Posts Categorized: BAS and super obligations

GST options

With the Sep 2017 BAS  comes options as to how you can calculate GST.  So what are these GST options?

Even with the introduction of the “Simpler BAS” there remain three ways to calculate and report GST.

We recommend most business clients select Option 3 (GST Instalments).  Option 3 (which is only offered to small businesses who lodge quarterly BAS’s and who have turnover of less than $10,000,000) is the best for most clients as:-

  • It reduces our fees by our not having to prepare BAS’s or amend those prepared by clients (at the risk of being misunderstood, there are matters that only come to light when preparing annual financial statements and which require past BAS’s to be amended).
  • One doesn’t have to amend BAS’s for where a tax invoice is not held by the time a BAS is lodged.
  • If profits are increasing, then one’s GST net liability will also be increasing.  The instalment will represent an under payment as the ATO advised instalment is based off the prior year’s lodged activity statements.  In most cases, the shortfall is not payable until May of the following year so one receives an interest free loan from the ATO to pay any GST shortfall.
  • If the instalment is too high, then they can be varied downwards (but best left until at least the second and preferably the third or fourth quarter when the year’s position becomes clearer).

 

Please contact us if the ATO have marked on your BAS that Option 3 is not available.  This is often simply an ATO error and one that we can easily have rectified.

If you adopt Option 3 , then the ATO will issue you with an Annual GST Return after the end of the financial year.  This form is completed by netting off the actual liability against the instalments paid.  The form is required to be lodged by the time the Tax Return is lodged and by which time a shortfall is to be paid or a refund will be generated.

At MRS, we will spend today planning for your success tomorrow.

June quarter deadlines

There are a number of upcoming June quarter deadlines.

For those of you who are employers, Friday 28th July is the end date for satisfying your SG super obligation for the June 2017 quarter.  Late payments will attract substantial interest and penalties which effectively doubles or triples the cost.  Even if your cash flow is tight, this commitment should be paid before anything else.

The final day for payments and reporting of Victorian Pay-roll Tax is Friday 21st July.

For those who lodge a quarterly BAS or IAS, your June quarter activity statement is due to be lodged by Friday 28th July (but 11th August for activity statements if you have registered your business as a user of the Taxpayer Portal and are not paying only fixed $ instalments).   

Please note that lodgement of an activity statement (even if it is nil statement) and payment are two separate requirements.  Late lodgement attracts a minimum non-deductible fine of $180 for every 28 days that a form is lodged late whereas as late payment results in an interest levy (which is often remitted).  A fine is not tax deductible, interest is.  Not that we encourage it, but should you not be able to pay an activity statement in full, do not defer lodgement as the possible fines are significant.  The ATO will of course in time identify that an activity statement liability has not been paid and follow it up; but by this time though the liability should be paid in full anyway and at worst, incur a deductible interest charge far less than any non-lodgement penalty.

Please be mindful that the ATO now reports unpaid business tax liabilities of more than $10,000 not subject to a payment arrangement directly to credit reporting agencies. Please refer to our blog from 12th June 2017 for further information.

I remind you that under the Director Penalty Regime which came into effect in July 2012, PAYG Withholding (WH) and SGC super which remains unreported and unpaid after 3 months now results in the unpaid amounts becoming a personal liability of any directors.  Placing a company into liquidation doesn’t avoid or extinguish this liability.  For further information, please refer to our September 2012 Tips and Traps newsletter.

Please contact us should you have any queries or require assistance.

For other key dates, please click on the Key Dates button on our firm app. If you haven’t done so already, you can download it from either Google Play or the Apple App stores.  Simply type in Maggs Reid Stewart at either site and we should come up first with our logo prominent.  You will also find a heap of useful tools and calculators in our app.

At MRS, we will spend today planning for your success tomorrow.

 

ATO tax debts and credit reporting agencies

From 1st July, the ATO will be reporting taxpayers with unpaid tax debts to credit reporting agencies.

Such reporting will mean that a black mark will added to one’s credit rating where it will remain for 5 years. This of course will have a detrimental impact on one’s ability to obtain finance and to re-finance.

Come 1st July, the ATO will report taxpayers who:-

  • Have an ABN.
  • Have a debt of more than $10,000 which has remained unpaid for more than 90 days.
  • The debt is not in dispute.
  • No payment plan has been established or an existing plan has defaulted.

The key outtakes are:-

  1. Do not let existing payment arrangements default.
  2. If your business tax debt is more than $10,000 and 90 days old, then you need to enter a payment arrangement NOW. We can help you with this application.
  3. It is now more important than ever to not commit to a payment plan than you can’t meet. Don’t commit to the first payment plan that comes into your head.
  4. Consider making extra payments – these can be offset against future instalments should you find that difficulty meeting them.
  5. Speak to us if you have are now having cash flow issues. We have a forecasting tool which can predict what your future cash positions will be like. Not only will we be able to show you what payment plan you can commit to but we look at your overall cash flow issues. Moreover, we can share our wealth of experience and knowledge of ways to improve your cash flow.

