Loans by companies – welcome relief in sight
Accountants call loans by companies to the shareholders and trusts as Division 7A loans. It requires corrective action to avoid being penalised.
It’s an area of tax law that clients just don’t understand. It is so incomprehensible that some four years ago the Board Of Taxation recommended a simplification of the rules. This welcome idea was backed up and supported by a statement within the 2016 Federal Budget.
Only trouble was that Treasury released a position paper in October 2018 that is a complete 180 in the other direction with:-
- Suddenly retrospectively penalising positions that were previously OK.
- Greater penalties.
- More complex rules.
And it’s all supposed to start from July 1 2019!
I have read this morning that the assistant Treasurer has stated that he and the ATO (of all people) are in line. He also said that he and Treasury are not in line with each other.
Thankfully sanity has returned. Pity though that it has taken over four months as Treasury has created great concern and panic. Hopefully they will now go back and do what they were asked to do and formulate a simplified set of rules.
What is left to explain is how it ever came to be that Treasury took off hard 180 degrees in the opposite direction….
And why the picture of the owl? Well they are supposed to be quite intelligent and able to turn their head back to normal after turning it 180. Over to you Treasury…
Cash flow troubles
Xero has just released its big data cash flow analysis of it users from January.
Xero in its Small Business Insights has reported that 50.12% of its users were cash flow positive in January. This means that just on every second business consumed more cash than came in during that month. And that is probably after keeping tight control of the purse strings.
January as we all know is usually the toughest month of the year for most small to medium sized businesses. And with that comes great stress and sleepless nights.
We have tools that will help you track your cash flow and forecast where it is going.
We also have many years of experience of dealing with all sorts of business. We can draw on that wealth of experience to help you improve your cash flow.
Ask us how by calling us to arrange a free meeting.
Instant asset write-off gets even better!
Small businesses receive a number of valuable tax concessions. And now the instant asset write-off gets even better!
It has been announced that the $20,000 limit will increase to $25,000. But please note that this is not yet law.
And there is more good news!
This concession which was due to expire at the end of June will be extended to 30th June 2020.
What you need to do about the instant asset write-off:-
- If your intended purchase costs more than $20,000 (excluding GST) then wait until the new limit has become law – so come back to our web page.
- That said, don’t leave it to the last day of June. Often the discounting on common items is reduced the closer one gets to the end of June.
- Refer to our other blogs which set out some of the tips and traps to be mindful of. Type asset into the search bar to find past blogs. Or better yet, ask us.
Your will and passwords
Your will becomes a public document once probate is granted. One can search on probates that have been granted.
It is therefore not the place to record usernames and passwords.
Please contact us if you would like the solution which we provide to our clients.
Cash flow control
In Xero’s most recent edition of Small Business Insights, they reported that those businesses with positive cash flow fell in December for the first time in four years.
What this means is that less businesses received more money than they paid out. With cash flow and cash holdings being the life blood of any business, this is of concern.
Business confidence was down in December. Retail sales were weak (but often this should be viewed in conjunction with January retail sales data).
We also have the doubt that comes when the polls say that there will be a change of government at the upcoming election. Last year Budgets tend to be generous but perhaps investors and households are more interested in what Labour’s major tax policies mean to disposable income. People and markets tend to fear change more than the change itself. The election can’t come soon enough!
Ask us if you want to find out ways to improve your cash flow. We also have tools that help you control and predict your cash flow. WE can even roll out a projection on a daily basis. Stop losing sleep and ask us!
Single Touch Payroll exemptions
Single Touch Payroll has now been legislated to apply to all employers from July 2019. So from 1st July, 2019, all employers must notify the Tax Office of every employees gross pay, tax and super at the time of payment.
Some exemptions and deferrals have been granted.
However, you shouldn’t need them. The main accounting software products offer Single Touch Payroll solutions. Furthermore, there is much preparatory work for which you will need to change and or improve your processes. It is not something bets left to deal with later.
Keep an eye out for future educational and preparatory steps.
STP – now law!
Single Touch Payroll has now been legislated for all employers. From July 2019, even the smallest of employers will have to report wage payments (inc super) to the ATO at the time of payment.
Whilst there will be some extensions, the time to start planning and preparing is now. We can help you with this.
Objecting against a Land Tax assessment
Objecting against a Land Tax assessments with the State Revenue Office issuing their 2019 assessments has become a hot topic of discussion. Many have fallen off their chair (and some unable to get back up) after reading that their 2019bill would increase by 40% or more.
What is Land Tax?
Land Tax is a state tax levied on land value. One’s principal residence (home) and farms are exempt, otherwise the land value is taxed under a progressive tax scale. The first $250,000 is tax free (although that threshold is only $25,000 for trusts). A higher rate applies to vacant holdings.
It is assessed against the registered hold of the land at 31st December. So notices are now being issued for the 2019 year based on who held the land at 31st December 2018. Adjustments are made upon settlement to apportion part of the bill to the new owner.
How is the land value calculated?
The State Revenue Office uses local council valuations of the land value. The State Revenue Office adopts new values every two years.
Why such big jumps in values?
Local council assessments of land values have largely jumped across the board. This can have a disproportionate effect as holding values pass through a progressive rates of 0.5%, 0.8%, 1.3% and even 2.25%.
Can you object?
Yes you can.
How do you object against a Land Tax assessment?
You must do so within 60 days of receiving the assessment. You do so by using a prescribed objection form.
Even if you object, you must still pay the assessed tax by the due date. If you objection is successful you will be refunded the excess portion of the assessment with interest.
What do you need to object?
You need a reasonable basis. To begin with, we suggest speaking to your real estate agent (that said, we would expect though that the State Revenue Office would not accept a real estate agent’s valuation). If the value appears to be excessive, we contend that you will require a valuation from a property valuer.
Implications for commercial and residential property owners
If you are a commercial landlord, you can continue to pass the Land Tax outgoing on to your tenant. If you are the tenant, your outgoings are going to go up.
If you are a residential property owner, you will not be able to on charge the Land Tax to your tenant. It may well be that a lot of large blocks come on to the market or are sub divided.
We welcome the opportunity to discuss your situation and options with you
and to assist you with preparing an objection.
National Employment Standards
It is a compulsory requirement to have issued all employees with the Fair Work Information Statement
That Statement includes the National Employment Standards.
You can access that document at:-
https://www.fairwork.gov.au/employee-entitlements/national-employment-standards
And please remember to:-
- Keep evidential records that you have given the statement to each employee, and
- Give one to yourself!
Loan rejections are on the rise
It has been reported that loan rejections are on the rise. This particularly so for loan renewals where the reported rejection rate jumped to 48% during December.
In fact, we have even heard to pre-approval loans being subsequently withdrawn.
This could prove to be a self feeding phenomenon as some have forecast Melbourne house prices to fall by another 11% through 2019.
What should you do?
- If you are due to renew a loan – start early and tighten up your application.
- If you are seeking a loan, source out alternative solutions. This is where a mortgage broker can prove invaluable. We would be happy to provide a referral.