Category: Accountants

Super guarantee increases to 11%

The increase to the superannuation guarantee (SG) rate from 1 July 2023 will see more employees (and certain contractors) entitled to additional SG contributions on their pay. But what happens when income earned before 30 June is paid after 30 June 2023 – will employees be entitled to the higher SG rate of 11%?

 

SG is based on when an employee is paid

On 1 July 2023, the SG rate increased from 10.5% to 11%. In some cases, an employee’s pay period will cross over between June and July when the rate changes.

However, the percentage employers are required to apply is determined based on when the employee is paid, not when the income is earned. The rate of 11% will need to be applied to all ordinary time earnings (OTE) that are paid on and after 1 July 2023, even if some or all of the pay period it relates to is before 1 July 2023.

This means if the pay period ends on or before 30 June, but the pay date falls on or after 1 July, the 11% SG rate applies on those salary and wages. The date of the salary and wage payment determines the rate of SG payable, regardless of when the work was performed.

 

Example

Nicholas is an employee of ABC Pty Ltd.

If Nicholas performed work:

• In June (or partly in June and partly in July) but he was paid in July, the SG rate is 11% on his entire payment and contributions, totalling 11% of his OTE for the September 2023 quarter. This must be made to his superannuation fund by 28 October.

• In July, but was paid in advance (before 1 July), the SG rate is 10.5% and contributions totalling 10.5% of his OTE for the June 2023 quarter must be made to his superannuation fund by 28 July.

 

SG rate will continue to rise 

Employers should prepare for ongoing, annual increases to the SG rate over the coming years. The following already-legislated increases to 12% by 2025 will proceed as follows:

 

Basis of SG

SG is only payable on a workers’ OTE. OTE is the amount you pay employees for their ordinary hours of work, including things like commissions and shift loadings, but not in relation to overtime hours (being those outside the ordinary hours stated in a worker’s award or other employment agreement).

 

More information?

If you are still uncertain around the application of the new SG rate or need guidance on which payments constitute OTE, reach out to us.

 

Superannuation and the right to delegate

Another key Federal Court case may have a bearing on whether you owe certain workers you engage superannuation guarantee or not.

For background, early last year the High Court made a game-changing decision in determining whether a worker is an employee or contractor at common law. It ruled that this is determined by the employment contract/agreement and whether it contains the usual indicators that tend toward a finding that a worker is an employee at common law including:

■ Does the business have control over the worker (e.g. what hours they work and how they do the work)?
■ Must the worker perform the work personally (rather than having the ability to delegate or subcontract the work to an outside party)?
■ Is the worker paid like an employee (e.g. hourly rate)?
■ Does the business supply the tools and equipment for the worker?
■ Does the business bear the risk and liability to outside parties for any defects in the work?

Where the answer to most of those questions is yes, then the worker is an employee at common law. Up until the High Court’s decision, lower courts were looking at how individual work arrangements were playing out in practice when answering the above questions. The High Court however ruled that you should instead look at the rights and obligations set out in the respective contract between the parties rather than how the situation plays out after the contract is signed. This is provided that the contract was not a sham.

With this new approach in mind, in early June 2023 a case came before the Full Federal Court where it was asked to determine whether a worker was an employee or contractor. Adopting the High Court’s new approach, the Full Federal Court examined the contract and found that the answers to some of the above questions were yes, while the answers to others were no.

However, ultimately it found that because the worker had the ability to delegate/subcontract the work (although a limited ability subject to the approval of the business) the worker was not an employee for superannuation purposes at common law:

.. if a person engaged to perform work has a contractual right to have someone else perform that work, that is a matter which at the very least tends against a conclusion that the person is an employee. The existence of the right is inherently inconsistent with an employee relationship. In the absence of significant countervailing considerations, how can you be an employee if, within the scope of the contract, you can lawfully get someone else to perform the entirety of your contractual obligations, whether for a short period, or for a longer period?

Because the worker had the ability to delegate, he was also not entitled to superannuation under the wider definition of “employee” in the superannuation legislation either which provides that if a person works under a contract that is wholly or principally for the labour of the person, the person is an employee of the other party to the contract. The ability to delegate meant that this test was not met.

The take-home message for employers is that the terms of the written agreement will determine whether a worker is owed superannuation at common law (but that contract cannot be a sham).

However, where the workerhas the ability to delegate, this will generally be decisive – no superannuation will be owed at common law or under the superannuation legislation.

All told, this is a complex area. Reach out to us if you are unsure of whether a superannuation = obligation is owed to a worker.

 

Time for a restructure?

The new financial year can be a time where business owners look at their operating structure and consider whether it still meets their needs. Choosing a structure is not simply about minimising tax, rather a range of factors should be considered as such as asset protection, establishment and ongoing compliance costs, succession planning, and your understanding of each structure etc.

Most small businesses operate as a sole trader, company, trust, or partnership. The table below is a comparative snapshot of each of the four structures:

You may find that, as your business grows or as your priorities change, your chosen structure no longer serves your needs. For example, a number of people commence businesses as sole traders (often for reasons of simplicity as well as keeping start-up costs to a minimum) but later find that this structure is no longer appropriate. From an income tax perspective, a drawback with sole traders is that income from the business is assessed personally to you at your marginal tax rates. As your business grows and the revenue generated increases, your tax rate also increases.

The take-home message is that you should periodically review your structure to ensure it continues to serve your needs. Be mindful however that changing structures can have CGT and stamp duty consequences – these one-off costs need to be taken into account when making the decision whether to change. Also note that under the small business rollover provisions, it may be possible for you to change your structure without incurring CGT.

Talk to us if you are contemplating changing your business operating structure.

*subject to the Personal Services Income (PSI) rules

 

 

Fair Work changes

Although not related to tax, there are a number of changes on the Fair Work front that employers should be aware of.

 

MINIMUM WAGE INCREASE

The National Minimum Wage applies to employees who aren’t covered by an award or registered agreement. From 1 July 2023, the new National Minimum Wage will be $882.80 per week or $23.23 per hour.

The new National Minimum Wage will apply from the first full pay period starting on or after 1 July 2023. This means if your weekly pay period starts on Monday, the new rates will apply from Monday, 3 July 2023.

Note that if a worker is covered by a registered agreement, the minimum wage increase may apply to them. This is because the base pay rate in a registered agreement can’t be less than the base pay rate in the relevant award. Check your agreement by searching for it on the Commission’s website: Find an agreement

 

AWARD MINIMUM WAGE INCREASE

The Fair Work Commission has also announced that minimum award wages will increase by 5.75%. Most employees are covered by an award. Awards are legal documents that outline minimum pay rates and conditions of employment in your industry or occupation.

If you’re not sure which award applies to a worker, use Find my award.

This increase will apply from the first full pay period starting on or after 1 July 2023. This means if your weekly pay period starts on Monday, the new rates will apply from Monday, 3 July 2023.

 

SECURE JOBS, BETTER PAY: 6 JUNE – CHANGES TO WORKPLACE LAWS

From 6 June 2023, changes also came on stream related to:

■ requesting flexible working arrangements
■ extending unpaid parental leave
■ agreement-making
■ bargaining.

For more information, visit, Secure Jobs, Better Pay: Changes to Australian workplace laws.

 

AGED CARE SECTOR

Direct care and some senior food services employees in the aged care sector will receive a 15% wage increase from 1 July 2023.

For more information, visit, 15% wage increase for aged care sector.

 

PAID PARENTAL LEAVE SCHEME

From 1 July 2023, the Paid Parental Leave scheme is changing.

From this date the current entitlement to 18 weeks’ paid parental leave pay will be combined with the current Dad and Partner Pay entitlement to two weeks’ pay. This means partnered couples will be able to claim up to 20 weeks’ paid parental leave between them. Parents who are single at the time of their claim can access the full 20 weeks.

These changes affect employees whose baby is born or placed in their care on or after 1 July 2023.

Other changes include:

■ allowing partnered employees to claim a maximum of 20 weeks’ pay between them, with each partner taking at least two weeks (except in some circumstances)
■ introducing a $350,000 family income limit (indexed annually from 1 July 2024) for claiming paid parental leave pay
■ expanding the eligibility rules for fathers or partners to claim paid parental leave pay
■ making the whole payment flexible so that eligible employees can claim it in multiple blocks until the child turns two
■ removing the requirement to return to work to be eligible for the entitlement.

 

Small business lodgement amnesty

Since Budget night, the ATO has released more information around the small business lodgment amnesty…which can now be taken advantage of from 1 June 2023!