 At MRS, we will spend today planning for your success tomorrow.

Did they really think they could get away with it?

Did they really think they could get away with it? I was gob-smacked when I heard about the $165 million tax fraud.

On one level, I was surprised how many people were allegedly involved.

On another level, I was surprised to hear that one of the main players was the son of a senior ATO official. How did it come to pass that not only a ATO official, but being one heading a major corruption and fraud section, saw his son leading what is reported to be an extravagant lifestyle?

What surprises me the most is how they thought that they would get away with it. The scam involved underpaying both employees and contractors.  Surely at some stage someone was going to complain about being underpaid. 

The really dangerous game though was in respect of the alleged underpaid PAYG WH (wages tax) and SG super. Since 2012, PAYG WH and SG super that goes unreported and unpaid for more than three months becomes a personal liability of a director (it doesn’t matter if the business can’t pay).  All the ATO has to do is issue what is called a Directors Penalty Notice (DPN). 

And if that all wasn’t bad enough, the other 40 tonne truck was the fact that the amount of late paid SG super is increased by the addition of lodgement fees and lost earnings. And if all of that wasn’t bad enough, the total amount payable is non-deductible – meaning that any late payment will cost anywhere from 2 to 3 times as much if it had been paid on time.

If all was as reported, then it was just a matter of time.

 

 

What was in the 2017 Federal Budget for you?

 

So what was in the 2017 Federal Budget for you?

There weren’t the nasty changes so often seen in a budget delivered in the first year of a new electoral term.  There were even some welcome announcements – particularly in respect of the extension of the $20,000 instant asset write-off.

That all said, much of what appeared on TV and the press is simplistic and narrow further confused by useless political clap-trap from both parties. 

We have published a briefing paper which sets out the important changes and includes tips thereon.  You can make a request by e-mailing admin@mrsaccountants.com.au

We will be modifying our 2017 pre-year end checklist for businesses to take advantage of any opportunities and avoid any of the pitfalls where possible.

But whilst there may be only be minor adverse outcomes from this year’s budget, we remind you of the superannuation changes announced in last year’s budget which include:-

  • From July 2017, the concessional contribution limit everyone will reduce to $25,000.
  • From July 2017, the non-concessional contribution limit everyone will reduce to $180,000 and the three-year bring forward limit will reduce from $540,000 (for which there are tricky transitional rules).
  • From July 2017, one will not be able make any further non-concessional contributions if their superannuation balance exceeds $1,600,000. 
  • From July 2017, one will be fined and forced to withdraw any pension balance in excess of $1,600,000.  Those affected by these rules and who take action before July also have the option of nominating Capital Gains Tax relief on an asset by asset bases.
  • From July 2017, income on transition to retirement pensions will be taxed.

These and other changes require many to take action both well before and after June and do so based on their individual circumstances.  Many will also need to revisit their estate planning.

At MRS, we will spend today planning for your success tomorrow.

 

 

Lessons from a Master Chef

George Calombaris from Master Chef was in the news during the week for his restaurants under-paying staff.

He apologised for this and said it was a book-keeping oversight caused by the business growing too quickly. This often happens.  And it can happen all too easily as whilst there are support channels and complaint procedures for employees (as there should be), there is no such similar support for businesses.  It is a pity there is such a lack of support for employers as there are so many matters to comply with.  It is particularly difficult for most employers to correctly identifying what award (or awards) employees apply. 

Sometimes, breaches are quiet avoidable – like not issuing pay slips or not issuing employees with the national 10 employment standards.

The costs of getting it wrong can be considerable – both financial (as in fines) and reputation (due to negative press stories).

We ran a seminar on employment obligations two years ago and will look to re-run it again. In the meantime, we can refer you on to a qualified employment expert who can ensure that you comply with all obligations – including PAYG WH, WorkCover, Pay-roll Tax, employment law, awards, FWA provisions.  We can also set you up on a complying payroll program (and guide you away from deficient ones).

At MRS, we will spend today planning for your success tomorrow.

Debts, snails & the ATO

One has two obligations to the ATO – lodge any required return and pay any associated tax. Those in financial trouble or difficulty often fail to do both.  This is a pity as the ATO is quite reasonable in dealing with paying off taxes owed. 

If you are in financial difficulty, you should ensure that the activity statement or return is lodged on time. If they are lodged late, then late lodgement penalties will be levied and the ATO will be far more reluctant to agree to any deferred payment arrangement.

Non-lodgement is particularly an issue for employers as unreported and unpaid PAYG withholding (tax from wages) and SG super become a personal liability if they remain unreported and unpaid for three months. The ATO routinely issue what are called Director Penalty Notices (DPN) and actively chase amounts owing.

A word of caution though. Entering into a payment arrangement with the ATO could be a breach of your loan terms or possibly even your franchise agreement.

