve a four-pronged approach:

• Supporting the OECD’s Two-Pillar Solution for a global 15% minimum tax, and ensuring some of the profits of the largest multinationals – particularly digital firms are taxed where the products or services are sold.
• Limiting debt-related deductions by multinationals at 30% of profits, consistent with the OECD’s recommended approach, while maintaining the arm’s length test and the worldwide gearing ratio.
• Limiting the ability for multinationals to manipulate Australia’s tax treaties when holding intellectual property in tax havens.
• Introducing transparency measures including reporting requirements on tax information, beneficial ownership, tax haven exposure and in relation to government tenders.

 

Downsizer scheme

The incoming government has adopted the former government’s proposed changes to the superannuation downsizer scheme. Age eligibility will be reduced to 55. Also, proceeds from the sale your house will be exempt from the pension asset test for two years instead of one.

For background, the downsizer scheme allows older Australians to downsize their family home and contribute up to $300,000 each into superannuation without counting towards the contribution caps.

 

SG increases to proceed

The increases to the superannuation guarantee rate will go ahead as legislated. The rate of SG will be increased to 10.5% from 1 July 2022. It will then continue to increase by a further 0.5% each year until reaching 12% in 2025.

 

Home to Buy Scheme

With the Labor party winning the election, the former government’s proposal to let individuals raid their super to buy their first home will not proceed. Rather, the new government will presumably push ahead with its home buyer proposal Help to Buy. This will be open to 10,000 Australians each financial year.

Eligible home buyers will need a minimum deposit of 2%, with an equity contribution from the Federal government of up to a maximum of 40% of the purchase price of a new home and up to a maximum of 30% of the purchase price for an existing home.

Help to Buy will be open to buyers who do not own a property – not just first home buyers – but eligible buyers must earn less than $90,000 a year, or $120,000 if they are a couple.

Participants must buy back the government’s share in their house if they start to earn more than the above amounts.

 

 

Four priorities for the ATO this Tax Time

In the middle of May, the ATO announced that there will be four focus areas on their radar during Tax Time 2022 – record-keeping, work-related expenses, rental property income and deductions, and capital gains from crypto assets. It is reminding taxpayers that there are three golden rules when claiming a deduction:

1. You must have spent the money yourself and weren’t reimbursed

2. If the expense is for a mix of income producing and private use, you can only claim the portion that relates to producing income, and

3. You must have a record to prove it.

 

Record-keeping

For the many people who lodge their tax return using a tax agent, your agent’s hands are tied in terms of claiming deductions on your tax return… unless you can furnish them with records to prove you have incurred the work-related expense, then they can’t claim it. Records can be kept in paper or digital format.

Examples of records you need to keep include: income statements or payment summaries from your employer and Services Australia, statements from your bank and other financial institutions showing the interest you earned during the income year, dividend statements, summaries from managed investment funds, receipts or invoices for equipment or asset purchases and sales, receipts or invoices for expense claims and repairs, contracts, and tenant and rental records.

 

Work-related expenses

Noting that many people worked from home during COVID-19, if your working arrangements have changed, the ATO warns taxpayers to not just copy and paste your prior year’s claims. If you use a tax agent, inform them of your changed circumstances. If your expense was used for both work-related and private use, you can only claim the work-related portion of the expense. For example, you can’t claim 100% of mobile phone expenses if you use your phone for private purposes.

You can easily keep track of your expenses with the myDeductions tool in the ATO app. Just take a photo of the receipt in the app, record the details of the expense and at tax time, simply upload the information directly to your return in myTax or email it to your registered tax agent.

 

Rental income and deductions

If you are a rental property owner, make sure you include all the income you’ve received from your rental in your tax return, including short-term rental arrangements, insurance payouts and rental bond money you retain.

The ATO says it knows that many rental property owners use a registered tax agent to help with their tax affairs. The ATO encourages you to keep good records, as all rental income and deductions need to be entered manually, you can ask us.

 

Capital gains from crypto

If you dispose of an asset such as property, shares, or a crypto asset, including non-fungible tokens (NFTs) this financial year, you will need to calculate a capital gain or capital loss and record it in your tax return.

Says the ATO’s Assistant Commissioner: “Crypto is a popular type of asset and we expect to see more capital gains or capital losses reported in tax returns this year. Remember you can’t offset your crypto losses against your salary and wages.”

“Through our data collection processes, we know that many Aussies are buying, selling or exchanging digital coins and assets so it’s important people understand what this means for their tax obligations”.