The amnesty was announced in the recent Budget. It applies to tax obligations that were originally due between 1 December 2019 and 28 February 2022 and runs from 1 June 2023 to 31 December 2023.

To be eligible for the amnesty, the small business must be an entity with an aggregated turnover of less than $10 million at the time the original lodgement was due.

During this time, eligible small businesses can lodge their eligible overdue forms and the ATO will then proactively remit any associated failure to lodge (FTL) penalties.

ATO Assistant Commissioner Emma Tobias urged small businesses to take advantage of the amnesty to get back on track with their tax obligations if they have fallen behind.

“The past few years have been tough for many small businesses, with the pandemic and natural disasters having a significant impact. We understand that things like lodging ATO forms may have slipped down the list of priorities. But it is important to get back on track with tax obligations. Lodging these forms are not optional, so we hope our amnesty will make it easier for impacted small businesses to get back on track. When forms are lodged with the ATO under the amnesty, businesses or their tax professionals will not need to separately request a remission of FTL penalties. All you need to do is lodge your outstanding tax returns or activity statements and we’ll take care of the FTL penalty remission from our end. You might see an FTL penalty on your account for a short period of time, but don’t worry, we will remit it.”

Ms Tobias also noted that outstanding lodgements can be an early indicator that a small business is not actively engaged with the tax system, which can be a red flag:

“We encourage all businesses to lodge any overdue forms even if they are outside the eligibility period. Whilst forms outside the amnesty eligibility criteria will attract FTL penalties, the ATO will consider your circumstances and may remit such penalties on a case-by-case basis. We understand that some small businesses may be worried about paying an amount owing on their overdue lodgment. If you are unable to make full payment of your debt, remember we can work together with you or your registered tax or BAS agent to figure out the right solution for you. We want to make this process easy and encourage small businesses to do the right thing. If you have a registered tax or BAS agent, now is a good time to reach out to them to make sure you are up to date with your tax affairs. Taxpayers still have an obligation to lodge overdue forms during the amnesty period and we will continue to work with them to help ensure they meet their obligations,” Ms Tobias said.

The ATO offers a range of support options, including payment plans. Many small businesses are also able to set up their own payment plan online.

Ms Tobias also explained that if a business has ceased trading, they need to advise their registered tax professional, or the ATO directly.

The amnesty applies to income tax returns, business activity statements and fringe benefits tax returns. It does not apply to superannuation obligations and excludes other administrative penalties such as penalties associated with the Taxable Payments Reporting System.

If you are ready to come forward and get your overdue lodgements up to date, we can help you, and hopefully secure the amnesty for you.

 

Book yourself in for the ‘super health check’ initiative

This tax time, the ATO is introducing the ‘super health check’ initiative. This consists of five simple and important things that individuals can do to get on top of their super, including:

1. Check your contact details.
2. Check your superannuation balance and employer contributions.
3. Check for lost and unclaimed super.
4. Check if you have multiple super accounts and consider consolidating, and
5. Check your nominated beneficiaries.

Individuals are encouraged to complete the check on ATO online services, through myGov or the ATO app at least once a year at tax time. Alternatively, you may wish to contact your superannuation fund to perform this check.

Although the super health check can be done at any time, the ATO is suggesting individuals do it when they prepare their tax return.

This reminder from the ATO is timely given the superannuation guarantee increases to 11% on 1 July 2023.

So make sure you start the new financial year strong and get on top of your super savings.

 

Work-related car expenses updated

The ATO has just announced that the cents per kilometre rate has increased to 85 cents per kilometre for 2023/24.

To recap, there are two methods to claim work-related car expenses as follows:

 

1. Cents per kilometre method

This method is easier for record keeping, involves a more simple calculation, and is generally suited to those with less vehicle use.

You simply keep a record of the number of kilometres you’re traveling for work or for business over the duration of the year and you claim these using the set rate.

The drawback of this method is that you are limited to a maximum of 5,000 work-related or business kilometres per year. That gives you a total maximum claim of $4,250. Thus, if you’re using your car a lot for work, you may find that this is method quite limiting.

 

2. Logbook method

This method can allow for greater claims depending on how much you’re using your car for work or business.

However, there are more recordkeeping requirements – the main one being that you must keep a 12-week logbook that records all of your trips, both business and private, for those 12 weeks.

At the end of the 12 weeks, you calculate your work-related or business percentage use, and you can claim that percentage for all deductions for your car.

You also need to keep all receipts for fuel, insurance, registration, interest, and servicing throughout the year.

As mentioned, despite the additional effort, it can often lead to a greater claim if you are using your car a lot for work and business.

 

Comparison

 

Summary

As you can see, both methods have their downsides and can have their benefits too depending on your situation. Consider which is best for you, taking into account:

■ If you have the time or the ability to save all of your car-related records
■ The level of your business-related vehicle use.

 

Click to view Glance Consultants July 2023 newsletter via PDF

 

 

 

 

Navigating the tax world as a small business can seem like an uphill battle, especially when the Australian tax system regularly introduces new changes that can take time to follow. 

To give you a helping hand, we’ve compiled the following guide that lays out the new tax changes in the 2023 financial year to ensure your small business has all the necessary information.

 

No More Take Back Initiatives

Many measures the Australian Government introduced to help businesses during the COVID-19 pandemic are gradually drawing to a close. The Loss Carry Back Tax Offset program is one that won’t be extended past FY23, meaning businesses won’t be able to offset tax losses against previous years’ profits from FY24. 

As a result, businesses must be vigilant regarding tax strategies, as it won’t be as easy to receive financial relief if tax losses occur in FY24. 

 

Temporary Full Expensing Draws to a Close

The Temporary Full Expensing scheme enabled eligible businesses to immediately write off asset purchases (upto a certain value for passenger vehicles), as opposed to writing the cost off over a few years (depreciation). 

The scheme will not expand into FY24. Those with an annual turnover of less than $10 million can still continue to enjoy the privilege of instantly deducting the full cost of eligible assets, as long as they fall under the new $20,000 threshold, until 30 June 2024. (This returns the asset write-off limit to the same level it was at in 2015.)

 

Working From Home Deductions Altered

The ATO will no longer accept deductions calculated with the shortcut or old fixed rate method. Instead, individuals must use the revised fixed rate method or the actual method and have reliable and accurate evidence for their working-from-home hours over the entire income year. 

The revised fixed rate is 67 cents per hour and covers expenses relating to energy, computer consumables, internet usage, mobile and home phone usage, and stationery. You can claim deductions for assets separately. 

 

Introduction to The Small Business Energy Incentive

Details surrounding the Small Business Energy Incentive are yet to be finalised, but it’s looking promising. With the incentive, small businesses with less than $50 million in turnover can claim an additional 20% deduction on energy-efficient expenses, such as electric heating systems. 

Going hand in hand with the energy incentive is the Energy Bill Relief Fund. This incentive means small businesses become eligible for energy bill relief of up to $650, depending on their area. The fund reflects the rise in energy bills and ensures small businesses don’t suffer from inflated prices. 

 

Lodgment Penalty Amnesty to Help You Get it Right

Small businesses with annual turnover of less than $10 million will be eligible for the Lodgment Penalty Amnesty to get back on track with taxes. With the amnesty, any outstanding taxes from 1st December 2019 and 29th February 2022 won’t be penalised as long as you lodge them from 1st June to 31st December 2023. 

 

Technology Investment Boost (not yet law)

In March 2022, as part of the 2022-23 Budget, the Morrison Government announced the Technology Investment Boost for small businesses, which would allow businesses with an annual turnover of less than $50 million, to deduct an additional 20% of the expenditure incurred for their digital operations. 

However, the legislation underpinning these tax breaks hasn’t been passed yet, and you won’t be able to claim the boosts until the law has been enacted. 

Were the legislation to pass, even something as simple as getting a Xero subscription could result in an extra deduction. It’s a free kick for small businesses – but only if the legislation ends up passing. 

As such, good detailed records will go a long way to identifying these extra deductions.

 

Other considerations

While small business owners should be aware of the extra perks and opportunities available, it’s important to approach tax planning holistically, and consider factors beyond tax benefits. 

There are always opportunities to optimise your tax position – but you should never make decisions based solely on the tax benefits. 

For instance, small businesses can claim a large upfront deduction by pre-paying their rent up to a year in advance. But then you may have strained your cash flow for a year to get a temporary tax advantage, and limited your ability to invest in other business needs throughout the year. Striking a balance between tax optimisation and business sustainability should be the goal.

