The 5 key things to implement in 2022

Hard to be believe this year is almost over!  It has been a tough year for many.  But that said, the economy has performed surprisingly well, we have high vaccination rates and statements from our leaders that we are not going back into lockdown.

It seems as though we can relax over the Christmas break with a degree of calm.

The Christmas break is a great time to take a breath and re-asses your work and personal life.

But having started work on the back of the 1983 recession and worked through the ealry’90’s recession, not to mention the GFC, the 1997 Asian crisis and other such events, the effects of covid will play out for a couple of years yet.  We are not out of the woods yet.

In light of the uncertain times that lie ahead, on Wednesday 12th January we will explore 5 key things to address and implement in 2022

  1. Re-evaluate how covid has changed your business and moreover how your business needs to adapt. In particular we will explore who is now your customer target base and how to find them.
  2. Amend your STP payroll reporting to not fall foul of Fair Work Australia obligations.
  3. Making a profit is the goal but the oxygen to a business is its cash flow. We will explore how to better manage and improve your cash flow.
  4. With a federal election looming, take up any advantage under existing tax laws.
  5. Being in business carries the risk of getting sued. We will examine key asset protection strategies to protect the wealth you have worked hard to generate and/or inherited.

You can reserve your place at this 45 minute webinar by clicking here

And as we are passionate about helping small business owners through these difficult times, we welcome your passing on this invitation to family, friend and business associates.

Important change to employer super obligations

An important new requirement took effect from 1st November 2021.  Employers now need to complete an extra step in respect of super when taking on a new employee.

Back in 2005, the ATO introduced Choice of Super Fund rules.  This was a positive change as it ensured employees had a choice as to where their super would be contributed to.  This initiative limited employees having multiple accounts and therefore reduced extra costs and the opportunity for super to be lost.  And arguably more importantly, it also ensured employees did not lose life insurance under super when changing jobs.

Where an employee did not exercise their choice then the super had to be made to a default fund.  A default fund had to offer a minimum $50,000 in life insurance (hardly enough but better than nothing).  The default fund was also specified in an award (hence the rise of the industry funds).

An improvement has been made to the choice system in light of technological advancements and the number of employees with multiple super accounts as a result of their not exercising choice.

So from 1st November, a system has been put in place to staple a super account to an employee.  This means that the default fund choice will be replaced by employers having to contribute to a stapled super fund where no choice is exercised.  It only applies to employees employed on or after 1st November 2021 (with one exception below).

How do you find an employees’ stapled super fund?

If a new employee has not exercised choice within 28 days of starting employment, then the employer must log on ATO online services and access the stapled super fund service.  Apparently the stapled fund(s) will be listed on screen within minutes of completing a request.

We are not yet clear as to what employers without access to a computer or ATO online services are supposed to do (other than ask employees to complete and return the choice form within 28 days).

What if you contribute to a non-stapled super fund?

If an employer contributes into the default fund without checking for a stapled super fund, then that contribution will be subject to super guarantee charge.  In other words, the contribution is disregarded AND another contribution has to be made (which is non-deductible and can easily be two to three times more costly).

Other words of warning

  • Employers only have two months to contribute into a super fund after an employee has exercised their choice.
  • If you received an employees choice before 1st November where they nominated the default fund but no contributions were made before 1st November, contributions must be made under the new stapled super fund requirements.

Want to know more?

Call us

A stinging case for reviewing your asset protection planning

An over-riding goal of asset protection planning is to split personal wealth assets from business risks.  A common strategy has therefore been to have the non-working non-risk spouse hold the family home in their name.

This strategy has worked well.

Until that is the recently decided case of the Commissioner of Taxation v Bosanac.

In this case, the Australian Taxation Office was successful in recovering tax debts of Mr Bosanac against the family home despite the fact that Mr Bosanac’s name was not listed on title.  And it never was from the time the house was bought 15 years ago in 2006.

The key facts were:-

  • The house deposit was paid from a joint bank account.
  • The house was subsequently used as security for other loans.
  • The couple lived in the house for 9 years until they separated. Thereafter the wife continued to live in the house.
  • The husband subsequently used the house as security to fund share trading.

The Federal Court decided that on the basis of what they saw as objective facts, the property had always been held by both husband and wife.  Moreover, it seems unlikely that the case will be appealed to the next and highest court, the High Court, as the presiding Federal Court relied on precedents from the High Court.