 

 

Downsizer contributions to SUPER

Did you know you could invest the proceeds of the sale of your family home to your superannuation, depending on your age and circumstances?

 

What is a downsizer contribution?

From 1 July 2022, if you’re aged 60 years or older you may be eligible to make a downsizer contribution of up to $300,000 (or $600,000 for a couple) to your superannuation fund from the proceeds of the sale of your home where specific requirements are met.

Downsizer contributions can be a great way of boosting your superannuation after retirement. As well as the extra capital they introduce, the contributions can also earn investment income that is either tax-free if you commence an income stream with the funds or be taxed at a concessional tax rate of up to 15% whilst in accumulation phase.

 

Eligibility requirements

1. You must be aged 60 or over from 1 July 2022 (or aged 65 or over if the contribution is made before 30 June 2022).

2. The amount of the contribution is an amount equal to all or part of the sale proceeds (capped at $300,000 per person) of a qualifying main residence, where the contract of sale of the main residence was exchanged on or after 1 July 2018.

3. The home was owned by you or your spouse for 10 years or more prior to the sale. Further, your home must be in Australia and must not be a caravan, houseboat or other mobile home.

4. The proceeds of selling your home are either fully exempt or partially exempt from capital gains tax under the main residence exemption or, if the home was acquired before 20 September 1985, would have been exempt.

5. You make the downsizer contribution within 90 days of receiving the proceeds of sale (ie, usually settlement date).

6. You complete the ‘Downsizer contribution into super form’ (NAT 75073) which is available on the ATO website and provide it to your superannuation fund either before or at the time of making the downsizer contribution.

7. You have previously not made a downsizer contribution from the sale of another home.

 

Provided that the above conditions are met:

• There is no obligation to purchase a new home or to move to a smaller or cheaper home. You simply need to sell your home and meet the above criteria to make a downsizer contribution.
• There is no maximum age limit to make a downsizer contribution.
• The downsizer contribution does not count towards your non-concessional or concessional contributions caps.
• There is no requirement to meet a work test or work test exemption to make a downsizer contribution, and
• Downsizer contributions can be made regardless of the size of your total superannuation balance (TSB). This means a downsizer contribution can still be made even if you have more than $1.7 million in superannuation.

TIP – As part of the federal election campaign, the new Labor government pledged to match the former Coalition government’s commitment to lower the downsizer eligibility age to 55. If Labor passes this measure, it would provide greater flexibility for Australians over the age of 55 to sell their home and contribute the proceeds into superannuation.

 

Other points to consider

While downsizer contributions can be made regardless of what your TSB is, once the downsizer contribution is made to superannuation it forms part of your TSB.

At this point, the downsizer contribution will increase your TSB which may impact your eligibility to:

• Make carry forward concessional contributions
• Make non-concessional contributions
• Receive government co-contributions, and
• Receive a tax offset for spouse contributions.

Similarly, a downsizer contribution will also count towards your transfer balance cap (TBC), which applies when you move your superannuation into retirement phase to commence an income stream.

So if you intend to use your sale proceeds to commence a superannuation income stream in retirement, it’s important to note that you have a personal TBC of up to $1.7 million on the total amount that can be transferred from a superannuation account into a tax- free superannuation income stream. You can find out your personal TBC by contacting the ATO or logging into myGov.

Lastly, your superannuation balance is assessed for your eligibility for the government age pension, whereas the value of your family home is an exempt asset. This means you may see a reduction or lose your entitlement to the age pension when you contribute some or all of the sale proceeds to your superannuation.

 

Seek advice

Although making a downsizer contribution may seem to be straightforward strategy, there are a number of eligibility requirements and nuances that you must be aware of when utilising these rules. If you’re thinking about downsizing and contributing to superannuation but want more information, talk to us. Our office number is 03 9885 9793.

 

Click here to view Glance Consultants June 2022 Newsletter via PDF

 

 

 

 

As international borders reopen and we are all eager to return to normal, a hurdle that has increasingly become more obvious is the largely outdated tax residency definition for individuals. 

The 2021 budget did acknowledge an overhaul, however no fixed date was declared, nor in fact, has any draft legislation been released. It is safe to say that any changes are therefore a long way off. 

Realistically, we are looking at the earliest possible date for changes to take effect to be July 1st 2023, which is far too late for both Australians choosing to live and work abroad and foreign talent finding security here. 