When you’re dealing with complicated financial & tax matters, it’s always a good idea to get help from experts who are skilled and have the necessary experience. They’ll offer personalised advice and help you make smart money decisions that fit your business goals and set you up for long-term success.

 

Need Help Getting On Track With Your Taxes? We Can Help

If you have any questions, reach out to us at Glance Consultants on 03 98859793 or at enquiries@glanceconsultants.com.au

 

As the end of the financial year draws ever closer, it can be a stressful time for business owners, especially given the last 12 months have had their fair share of ups and downs. However, there is no better time than now to look optimistically to the future, and here’s how you can hit June 30th with some needed momentum:

 

Tidy Up Loose Ends

We’re all guilty of putting bookkeeping to one side now and then, so you’ll likely have some unfinished work in this area. Now is the time to get all your receipts/invoices and books upto date to ensure your data for the past year is reliable and accurate. A clear overview of your finances over the last twelve months is vital to boost your business into the new financial year with a sense of direction and purpose.

 

Make Sure Your Up To Date With New Legislation

There are often a ton of changes when it comes to legislation when the new financial year rolls around. The minimum wage increase is one of the most crucial changes to be aware of, with a rise of 5.75% starting on July 1st 2023. The superannuation guarantee %  on wages is changing, lifting from 10.5% to 11% on 1 July 2023, which means if you employ people, it’s time to adjust how much you put away for each pay run. 

Understanding these financial changes ensures you can prepare your business’s budget for the upcoming financial year and remain compliant.

 

Stock Take

If you run a product based business, a stock take is a must in June (prior to 30 June). While this may not be a fun process,  there are benefits of this process. This process can help you make informed decisions about next year and the direction you want to go when it comes to stock that sold, versus stock that lasted a bit longer than expected thus providing greater insight.

 

Know Your Deductions

While many expenses are tax deductible or a write off, unfortunately not every expense is. Connecting with your accountant as the financial year draws to a close can be an excellent way to ensure you’ve claimed all the correct expenses to avoid any issues with the ATO.

 

Working from Home

Please remember there are changes when it comes to work from home this year. You will need to make sure you have adequate records to prove your work from home hours. The revised fixed rate is now $0.67/hour.  Use timesheets, diary entries, and other proof of working from home to ensure you’ve covered your back!

 

Do You Need Support With Bookkeeping? We Can Help 

If you’re anticipating a busy year ahead, it’s best to get on top of your finances sooner rather than later. Contact Glance Consultants today.

 

The State Budget 2023–24 has just been released, included in this budget is a number of announcements related to legislation administered by the State Revenue Office.

These measures have to be approved by the Victorian Parliament before they can start. You should only rely on the exact detail of the changes once the legislation is passed.

Please get in touch with us at Glance Consultants for more information or if you have any queries.

 

Measures:

• Land transfer duty (stamp duty) on commercial and industrial properties will be abolished and replaced with an annual property tax.  From 1 July 2024, commercial and industrial properties will transition to the new system as they are sold, with the annual property tax to be payable from 10 years after the transaction.The annual property tax for commercial and industrial property will be 1 per cent of the property’s unimproved land value.

Expected start date: 1 July 2024

 

• COVID-19 debt  — temporary payroll tax surcharge

A temporary payroll tax surcharge will apply on wages paid in Victoria by businesses with national payrolls over $10 million a year.  A rate of 0.5% will apply for businesses with national payrolls above $10 million, and businesses with national payrolls above $100 million will pay an additional 0.5%.

The surcharge will apply for 10 years until 30 June 2033.

Expected start date: 1 July 2023

 

• COVID-19 debt — temporary land tax surcharge

A new COVID-19 debt temporary land tax surcharge will apply in addition to existing land tax from the 2024 land tax year for ten years.

Exempt properties — including your home — remain exempt from this surcharge. This means the value of exempt property is not included in your landholdings.

 

• General land tax rates

– For taxable landholdings between $50,000 and $100,000 — a $500 flat surcharge will apply

– For taxable landholdings between $100,000 and $300,000 — a $975 flat surcharge will apply

– For taxable landholdings over $300,000:

• • a $975 flat surcharge
  • an increased rate of land tax by 0.10 percentage points.

 

• Trust surcharge land tax rates

– For taxable landholdings between $50,000 and $100,000 — a $500 flat surcharge will apply

– For taxable landholdings between $100,000 and $250,000 — a $975 flat surcharge will apply

– For taxable landholdings over $250,000:

• • a $975 flat surcharge
  • an increased rate of land tax by 0.10 percentage points.

Expected start date: 2024 land tax year

 

• The absentee owner surcharge rate will increase from 2 per cent to 4 per cent and the minimum threshold for non-trust absentee owners will decrease from $300,000 to $50,000. (The threshold for land held by an absentee trust remains unchanged at $25,000.)

Expected start date: 2024 land tax year

 

• The land tax exemption for principal places of residence under construction or renovation will be expanded to provide the Commissioner of State Revenue with discretion to extend period by two years if builder goes into liquidation.

Expected start date: 2024 land tax year

 

• A new land tax exemption will apply to land protected by a conservation covenant with Trust for Nature.

Expected start date: 2024 land tax year

 

• A new land tax exemption will apply to land owned by an immediate family member and used as the home of an individual eligible to be a beneficiary of a special disability Trust, including where a special disability trust has not been established.

Expected start date: 2024 land tax year

 

• The deduction threshold for the land transfer duty special disability trust concession will increase from $500,000 to $1.5 million for principal place of residence transfers.

Expected start date: 1 July 2023

 

• A new land transfer duty concession will apply for the transfer of a home valued up to $1.5 million by an immediate family member to an individual eligible to be a beneficiary of a special disability trust.

Expected start date: 1 July 2023

 

• The land transfer duty pensioner exemption and concession thresholds will be aligned with the thresholds for first home buyers, at $600,000 and $750,000 respectively.In addition, eligibility will be assessed on the total value of the purchase.

Expected start date: Contracts entered into from 1 July 2023

 

• The payroll tax-free threshold will be increased:
  • commencing 1 July 2024 — from $700,000 to $900,000
  • commencing 1 July 2025 — to $1,000,000.

  The deduction associated with tax-free threshold will begin phasing out for every dollar of wages above $3 million. This means businesses with wages above $5 million will not receive any benefit associated with the payroll tax-free threshold.

Expected start date: 1 July 2024

 

• Payroll tax exemption for high-fee non-government schools to be removed.

Expected start date: 1 July 2024

 

• Business insurance duty will be abolished over a 10-year period. The rate of duty, currently 10 per cent, will be reduced by 1 percentage point each year

Expected start date: 1 July 2024

 

• The wagering and betting tax rate will increase from 10 per cent to 15 per cent of net wagering revenue.

Expected start date: 1 July 2024

 

Please click the link below for the SRO announcement in relation to the budget overview:

https://www.sro.vic.gov.au/state-budget-2023-24-announcement

 

 

It is fundamental to credit-check your customers, mainly if you are a small business with cash flow pressures. Efficiently checking your customers’ credit scores is a great way to prepare for potential issues while establishing a healthy cash flow. 

Below, we will detail the top reasons for credit checking your customers and how these reasons feed into the above-mentioned benefits.

• Avoid Delayed Payments

If a customer has a poor credit history, there is a significant chance that they have had an experience of missing payment deadlines and not sending payments on time. Devising a credit check will ensure you can outline these risks and prevent your business from receiving missing or late payments. 

• Reduce Payment Default 

With a credit check, you can identify if your potential customers have good credit scores and are, therefore, less likely to default on payments. If your customers were to default payments to your business, your company might have issues with profits and business liquidity. Credit checks are an accurate way to prevent this, ensuring your business has a healthy cash flow. 

• Avoid Invoice Financing 

As payments become more delayed, your business may require finance to manage cash flow issues. Invoice financing result in increased costs such as fees and interest charges.

• Keep Your Supply Chain Active

Even having just one customer make a late payment can affect your supply chain as a small business. When you have tight margins to meet and suppliers to pay, you can’t afford to take on customers with poor credit scores. These delays can massively impact your supply chain and stunt new orders, affecting your business reputation. 

• Payment Consistency 

Although it may sound harsh to credit check long-standing, loyal customers, doing so will help you to minimise the risks of inconsistent payments. After all, your customers’ financial situations and credit scores can change with the current financial climate being so unpredictable. 

