Posts Categorized: General
Small businesses protection against unfair contract laws
Unfair contract laws to protect small businesses were introduced in 2016. We are pleased to report that as of Thursday 9th November, they have substantially tightened.
One of the main changes is that fines can now be imposed against those enforcing unfair contract terms on small businesses. Those fines are up to $2,500,000 for individuals and $50,000,000 for corporations. Previously there were no fines. Now these laws have some teeth!
Furthermore, a person who breaches the new rules can be disqualified from being a director for up to 6 years.
Following are some examples of unfair contract laws (where it gives one party but not the other):-
- Vary the terms of a contract.
- Terminate a contract.
- Renew or not renew a contract.
- Apply penalties to the other party for a breach of contract.
- Vary the price payable without the other party having the right to terminate the contract.
- Vary the characteristics of the contracted goods or services.
- Restrict one party’s right to the sue the other party.
- Another important change is the definition of a small business has been increased from 20 to 100 full and part time employees.
The somewhat recent small business protection now really has some teeth. Moreover, it will act as a deterrent against those who have unfairly acted against small businesses in the past.
Please contact us if you would like a referral for a unfair contract matter to a qualified lawyer.
Two important WorkCover obligations
It’s a busy time of year and therefore timely to remind you of two important WorkCover obligations.
Injured at work posted
One of the fundamental WorkCover obligations is to display the If you are injured at work poster.
If a Victorian WorkCover official visits you then they ask to see it. And you will be fined if you don’t have it displayed.
Please note that this poster is to be displayed at each work location.
If you don’t have a copy you can download a copy at – click here
If you employ workers (and some types of contractors) interstate then you will also need to comply with that state or territory’s obligations.
WorkCover remuneration certification
It may be time to complete your 2023 WorkCover remuneration certification.
Large employers are required to submit early. Other employers have delayed lodgement dates. That said, it still may be in your interest to lodge soon. This is particularly the case if your remuneration will be significantly less in 2023/24 than for 2022/23.
You will get back what you over pay based off their estimate; but why over pay in the first place.
You will also ensure it is lodged. Many employers forget to lodge and suffer from WorkCover’s default 20% annual increase. So get it done now when you have finalised and issued the PAYG Payment Summaries.
Casual employee obligations
Casual employee – probably the most misunderstood employment term!
Whether your employee is causal or not is a question of fact. Yet stories abound about employers wrongly classifying employees as casual. As soon as there is regularity of days and/or hours then they are not casual. In particular, someone who works say Tuesdays, Thursdays and Fridays is not a casual employee; they are permanent part time.
So what is the risk of classifying someone incorrectly as a casual employee?
You might well have paid them a 25% loading – but if they go off to Fair Work Australia and win then you will have to pay leave entitlements on top of that 25%.
It may have been lost during covid, but employers are now required annually to offer casual employees full or part time work. You can read more at – https://www.mrsaccountants.com.au/important-action-if-you-employ-casual-employees/
Employees have the right to request full or part time work.
Employers with more than 15 employees are required to:-
- Offer casual conversion at least annually.
- Make a written offer within 21 days of anniversary.
- If not offering conversion, notify the employee within 21 days (including reason).
These requirements provide a clear framework for employers to adhere to. Don’t expect to win any dispute if you have not followed these rules.
Please contact us if you would like a referral to an employment specialist.
Reminder about new home office deductions rules
We are returning to the important changes to home office deductions; in particular, how the ATO now requires you to prove the hours you have worked from home to continue to claim under the cents per hour / fixed rate method.
You need to comply with the new requirements in order to make a claim for this 2023/24 year. We cannot emphasise enough the requirement to keep actual records of all hours worked at home or have access to timesheets or roster records (if kept/accessible).
What are the key changes?
The ATO has re-set the rules for taxpayers who are working from home and wish to claim deductions based on either:
- actual expenses, or
- revised fix rate method of 67 cents per hour.
A key and indeed welcome change is that you do not need to have a separate home office or dedicated work area set aside in your home in order to rely on the fixed rate method.