A reform is necessary because existing residency tests are outdated and highly subjective. Also, in 2009, the general exemption for foreign-sourced income earned by Australian tax residents overseas was removed. As a result, many Australians took efforts to cease being a resident so that they were only taxed in the country they were working. 

For those living and working internationally, it is common knowledge that in most other countries, the individual tax rates are lower than that of Australia’s. Declaring a salary in both countries is also painstaking and impractical. It is no wonder the courts are seeing a dramatic increase in individual tax residency statuses. 

It has been proposed that by simplifying tax residency status to automatically treat an individual as an Australian tax resident if they are residing in this country for more than 183 days will offer greater certainty. 

For those with more complex cases, they will either need to apply for a commencing residency test or a ceasing residency test. They may also need to satisfy a factor test, which all adds up to becoming equally as cumbersome as current tax residency tests are. 

There is no doubt about the fact that a lot of work needs to go into improving the strategies surrounding these decisions so that Australia is more aligned with their approaches to residency as other countries are. 

If you are considering a move to live and work overseas now that international borders are open, it is imperative that you understand your tax obligations. It’s best to consult our team at Glance Consultants on 03 9885 9793 to get the support you need as it is likely your residency status will be assessed on a case-by-case basis. 

The CPI (consumer price index) figure, a measure of inflation, was higher than expected for this quarter at 5.1% and this is going to impact businesses and individuals in some way or another. 

Previously, Australia’s inflation rate was lagging behind other countries such as those in Europe and the US, however the scale of the recent increase indicates that this is changing. 

The RBA recently increased its cash rate target to 0.35% as a response and we can expect further inflation pressures to cause uncertainty for businesses in the coming months. 

In particular, small businesses are hit hard by inflation, primarily due to the flow on effect on wages and the cost of capital. Although we are going down the same CPI path as other developed countries, it doesn’t make the news any less difficult to take. 

Tony Greco, the general manager technical policy at IPA acknowledges that ‘the cost of capital is a business cost, so businesses need to factor into their price structures the impact of future rate hikes’.

Highly leveraged operations are going to be more exposed than those that do not have significant levels of borrowing, so the impact and response across the economy is not going to be a uniform one. This is cause for concern for many businesses that have seen it tough over the past few years and have yet to recover, yet would have otherwise had the ability to do so.

Fuel price is yet another great unknown that companies are needing to adjust their forward estimates to compensate for. Temporary excise cuts cannot mitigate the issue for long and there is a large question mark over the likelihood of peace in Ukraine in the foreseeable future. 

However, perhaps the biggest factor for businesses to consider is the need for an increase in wages in response to ongoing inflationary pressures. 

By considering a 5% wage increase and understanding the impacts that this would have in addition to other additional expenses, businesses are able to determine how they are able to continue operations over time. 

Needless to say, many small businesses are going to find it difficult and impacted negatively when CPI increases and the value of the dollar goes down. 

We are aware of the need for forward thinking and proactive approaches at this time and are eager to support our clients in ensuring that they are securing their businesses in these uncertain times. 

Contact Glance Consultants today to get help or advice for your small business on 03 9885 9793

 

Virtual sales calls have replaced the more traditional face-to-face style, even as we move out of the pandemic and lockdown restrictions. Video calls are both flexible and they allow your business to scale up, globally should you wish. They certainly have their benefits.

Meeting over Zoom or Microsoft Teams is convenient for both client and sales representative and has essentially become the normal.

But if you’re unsure whether you have mastered the skill of closing a deal in a virtual setting, then do take a look at some of the following tips. 

 

Plan ahead. 

All telesales representatives have a script that they memorise over time. You can tell the new employees from the seasoned ones by how they deliver their script and whether it sounds natural or simply read out from the screen. 

We suggest that you too use a script to get you started, but with bullet points of information to allow for natural engagement and an organic flow. 

 

Make it engaging.

Imagery sells, so share your screen and create powerpoint presentations, or take them through a series of different websites to paint a clear picture that emphasises the points you are making.  

 

Look professional.

Not only do you look the part by having the right equipment, you will also feel more confident and comfortable within yourself. 

Set up your workstation and invest in a good microphone and in some quality lighting. Perform a test run with a friend to make sure everything is working properly. 

 

Keep an eye for cues.

Our attention spans in front of screens are notoriously low, as in about 10 minutes long. Make sure you are watching your prospect for signs of boredom and react accordingly. 

If something can be added in an email, then skip it during the call. 

Reading body language virtually can be extremely difficult, but a good trick is to occasionally mimic what the other person is doing and make eye contact with the camera when listening. 