While you don’t need to conduct persistent customer credit checks, implementing a credit check routine on a semi-annual basis can give you peace of mind and ensure you have an idea of your customers’ financial situations and how best to move forward with your customer base.

• Got Issues With Your Business Cash Flow? Glance Consultants Can Help 

We recognise that every business is different, and you may need a helping hand with your cash flow management. Get in touch today to learn how we can elevate your business’s accounting. 

 

 

2023–24 Federal Budget Highlights

The Federal Treasurer, Dr Jim Chalmers, handed down the 2023–24 Federal Budget at 7:30 pm (AEST) on 9 May 2023.

The Budget forecasts the underlying cash balance to be in surplus by $4.2 billion in 2022–23, the first surplus since 2007–08, followed by a forecast deficit of $13.9 billion in 2023–24.

Putting forward a “responsible budget” for uncertain economic times, the Treasurer has described the tax measures as “modest, but meaningful”, including changes to the Petroleum Resources Rent Tax and confirmation of a 1 January 2024 implementation of the BEPS Pillar Two global minimum tax rules.

A range of measures provide cost-of-living relief to individuals such as increased and expanded JobSeeker payments and better access to affordable housing. No changes were announced to the Stage 3 personal income tax cuts legislated to commence in 2023–24.

As part of the measures introduced for small business, a temporary $20,000 threshold for the small business instant asset write-off will apply for one year, following the end of the temporary full expensing rules.

Several tax measures of the former Coalition government have also been amended or dropped, including the patent box tax incentive measures.

The full Budget papers are available at www.budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au. The tax, superannuation and social security highlights are set out below.

 

Business

• The instant asset write-off threshold for small businesses applying the simplified depreciation rules will be $20,000 for the 2023–24 income year.
• An additional 20% deduction will be available for small and medium business expenditure supporting electrification and energy efficiency.
• FBT exemption for eligible plug-in hybrid electric cars will end from 1 April 2025.
• An increased capital works deduction rate and reduced withholding on managed investment trust (MIT) payments will apply to new build-to-rent projects.
• The clean building managed investment trust (MIT) withholding tax concession will be extended from 1 July 2025 to eligible data centres and warehouses, where construction commences after 7:30 pm (AEST) on 9 May 2023.
• The start date of a measure to prevent franked distributions funded by certain capital raisings announced in the 2016–17 Mid-Year Economic and Fiscal Outlook has been postponed from 19 December 2016 to 15 September 2022.
• The patent box regime announced in the Coalition government 2021–22 Budget, and expanded in the 2022–23 Budget, will not proceed.
• The introduction of tradeable biodiversity stewardship certificates issued under the Agriculture Biodiversity Stewardship Market scheme will be delayed to 1 July 2024.
• The Location Offset rebate and the Qualifying Australian Production Expenditure thresholds will be increased to boost investment in film production in Australia.
• Deductible gift recipients list to be updated.

 

Individuals

• Income support payment base rates will be increased by $40 per fortnight.
• The minimum age for which older people qualify for the higher JobSeeker Payment rate will be reduced from 60 to 55 years.
• The workforce participation incentive measures to support pensioners who want to work without impacting their pension payments will be extended for another 6 months to 31 December 2023.
• Eligibility for Parenting Payment (Single) will be extended to support single principal carers with a youngest child under 14 years of age.
• Housing measures will be introduced to increase support for social and affordable housing and improve access for home buyers.
• The maximum rates of the Commonwealth Rent Assistance (CRA) allowances will be increased by 15% to help address rental affordability challenges for CRA recipients.
• CPI indexed Medicare levy low-income threshold amounts for singles, families, and seniors and pensioners for the 2022–23 year announced.
• Eligible lump sum payments in arrears will be exempt from the Medicare levy from 1 July 2024.

 

Multinationals

Australia will implement key aspects of the Pillar Two solution of the OECD/G20 BEPS Project, meaning certain large multinationals will be subject to a 15% minimum tax in the jurisdictions in which they operate.

• The scope of the general anti-avoidance rules in Pt IVA of ITAA 1936 will be expanded from 1 July 2024.
• Changes will be made to petroleum resource rent tax (PRRT), including the introduction of a cap on deductible expenditure at 90% of assessable income for projects that produce liquefied natural gas from 1 July 2023.
• The meaning of “exploration for petroleum” in the petroleum resource rent tax legislation will be amended to reflect the government intent and ATO guidance.
• Taxation legislation will be amended to realign the taxation law with the reissued AASB 17: Insurance contracts effective for income years beginning from 1 January 2023.

 

Superannuation

Superannuation earnings tax concessions will be reduced for individuals with total superannuation balances in excess of $3 million from 1 July 2025.

• Employers will be required to pay their employees’ superannuation guarantee entitlements at the same time as they pay their salary and wages from 1 July 2026.
• The non-arm’s length income (NALI) provisions will be amended to provide greater certainty to taxpayers.

 

Tax administration

• Funding will be provided to the ATO over 4 years to lower the tax-related administrative burden for small and medium businesses, cut paperwork and reduce time small businesses spend doing taxes.
• Reduction in GDP adjustment factor for pay as you go and GST instalments.
• Funding to improve the administration of student loans.
• Additional funding will be provided to address the growth of businesses’ tax and superannuation liabilities, and a temporary lodgment penalty amnesty program will be provided to small businesses.
• The Personal Income Tax Compliance Program will be extended for 2 years from 1 July 2025 and its scope expanded from 1 July 2023.

 

GST and other indirect taxes

• Funding for GST compliance will be extended for a further 4 years to address emerging risks to GST revenue.
• The Heavy Vehicle Road User Charge rate will increase 6% per year from 2023–24 to 2025–26.
• Indirect Tax Concession Scheme: diplomatic and consular concessions extended.
• The start date for streamlining of excise administration measures announced in the Coalition government’s 2022–23 Budget will be amended.
• Tobacco excise and excise-equivalent customs duty will be increased by 5% per year for 3 years from 1 September 2023, in addition to ordinary indexation.

 

Please check the following link for our PDF report on the 2023-2024 Budget:

Federal Budget PDF 2023-2024

 

 

 

Temporary Full Expensing: get in quick!

This could be the final opportunity for your business to take advantage of Temporary Full Expensing (TFE)…but get in before 1 July!

To recap, TFE encourages and supports businesses by allowing an immediate deduction for the business portion of the cost of a depreciating asset. There is no cost threshold – the whole cost of the asset can be written off in the relevant year. However, cars can only be depreciated up to the car limit which is currently $64,741. The car limit does not, however, apply to vehicles fitted out for use by people with a disability.

For background, a ‘car’ is defined as a motor vehicle designed to carry a load of less than one tonne and fewer than nine passengers (excluding motor cycles and similar). Therefore, for those vehicles, the car limit has no application, and full depreciation is available.

Benefits

The principal benefit of TFE is cashflow. TFE enables businesses to bring forward their depreciation claims, and therefore their deductions upfront, into a single year rather than having them spread out over multiple future years. Ultimately, this assists cashflow which itself is one of the main challenges faced by businesses.

Eligibility

The vast majority of businesses including sole traders will be eligible for TFE as their aggregated, annual turnover will be less than $5 billion. Until 30 June 2023, under TFE, businesses can claim both new and second-hand depreciating assets where those assets are used or installed ready for use for a taxable purpose. From a timing standpoint, this means you will not be eligible for TFE in this financial year if you merely order or pay for an eligible asset before 1 July, 2023 – rather, the asset must be used or installed ready for use in your business before this date.

Ineligible assets 

Most business assets are eligible including machinery, tools, furniture, business equipment etc.

There are however some ineligible assets as follows:

■ buildings and other capital works for which a deduction can be claimed under the capital works provisions in division 43 of the Income Tax Assessment Act 1997
■ trading stock
■ CGT assets
■ assets not used or located in Australia
■ where a balancing adjustment event occurs to the asset in the year of purchase (e.g. the asset is sold, lost or destroyed)
■ assets not used for the principal purpose of carrying on a business
■ assets that sit within a low-value pool or software development pool, and
■ certain primary production assets under the primary production depreciation rules (including facilities used to conserve or convey water, fencing assets, fodder storage assets, and horticultural plants (including grapevines)).

Business plan

Because under TFE you cannot claim any extra depreciation deductions than under the standard depreciation rules, you should stick to your business plan and only continue to buy assets that align with that plan and that you were contemplating buying anyway…and then enjoy the cashflow benefits of TFE.

If you have any questions about TFE – especially around asset eligibility and timing leading up to 30 June – reach out to us.

