Relief to SMSF property owners

Thankfully the ATO is on record as to providing relief to SMSF property owners.

In today’s climate, many landlords are reducing the rent to help retain tenants. 

However, there has been concern that a self managed super fund charging less than market rent on a commercial property to a related party would still constitute to a breach/contravention.

The ATO has now stated that they will not take action against a temporary rental reduction in either the remainder of this 2019/20 year or 2020/21.

So what is an acceptable rental reduction? 

That remains to be seen and should be monitored.  However, the most common story over the last two weeks seems to be that rents are being reduced by between a third and a half.

 

How long can you last without customers (1 minute video)?

How long can you last without customers? 

It is a question most businesses are asking at the moment.

And it is one that keeps people awake.

We can show how long you can last – click on the following video to see an example.

https://www.loom.com/share/588fb889519e4eb19a853f6adc097976

Moreover, we can show the outcome from changing multiple drivers in your business.

So don’t like awake at night worrying; replace worry and fear for a predictable future.  And there’s nothing to fear from the meeting itself as we use Zoom Meetings.

 

ATO’s audit focus

Over the last couple of years, all one has heard is that the ATO keeps reducing its workforce; at the same time it has spent a fortune on IT and data matching.  As a result, the ATO’s audit focus has totally changed.

In recent years, the ATO has escalated the number of warning letters.  They have done so in the knowledge that it generally results in reduced claims – many people are fearful and don’t want to claim what is genuinely claimable.

Of late, the ATO’s audit focus has changed.  They are announcing visits to certain suburbs and towns; such as Bathurst just before the car race.  Moreover, they are stating that they are intending to visit 100’s of businesses at a time.  Unless they have done something like doubling their workforce or re-deploying people, I can’t see how this can be done.  How many staff do they need to visit the 800 business stated for visits in Croydon and Frankston even if the visit itself is only 30 minutes as they say?  And these visits must be undertaken over a short time frame as such visits are now being announced every month.

Businesses to be visited in Croydon will include common targets of takeaway food places, hairdressers, cleaning businesses and somewhat surprisingly management consultants and financial advisers.

Businesses to be visited in Frankston will include the common targets of again take away food places and restaurants but also real estate agents and accountants.  Would could deduce that they are trying to scare accountants and get them to put their wind up their clients.

Of particular interest is that the ATO has stated that they are not just relying on the old gold mine of tips offs but also from government regulators such as Fair Work Australia.  Under the table payments and under award payments are the very clear focus of this campaign.  Discussion topics also include payment facilities, lodgements and super obligations.

Check their identity

The ATO will notify their visit.  I strongly recommend cross checking the validity of a request to ensure it is genuine.  I say that as when the ATO were undertaking GST reviews in 2000/01, we found that one such client review was in fact a competitor trying to bluff their way in to get inside knowledge.

You can read more at the following link including details on information sessions.

https://www.ato.gov.au/Media-centre/Media-releases/ATO-to-visit-800-businesses-in-Frankston-and-Croydon-in-response-to-black-economy-warning-signs/ 

 

 

CGT hit on those who sell their home whilst living overseas

Late last week, a highly contentious bill passed which levies a Capital Gains Tax (CGT) hit on those who sell their home whilst living overseas.

It doesn’t matter how long you lived in your former Australian home.  If you sell it whilst loving overseas, you pay tax on the whole gain.  There is neither a reduction for:-

  • The time it was your home, nor
  • The 50% general CGT tax discount which non-residents are not entitled to since 2012.
We will set out more later.

In the meantime, if this affects you, family or friends, keep the following two tips front of mind:-

  • It doesn’t apply to house owned since May 2017 which are sold before July 2020.
  • Normal CGT treatment applies if the house is sold when you again become a tax resident of Australia.

In the meantime we welcome any question you may have.

 

Binding death benefit nomination

For a binding death benefit nomination to be binding:-

  • It must be made in favour of a tax dependent.

  • It must be done using the approved form for the fund.

  • It must be witnessed.

  • It must be made whilst having mental capacity (so an elderly person may be wise to have their GP assess their cognitive powers).

A binding death benefit nomination only holds for 3 years.  After 3 years, it loses its validity.

Whilst a binding death benefit nomination must be followed by the super fund trustees and therefore creates certainty, it may not be the best option for you.  

You should not execute a binding death benefit nomination until you have completed a full estate planning review and done so with the input of your accountant, financial planner and estate planning lawyer.

Early release of super

Part of the first stimulus package was the to permit an early release of super within the next 6 months.