 

Be clear about what’s next.

A good sales trick whatever the setting, it’s important to keep your potential client comfortable by letting them know what they are to expect next. 

Follow up all information with an email and potentially include some time-limited sales incentives or other tactics. 

Here at Glance Consultants, we seek to remain at the forefront of technological advances in order to support our clients through their transitions into the next digital generation. Let’s chat about how you can adopt technology more effectively. Contact us now on 03 98859793 or at enquiries@glanceconsultants.com.au

 

It’s pretty clear that recently, there has been a shortage of talent in the workforce and those employees with the necessary skills are highly desirable amongst many competing businesses. 

Business leaders are looking at two very important levers to business success. That is technology and people. 

So how do you approach this battle between your competitors and manage the balance between obtaining the workforce that you need to get ahead and affording to do so?

Be Brave

We have seen that the businesses that have continued to do well over the past couple of years have been those that refuse to be victims of change. The business leaders who have addressed both the issues of talent and technology have remained at the forefront in terms of growth and success. 

But although the business can adopt new cloud-based, highly secured platforms and sustain a remote work setting that got them through the pandemic, without the talent that is needed to leverage this and further development, technology just becomes a cost line item. 

Mid-market businesses report that the two leading changes planned for 2022 are to either:

1. hire new full-time employees, 34%, or
2. decrease staff numbers, 32%. 

This shows bold decision making. It may be that 32% of businesses are faced with a reduction in revenue. It could be that they have developed more efficient systems. If you’re one of the 34%, how on earth do you acquire staff when there are so many other businesses doing exactly the same?

It comes down to how you are winning the hearts and minds of the talent out there. 

Does your business enable the development of meaningful connections in the community? Can you provide hard evidence to support your claims that by joining your company, a potential employee’s life will be better and stronger than if they went somewhere else?

You want to be able to expose your employees to an environment that stretches them and protects them for the future. Whether they plan to work in your company for 12 months or 12 years, it shouldn’t matter to you. They want to build their CV with relevant skills that improve their lives as a result. 

Although technology is effectively invalid without the talent to use it, we also believe that without the technology, you will not gain the talent.

Being brave in your decision to be a leader both in your business and in your sector will help you win the war. Without the technology that your talent wants to work with, you’re essentially bringing a knife to the gun fight. 

For more advice on building your business, get in touch with a team member at Glance Consultants, today. Our office number is 03 98859793 or alternatively you can email us at enquiries@glanceconsultants.com.au

 

FBT year-end checklist

 

March 31 marks the end of the 2021/2022 fringe benefits tax (FBT) year which commenced 1 April 2021. It’s time now for employers and their advisors to turn their attention to instances where non-cash benefits have been provided to employees, and also where private expenses have been paid on their behalf.

Although it will generally fall to your accountant to prepare the FBT return, from your software file or other records, all of the instances where you have provided employees and/or their associates (e.g. spouse) with a potential fringe benefit may not always be apparent to them. To assist you in bringing these potential benefits to the attention of your accountant, following is a general checklist (non-exhaustive).

 

CARS

• Did you provide or make available a car that your business (or an associate of the business) owned or leased, to an employee or their associate for private purposes?

Exemptions include minor, infrequent and irregular non-work-related use by an employee of certain commercial vehicles.

 

• Did you as an employer reimburse expenses of an employee in relation to a car they owned or leased?

Exemptions include where the business compensates the employee on a cents per km basis for estimated travel and where the car has not been used for private purposes.

 

LOANS

• Did your business provide a loan to an employee or their associate?

Exemptions include where the loan is strictly related to meeting an employment expense (which must be incurred within sixth months of the loan being made). Exemptions also include loans made by private companies to employees who are also shareholders but the loan is Division 7A compliant.

 

DEBT WAIVER

• Did your business release an employee or their associate from paying an outstanding debt?

An exemption applies where the debt in question is genuinely written off as a bad debt (as distinct from waived for employment or personal reasons).

 

HOUSING

• Did your business or an associated entity provide an employee or their associate with the right to use accommodation by lease or licence?

The benefit may be exempt in the event that it relates to a remote area.

 

LIVING AWAY FROM HOME ALLOWANCE (LAFHA)

• Did you pay an employee an allowance to compensate them for private non-deductible expenses because they are required to live away from their usual place of residence for work?

Strict exemption conditions can apply which your accountant can walk you through.

 

EXPENSE PAYMENTS

• Did your business reimburse an employee or pay a third-party expense of theirs?