 

 

How to claim an early tax deduction on SG contributions

Are you an employer who needs to make superannuation guarantee (SG) contributions for your employees? If so, it may be worthwhile bringing forward these SG contributions to before 1 July to benefit from a tax deduction this financial year. However the timing of when SG contributions are deductible to an employer can be tricky if employers pay SG contributions for their employees via a superannuation clearing house (SCH).

RECAP – WHAT IS A SCH?

The ATO’s free Small Business Superannuation Clearing House (SBSCH) is the only ‘approved’ clearing house – none of the many commercial clearing houses have this status. The SBSCH is a free service that small businesses with 19 or fewer employees, or an annual aggregated turnover of less than $10 million, may use to make superannuation contributions to employees.

The SBSCH aims to reduce compliance costs for small business employers by simplifying and streamlining the process of making employee superannuation contributions, by allowing employers to make a single lump payment of their contributions to the SBSCH each quarter. That lump sum payment is broken into individual payments by the SBSCH, and then contributed to each employee’s respective super fund or RSA.

TAX DEDUCTION AVAILABLE FOR EMPLOYERS

Employers can claim income tax deductions for SG contributions made to a superannuation fund on behalf of their employees, subject to certain conditions being met.

As the income tax deduction is available in the financial year the contribution is made, some employers may wish to improve their current year tax position by bringing forward the June quarter SG contributions to before 1 July, even though these SG contributions are not due until 28 July 2023.

TAKE CARE IF YOU USE A SCH 

As mentioned above, SG contributions are tax deductible in the year in which they are made. That said, a contribution is not made until it is received by the fund, and when that happens depends on the way in which the contribution is made.

This is clear cut where an employer pays SG contributions directly to an employee’s nominated superannuation fund. That is, the contribution will be made when it is received by the fund.

However, the timing of the tax deduction and when the contribution counts towards the employee’s contribution cap is not as straightforward where SG contributions are made to a SCH for all employees. Here, the SCH electronically transfers SG contributions to employees’ funds on the employer’s behalf.

In this situation, the contribution is not made at the time the clearing house is credited with the funds from the employer.

Rather, the contribution is made and therefore deductible when the funds are credited to the respective employee’s superannuation fund (following an electronic transfer of money from the clearing house) and then allocated to the employee’s superannuation account.

Tip: Employer SG obligations – For SG purposes, an employer who makes contributions via the SBSCH is treated as having satisfied its SG obligations when the monies are received by the clearing house.

BEWARE OF TIMING DELAYS

The ATO is aware that there may be a period of time between an employer’s payment to the SBSCH and superannuation fund receiving the contribution. Further, the SBSCH may be unavailable over a weekend close to the end of the financial year for scheduled system maintenance.

This means that payments made towards the end of a financial year may not be received by an employee’s superannuation fund in the same financial year. This may therefore impact when an employer is entitled to an income tax deduction for the SG contributions.

ACTION ITEMS FOR EMPLOYERS

For those employers who do not use the SBSCH but instead use commercial clearing houses, for the contributions to be deductible in 2022/23, it is recommended that it be made up to 21 days before the end of the financial year.

For employers who make contributions directly to their employees’ superannuation funds, the contributions should be made a few days before the end of the financial year to ensure they are received before 1 July and therefore deductible in the current financial year.

 

Federal Budget -what to watch out for

It’s now only a week or so until the Federal Budget, which is to be handed down on 9 May.

Some of the things to look out this year potentially include:

Abolition of Temporary Full Expensing

Under current legislative settings, TFE (see earlier) is set to cease on 1 July 2023 with the write-off set to revert to just $1,000 from that date. If no action is taken in the Budget to extend TFE, this will have a cashflow impact on businesses in the sense that depreciation deductions will be spread out over a number of years rather than being claimed upfront. Record keeping will also be more burdensome in this space.

Stage three tax cuts

The fate of these tax cuts is also expected to be revealed. This round of tax cuts follows the first two stages which are now law, and which largely benefited lower income earners. If the stage three tax cuts are to proceed, from 1 July 2024, they will abolish the current 37% tax bracket, lower the existing 32.5% bracket to 30%, and raise the threshold for the top tax bracket from $180,001 to $200,001. The following table illustrates how the rates and thresholds will change if the tax cuts proceed (see below).

On the face of it, lowering the 32.5% tax bracket to 30% and removing the 37% tax bracket altogether seems like a big win for middle and upper-middle income earners. But it will actually be a much bigger win for higher-income earners, in dollar terms.

For example, an individual who earns:

■ $75,000 will be better off by $750 per year compared to now
■ $125,000 will be better of by $2,225
■ $200,000 will be better off by $9,075.

Low and middle income tax offset (LMITO) replacement?

This $1,500 tax offset ceased from 1 July 2022. The LMITO was introduced by the former Coalition government in 2018. It was only meant to be paid out once but was twice extended due to the COVID-19 pandemic. We will wait until Budget night to see what, if any, alternative tax relief is offered to low and middle income earners, or indeed whether the LMITO is reinstated. If not, then low-income earners may face an increased tax liability of up to $1,500 when upcoming 2022/23 tax returns are lodged.

CGT concessions trimmed?

While it’s unlikely the CGT main residence concession on the family home will be reduced, the 50% CGT discount for other investments held more than a year could be partially on the chopping block for some people. It’s possible to imagine a reduction in the discount for capital gains over a certain threshold – say $3 million, in line with the threshold for the recent increase to superannuation earnings – limiting the impacts to a smaller, wealthier cohort of individuals.

MORE INFORMATION

In the days following, please contact us if you have any questions around how the Budget may impact your business, investments, or you as an individual.

 

Financing motor vehicles

One of the most common decisions facing business is how to finance and account for the acquisition of a motor vehicle. There are numerous ways of doing so, with each resulting in differing accounting, taxation and GST treatment.

OPTIONS

How should you go about purchasing a vehicle? While it may seem a relatively straightforward question, there are numerous ways of doing so. Some of the more common methods are:

■ Outright purchase
■ Lease
■ Hire purchase, or
■ Chattel mortgage.

Outright purchase

The advantage of purchasing a vehicle outright, as opposed to financing the acquisition of the vehicle, is that there will be no ongoing costs of finance. This is a real benefit now that interest rates are on the rise.

On the downside, the outright purchase of a vehicle can impact greatly on the cash resources of an entity when those funds may be better utilised elsewhere.

It is far easier to obtain finance for the acquisition of a vehicle than it is for the acquisition of trading stock. Care should therefore be taken not to cripple your business’s cashflow if considering an outright purchase.

Lease

Rather than choosing to acquire a vehicle outright, your business may elect to finance the acquisition. The central issue that surrounds any form of financing, and how it is to be accounted for, is whether the person providing the asset under the finance arrangement is the legal owner of that asset. This issue goes to the heart of how the finance transaction is to be treated and is often the subject of ATO scrutiny.

The ATO has warned taxpayers about the trap of claiming deductions for what appear to be lease payments when in fact the finance arrangement is a hire purchase or similar type of transaction. The only way to identify the difference is to read the terms and conditions of the finance agreement.

The ATO will consider a finance arrangement to be a lease when:

■ there is no option to purchase the vehicle written into the agreement, and
■ the residual value reflects a bona fide estimate of the vehicle’s market value at termination.

If these two conditions are not met, the ATO considers the finance agreement to be a hire purchase or other instalment type agreement.

Under a leasing arrangement, the lease payments are a deductible amount to the extent the vehicle is used for income producing purposes, and the financed sum is not typically booked on the balance sheet of the entity.

Hire purchase

This is simply another form of finance. Its tax and GST treatment however is vastly different from both that of leasing and acquisition by chattel mortgage. As a result, this form of finance needs to be considered on its own merits.

In essence, a hire purchase arrangement is an agreement to purchase goods by instalments. The term hire purchase is defined as:

“ a contract for the hire of goods where:

i) the hirer has the right or obligation to buy the goods; and
ii) the charge that is or may be made for the hire, together with any other amount payable under the contract (including an amount to buy the goods or to exercise an option to do so), exceeds the price of the goods; and
iii) title in the goods does not pass to the hirer until the option to purchase is exercised; or
iv) where title in the goods does not pass until the final instalment is paid”.

Unlike a lease, where there is no obligation to acquire the goods at the end of the instalment period, a hire purchase arrangement provides for this obligation and as such the goods will be eventually owned by the purchaser.

