Password fatigue – and what to do about it

If you are like me, you are finding you are doing more and more on line. And with this comes the need to make up strong, unique and memorable passwords.

And with that comes password fatigue.

And no wonder as it is recommended that a password needs at last 12 if not 15 or more characters; and those being a combination of letters, numbers and characters.

So what should you do?

The answer is to use a password program that stores all your passwords. There are many such programs and all give protection via one strong and unique password.

You will also benefit from such a program as it will allow you to regularly change your passwords – as keeping the same password is another source of risk.

Please let us know if you would like a referral to an IT specialist who can recommend and install a password protection program for you.

Special disability trusts

Special disability trusts are a most effective way to provide for a family member who suffers from a severe disability. Special disability trusts provide for the accommodation and care of family member. Such trusts receive substantial social security and tax relief.

Special disability trusts receive the following social security concessions:-

Up to $500,000 can be gifted into a special disability trust before gifts are counted under the asset gifting rules .
The first $669,750 within a special disability trust will not be assessed under the assets test.
The income of a special disability trust doesn’t count against the beneficiaries income test.
All reasonable medical and home care expenses can be paid by the trust.
A special disability trust can also pay up to $12,000 of discretionary expenses.

By transferring a parent’s assets into a special disability trust, a parent can improve their age pension entitlement.

A special disability trust can be established in two way:-

Via a will. However, it must be noted that there is a risk that the provisions of a will may not comply with future laws.
In one’s lifetime. However, this means that on-going costs are incurred from day one.

Does a special disability trust sound like a good option for your family’s situation?

You should only make that decision after receiving financial planning advice from a qualified financial planner. You also need a referral to a qualified lawyer who specialises in this area (we can refer you).

You should also have Centrelink assess your child to ensure they qualify.

What is the company income tax rate for 2018?

What is the company income tax rate for 2018? Sounds like an easy question doesn’t it. And so it should be? It has however proved to be anything but – until now.

Thankfully, and at long last, the Senate has passed the legislation that determines which companies pay the 27.5% income tax rate after 30^th June 2017. Corporate businesses with turnover of less than $25,000,000 for the year ended 30^th June 2018 (and $50,000,000 thereafter) will pay the 27.5% company income tax rate if they pass a new income test. The planned further reductions in the company tax rate did not pass.

Confusion has reigned until now. For the 2017 year, the ATO defined a company as carry on a business where there was a view to making a profit. It was justified on the basis of very old case law (none of which I ever recall studying at university). More notably, it was completely contradictory to what was considered a business where operated within in a trust of partnership or by an individual.

Why did the ATO take this approach?

It meant that dividends could be franked at only 27.5% (despite having paid tax at 30% on those profits). It meant that individuals would either pay more tax or receive a lesser refund. Some consider it to be theft.

So why did the government fix this?

The government was clearly annoyed that the ATO took the approach they did. They proposed legislation a year ago – which has taken until now for our parliamentarians to pass.

So which company businesses qualify for the 27.5% company income tax rate?

Companies that receive less than 80% of its revenue from passive sources. Passive sources include:-

Interest
Rents
Capital gains
Dividends from companies where less than 10% of the issued shares are held.
Trust distributions and profit shares – their character depends on the nature of the income as earned by the trust or partnership.

Franking rate

The same test will also apply to determining the franking rate. That said, one refers to the income derived in the prior year to determine the current year franking rate. Yes, it is possible to be paying 30% tax yet only be able to frank dividends at 27.5% in any one year.

We would welcome any question you may have.

What you need to know about the new Comprehensive Credit Reporting regime

You need to know about the new Comprehensive Credit Reporting regime that came in took effect from 1^st July 2018.

Comprehensive Credit Reporting (CCR) is designed for lenders and borrowers to more openly share data. The goal is to have lenders be able to readily access information about borrowers from a shared source. Gone will be the days that borrowers could relatively easily hide certain information from a potential lender.