The ATO may reverse fines for late lodgement of a Tax Return(s) where there are extenuating circumstances. In an article in The Age on 13th February 2017, a list was provided of reasons that the ATO rejected as not constituting extenuating circumstances and which included:-

  • Snails eat our mail, so your lodgement demand letter must have been eaten.
  • I had a fight with my wife and she works my tax agent so I couldn’t meet with him.
  • My client can’t lodge because she is currently of the North Pole.
  • I could lodge my 2003 Tax Return because suffering from trauma from a serious car accident I had in 2007.

At MRS, we will spend today planning for your success tomorrow.

Simpler BAS reporting

Simpler BAS reporting? Sounds too good to be true doesn’t it?  

The ATO has been in consultation with tax bodies, industry associations, small businesses and accounting software providers. The end result is that one will soon be able to choose to only report:-

  • G1 – Total sales
  • 1A – GST on sales
  • 1B – GST on purchases

But does this really save time and cost?

It depends.

If your accounting processes are basic then it probably will.

But for most people, it won’t constitute any real saving.  With modern accounting software and by implementing automated bank feeds and perhaps even integrated point of sale systems and other modules, it has become much easier to run an up to date and accurate accounting system.  From such a system, completing a BAS is no harder than running a couple of reports after undertaking some checks.  Preparing an accurate BAS should be no more than a by-product of a reliable and up to date accounting system.  So reporting less on a BAS doesn’t mean much.

If running an up to date accounting system is a challenge or impractical, then I suggest that the simpler BAS option may not be the best option. If you struggle to run accurate accounting records, then having fewer labels to won’t actually amount to much.  Perhaps the better solution is to utilise GST Option 3 where one pays a fixed amount as advised by the ATO.  Then, when the year end financial statements and Tax Return have been finalised, an annual BAS / GST Return can be prepared (within which credit is given for the quarterly GST instalments paid).

I suggest that for most, a Simpler BAS is only simpler in name.

At MRS, we will spend today planning for your success tomorrow.

Beware of the $1,600,000 pension cap

Beware of the $1,600,000 pension cap. If you thought it was straight forward, then think again. 

It’s complex and the costs of getting it wrong are high as evidenced by:-

  • You have to monitor your position. You have to know the balance of your transfer balance cap (your amount in pension mode) against the general transfer balance limit (the allowable limit).
  • If you exceed your transfer balance cap at 30th June 2017, you will receive an excess notice which will require you to pay tax and withdraw sufficient monies to get beneath the general transfer balance limit. Doing nothing is not an option if you currently exceed or may exceed your transfer balance cap. Thankfully our SMSF clients will know where they are at with our real time SMSF reporting system and will be able to take prompt action. Those with public funds may know their balance as of the day before but will find it, to say the least, difficult to bring themselves sufficiently under their cap as redemptions can take weeks to process.
  • Many with their own super fund may well know the value of their super interests.  But what if the fund’s assets include  assets that aren’t valued daily such as properties?  One needs to have a very good understanding of the value of all fund assets.  And keep in mind that Melbourne property prices posted double digit growth for 2016.
  • You need to be aware that the very useful estate planning tool of reversionary pensions may no longer be such a wonderful solution. The reversionary pension will count against your transfer balance cap – although one has 12 months grace in pulling money out as a lump sum.
  • The growth in your pension assets doesn’t count against your transfer balance cap. Think carefully about what assets you keep / put into pension mode.
  • And here is a real nasty one. If you exceed your transfer balance cap, then you will be denied taking advantage of any further increases in the cap. So when it increases from $1,600,000 to $1,700,000,  to $1,800,000 and so on, you will be denied these increases if you have ever exceeded your transfer balance cap.

These are just some of the issues to be addressed well before July 2017.

Inaction can be the worst action.

With the removal of the accountant’s exemption as from June 2016, accountants can no longer provide any form of financial planning advice.  The only way for you to properly address your situation is to obtain financial planning advice and do so from a financial planner who understands these complex tax rules.

Single Touch Payroll is coming

Single Touch Payroll is coming. Single Touch Payroll (STP) will require all employers to report to the ATO at the time of every pay how much they are paying and to whom.  No more advising the total of all wages at W1 and tax thereon at W2 on the following activity statement (with the detail only being provided to the ATO with the supply of the PAYG Payment Summaries after the end of the year).

A test program is underway. It will become optional from July 2017 and mandatory for all employers with 20 or more employees from July 2018.  Once the systems is fully up and running the need for PAYG Payment Summaries (group certificates) will be dropped as the ATO will know exactly how much has been paid as of an employee’s last pay.  Employees will be able go into their MyGov account and see these details – as well as the super that is to be paid.

STP will also allow employers to provide employers with TFN Declarations and Super Choice forms.

Thankfully it was announced in September that the proposed requirement for employers to pay the PAYG WH to the ATO at the time employers are paid has been dropped – exactly how cashed up did they think the typical small & medium sized business is?

So if you don’t have a complying and/or efficient payroll system, now is the time to explore your options. Speak to us about your options and what you need to do.

At MRS, we will spend today planning for your success tomorrow.