Chattel mortgage

A chattel mortgage from the perspective of recording the asset purchase and recognising the liability is identical to that of a hire purchase arrangement. The difference between a chattel mortgage and other forms of finance such as hire purchase and lease comes when dealing with the GST consequences.

Not sure? Please contact us if you would like to discuss your options and the tax consequences.

 

 

Upcoming trust distribution strategies –latest developments

If you run your business through a family trust, there’s some good news on the distribution front.

In mid-April, the ATO responded to the landmark trust distribution case, namely the Guardian AIT appeal ruling in January by the Full Federal Court, with a decision impact statement that where the ATO concedes that it will have to amend its position on trusts, section 100A of the Income Tax Act and reimbursement agreements. In the Guardian appeal, the Full Federal Court rejected the ATO’s position that a reimbursement agreement existed in the Guardian case and so section 100A did not apply.

To recap, the ATO in February 2022 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, potentially the ATO may take an unfavourable view on what were previously understood to be legitimate trust distribution arrangements. The ATO is chiefly targeting arrangements under section 100A, 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 Taxpayer Alert (TA 2022/1) illustrates how section 100A can apply to the quite common scenario where a parent benefits from a trust distribution to their adult children.

Moving forward, there are a number of tax-effective strategies that can be employed that will not fall foul of the ATO’s interpretations in this area including:

■ Only distribute to Mum and Dad

This would be quite safe from section 100A scrutiny. No person pays less tax as a result of any agreement, and this is unlikely to be seen as high-risk by the ATO.

■ Continue to distribute to young adult beneficiaries, but hand over the money

If you are happy to give money to your children, this can be achieved while at the same time optimising tax.

■ Charge board and current university fees

If adult beneficiaries are living at home, they should pay board (just as if they had a job). This will not add up to large sums, but arm’s-length board for a full year could come to about $18,000. This allows for some tax arbitrage without handing the kids any money.

■ Use of bucket company

Having a private corporate beneficiary caps the tax rate imposed on trust income. Franked dividends can subsequently be flexibly allocated through having a trust structure interposed between the bucket company and the beneficiaries. The present entitlement can be lent back to the trustee for use in the business of the trust, although there are minimum repayment conditions. Avoid having the main trust as a shareholder in the bucket company.

The ATO considers circular income flows to be high-risk.

■ Be alert for the “no reimbursement agreement” argument

If you are contemplating making a gift or an interest-free loan to another person, ask questions about the circumstances behind this plan. If it was not in contemplation at the time of the relevant appointment of trust income (up to two years ago), but has arisen because family circumstances have changed recently, there may not be a reimbursement agreement.

■ If making gifts, go once and go big.

There are also other slightly bolder strategies.

If you operate your affairs through a discretionary trust, chat with us around your distribution options prior to the 30 June deadline.

 

 

New reporting arrangements for SMSFs from 1 July 2023

From 1 July 2023, trustees and directors of SMSFs must report certain events that affect their members transfer balance account quarterly.

These events must be reported by lodging a ‘transfer balance account report’ (TBAR) no later than 28 days after the end of the quarter in which they occur.

The purpose of this change is to streamline the reporting process and bring all SMSFs under a single reporting framework. This means there will no longer be an ‘annual reporter’ option.

What is a transfer balance account and a TBAR event?

The introduction of a transfer balance cap (TBC) from July 2017 introduced a limit on how much an individual could transfer from their superannuation accumulation account into a retirement phase pension. In order to track an individual’s use of their TBC, a ‘transfer balance account’ (TBA) is created to record necessary transactions from the time an individual first commences a retirement phase pension.

Importantly, a TBAR is only required when a member has an event which affects their TBA. The most common reporting events include:

■ Commencement of a pension
■ Lump sum withdrawals from a pension account
■ Commencement of a death benefit pension.

For many SMSFs, the members will have only one or two TBAR events in their lifetime.

Other events that do not affect a member’s TBA and therefore do not need to be reported include:

■ Pension payments
■ Investment earnings or losses
■ When an income stream ceases because the capital has been depleted
■ Death of a member.

Changes from 1 July 2023 

From 2023/24 onwards:

■ A member’s total superannuation balance will no longer be relevant in determining whether an SMSF reports on a quarterly or annual basis, and
■ All SMSFs must lodge a TBAR within 28 days after the end of the quarter in which the TBC event has occurred (ie, by 28 January, 28 April, 28 July, and 28 October).

The new TBAR timeframes will therefore be due from1 July 2023 as follows:

This means that SMSFs that have previously been permitted to lodge a TBAR on an annual basis will no longer be permitted to do so from 1 July 2023.

However, the obligation for SMSFs to report earlier will remain in cases where a fund must respond to a pension excess transfer balance determination or a commutation authority from the ATO.

Action items for SMSF trustees

For those SMSFs that already report on a quarterly basis, there will be no change to the reporting frequency for TBAR events.

The changes impact SMSFs that are annual reporters only.

Note, if you’re currently lodging your TBAR annually at the same time as your SMSF annual return, you will need to report all events that occurred in the 2023 financial year by 28 October 2023.

Should you have any questions on your TBAR reporting obligations, please contact us today as we can help you prepare for these upcoming changes.

 

Click here to view Glance Consultants May 2023 newsletter via PDF

 

 

 

 

 

Gone are the days of manual record keeping processes. Accounting software provides excellent opportunities for all types of businesses, whether you’re a startup, established, or small business. Today, we will cover how small businesses can determine which accounting software suits their needs. 

 

Consider Your Priorities

You know your business better than anyone, from its operation to areas you struggle to manage. The accounting software you choose should reflect your business’s revenue, industry, and size. As a small business, you will likely need to use affordable accounting software that may not be industry-specific, but that doesn’t mean it can’t be effective and significantly benefit you. 

For example, one of your priorities at this stage is to spot potential growth areas. Many accounting software can help you achieve this by providing organised tools that collate financial data over a specific period, helping you create financial statements pointing to improvement areas. 

 

Focus on Cloud-Based Solutions 

As a small business, you don’t want to use software that requires buying excess storage and physical space. Instead, a cloud-based platform will provide an accessible and affordable solution to securely storing financial data while not requiring a specific IT department to run it. 

 

Don’t Forget Your Budget

It’s easy to get whisked away by the fancy features of specific software, but you need to keep your budget in mind to avoid facing additional expenses. Your accounting software is here to make your life easier, not to put you out of pocket!

 

Enlist the Help of a Professional 

You want your small business to thrive without worrying about who you can trust, and putting your faith in a third-party source isn’t always easy. Talking to an accountant or bookkeeper will ensure that you only use trusted software that you can rely on.

 

Need a Hand Deciding on Accounting Software? We Can Help 

With hundreds of accounting platforms readily available, it’s not surprising that business owners struggle to find software most suited to their needs. If you need support using or finding the most suitable accounting software, Glance Consultants can help! Get in touch today.

 

 

As a small business owner, you will likely complete many accounting processes independently. Undoubtedly, this is stressful, and sometimes you may need support to ensure you undertake your business’s accounting & bookkeeping correctly. Below, we will take you through five essential accounting tips all small business owners should be aware of; 

Keep Business and Personal Finances Separate 

While it may sound appealing to have all your finances in one account, combining your personal and business finances can cause many organisational issues. 

Instead, we recommend having a business account that only holds the financial transactions concerning your company. A separate account for these transactions makes bookkeeping, paying taxes, creating financial statements, and finding specific payments much easier. 

Ensure Records are Accurate Through Proactive Management 

Recording financial information is essential and should be done as accurately & timely as possible. You can achieve this by reporting financial transactions as they occur and having organised accounts that are easy to follow and track using accounting software such as Xero.

Complete Financial Statements 

Understanding your company’s financial health will help you project business growth and acknowledge any areas for improvement. Maintaining up to date financial statements is an excellent way to track economic trends and understand your cash flow. 

Understand Taxes and Timeframes

The last thing you want is to miss a tax deadline or inaccurately calculate your tax. To ensure this doesn’t occur, note when your tax is due, and keep your financial statements updated throughout the year. This way, you will have a clear idea of your tax obligations with the assistance of our firm as your accountant & business advisor. It is important to ensure you work closely with your accountant and bookkeeper to achieve this.

Use Accounting Software and Support

There are many things to consider when completing record keeping as a small business owner. To ease your way into these processes, using accounting software that tracks your financial data and simplifies organisation and accounting management will be helpful. 

Still Trying to Figure Out Where to Start with Accounting for your Small Business? We Can Help 

If you require support in relation to your small business’s financial management activities, don’t worry, we can help. Get in touch with our skilled accountants at Glance Consultants today to find out more. 