Also, if more than one individual is working from home at the same time, each individual will be able to apply the fixed rate method if they each meet the requirements listed above.
To be eligible to claim tax deductions for working from home expenses, you must:
- incur additional running expenses as a result of working from home
- be working from home to fulfil your employment duties, not just completing minimal tasks
- keep records at the time you work to prove you incur the cost.
Revised Fixed Rate Method
The revised fix rate method:
- has increased from 52 cents to 67 cents per hour worked from home
- removes the requirement to have a dedicated home office space
- includes claims for:
- data and internet
- mobile and home phone usage
- electricity and gas
- computer consumables (e.g. printer ink)
- stationery
- allows taxpayers to separately claim the work-related portion of:
- immediate deduction for items that cost less than $300 (e.g. keyboards, computer mouses, power boards, desk lamps and chargers)
- depreciation of office furniture and computers (items that cost more than $300)
- repairs and maintenance of these assets
- cleaning (only if you have a dedicated home office)
Actual Cost Method
The actual cost method allows you to claim a tax deduction for the actual expenses you incur as a result of working from home.
Using this method, you are required to keep an invoice/receipt for every expense you claim.
Expenses You Can’t Claim
The ATO has stated that you can’t claim a tax deduction for:
- coffee, tea, milk and other general household items, even if your employer may provide these at work
- costs that relate to your children’s education, such as equipment you buy – for example, iPads and desks, subscriptions for online learning
- items your employer provides – for example, a laptop or a mobile phone
- expenses where your employer reimburses you for the cost.
VERY IMPORTANT: The records you need to keep for the fixed rate method
You need to keep record of the total number of actual hours you worked from home to prove your fixed rate method working from home tax deductions for the 2024 financial year onwards.
To claim your working from home deduction using this method, you must keep:
- a record of the number of actual hours you work from home during the entire income year – for example, a timesheet, roster, diary or other similar document.
- at least one record for each of the additional running expenses you incur that the rate per work hour includes – for example, if you incurred electricity and stationery expenses keep one quarterly bill for your electricity expenses and one receipt for your stationery expenses.
Next steps
It has come to our attention that some clients have not been keeping record of the hours worked at home – that being one of:-
- timesheets
- rosters
- a diary or similar document kept contemporaneously.
We have therefore built a spreadsheet for you to use and which you can download here – 2023-24 Home Office Expenses – hours worked log
You must also keep evidence for each of the additional running expenses that you incurred. The documents you need to keep in order to demonstrate that you have incurred additional running expenses must show what the expense is and that you incurred the expense.
For energy, mobile and/or home telephone and internet expenses, you must keep one monthly or quarterly bill. If the bill is not in your name, you will also have to keep additional evidence showing you incurred the expenses; for example, a joint credit card statement showing payment or a lease agreement showing you share the property, and therefore the expenses, with others.
For stationery and computer consumables, which are occasional expenses, you must keep one receipt for each item purchased.
Please feel free to contact our office and speak with one of our expert accountants if you need any assistance with this so we can help you to maximise your tax deductions in your 2024 and future year Tax Returns.
Can I claim the super co-contribution?
Under the super co-contribution scheme, the government will contribute $1 for every $2 of personal contributions made by an employed or self employed person.
The maximum government co-contribution is $500. So if you wish to target the full $500, you will need to contribute $1,000.
To be qualify, one must:-
- Be employed with their employer paying the compulsory SGC or be a self employed person running a business.
- Have 10% or more of one’s income coming from employment and/or a sole trader business.
- Be less than 71 at the end of the financial year.
- Have combined assessable income (that being income before deductions), Reportable Fringe Benefits (RFBA) and employer super contributions in excess of basic SGC amount (RESC) of less than $57,016.
- Have paid a non-deductible contribution into superannuation from after tax money by 30thJune 2023. This means the contribution must be made from a personal or joint bank account.
- Not be a temporary visa holder.
- Lodge a Tax Return for the year ending 30thJune 2023.