Exemptions include where the expense would have been otherwise deductible to the employee because it was work-related.

 

CAR PARKING

• Did you pay for an employee’s car parking expenses or provide them with a car park during the year?

Various exemptions apply including where the benefit is for a disabled person, or provided by small businesses or certain non-profit employers, or the minor benefit exemption applies.

 

ENTERTAINMENT

• Did your business provide an employee or associate (or in some cases third-parties) with entertainment by way of food, drink or accommodation in connection with this?
• Did your business provide an employee or their associate with a corporate box, a boat or plane for the purpose of providing entertainment, or other premises for the purpose of providing entertainment?

 

Record keeping

Keeping good business records is important for a number of reasons. It assists you to:

■ comply with your tax and superannuation obligations
■ gain a greater insight into the financial health of your business, enabling you to make informed decisions
■ manage your cashflow
■ demonstrate your financial position to prospective lenders, and also potential buyers of your business.

 

ATO REQUIREMENTS

Broadly, the ATO requires that:

■ you keep most records for five years from when you obtained the records, or completed the transactions or acts that they relate to – whichever is the later
■ you be able to show the ATO your records if they ask for them
■ your records must be in English or be able to be easily converted to English.

 

DIGITAL RECORDS

The ATO is reminding business owners that you can keep your records (paper/hard copies) digitally. The ATO accepts images of business paper records saved on a digital storage medium, provided the digital copies are true and clear reproductions of the original paper records and meet the standard record keeping requirements.

Once you have saved an image of your original paper records, you don’t have to keep the paper records unless a particular law or regulation requires you to.

However, if you enter information (for example, supplier information, date, amount and GST) from digital or paper records into your accounting software, you still need to keep a copy of the actual record, either digitally or on paper. Some accounting software packages may do both your accounting as well as your record keeping.

 

STORAGE OPTIONS

1. Cloud

If you use cloud storage, either through your accounting software or through a separate service provider, eg, Google Drive, Microsoft Onedrive or Dropbox, ensure:
■ the record storage meets the record-keeping requirements
■ you download a complete copy of any records stored in the cloud before you change software provider and lose access to them.

2. E-invoicing

Regardless of your E-Invoicing software or system, your business is responsible for determining the best option for storing business transaction data. You should:
■ ensure that your process meets the record-keeping requirements
■ discuss your options with your software provider
■ talk to your business adviser, if necessary.

 

DIGITAL ADVANTAGES

As the ATO point out, there are many advantages to keeping your records digitally. If, for example, you use a commercially-available software package, it may help you:

■ keep track of business income, expenses and assets as well as calculate depreciation
■ streamline your accounting practices and save time so you can focus on your business
■ automatically calculate wages, tax, super and other amounts, including
• develop summaries and reports for GST, income tax, fringe benefits tax (FBT) and taxable payments reporting system (TPRS), as required
• be prepared to lodge your tax and super obligations, including your tax return, business activity statements (BAS) and taxable payments annual report (TPAR) if you are a business that is required to
• send some information to the ATO online (if the package meets ATO requirements), for example, your activity statement
• meet your legal Single Touch Payroll (STP) reporting obligations
■ back up records using cloud storage to keep your records safe from flood, fire or theft.

 

ATO’s new crackdown on Discretionary Trusts

The ATO has just updated its guidance around trust distributions made to adult children, corporate beneficiaries and entities that are carrying losses. Depending on the structure of these arrangements, there is a potential that the ATO may take an unfavourable view on what were previously understood to be legitimate arrangements.

 

Background

For various reasons, including legal tax minimisation and asset protection, many business owners operate their affairs through a trust structure. While trust structures are legitimate, the ATO has become increasingly sceptical of the motivations behind the use of trusts which it believes in many cases are motivated chiefly by tax minimisation.

In February 2022, the ATO updated its guidance directly focusing on how trusts distribute income, and to whom! Consequently practices which may have once been previously accepted may now not be. This may result in higher taxes for family groups in particular – both going forward, and potentially retrospectively.

 

Target

The ATO is chiefly targeting arrangements under s100A of the Tax Act, specifically where trust distributions are made to a low rate tax beneficiary but the real benefit of the distribution is transferred or paid to another beneficiary usually with a higher tax rate. In this regard, the ATO’s new Taxpayer Alert (TA 2022/1) illustrates how s100A can apply to the quite common scenario where a parent benefits from a trust distribution to their adult children.