Trust distribution landscape now more settled

If you carry on your business affairs through a trust structure, there is now more clarity around the law on distributions following much uncertainty throughout the year.

Neither the taxpayer, Mr. Springer, nor the Commissioner has appealed against the Full Federal Court decision handed down in January 2023 (Commissioner of Taxation v Guardian AIT Pty Ltd ATF Australian Investment Trust [2023] FCAFC 3).

Readers will recall that the Full Court ruled against the Commissioner on the section 100A issue, but upheld his Part IVA determination for the 2013 year on the basis that the taxpayer had not demonstrated that absent the scheme (involving a distribution to a corporate beneficiary that was paid back to the trust as a franked dividend and on-paid to the non-resident, Mr. Springer, without any top-up tax) the trust would have done something other than making a distribution directly to Mr. Springer.

The Commissioner was unsuccessful with his Part IVA appeal for the 2012 year, when events were still said to be evolving.

Mr. Springer may well have decided he’s done well enough, having succeeded in challenging all but one of the income years attacked by the Commissioner.

The Commissioner may have been disappointed with the section 100A outcome, but will probably rationalise the decision on the basis that it turned very much on its own facts – at the time the 2013 resolution was made to appoint trust income there was no certainty that the corporate beneficiary would pay a franked dividend back up to the trust.

But he would have been quite pleased with the Part IVA result, which confirms that the 2013 amendments have been effective in disposing of the “do nothing” alternative postulate that was successfully relied upon by RCI, News Corp and Futuris.

The legal and practical upshot of the Part IVA decision is that taxpayers can now be taxed on notional transactions with a very  high tax cost that they would not have contemplated entering into in a million years. Just goes to show that taxpayer success in the courts can be undone by the stroke of a legislative pen.

The Full Federal Court ducked the issue of the ordinary dealing exception, which it was entitled to do, given its conclusion that there was no reimbursement agreement. But that outcome is regrettable at a broader level. Absent further guidance from the Full Court, we are left with some encouraging comments from Logan J at first instance (about the lack of artificiality) which the Commissioner reads down in TR 2022/4.

Hopefully the Full Court’s decision in a case known as BBlood, expected later this year, will shed further light on the issue. Given the decision at first instance, it seems unlikely the taxpayer will succeed on the ordinary dealing question in that case. However, the appeal decision may include some helpful guidance from the Full Court, even if the taxpayer is unsuccessful.

In the meantime, 30 June is rushing towards us, and family trusts need to be considering their position in relation to upcoming trust resolutions. Chat with us to establish your distributions for this year which may be governed, among other things, by your appetite for risk within the confines of the law.

 

Proposed tax on $3m super balances

Individuals with large superannuation balances may soon be subject to an extra 15% tax on earnings if their balance exceeds $3m at the end of a financial year.

 

What has been proposed?

Recently, the government announced it will introduce an additional tax of 15% on earnings for individuals whose total superannuation balance (TSB) exceeds $3m at the end of a financial year.

Those affected would continue to pay 15% tax on any earnings below the $3m threshold but will also pay an extra 15% on earnings for balances over $3m.

The proposal will not impose a limit on superannuation account balances in the accumulation phase, rather it is about how generous the tax concessions are on higher balances.

The government has confirmed the changes will not be applied retrospectively and will apply to future earnings, coming into effect from 1 July 2025. This means your balance in superannuation at 30 June 2026 is what matters initially.

 

What counts towards the $3m threshold?

The $3m threshold is based on your total superannuaton balance (TSB) and includes all of your superannuation accounts. This includes your accumulation and pension accounts and all superannuation funds you may have (such as your SMSF and any APRA-regulated superannuation funds you have).

Further, the $3m threshold is per member, not per superannuation fund. This means a couple could have just under $6m in superannuation/pension phase before being impacted by the proposals.

 

How will earnings be calculated?

Put simply, the extra 15% tax is unrelated to the actual taxable income generated by your superannuation fund. Rather, it is a tax on earnings or increases in account balances over $3m (including unrealised gains and losses).

This means any growth in balances will include anything that causes your account balance to go up – such as interest, dividends, rent, and capital gains on assets that have been sold, including any notional or unrealised gains on assets that increase in value, even if your fund hasn’t sold them.

Apart from the extra 15% tax, the taxation of unrealised gains is what has caused a stir, as currently individuals do not pay tax on income or capital gains on assets that have not been sold.

When looking at how to capture growth in a person’s TSB over a financial year, earnings will be calculated based on the difference in TSB at the start and end of the financial year, and will be adjusted for withdrawals and contributions.

It is also worth noting that negative earnings can be carried forward and offset against this tax in future years’ tax liabilities.

How is the extra 15% tax calculated?

Superannuation funds, including SMSFs, will not be required to calculate the earnings attributable to a member’s balance above $3m.

Rather, the ATO will use a three-step formula to calculate the proportion of total earnings which will be subject to the additional 15% tax.

 

How will the extra tax be paid?

Individuals will be notified of their liability to pay the extra tax by the ATO. This means the ATO, not their superannuation fund, will issue members with a tax assessment.

Individuals will have the choice of either paying the tax themselves or from their superannuation fund(s) (if they have multiple funds).

The tax will be separate to the individual’s personal income tax liabilities.

 

Don’t fret just yet

The measure is due to start from 1 July 2025, so superannuation funds and members still have time to consider their options.

Remember, this measure is still a proposal and must be passed into legislation by Parliament to become law. So don’t rush to remove benefits below the $3m limit just yet as once amounts have been withdrawn from superannuation, it’s hard to get them back in.

If you have any questions or would like to discuss this proposal in further detail, please contact us for a chat.

 

FBT exemption for electric vehicles

With car fringe benefits one of the most common benefits provided by employers to employees, a new ATO fact sheet shines more light on the FBT exemption for electric vehicles.

To recap, in the October 2022 Federal Budget, the government announced that it would exempt from FBT the private use, or availability for use, of cars to current employees that are zero or low emissions vehicles with a value at first retail sale below the luxury car tax threshold for fuel efficient vehicles. This is aimed at making electric cars more affordable, to encourage a greater take-up of electric cars by Australian road users to reduce Australia’s carbon emissions from the transport sector.

The new law applies to fringe benefits provided on or after 1 July 2022 for cars that are eligible zero or low emissions vehicles that are first held and used on or after 1 July 2022 (see examples 1 and 2 in the fact sheet).

To be clear, the new rules apply to cars that are collectively referred to as zero or low emissions vehicles, namely:

■ battery electric vehicles
■ hydrogen fuel cell electric vehicles, and
■ plug-in hybrid electric vehicles.

For such vehicles, an FBT exemption should normally apply where both: the value of the car is below the luxury car tax threshold for fuel efficient vehicles ($84,916 for the 2022/23 financial year), and the car is both first held and used on or after 1 July 2022.

From 1 April 2025, private use of a plug-in hybrid EV is no longer eligible for the exemption unless:

(i) use of the plug-in hybrid electric vehicle was exempt before 1 April 2025; and

(ii) the employer has a financially-binding commitment to continue providing private use of that vehicle on and after 1 April 2025.

Other key points in the facts sheet are:

■ An FBT exemption may apply to a car benefit arising if either:

– you allow your current employees, or their associates, to use a zero or low emissions vehicle (electric vehicle) for their private use, or

– the electric vehicle is considered available for your current employees’, or their associates’, private use under FBT law.

■ If an employer or lessor provides an employee with the use of a car by means of a lease arrangement, the benefit provided is only a car benefit if the car lease arrangement is a bona fide car leasing arrangement.

■ Associated benefits arising from the provision of certain car expenses provided with the electric vehicle are also exempt from FBT. These are not included when working out if an employee has a reportable fringe benefits amount. These benefits may be provided as an expense payment, property or residual benefit, and include: registration and road user charges, insurance, repairs and maintenance and fuel (including electricity to charge and run electric vehicles).

■ Providing your employee with a home charging station is a fringe benefit – the benefit is not an exempt associated benefit.

■ If the use of the car and the associated car expenses are provided under a salary sacrifice arrangement, the exemption can still apply.

■ Even if an exemption applies for the electric vehicle car benefit, you still need to work out the taxable value of the car benefit provided. This is because the car benefit’s value is used in working out if the employee has a reportable fringe benefits amount. This does not include the value of any associated car expense benefits.

