Monthly Archives: June 2016

Last minute tax saving tips

And so another tax year draws to a close!  But there is still time to legitimately  and legally adopt last minute tax saving tips to improve your tax position by adopting one or more of the following strategies:-

  • Buying items such as stationery, printer cartridges, stamps, etc by Thursday 30th June.  Those of you who entered the Simplified Tax System (STS) by 30th June 2005 (and are therefore automatically assessed on a cash basis) may wish to pay any bills not due until July like your phone bill, rent, insurance etc.   Paying your accounting fees is also recommended!
  • Superannuation is of course a major deduction provided it is paid by 30th June.  Contributions into super are taxed at only 15% whereas your marginal tax rate may be much higher at 19%, 32.5%, 37% or 47% – as well as Medicare Levy at 2% and a 2% Temporary Budget Deficit Repair Levy.  A June contribution that doesn’t clear until July will be not be deductible in 2015/16 and will count against next year’s contribution limit.  It is now too late to make payment by B-Pay.  And beware of making EFT payments after your bank’s night time cut off.
  • Whilst there are minimum levels of super to be paid by employers on behalf of employees under SGC provisions, your own business conducted through a company or trust can claim a deduction up to $30,000 ($35,000 if you were 49 on 1st July 2015 – i.e. those who now 50 or older).
  • For those who are self employed, the same limits apply.
  • STS taxpayers are now known as Small Business Taxpayers (SBTs).  SBTs also include taxpayers with an annual turnover under $2,000,000.  As we have previously highlighted, SBTs can claim a full deduction for any assets acquired costing less than $20,000 (excluding GST).
  • From 1st July 2016, the threshold for being classified as a small business rises from $2,000,000 to $10,000,000 meaning that they too can take advantage of the $20,000 asset write-off from this Friday.
  • Please keep in mind that the $20,000 write off is due to expire a year from tomorrow.
  • Furthermore, SBT taxpayers can claim half a year’s depreciation on acquired assets that cost more the above limits – even if the asset is purchased on the last day of the year.
  • SBT taxpayers can also claim a full deduction for payments such as insurances, rent and the like which cost more than $1,000 even though the service period runs past 30th June and into the next financial year.
  • For those of you who receive this e-mail that are employees or rental property owners, you can claim a complete write off for assets costing less than $300.
  • If a property is jointly owned, then you can claim the full cost of assets costing less than $600 (meaning you claim less than the $300 limit each).
  • Investors can claim prepayments in full.  An investor with a property or share loan can claim a deduction for 12 months prepaid interest.  Please note that the ATO requires that for the prepayment to be claimed, one must benefit through a lower interest rate (for which you need to keep proof).
  • For those who have already generated a large capital gain, consideration should be given to selling other investments that have an unrealised capital loss.  Those with no or minimal employer SGC support should consider making a deductible contribution into superannuation to offset the tax on the capital gain (but speak to us first).
  • From 1st July 2004, persons under 65 no longer need to be working or have ceased employment within the last two years in order to make a deductible super contribution.  Consequently, those with large incomes can greatly reduce their tax burden by putting monies into superannuation.  With super pensions paid to those older than 60 now being tax free, the tax savings are greater than ever before.
  • Please note that those over 65 but under 75 can only contribute into super only after they have satisfied a work test.
  • If you are about to sell an asset which will generate a capital gain, consideration should be given to selling it after 30th June.  This will defer the payment of any capital gains tax liability until after 30th June 2017.

We have considered these matters when undertaking our pre year end client business reviews.  However, do not hesitate to contact us should you wish to clarify any matter.

We take this opportunity to remind seriously consider the QuickBooks Online offer. The benefits and bonuses are incredible.  You can at least start with it and if you don’t like it, stop within say three months and it will cost you no more than $40.

We also reminder you that Super Stream has been deferred for 3 months – QuickBooks Online will provide the most cost effective solution for many.

For more free tips, why not visit the weekly blog section at http://mrsaccountants.productivation.com.au.  And from next month you can visit our app which will be full of useful tools and calculators!

At MRS, we will spend today planning for your success tomorrow.

 

 

Getting your stocktake right

I had an interesting meeting with a new client during the week. They were referred to me as they couldn’t understand why they had the same money after a year in which their sales had doubled.  They aren’t trained in accounting and sadly their accountant didn’t help educate them as to what to identify and track in their business.  In particular, they weren’t assisted in the importance of getting your stocktake right.  Furthermore, their cost of goods sold was grossly understated by virtue of excluding direct costs of production other than materials purchased– so much so that their real trading margin is closer to 15% than it is to the stated 50%.  Such a discrepancy can only result in wrong decisions which can prove dangerous if not fatal.