It is of great concern that a prime asset protection strategy may no longer be effective.  Asset protection (including estate planning) is never a set and forget matter.  And with so much economic harm inflicted by covid on small business around Australia solvency risks have increased, arguably greatly so for some.

Now is a great time to review your asset protection strategies.  We welcome the opportunity to assist you and ensure that your family’s wealth is not left open to creditors.

State government assistance to the construction industry

Compensation is available to firms within the construction industry that were closed for the two weeks ended 4th October 2021.  Payments are tiered according to payroll size.

The compensation program is called Business Costs Assistance Program Round Four – Construction.

So how does my business qualify:-

  • Must have held an ABN as of 24th September 2021.
  • Must have been registered for GST as of 24th September 2021.
  • Have a payroll of less than $10,000,000.
  • If your business employs, you must be registered with WorkCover.
  • If your business doesn’t employ anyone, you must hold a WorkSafe Construction Induction Trading Card.
  • You must operate within an eligible sector – click here to check your business.
  • Your business must have incurred costs directly due to the lockdown and were not able to operate remotely.
  • Your business must have been contracted to work within a lockdown municipality.

Costs directly incurred as a result of the lockdown include such outgoings:-

  • Contract penalties
  • Equipment rental
  • Paid employee leave for staff who were prohibited from attending a work site.

Business that received any one of last year’s three rounds of the Business Support Fund and/or the Pay-roll Tax rebate/waiver can apply.

However, businesses do not qualify for round 4 if the received any one of:-

  • Business Costs Assistance Program Round Two
  • Business Costs Assistance Program Round Two – July Extension
  • Small Business COVID Hardship Fund

Those businesses still awaiting the outcome of their application to those three programs can apply for Round 4.  If successful under any of the four programs, they will be paid under the grant that pays the greatest amount.

The grant amount is tiered to payroll size:-

  • $2,000 for non-employing businesses.
  • $2,800 for employers with an annual payroll of less than $650,000.
  • $5,600 for employers with an annual payroll between $650,000 and $3,000,000.
  • $5,600 for employers with an annual payroll between $3,000,000 and $10,000,000.

Applications are to be processed within 10 business days with the program closing on 9th November or earlier of the allocated funds run out.

We welcome the opportunity to examine whether you qualify, answer any questions you may have or assist you with your application.

Does your businesses now qualify for rent relief?

Many Victoria businesses suffered through lockdown.  But whilst it may have been tough from early August, many businesses did not see their turnover fall by more than 30% in a 3 month block to the end of September.

This was unfortunate as it meant rental relief could not be back-dated to 28th July.

But what seems to have been forgotten is that, with the three months ending 31st October being almost all in lockdown, there may have now been a greater than 30% fall in turnover.  Such businesses would now qualify for rental relief until mid January 2022.

So is your business one that now qualifies?

 

 

Director Identification Numbers

Over the next 13 months, every director needs to apply for what is called a Director Identification Number (aka Director ID & DIN).

The purpose is so ASIC can identify every director in Australia.  This is primarily being done to prevent what is called phoenixing.  Phoenixing is where one insolvent company is abandoned only for that business to suddenly be run by another company; that new company might have the same directors or relatives thereof.  If your business has been dudded by such activity then you will be all in favour of this.

DIN’s are also being introduced to prevent fake identities being used.

To facilitate this, the ATO will be entrusted with the system.  And what was known as the ABN registry will become the Australian Business Registry Services.

There will be a transition period with the expectation that by November 2022, all Australian directors will have been issued with their director ID.

  • From November, any new director will need to apply for DIN and do so within 28 days.
  • Current directors need to have applied for their DIN by November 2022.
  • By November 2022, a first time director will need to apply for a DIN before becoming a director.

So you will be issued with a unique number.  You will be issued with just one number irrespective of how many companies you are a director of and it will stay with you until the grave (and never be re-assigned to anyone else).

How do you apply

Somewhat oddly, directors must apply for their own DIN; accountants and lawyers cannot do so for their clients.  This seems a remarkably impractical requirement given the age and computer abilities of many directors.  Furthermore, many of our clients don’t have (nor want) a MyGov account but will be forced to open one.  Some clients don’t even have a computer (which is not  crime).  Moreover, many will feel uncomfortable providing proof of identity documents such as passports, birth certificate and drivers licence.  Only those with a disability, injury or illiteracy can ask someone to ask on their behalf.

The fines for non-compliance are breath taking – 5,000 penalty units ($1,050,000 – yes more than $1mAUD) or three times any benefit derived.