■ An employee’s reportable fringe benefits amount is reported on their income statement or payment summary. Employees do not pay income tax on this amount, but it does impact their income tests and thresholds for family assistance, child support assessments and some other government benefits and obligations.

■ The government will complete a review of this exemption by mid-2027 to consider electric vehicle take-up.

Touch base with us, for more information about this new FBT exemption.

 

Reducing the risk of crypto scams

ASIC has released fresh and timely information around crypto scams.

Scammers use cryptocurrencies, like bitcoin or ether, because they are not easily recovered.

Crypto can be sent overseas quickly with limited oversight. If you lose your money to a crypto scam, your money is likely gone. If you buy crypto, only invest what you can afford to lose as it’s a somewhat volatile investment.

 

How to spot a crypto scam

If you’re investing in crypto, watch out for these potential red flags:

1. Unexpected contact

Someone you don’t know contacts you with investment advice or offers:

■ through phone, email, social media or text message

■ claiming to be an investment manager or broker

■ through an online forum discussing crypto.

2. Recommendations from someone familiar

You may hear about it through:

■ an advertisement or fake celebrity endorsement on social media

■ an online influencer promoting a token and claiming to have made huge, quick profits

■ family and friends who have unknowingly been scammed themselves

■ an online romantic partner who asks for money paid in crypto or suggests an investment opportunity.

3. Pressure to take action

You are being pushed to:

■ transfer crypto off your current exchange and invest through their site

■ use crypto to pay an individual or for a financial service

■ download an investment app not listed on Google Play Store or Apple Store

■ deposit money to invest into different bank accounts

■ pay tax or invest more in order to access your funds.

4. Something just doesn’t feel right

You’re not sure about:

■ the crypto investment offers “guaranteed” high returns or “free” money

■ crypto service providers that withhold investment earnings for “tax purposes”

■ strange tokens appear in your digital wallet that you did not trade yourself

■ there is little paper trail for crypto investments you make

■ the document describing the crypto investment (sometimes called a “whitepaper”) is poorly written or non-existent

■ online searches indicate that an entity may be a scam or has bad reviews

■ a work from home job offer that requires you to purchase cryptocurrency.

 

How crypto scams work

There are three main types of crypto scams:

1. Investing in a fake crypto exchange, website or app

Scammers create fake crypto trading apps to steal your money. The giveaway is usually that they ask you to download the app from their website. They may appear on legitimate platforms like Google Play and Apple, but are usually promptly removed. If you find one on an app store, check for overly positive reviews and be cautious.

2. Fake crypto tokens, investments or jobs trading crypto

■ Scam tokens in crypto wallets – A mystery token appears in your crypto wallet, seemingly worth thousands. If you sell it, a “smart contract” is activated. This transfers your legitimate crypto tokens and private keys to the scammer.

■ Crypto ponzi scheme – You are promised large “returns” by investing in crypto. But the promoter uses money from other investors to pay your “earnings”.

■ Jobs “trading crypto” – You apply for a job ad for “crypto traders”, for a fake or impersonated financial services firm. You are told to set up multiple bank and crypto accounts, and are paid well for a few hours of work a week. You think you’re trading crypto for the entity’s “investors” or “clients”, but you’re actually money laundering for the scammers. You could be charged by state or federal police.

3. Using crypto to pay scammers

■ Requests for payment in crypto – An online romantic partner, job recruiters, work from home job, or fake financial services firm asks for payment in crypto only.

■ Giveaway scams – Fraudulent posts on social media offer to match or multiply crypto invested with them in a crypto giveaway scam. Often, this uses fake celebrity endorsement.

■ Blackmail/extortion – You’re told by a scammer they have your internet browsing history, compromising photos or videos. They demand payment in crypto.

 

Take-home message

If you’re uncertain whether you’re being scammed by an unsolicited contact, keep your powder dry and abstain from acting. Contact your advisors before acting.

 

Fending off GST audits

The Government has welcomed the actions of an ATO-led taskforce in relation to what is termed “the biggest GST fraud in Australia’s history”.

The ATO states that the fraud was first detected in early 2022 and involved offenders inventing fake businesses and ABN applications, then submitting fictitious Business Activity Statements in an attempt to gain a false GST refund. In response, the ATO’s Serious Financial Crimes Taskforce set up “Operation Protego” in partnership with the Australian Federal Police.

Warrants were executed in three States against ten individuals suspected of promoting the fraud (which included the use of social media).

Some of the numbers involved are simply staggering in terms of the perpetrators’ audacity:

■ The ATO has taken compliance action on more than 53,000 “clients”.

■ It has stopped approximately $2.5 billion in fraudulent GST refunds from being paid (as at 31 December 2022).

■ Two individuals have been sentenced to jail following their arrest in 2022.

■ There have been some 87 arrests across the country, “with many more to come”.

■ The ATO has commenced writing to more than 20,000 individuals involved in the fraud.

The purpose of our informing clients of this operation goes to GST audits conducted by the ATO and what they will be looking for should you or your business be selected. As a starting point, generally, the ATO will apply at least some level of scrutiny to Activity Statements where there is a refund of $5,000 or more or where the refund is uncharacteristically large for the taxpayer involved.

The key to staving off a GST audit is the obtaining and retaining of tax invoices. As your tax agent, there is no requirement for us to view each and every tax invoice you hold before we make a claim for GST credits on your behalf on your Activity Statement.

However, no claim can be made without you being in possession of a tax invoice.

Tax invoices for purchases of less than $1,000 must include enough information to clearly determine the following seven details:

1. the document is intended to be a tax invoice

2. seller’s identity

3. seller’s Australian business number (ABN)

4. date the invoice was issued

5. brief description of the items sold, including the quantity (if applicable) and the price

6. GST amount (if any) payable – this can be shown separately or, if the GST amount is exactly one-eleventh of the total price, as a statement which says “Total price includes GST”

7. extent to which each sale on the invoice is a taxable sale.

 

Tax invoices for sales of $1,000 or more also need to show the buyer’s identity or ABN.

The following example shows:

■ GST included in each line item

■ the sale is clearly identified as being fully taxable by the words “Total price includes GST”

■ the buyer’s identity for sales of $1,000 or more.

If you have any questions around tax invoices, or if you are having problems obtaining them, reach out to us.

 

Lost super

Did you know there is around $16 billion in lost and unclaimed superannuation across Australia? The ATO recently indicated this is an increase of $2.1 billion since last financial year and is urging Australians to check their account to see if some of the money is theirs.

 

How to find lost or unclaimed super

Finding lost or unclaimed superannuation is easy and can be done in a matter of minutes. To find and manage your superannuation using ATO online services:

■ Sign in or create a myGov account

■ Link your myGov account to the ATO

■ Select “Super”.

You can then find and consolidate your super.

Alternatively, if you are unable to access ATO online services, you can call the ATO’s lost super search line on 13 28 65. You will need to provide information such as your personal details, contact details and superannuation fund details.

 

Who can have lost super?

People often lose contact with their superannuation funds when they change their job, name, address, live overseas, or simply forget to update their details.

Lost super is superannuation money held by superannuation funds. You become a “lost member” and your superannuation becomes “lost” if you are:

■ Uncontactable – the fund has lost contact with you and your account hasn’t received a contribution or rollover for at least 12 months

■ Inactive – your account hasn’t received a contribution or rollover in five years.

Your fund will hold your lost super until they find you.

If they can’t find you, some types of lost super will be transferred to the ATO.

 

Who can have unclaimed super?

Unclaimed super is money funds are required to transfer to the ATO twice a year.

Generally, super will be transferred to the ATO from superannuation providers for any of the following:

■ Unclaimed super of members aged 65 years or older, non-member spouses and deceased members

■ Superannuation of former temporary residents who have left Australia for six months or more and their visa has expired

■ Small lost member accounts (with balances of less than $6,000)

■ Insoluble lost member accounts (ie, lost accounts which have been inactive for a period of five years and have insufficient records to ever identify the owner of the account)

■ Inactive low balance accounts

■ Accounts held in eligible rollover funds that were transferred to the ATO before they wind up

■ Amounts your fund transferred to the ATO on a voluntary basis when they determine that it is in your best interest.

 

Don’t wait, start looking!

Superannuation is one of the most important investments many Australians will have during their lifetime. Make sure you search for any lost or unclaimed super you may have as bringing it all together may help you save on fees and will also make it easier to manage your retirement savings.

For information on how to manage your superannuation and view all your superannuation accounts, including lost and unclaimed super in myGov, contact us today.

 

 

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