The sad thing is that I have no way of knowing their true position. The value recorded as closing stock was unchanged for the two preceding years and the most recent year, being a year of doubled sales, was less than the year before!  That could be the case, but that is most unlikely.  Moreover, the value of closing stock was a round number in all years; a very round number.  It stunk of sticking a number in the Tax Return that was convenient for tax purposes but in no way reflected the real position.

Fortunately, they have the opportunity to rectify this by undertaking a proper stock by 30th June.  That said, the gross margin for 2015/16 will still be wrong as the opening stock is wrong.

From next year though with the correct opening stock and by tracking month end closing stock, they will have a firm grip on where they are where they are headed. And why is this important – read the following blog on why not all growth is good.

http://www.mrsaccountants.com.au/2015/02/

If you would like assistance with getting your stock take right, please ask for a copy of our checklist or call us to discuss your particular situation.

 

At MRS, we will spend today planning for your success tomorrow.

 

A guide to avoiding employment disasters

There are many things to get right when employing someone.  And whilst employees are protected by Fair Work Australia, there is no such protection offered to employers.  As an employer, you must get everything 100% right.  Thankfully, a federal government has finally produced a guide to avoiding employment disasters.

The minister for small business Kelly O’Dwyer recently released a checklist by which small business owners can find all of the things they need to address and do and do so by going to just the one source.

The checklist also provides information on:-

  • The various types of employment
  • Awards
  • WorkCover
  • Employing foreigners
  • Anti-discrimination
  • Record keeping requirements
  • PAYG WH and SG super obligations
  • Health & safety

It also has a employee v contractor decision tool.

You can access the checklist at:-

https://www.business.gov.au/info/run/employ-people/recruitment-hiring-employees/taking-on-an-employee-checklist

At MRS, we will spend today planning for your success tomorrow.

Are you Super Stream ready?

Are you Super Stream ready?  You need to be as it is the only way that employers can both report and pay employer super contributions after 30th June 2016.

It won’t apply to personal contributions nor to employer contributions to a related party’s self managed super fund.  Every other employer contribution by every employer in the country must be made through Super Stream.

You can learn more by watching the following video from the Australian Taxation Office.

Or better yet ask us to help you personally.

At MRS, we will spend today planning for your success tomorrow.

$20,000 asset write-off – Part 2

One of the best tax planning options available to small businesses is the ability to claim a full tax deduction for the cost of any business asset costing less than $20,000. In $20,000 asset write-off Part 2 we explore 6 other important considerations and traps to take into account before committing a significant part of your cash reserves:-

  1. If you trade-in an asset, it is the cost of the new asset that qualifies. So if your business buys a car for $30,000 and trades in an old car for $12,000, there is no entitlement as the cost of the new asset exceeds $20,000.
  2. The $20,000 refers to the GST exclusive price. If however, a business is not registered for GST, it is the cost of the asset including GST.
  3. You can only claim the business portion on an asset that is used for both business and privately – such as a car or lap-top.
  4. As tempting as this limit is, don’t get too carried away and buy assets that your cash flow cannot support.
  5. If your business has current or carried forward losses in excess of your intended asset purchase(s), then your business will not gain any tax saving in this financial year.
  6. This accelerated write-off rate applies will remain in place until 30th June 2017 so next year is the last time you can utilise this generous arrangement.

If you haven’t done so already, please refer to last week’s post where we outlined 6 other important considerations. Moreover, please contact us if you have any questions in relation to this or any other pre year end tax planning issue.

At MRS, we will spend today planning for your success tomorrow.

 

$20,000 asset write-off

It’s nearly the end of the tax year and as the year’s result should now be clear, it’s now appropriate to address tax planning. One of the tax planning tips is to use the $20,000 asset write-off.

So if your business does need a small asset, now is the perfect time to buy it.

But before doing so, please ensure you have factored in the following considerations:-

  1. Only buy an asset if you need it. So if a company registered for GST buys and asset for $11,000, it will get back $1,000 of GST and will have a tax deduction of $10,000. It will pay $3,000 less company income tax. It will still be $7,000 out of pocket.
  2. You need to elect or have previously elected to use the small business general pooling depreciation method. A business qualifies as a small business if its current year or prior year turnover is under $2,000,000. If not, the $20,000 provisions do not apply.
  3. Your small business must own the asset. Your business either needs to pay for it or finance it by a loan, hire purchase or by way of a chattel mortgage contract.
  4. Leased assets do not qualify for the write-off as one does not own the asset until the final payment is made or the lease contract is paid out early.
  5. If you need to finance an asset purchase, then you need to act quickly, very quickly, as financiers will be inundated.
  6. To qualify, an asset must be installed or ready for use by 30th June.

We will list other considerations in our upcoming Part 2. In the meantime, please contact us if you have any questions.

At MRS, we will spend today planning for your success tomorrow.