Monthly Archives: April 2017

The importance of coming under your transfer balance cap

The importance of coming under your transfer balance cap can’t be understated.

If you do exceed your transfer balance cap you can rectify the matter yourself. There is also transitional relief in the 2018 year were a breach of less than $100,000 is rectified before January 2018.  Otherwise, there is a three-way penalty:-

  1. The ATO will issue you with an excess notice which includes a 15% penalty (30% for a second offence).
  2. The amount payable will attract interest charged daily at the GIC rate (currently about 9%).
  3. You will be denied the option to claim Capital Gains Tax relief on assets that are removed from your pension balance.

So an excess pension balance can prove to be quite costly.

But it doesn’t end there.

One has 60 days to act on an excess notice from the ATO (called a Crystallised Reduction Amount). If you do not commute (remove) the excess balance out of your pension balance within 60 days then:-

  • The fund (not just your portion) will be in breach. This may result in the ATO removing complying status for the fund. This has many nasty implications including the fund not being able to receive concessional contributions from any source.
  • The offending pension balance will cease to be in retirement phase in the year which the 60 day period ends. This could easily result in upwards of $5,000 of tax being payable.

The changes in respect of pension balances are amazingly complicated. If you have not acted upon your situation then you need to do so immediately to ensure that everything is done that needs to and can be done before July 2017.  Receiving advice on your particular circumstances is financial planning advice for which you will need the services of a financial planner; as accountants we are prohibited from doing any more than explaining the rules to you.

The top 10 benefits of cloud accounting

The cloud is still a widely misunderstood tool. This is a pity as there are compelling reasons as to why your accounting file should be in the cloud.

Here are our top 10 benefits of using cloud accounting:-

  1. You can access your numbers anytime from anywhere and do so easily. So can we.
    So can your bookkeeper.
    So can someone else in another store.
    So can anyone else that you need or wish to give access to.
    Access can be granted with differing rights to access certain areas and perform various functions (such as access payroll records and generate a profit and loss). 
  2. You can issue invoices from anywhere at anytime, even from a tablet or mobile.  No more waiting until you get back to the office.  You can even speed up your cash flow by taking payments on the go. 
  3. The four big players in this space, Xero, QuickBooks Online, MYOB and Reckon Hosted, all include the option to automatically upload bank transactions.  You don’t have to, but it does save time – so you either pay your bookkeeper less or spend less time yourself bent over the keyboard. 
  4. With automatic bank feeds, it becomes much easier to keep your numbers up-to-date.  Remember that old saying – what you can measure you can manage (and by extension, what you can manage you can control and what you can control gets done).  You will have the power to know what is happening in your business at all times.  The days of business owners being in the dark as to their true situation until a Tax Return is prepared some time after 30th June should, finally, be a thing of the past.

  5. As multiple people can access the same file, gone will be the common problem of the client, the bookkeeper and the accountant all wanting to work on the file at the same time yet only one having the current file at any one time.  No more re-entering invoices, no more incorrect restores, no more avoidable time wasting, no more wasted and costly time in delivering or collecting a back-up of a desktop file and other such annoying problems. 
  6. It is sometimes months after year end before we finalise a client’s financials (we only have two arms so we can’t finalise them all in July).  Cloud accounting packages allow us to access a client file at all times.  The closer we are to the time of each transaction, the greater value we can be to our clients. 
  7. You don’t have to load upgrades to the software – it is done for you. 
  8. No more version control problems between a client and their accountant. 
  9. We have for some years used programs such as LogMeIn to access clients’ computers remotely whether that be to obtain reports, fix problems, etc.  Those remote access programs are comparatively cumbersome.  With cloud based programs, we can just login once you have set us up as a user.  We can then answer your queries far more quickly and efficiently. 
  10. When up and running and used properly, cloud accounting should reduce accounting fees and, more importantly, enable us to provide a better service.

 If you are not yet using cloud accounting, then we welcome the opportunity to discuss your needs and discussing solutions. We are software agnostic – we don’t push only one program as some accountants do as we recognise that one program does not suit all needs.  We recommend what is best for you.  Call us for a free initial meeting to discuss your business and its needs.

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

Lessons from a Master Chef

George Calombaris from Master Chef was in the news during the week for his restaurants under-paying staff.

He apologised for this and said it was a book-keeping oversight caused by the business growing too quickly. This often happens.  And it can happen all too easily as whilst there are support channels and complaint procedures for employees (as there should be), there is no such similar support for businesses.  It is a pity there is such a lack of support for employers as there are so many matters to comply with.  It is particularly difficult for most employers to correctly identifying what award (or awards) employees apply. 

Sometimes, breaches are quiet avoidable – like not issuing pay slips or not issuing employees with the national 10 employment standards.

The costs of getting it wrong can be considerable – both financial (as in fines) and reputation (due to negative press stories).

We ran a seminar on employment obligations two years ago and will look to re-run it again. In the meantime, we can refer you on to a qualified employment expert who can ensure that you comply with all obligations – including PAYG WH, WorkCover, Pay-roll Tax, employment law, awards, FWA provisions.  We can also set you up on a complying payroll program (and guide you away from deficient ones).

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

What do the company tax cuts mean to you?

After much debating and deal making, the company tax rate cuts announced in last year’s Federal Budget have finally been passed by the Senate. So what do the company tax cuts mean to you?

The most important matter to understand is that the tax rate cuts only apply to businesses – the company tax rate for companies that earn passive income from such sources as interest, rents and dividends will still be taxed at 30%.

So for companies with turnover under $10,000,000, the tax rate for 2016/17 will be 27.5%. The same rate will apply in 2017/18 for those companies with turnover under $25,000,000 with progressive increases in the threshold turnover until it applies to all corporate businesses in 2023/24.  Thereafter, the rate will reduce progressively down to 25%.

Businesses who trade through a corporate structure will benefit in that they will pay less tax (including PAYG Instalments). Their cash flow will improve.

So who won’t benefit:-

  • Businesses who don’t trade through a corporate structure whether that be as a sole trader, partnership or trust (although there is a tax discount of up to $1,000 granted to non-corporate businesses).
  • Corporate businesses who make a loss or have carried forward income tax losses. In this regard, it must be noted that it is said that half of all companies don’t make a profit.
  • Those shareholders who are remunerated by dividend from their company as they will receive a lower imputation credit and will therefore either pay more tax or receive a lesser refund.

The last point is just as important to investors (including self managed super funds) as it is to shareholders of their own company.

So let’s compare the situation as we have known it with what happens if a (a) company pays out the same amount of dividend and (b) a company that pays out all after tax profits out as dividends. 

 

To date at 30% company tax

If company pays same dividend amount

If company pays out same amount of pre-tax profit
Profit 1,000 1,000 1,000
Tax 300 275 275
Profit after tax 700 725 725
Assuming all paid out as a dividend 700 700 725
Franking credit 300 266 275
Taxable income 1,000 966 1,000
Individual’s tax at 39% MTR & M/care 390 377 390
Franking Cr claimed 300 266 275
Tax payable by shareholder 90 111 115
After tax money 610 589 610

Companies will still be able to attach imputation credits to dividends at the same rate the company tax was paid. That said, it won’t be long before the 30% credits are used and the first column in the above table will be a thing of the past.

So what can you do to maximise your position? If you or your super funds is a shareholder in a public company, then your position will be dictated by the dividend pay out rate as resolved by the board and existing tax credits.  However, if you are a shareholder in your own name, you may wish to change your strategy to better suit your circumstances both now and into the future.  We would the opportunity to discuss your situation with you.

 

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