This process will also clean up ASIC’s data base which is full of permutations of a director’s name and/or address.  It is not uncommon to on board a new client and find there are 3 versions of their name across multiple entities due to a missing middle name or mis-spelt names.  Fortunately, this is a process we have already been tidying up as part of our new corporate affairs program you have seen by virtue of the new ASIC Annual Reviews.

Whilst we are denied from being able to apply on your behalf (as we can do for Tax file Numbers, and ABN applications) we will happily answer any question you may have so we can point you in the right direction.

 

 

 

SG super reminder

Thursday 28th October is the end date for satisfying Super Guarantee (SG) super obligations for the September 2021 quarter.

But as super clearing houses take up to 10 days to pass the money through to the super fund, it means that processing and payment to the clearing should be made no later than this Friday.

And please make sure you have been calculating super at 10% since it increased on 1st July 2021.

And being the start of a new financial year, we take the opportunity t remind you that SG super is payable on all forms of remuneration including:-

  • Commissions.
  • Bonuses (but see below).
  • Directors’ fees and all other forms of remuneration to directors.
  • Allowances (except where fully expended).
  • Individual contractor paid mainly for their labour.

But excluding the following forms of remuneration:-

  • Overtime.
  • Reimbursements.
  • Unused annual leave on termination.
  • Remuneration of less than $450 in a month.
  • Bonuses that are only in respect of overtime.
  • Bonuses that are ex-gratia but have nothing to do with hours worked (harder to satisfy than what you might think).
  • In respect of employees younger than 18.
  • Employees carrying our duties of a private or domestic nature for less than 30 hours in a week (such as nannies).
  • On quarterly remuneration greater than $58,920.
  • Non-residents performing work for an Australian business outside Australia.

SGC super should never be paid late as late payments attract substantial interest and penalties.  Furthermore, and SG (and BAS) liabilities that remain unreported and unpaid after 3 months automatically become personal debts of directors.

We welcome any question you might have.

 

Relief for commercial landlords

Relief is available to those commercial landlords who have given rent relief under the 2021 revised Commercial Rent Relief Scheme.

Under that scheme landlords are required to provide the following relief to their tenants:-

  • A reduction in rent commensurate with the decline in the business’s turnover.

  • Half of that reduction is to be waived permanently.

  • The other half is to be paid on a deferred basis.

  • Not evict any tenant.

  • Not to charge any outgoings where the tenant can’t occupy the building.

  • Extend the lease on the same terms as the period of rent relief.

You can read more at – https://www.mrsaccountants.com.au/rent-relief-2021/

As part of this process, landlords are required to issue an acceptance letter.

To support landlords, the State Government has announced the following relief:-

  • A 25% Land Tax Relief (which is additional to any previous reduction).

  • A deferral of any residual Land Tax for the 2020 and 2021 years until 31st May 2022.

  • Small landlords who consequentially suffer hardship can receive up to $6,000 under the Commercial Hardship Fund #3. Small landlords are those with holdings of less than $3,000,000.

  • This grant can be increased to $10,000 where a landlord suffers acute hardship. Acute has been defined as where rent represents 70% or more of total gross income – with gross meaning income before deductions.

Applications close by 15th January 2022.

At the time of writing, we are still awaiting the revised Land Tax application form.

We will be in touch when the Land Tax applications open.

 

Statutory declaration for Victorian rent relief scheme

One of the requirements for the 2021 Victorian rent relief Scheme  is for the tenant to provide a Statutory Declaration.

You can access a Victorian Statutory Declaration by clicking here.

And you can read more about the scheme at https://www.mrsaccountants.com.au/rent-relief-2021/

But please do so quickly as applications lodged before Friday result in the rent relief being back dated to 28th July.  Any applications lodged after that date will only receive rent relief from the date of application.

Important actions to obtain Victorian Small Business Rent Relief

A new rent relief system is now open to Victorian small businesses. 

Whilst it is similar to last year’s system, there are some important differences including:-

  • A tightened process (partly in light of the previous scheme relying on the fall in turnover as declared within the JobKeeper application).

  • Deemed acceptance of application for relief.

  • Mandatory re-assessment of rent relief (more later).

  • A two stage process.

What follows is a summary of the system and what you need to action; it is not a complete summary as that would cause this summary to lose clarity in favour of obscure scenarios not relevant to our clients.  Please also keep in mind that there will no doubt be changes and clarifications to this system (of which we will keep you aware by blogs on our web page).