Most importantly, CCR requires both positive and negative information be recorded about borrowers.

So what does the Comprehensive Credit Reporting regime mean to you?

This means that possible lenders will be able to access information about one’s recent repayment history. Adverse events will include such things as late payments of monthly credit card due amounts.

Perhaps it is time for you to schedule paying off credit card balances or making a minimum payment a day or two earlier than normal.

CCR is still in implementation. The Big 4 banks were required to be 50% ready by 1^st July 2018. They will be required to be 100% data ready by 1^st July 2019.

Some argue that reporting of the payment history of telcos and power bills should become part of this system as it is with the New Zealand model. It may well be added in time as it is argued that provides a great insight into one’s financial commitment capabilities.

Taxable Payments Annual Report

28^th August is the end date for lodging the ATO’s Taxable Payments Annual Report. This form requires those businesses within the building and construction industry to report all payments to contractors within the building and construction industry.

Building and constructions includes more services than one might think as evidenced by the following link – http://tinyurl.com/y7hrnfxm

You need a good accounting system to simplify the reporting of Taxable Payments Annual Report as you need to report the following for each contractor:-

Name
ABN
Address
Gross payment including GST as well as the total GST amount. It is important to note that for those who run an accrual accounting system, reporting is based not off the date of the contractor invoices, but they year in which they are paid.

If you are struggling with this reporting requirement, we would be happy to help you or refer you to a good book-keeper.

Ways you can lodge the Taxable Payments Annual Report

The main software providers enable the Taxable Payments Annual Report to be lodged from the software.
You can also lodge by paper.
You may also wish to view the following YouTube clip from the ATO on how to lodge the Taxable Payments Annual Report through the Taxpayer Portal.

https://www.youtube.com/watch?v=SRhFsB-k1Uc

So what to the ATO do with all this data?

They crossmatch all payments reported to each business within the building construction industry to their reported income. The ATO had a field day some years ago with a pilot program of plasterers within the Hunter Valley. Obviously it is paying dividends if the ATO still requires this reporting – so much so that it has now been expanded to other industries from July 2018.

2018 Company Tax rate

At last we know what the 2018 Company Tax rate will be for small and medium size businesses! So whilst the House of Reps was in uproar today, at least the Senate did something.

What a joke it is that only now do we know with certainty what tax rate applies from 1st July 2017.

Finally we can finalise Tax Returns with certainty!

If you would like to read more about this, please refer to our August edition of Tips & Traps.

Reasonable travel allowances & how they help you

It is now time for Victorian employers to lodge their annual Pay-roll Tax declaration. One of the dangers of Pay-roll Tax is not complying with grouping provisions.

The grouping provisions assess a number of employers against the remuneration threshold (now $650,000). Remuneration in excess of that threshold is subject to Pay-roll Tax at 4.85%.

Employers can be assessed as a group where:-

There is common ownership and control, or
Where an employer performs duties for another business.

The latter one is commonly misunderstood. Having a larger business answer the phone of a smaller business (with unrelated owners) for 30 minutes over lunchtime can be enough to treat a business as grouped. So it could be that a small business with remuneration of only $100,000 has to pay Pay-roll Tax of $4,850 for the sake of 2 ½ hours a week of phone minding. A phone answering machine or service would seem to make more sense!

If you would like to know more about grouping, you can go to:-

https://www.sro.vic.gov.au/grouping

You can also watch the Victorian State Revenue Office’s video on grouping at:-

https://www.sro.vic.gov.au/videos/payroll-tax-grouping-provisions-webinar

With we welcome any question you may have in respect of this or any other employment related matter.

Pay-roll Tax and the danger of grouping provisions

It is now time for Victorian employers to lodge their annual Pay-roll Tax declaration. One of the dangers of Pay-roll Tax is not complying with grouping provisions.

The grouping provisions assess a number of employers against the remuneration threshold (now $650,000). Remuneration in excess of that threshold is subject to Pay-roll Tax at 4.85%.