For some, this may be what gets them through this period.  But it will not be appropriate for many.

There are many reasons as to why one should not take up this option. 

Moreover, it should NOT be done without first obtaining financial planning advice.  You must ensure that taking super out before retirement is an appropriate course of action.

The qualifying rules can be found at https://tinyurl.com/tojexfp

If you are with a public fund, you may find that they do not offer an early release of super – which is understandable considering the cost to temporarily changing all their systems.

If you have your own self managed super fund, then you should assume that you can’t.  Many trust deeds wont permit such a withdrawal before age preservation age – so if you do pull money out then it is a notifiable breach.  

So please don’t assume that you can withdraw some of your super or that it is your best course of action.  Seek advice first.

 

Staying afloat with better supplier terms (2 min video)

Want to know how much lost sales can be covered by getting a 5% discount from suppliers.

You might be very surprised.

Please click on the following link to find out:-

https://www.loom.com/share/f1f52aba9c164833a94cf2c959baa2f4

We welcome the opportunity to show you how you can safeguard your business in today’s COVID-19 by making any change to the key drivers in your business.

 

 

Analysing the stimulus packages

We’ve spent a great deal of time educating ourselves on the many initiatives within the two federal stimulus packages so we can explain them to our clients and employ strategies to keep their businesses alive and maximise any intended concession. 

Ditto state based stimulus concessions.

So keep coming back to the web page as we will be blogging at least twice a day on stimulus initiatives as well as business survival suggestions .  There will also be short videos and links to future webinars.

You can be assured that we will do whatever we can to help our clients, whether that be from home or the office (for as long as that may last).

We will also have a panel of trusted advisers to help you with your various needs such as IT, human resources, finance and even health and fitness.

In the meantime, we welcome any question you may have.

Frustration over unresolved PAYG WH concession frustration

It all sounded so simple.  Small business which employ would receive at least $20,000 and as much as $100,000.  It wasn’t going to solve the lack of revenue and cash, but, in a small way, would partially help employers to keep employing as many as possible.  However, all is not as it seems.  Frustration over the unresolved PAYG WH concession is growing amongst all accountants.

I have just checked an accounting Facebook group and everyone is expressing increasing frustration over the lack of clarity over the PAYG WH concession and unfairness over common situations.  I have spoken with many accounting colleagues and they too are frustrated.

The interaction of the legislation as passed and how the ATO says they are going to interpret it are going to mean many small business owners will receive no relief either due to the timing of remuneration or form of reward. 

It seems that many small business owners who would reasonably understand they would benefit from this PAYG WH concession are going to miss out.

There is much for the government to do at the moment but this major incentive rapidly requires clarification.  If necessary, the legislation as passed earlier in the week needs to be rapidly amendment to avoid many small businesses missing out.

We will keep you posted.

 

Am I eligible for PAYG Withholding relief?

By far the most common question being asked now by small businesses is am I eligible for PAYG withholding relief?

There have been two announcements with the effective doubling of the concession on the second stimulus package as announced last Sunday.

That package was rushed through Parliament earlier in the week.  Whilst we now have some clarity, questions still remain.

To qualify a business must:-

  1. Have an ABN by March 12, 2020. This is an obvious requirement to avoid restructuring.

  2. Make a payment of salary and wages (or directors fees, commissions etc). It doesn’t matter that there may be no requirement withhold PAYG withholding if the wages are small. 

  3. Either have (a) lodged the 2019 Tax Return by March 12, 2020 which reports assessable business income or (b) lodged an activity statement for the 2019/20 year which declares business income (which is presumably either sales subject to GST and/or business income subject to PAYG Instalments).

  4. The entity has not engage in a scheme for the sole or dominant purpose of seeking to make the entity entitled to the payment would increase entitlement entity to the payment. In other words, tax avoidance.

The ATO has also stated that they will review sudden changes to the characterisation of payments and investigate whether the payments are in fact wages.  This is quite reasonable where PAYG withholding and not been reported and SG super contributions had not been made.  We also note that some people who may wrongly trying claim may have a hard time proving so where there is no WorkCover policy in place.  This is much easier for the ATO to determine given the introduction of Single Touch Payroll for all employers from July 2019. 

However, questions do remain.  

In particular, it is very common for a business owner to only draw a salary at the end of the financial year when the business is known to be profitable.  It would be most unfair if they were to miss out.

We will post further information when matters are made clearer.

In the meantime:-

  • We would be happy to answer any question you may have.

  • Ask you to keep returning to this section as blogs will be posted at least twice daily