So what is the relief available where there has been a 30% or more fall in turnover?

  • A reduction in rent proportional to the extent that turnover has fallen.

  • Half of that reduction is to be waived; the other half is to be deferred (and this will be on top of any amount deferred from last year’s program).

  • No rent increases during the period of relief (being from 28th July 2021 or latter qualifying date until 15th January 2022).

  • Tenants cannot be evicted.

What is turnover?

  • Turnover is your income – sales, fees, commissions etc.

  • Turnover is measured as per your GST method. That will be cash for the vast majority of small businesses. 

Tips and traps in respect of calculating turnover include

  • Make sure you test within your accounting software on your GST basis.

  • State covid grants are included.

  • Unlike the prior scheme, supplies within a GST group are now included.

  • Exclude input taxed supplies.

  • Includes GST free supplies.

  • For those on accrual for GST purposes, bad debts do not reduce turnover but discounts and credits do.

  • Beware of adjustment events and insurance settlements.

For most it should be relatively straight forward.  For others turnover for this scheme will not be the same as reported at G1 on a BAS.

What is the qualifying test?

  • For business trading before 1st Aril 2019 – compare three whole consecutive calendar months from 1st April 2021 to 30th September 2021 to the same three months in 2019.

  • For business that started trading between 1st Aril 2019 and 31st March 2020 – compare three whole consecutive calendar months from 1st April 2021 to 30th September 2021 to the average monthly turnover to 31st March 2020.

  • For business that started trading between 1st Aril 2020 and 31st March 2021 – compare three whole consecutive calendar months from 1st April 2021 to 30th September 2021 to the average monthly turnover to 31st July 2021.

  • For business that started trading after 1st April 2021 – parties must negotiate in good faith.

  • There are again alternative tests (which we briefly summarise as applying where natural disasters or sole trader unable to work).

Other key features of the system

  • Must be running a small business (turnover under $50,000,000).

  • Non for profits and charities also qualify.

  • Must have a lease agreement.

  • A business need not be registered for GST.

  • Landlords are under an obligation to consider waiving outgoings during the relief period if the tenant is unable to occupy the property.

  • A landlord must offer an extension to the lease term proportional to the period of rent relief.

What are the two steps I must satisfy in order to obtain rent relief?

  • Lodge an application.

  • Then provide

    supporting evidence within 14 days of lodging the application.

The Victorian Small Business Commission has provided two letters with which to lodge an application

  • A letter for both applying and submitting required information –  you can access it by clicking here.
  • A letter with which to make the initial application and a further letter with which to subsequently supply the required information –  you can access it by clicking here.

We are unable to link the documents at this time so please ask us for a copy.

One or more of the following items of information need to be supplied

  • Extracts from accounting records.

  • Bank statements.

  • A BAS or BAS’s that cover the period

  • Statement from a practising accountant.

  • AND a statutory declaration signed by yourself attesting that the information provided is true. 

It is your choice as to what you release so you can rightly elect not to release one of these items if you consider it too sensitive.  Furthermore, you are not under any obligation to release financial statements if requested.

A major change within this scheme is the introduction of a mandatory re-assessment.  By 31st October the tenant and landlord must check in and assess whether circumstances have changed (such as ending or extending lockdown) and adjust the rent relief accordingly.

Of utmost importance is the need to apply by 30th September to have any relief back dated to 28th July.  Applications after that date will only receive relief from the date of application. 

Two words of warning

  • So what if you have only suffered a decline in turnover since July or August? You might not have qualified yet but may well do so by the end of this month.  Perhaps it is best to apply to ensure you are entitled for back dated relief should you qualify.  If it turns out that you don’t qualify then you can withdraw your application and/or fail to supply the required information meaning that your claim is annulled.

  • If this system proves to be like JobKeeper, then we can expect modifications and clarifications. Please return to our web page blogs for updates.

Please note that we will shortly set out the relief available to landlords.

Who is to apply? 

  • As an accountant and tax agent, we are registered at act on your behalf with bodies such as the ATO and ASIC.  We don’t though have any dealings, association or authority with your landlord.  So as with last year’s rent relief system¸ we won’t be acting on your behalf unless you instruct us to do so and notify your landlord of our engagement.  If we do assist you with one or more parts of this process you will still need to sign a statutory declaration.

Please do act promptly to ensure any current entitlement is secured by the cut off date of 30th September.

We welcome any question you may have.