Employers can be assessed as a group where:-

There is common ownership and control, or
Where an employer performs duties for another business.

If you would like to know more about grouping, you can go to:-

https://www.sro.vic.gov.au/grouping

You can also watch the Victorian State Revenue Office’s video on grouping at:-

https://www.sro.vic.gov.au/videos/payroll-tax-grouping-provisions-webinar

With we welcome any question you may have in respect of this or any other employment related matter.

Last minute tax saving tips

Are you a business owner who wants to legally minimise your tax? Or perhaps you’re an individual who wishes to legally minimise your tax? Our June edition of Tips and Traps (being our monthly newsletter) explored last-minute tax saving tips.

If you would like a copy that newsletter setting out those tax savings tips then please email admin@mrsaccountants.com.au

We have a thorough tax planning process to ensure clients avoid pitfalls and take advantage of any opportunity that is legally available. Our process is to:-

Review year-to-date numbers to the end of May.
Understand what may have happened or will happen during June.
Run through our seven page tax planning checklist.
Identify all opportunities.
Identify pitfalls that may require corrective action either now or shortly after year-end.
Set out our recommendations in a clear and concise report. That report also addresses the timing the future payments or refunds.
Discuss those recommendations with you in either a face to face or Skype meeting.

The end result to you is that you:-

Are left in the best position.
Have our advice presented to you in an understandable report (backed up with a discussion).
Know the timing of your future tax payments – and are not left with any shocks when the Tax Returns are finalised.

Today, our process and tax savings tips have saved our clients over $400,000. This doesn’t take into account the value of other advice given throughout the year.

If you feel that your accountant is just filling in your Tax Returns and not looking after your long-term interests, then call Alex Stewart on 03 9899 7511. Our initial meeting is free of cost of obligation so you have nothing to lose (and maybe a lot to gain).

Personal super contributions

Last year’s super tax changes certainly received substantial press coverage. Most of that though was in respect of the must do corrective (and negative) aspects such as commuting under the $1,600,000 pension balance cap.

There were however some sensible and attractive changes (you may wish to refer back to our 2017 Budget Briefing paper which explored these).

One of the attractive changes is that since July 2017 employees been able to claim a tax deduction for personal super contributions. Until then, employees were denied a personal tax deduction where their employer had an obligation to pay SG (whether they paid it or not). There was an exemption for those whose employment income was minor.

So who are personal super contributions attractive to:-

Those whose employer who won’t allow a salary sacrifice arrangement.
Small business owners who wish to pay the super in their own name rather than having their own business pay it (which would be subject to WorkCover).
Those who may wish to reduce the tax on their other income including interest, rent or capital gains.
Those who can use the money more efficiently – like pay down the mortgage during the year but pull it back at the end of the year to fund the super.
Those who are employees aged over 65 who have more than $1,600,000 in super (and are denied making further non-concessional contributions) and who have already satisfied the 40 hours in a 30 day work test during the year.

Is making personal super contributions best for you?

Well that depends entirely on your personal circumstances.

And the younger you are the more careful you have to be as super is locked away until one reaches what is called preservation age (which can be as late as age 60 even for those who retire early).

There are also other considerations like Section 293 tax.

You don’t want to have excess super contributions as you will issued with an excess contribution notice which can easily happen if you don’t fully understand all the complexities.

Moreover, you should not make such a contribution without first seeking financial planning advice as that advice will consider all of our circumstances, explain the risk and rewards of all strategies (and do so in context of other strategies) and show you the long term results from advanced financial planning modelling software.

A word of warning

There is now just one concessional (deductible) contribution limit for all employees – it is now just $25,000. And that as assessed by when the fund receives the contribution. So a contribution by an employer for the June 2017 SG quarter (which may include salary sacrifice contributions) paid into a super fund in July 2017 counts as a contribution in the 2017/18 year.

You should therefore disregard whatever appears on your pay slip as that just records what has been provisioned by your employer during the year. You must check what has been received by your super fund(s).