Released at the same time, the ATO’s new draft ruling states that for the new guidance to potentially apply, one or more of the parties to the agreement must have entered into it for a purpose (not necessarily a sole, dominant purpose) of securing a tax benefit. This sets the bar quite low and may capture a number of arrangements.

 

Assessing the risk

The ATO released an accompanying guideline providing taxpayers with a risk assessment framework for them to work through with their accountants to assess the level of risk involved in current and past distribution arrangements. In the guideline, the ATO has provided a number of examples of high-risk arrangements that are actually quite common and include:

1. Arrangements where the presently entitled beneficiary lends or gifts some or all of their entitlement to another party and there is a tax benefit obtained under the arrangement
2. Arrangements where trust income is returned to the trust by the corporate beneficiary in the form of assessable income and the trust obtains a tax benefit
3. Arrangements where the presently entitled beneficiary is issued units by the trustee (or related trust) and the amount owed for the units is set-off against the beneficiary’s entitlement
4. Arrangements where the share of net income included in a beneficiary’s assessable income is significantly more than the beneficiary’s entitlement
5. Arrangements where the presently entitled beneficiary has losses.

For arrangements that fall into the high-risk category, the ATO advises that it will conduct further analysis on the facts and circumstances of the arrangement as a matter of priority. If further analysis confirms the facts and circumstances of your arrangement are high risk, they may proceed to audit where appropriate.

 

What next?

The ATO’s new ruling and guidelines are still in draft form, and are expected to be finalised soon. Once finalised, they are intended to apply both prospectively and retrospectively. However, for entitlements conferred before 1 July 2022, the ATO has indicated it will stand by any administrative position reflected in its prior website guidance before the new material was released.

If you have any concerns about your trust distributions and exposed risk to Section 100A, you should contact our office to organise a meeting based on your personal circumstances.

 

Ridesharing: The Driver

Uber and other ride-sourcing facilitators have become increasingly popular over recent years. From a driver’s standpoint, there are a number of tax issues potentially in play. See overleaf for the tax implications from a rider’s perspective.

 

INCOME

Income from a driver’s ride-sourcing activities must be declared in their tax return irrespective of the amount they earn, and irrespective of whether they have another job. The amount to be declared is the full fare (including or “grossed-up” by the facilitator’s fee, less GST). The full fare amount must be declared in a driver’s personal tax return (or in an entity’s return if they are operating through a company, trust etc.).

 

EXPENSES

Expenses (less GST) incurred by drivers in operating their ride-souring activities are deductible. However, not all expenses will be deductible and may need to be reduced/apportioned to take account of any private use of the vehicle. The following common expenses are not deductible – fines (e.g. speeding or parking), cost of own meals and drinks during shifts, and clothing except if either compulsory or noncompulsory clothing that is unique and distinctive to the Facilitator you drive for.

In instances where a vehicle is being claimed in the driver’s personal tax return, the costs will be claimed using either of the following methods:

1. Cents per kilometre

Whereby you claim a set number of cents per kilometre travelled (currently 72 cents). The advantage of this method is very little record keeping is required. You only need to be able explain how you arrived at your calculation – you do not need any documentary evidence in the way of receipts or log books etc. Even where you travel more than 5,000 kilometres, you may still elect to use this method (and save the hassle on the record-keeping requirements that are required under the logbook method) by capping your claim at 5,000 kilometres. In summary, this method can be appealing to drivers who:

■ Have travelled less than 5,000 business kilometres
■ Have older vehicles (therefore depreciation and interest costs are low)
■ Have not kept, or do not wish to keep, records of kilometres travelled. This method incorporates all car expenses including petrol, servicing, depreciation, etc. You can make no further car expense claim.

2. Logbook

Under this method, your claim is based on the business use percentage of each car expense, which is determined by a logbook that must have been kept for a minimum 12-week period.

This logbook must be updated every five years. To ease the record-keeping burden, check out one of the innumerable logbook ‘apps’ on the market, either from the App Store or Google Play as the case may be.

In summary, under this method you can claim all expenses that relate to the operation of the car, at your percentage of business use, as established from your logbook. This method generally gives the best result where the vehicle has substantial business use. Drivers can calculate their claim and determine which method provides the largest deduction, by using the ATO’s Work-related car expenses calculator on its website.

 

GST

Under general GST law, you are only required to register for where you are carrying on an enterprise and your annual turnover is $75,000 or more. However, where your enterprise involves providing ‘taxi travel’ you must register for GST irrespective of the level of turnover.

