Monthly Archives: November 2020

Main outtakes from Victorian State Budget

During the week the Victorian State Government handed down is budget.

It has been pitched as an incentive budget.  Most of the breaks go to property.  In part this is not surprising given its political appeal and that it has a great multiplier effect through the economy.

Property incentives:-

  • 50% reduction in Stamp Duty for the acquisition of  newly constructed property costing up to $1,000,000.

  • 25% reduction in Stamp Duty for the acquisition of  existing property costing up to $1,000,000.

  • This reduction is additional to the first home buyers concession.

  • And we remind you that there is also the previously announced 50% Stamp Duty reduction on the purchase of commercial properties.

  • Also announced was a 50% Land Tax discount for build to rent developments.

Pay-roll Tax relief:-

  • Employers with remuneration under $10,000,000 will receive a 10% credit for the 2020/21 and 2021/22.

  • From 2021/22, the monthly payment threshold will increase from $40,000 of pay-roll tax to $100,000.

  • There will also be 10% credit (capped at $10,000) for those employers who increase their wages by $100,000 during 2020/21 and/or 2021/22.  

  • Unfortunately the threshold in Victoria will remain at $650,000.  All other Victorian states and territories have thresholds of $1,000,000 to  $2,000,000 before they levy Pay-roll Tax.  This seems a significant disincentive to employ in Victoria, particularly for those Murray River border towns.

We welcome any question you may have about the State Budget or any other matter.

A warning on interest rates

With a further fall of the official interest rate, interest rates paid to investors have fallen again.

Term deposit rates are pitiful.  Not only are they low, they are pretty much half of the current inflation rate.  What that means is that in real terms, balances are going backwards.

But what is really scary is what interest rates are being paid on “investment” accounts. 

We have recently seen examples where clients are earning nothing (like zero) on account balances up to $250,000.  Sometimes this has been missed by a client as there had been, until recently, a decent interest rate paid.  Sometimes it has been missed due to a bank publicising the headline interest rate for balances over say $500,000.

But beware if chasing higher interest rates.  If someone is paying over the odds, then tread carefully.  Very carefully.  Often it means the investment is risky.  So is an extra % or two really worth the risk of losing your hard earned dollars?

 

Are you missing out on the Family Tax Benefit?

The Family Tax Benefit is designed to support low and middle income with the cost of raising a family.  It is not only a generous payment, it is non-taxable – meaning you get to keep the lot.

So generous that they must be taken into account when undertaking any tax planning.

There are two Family Tax Benefit components:-

  • Part A is based of combined family income.

  • Part B is based of the secondary earner’s income (but the main income earner’s income must be below $100,000).

Part A is paid in graduated levels:-

  • The full amount per child is paid where the combined family income is under $55,626.

  • For every dollar of income over $55,626, the Part A entitlement is reduced by 20 cents until it reaches what is called a base rate.

  • Families are paid the base rate until combined income exceeds $98,988. Every extra dollar of income then reduces the benefit by 30 cents in the dollar until any entitlement is exhausted.

  • The maximum payment rates are $4,929pa for each child under 13, $6,410pa for children aged between 13 and 15 and the same rate for children aged between 16 and 19 who meet study requirements.

  • The base rate is $1,583pa.

Part B is paid in respect of one child only:-

  • Is paid at $4,190pa where the youngest child is under 5.

  • Is paid at $2,927pa where the youngest child is aged 5 to 18.

  • After the first $5,767 of annual income of the secondary income earner, the rate of payment is reduced by 20 cents for extra dollar of income.

  • This means that no entitlement is paid where the youngest child is under 5 and the secondary income earner’s income exceeds $28,671; $22,388 for youngest child being 5 and over.

Payments can be received either fortnightly or after lodgement of your Tax Return for that year.  But a Tax Return must be lodged by the following 30th June otherwise all entitlements are denied.

The amounts payable can be substantial.  They can mean that a two child family can effectively be paying no income tax on incomes of $60,000.

A lack of proper planning by your accountant could see a loss of not just of tax of 39% but may be 30% of a Part A entitlement and even all of the Part B entitlement.  As they say, proper planning prevents poor performance!

If your accountant hasn’t spoken to you about the Family Tax Benefit then you could be missing out on many thousands of dollars.  We welcome the opportunity to discuss your situation.

Fair Work Australia relaxations for JobKeeper employers

First the background and then the good news. 

Employers who qualified for the initial JobKeeper system were able to avail themselves of relaxed Fair Work Australia provisions.

Such employers were able to:-

  1. Stand down employees.

  2. Direct employees to change duties or work location.

  3. Change their days of work.

  4. Request employees to take annual leave at half rate.

The good news for employers still doing it tough (as in they qualify for JobKeeper past 27th September) is that all but the fourth relaxation can still be utilised.

So employers who have qualified for JobKeeper for this December quarter can use these concessions until 28th February 2021.

But there is good news for some employers who dropped out of JobKeeper after 27th September. 

Such employers who suffered at least a 10% decline in turnover for the September 2020 quarter can continue to apply these concessions.  Such employers are called legacy employers.

But it is not automatic.  Such employers must:-

  • Have a certificate completed by their accountant or

  • For small businesses with less than 15 employees, complete a statutory declaration.

You can access a statutory declaration here.

That’s the short story.  There are a number of other requirements and paperwork to attend to. 

If you want to know more then please ask us.

How to benefit from the instant asset write-off

How can I benefit from the Instant Asset Write off?  This is common question we are receiving more often now that there is no upper limit.

Rather than claiming a portion of the cost of an asset used in a business (that being depreciation) over a number of years, a business can claim the cost in the year of purchase.  That can deliver some income tax and cash flow outstanding outcomes.

And with the October 2020 Federal Budget the results can be even more outstanding now that:-

  • There is now no upper limit. Yes, the limit that was $20,000 at the start of the 2018/19 financial year that became within that year $25,000 and then $30,000 which applied to small businesses only to become $150,000 with the March stimulus relief now has no limit for all but the largest businesses. 

  • And if that wasn’t good enough, stunning results can be used for companies who qualify for being able to carry back losses against tax paid in prior years and claim back tax previously paid.

And not only is it great for businesses claiming the concessional it can be sensational for those businesses which sell large assets to businesses – the tax savings and improved cash flow can make a compelling argument.

So to see a number of examples click here.

We welcome discussing how you can benefit from this. When doing so we can model out your cash flow to include future year finance instalments and the impact of the asset increasing revenue and/or reducing expenses.