The ATO adopts a broad interpretation of ‘taxi’ to include cars made available for public hire to transport passengers in return for a fare (but not including trucks and bike courier services). The Federal Court has confirmed this interpretation. Drivers therefore generally must register for, and charge, GST as soon as they commence operating.

 

ABN

Drivers generally speaking will always be ‘carrying on an enterprise’, and therefore should register for an ABN. The only instance where it’s conceivable that a driver would not be carrying on an enterprise would be where they are an employee of the facilitator. This is rare, however.

 

Ridesharing: The rider
This article examines the tax implications from a rider’s perspective.

 

DEDUCTION

The same principles apply as per taxi fares. Where the fare is business-related, for example you are travelling from your office to a client’s premises, the fare will be deductible in full. However, where the travel is personal the fare is not deductible. This includes travel between home and work. That is, trips between your home and regular place of work can’t be claimed even if you:

■ live a long way from your regular place of work
■ work outside normal business hours – for example, shift work or overtime
■ do minor work-related tasks – eg, picking up the mail on the way to your regular place of work or home
■ go between your home and your regular place of work more than once a day
■ are on call – eg, you are on stand-by duty and your employer contacts you at home to come into work
■ have no public transport near where you work
■ do some work at home.

To evidence the deduction, the rider will need documentation. The good news is that Uber, and we suspect other facilitators, will provide you with sufficient documentation to substantiate your deduction. You obtain this by logging back into their ‘app’ after the ride.

 

GST

To claim GST on a fare, the trip must be business-related (see earlier), and the rider must be in possession of a valid Tax Invoice. For many fares however, a Tax Invoice will not be required as the total fare may be less than $82.50 (including GST). Where this is the case, any of a Tax Invoice, a docket, an invoice, or a receipt will suffice for your GST claim.

The question then arises, what actual documentation does Uber or the driver provide at the conclusion of the ride? In the vast majority of cases, the driver will not provide you with any documentation (e.g. invoice etc.). Rather, after the ride, if you visit Uber’s ‘app’ they will on behalf of the driver provide you with a tax invoice if the driver is registered for GST. Tax Invoices are provided by Uber even where the fare is below $82.50. We can confirm that the standard Uber-provided Tax Invoices are in full compliance with the ATO’s requirements.

You will need to check the documentation of other facilitators for compliance.

 

ABN WITHHOLDING

Another relevant tax issue is ABN Withholding. Under this regime, if a supplier of a good or service does not provide an ABN and the total payment for that good or service is more than $75 (excluding GST), the recipient generally has to withhold the top rate of tax (currently 45%) from the payment and pay it instead to the ATO.

Having withheld from the payment, the recipient of the supply must then complete a PAYG payment summary – withholding where ABN not quoted and give it to the supplier at the same time the net amount is paid to them or as soon as possible after. However there are various exceptions. In the absence of one of these exceptions applying, this then raises the question of whether the rider would be liable for penalties for failing to withhold.

The reality is that under a typical ride-sourcing model (and certainly with Uber), the Rider is not in a position to withhold the 45% penalty as the payment they make for the fare is in the form of a direct debit of the Rider’s credit card. Therefore, it would be very difficult to imagine the ATO penalising Riders for not withholding when, in a physical sense, they have no ability to do so.

 

Salary sacrificing to super

Are you an employee thinking of putting some of your pre-tax income into superannuation to boost your retirement savings? This is known as salary sacrifice, and the good news is that it can benefit you and your employer.

 

What is salary sacrifice?

An effective salary sacrifice agreement (SSA) involves you as an employee, agreeing in writing to forgo part of your future entitlement to salary or wages in return for your employer providing you with benefits of a similar value, such as increased employer superannuation contributions.

Contributions made through a SSA into superannuation are made with pre-tax dollars and do not form part of your assessable income. This means salary sacrifice contributions are not taxed at your marginal tax rate (MTR) and will instead be subject to superannuation contributions tax of up to 15% when received by your superannuation fund and will count toward your concessional contributions (CC) cap.

The CC cap is a limit to how much you can contribute to superannuation. The combined total of your employer superannuation guarantee (SG) and salary sacrificed contributions must not be more than $27,500 per financial year. Note that there are other, very rare types of contributions that also contribute towards your CC cap.

For most people, the 15% contributions tax will be lower than their MTR. You benefit because you pay less tax while boosting your retirement savings.

Your employer also benefits because salary sacrifice contributions are tax deductible to them and there is no limit to the amount of their contribution/deduction.

However, this is not the case for employees. Salary sacrifice contributions in excess of your CC cap will be included in your assessable income and taxed at your MTR. You will however be entitled to a 15% non refundable tax offset to compensate for the tax paid by the superannuation fund on the same excess contribution.

 

The benefits of salary sacrifice

■ Disciplined approach to saving – individuals who struggle to save may benefit from salary sacrificing as contributions are deducted directly from pre-tax income. This automatic process can help you build your superannuation over the long-term and save for retirement.
■ Tax saving is immediate – because contributions are made from pre-tax salary, the personal tax benefit is derived ‘up-front’. This means the saving goes straight to your superannuation fund and you can benefit from compounding returns on the tax saving amount (presuming the return is positive) throughout the year.
■ Dollar cost averaging – salary sacrifice allows you to buy into the market at regular intervals and, therefore, reduce the risk of market timing.
■ Easy to administer once established – you do not need to claim a deduction in your tax return or lodge a notice of intent form with your superannuation fund when salary sacrificing, unlike personal deductible contributions.
■ Employer matching arrangements – salary sacrifice may also be attractive if your employer offers generous matching arrangements to their employees, for example, an additional 1% employer contribution for each 1% of salary sacrificed.

 

The key issues to consider

■ SSA may be ineffective – where your employer offers salary sacrifice, the arrangement must be in place before you have actually earned the entitlement. This means only income that relates to future employment and entitlements can be salary sacrificed into superannuation. This is known as an ‘effective’ SSA. With any bonus payments, the arrangement needs to be made before a decision to pay the bonus has been made. This applies even when the bonus won’t be paid until some time in the future.
■ No control over when a salary sacrifice contribution will be made – all SSA should be documented and signed by you and your employer in writing. It should also include details outlining the amount to be salary sacrificed and frequency of contributions. This is because superannuation legislation does not specify the contribution frequency required for salary sacrifice contributions, unlike SG contributions.
■ Employer may not offer salary sacrifice to employees – although most employers will offer SSA to their employees, it is not compulsory for an employer to offer salary sacrifice to their staff. Further, due to the paperwork involved and changes to the pay system, some employers may restrict their employees to one salary sacrifice negotiation per year, which can make it hard if the employee changes their mind if things change from month to month.
■ Potential for excess CCs – once established, salary sacrifice should not be a ‘set and forget’ strategy. For example, your salary may increase/decrease, or the CC cap may change. Therefore, it is important to track the contributions regularly if aiming to maximise, and also stay within, the CC cap.

 

Division 293 tax on higher income earners

If you earn more than $250,000 pa in income, you will pay an additional 15% tax on your CCs.

For many impacted people however, CCs are still worthwhile as even though they pay 30% tax on CCs, this is still less than the top MTR of 47% (including Medicare levy) that applies to high income earners who are liable for Division 293 tax.

The additional Division 293 tax is administered by the ATO who will work out if you need to pay the tax based on information in your tax return and data the ATO receives from your superannuation fund(s).

 

Consider the carry forward rules

You may be eligible to make large CCs in a year without exceeding your CC cap under the carry forward CC rules. These rules allow certain individuals to make extra CCs in excess of the general concessional cap by utilising any unused concessional cap amounts from the previous five financial years (commencing from 1 July 2018).

To be eligible to make carry forward CCs in a year, you must have:

• A total superannuation balance (TSB) of less than $500,000 at the end of 30 June in the previous financial year, and
• Unused CC cap amounts for one or more of the previous five financial years in which the extra CCs are made.

 

Click here to view Glance Consultants April 2022 Newsletter via PDF

 

 

The Federal Treasurer, Mr Josh Frydenberg, handed down the 2022–23 Federal Budget at 7:30pm (AEDT) on 29 March 2022.

In an economy emerging from the pandemic, the Treasurer has confirmed an unemployment rate of 4% and an expected budget deficit of $78 billion for 2022–23. As international uncertainties add pressure on the cost of living, key measures in the Budget provide cost of living relief in the form of an increased Low and Middle Income Tax Offset, a one off $250 payment for welfare recipients and pensioners and a 6-month fuel excise relief.

Other measures for business seek to promote innovation, with expanded “patent box” tax concessions proposed, and provide tax incentives for small business to invest in the skills of their employees. A lower GDP uplift rate for PAYG and GST instalments has also been proposed to support cash flows of small and medium businesses.

Please check the following link for our report on the Budget:

Federal Budget Update Glance Consultants 2022-23