- The maximum co-contribution for a personal contribution of $1,000 is $500 if your combined assessable income is under $42,016. Thereafter it progressively reduces by 3.333 cents for every dollar in excess of $42,016. There is no entitlement if your combined assessable income exceeds $57,016.
- Not have contributed more than your non-concessional cap.
- Have a total super balance under the Transfer Balance Cap (between $1,600,000 and $1,700,000).
If you want to find out what you might be entitled to, click on the following link to the ATO’s calculator here
Other matters to note are:-
- One’s own contribution and that made by the government will be preserved. That is, one will not be able to access it until one retires or satisfies another condition of release.
- The ATO will deposit the co-contribution into one’s super account once they have reconciled one’s lodged 2023 Tax Return with the information provided by one’s super fund(s). Consequently, most co-contributions will not be credited until at least January 2024.
- If your super is with a public or employer superannuation fund, you will need to ensure they accept such contributions. You also need to obtain the appropriate form.
- You will need to make your contribution well before 30th For those with your own SMSF, your fund can only accept such a contribution if permitted by its trust deed. We will take no responsibility where a client does not consult with us beforehand.
What is best for you depends on your circumstances and take into account a large number of considerations.
You should therefore seek financial planning advice to ensure such a contribution will work as intended and is in your best overall interests.
Unclaimed monies reminder
Unclaimed monies – it such an important but hidden sleeper that it is worth re-blogging about this.
When we last blogged on this 5 years ago, there was $1,100,000,000 of unclaimed bank account monies, shares and life insurance. Today it stands over $1,500,000,000.
How can I lose money that is mine?
The balance of any bank account unused for more than 7 years is transferred to the government.
So too is a life policy which is not claimed within 7 years of maturity also becomes unclaimed money.
It is not easy to reclaim one’s money as what one might think. So to avoid the problem of trying to recoup unclaimed monies, you need to:-
- Create and check a list of bank accounts, shares and endowment life insurance policies (and store it securely).
- Transact on any bank account every seven years. Please remember that charges debited or interest credited by a bank to your account do not keep an account active. So you need to either make a payment from or deposit into an account for it to be considered active. Make a habit of transacting on every bank account in the first week of January (or July if you’re finance minded like me and think in financial years).
- Update contact details after a move.
If you want to know more or undertake a search on a closed bank account or shareholding or matured life insurance policy, go to http://tinyurl.com/qjozgon
How can I find lost super?
How can I find lost super?
More people should ask that same question as ATO number reported as recently as the end of February that there is $16 billion of lost and unclaimed super.
So how can you find or check for lost super?
- Log into your MyGov account and the click on the Manage My Super lik.
- Call the ATO on 13 28 65
- Complete a paper form – click here
You will need to have the following information ready to supply:-
- Your Tax File Number
- Your contact details
- Details of any super fund you have been a member of – fund name, account number, beneficiaries and period of contributions
As this process requires the provision of personal information we are unable to attend to this on your behalf. But please don’t hesitate to ask us if you have any questions.
Important Single Touch Payroll 2 (STP) changes
Single Touch Payroll 2 (STP2) has finally kicked in.
Critically STP2 requires further disclosures. And it is critical to note that the expanded information will be shared with Fair Work Australia (FWA). FWA will jump on apparent offences – so one needs to be careful of making innocent mistakes.
STP2 will increase reporting in 2 ways:-
- Greater disclosure of earnings.
- Reporting extra information.
Greater earnings disclosure will comprise:-
- Allowance types (within prescribed types).
- Paid leave by types.
- Overtime.
- Bonuses.
- Commissions.
- Directors’ fees.
- Salary sacrifice and deduction amounts.
- Lumps sum payments and eligible termination payments.
Significantly, the following additional data are to be declared under STP2:-
- Employment basis – full time, part-time and casual.
- Tax treatments of employees (tax scale, Medicare Levy options and PAYG variations).
- Termination reason.
What is particularly important is that if you weren’t STP2 compliant from the start of the year you may need to split and re-report data reported earlier in the year.
The ramifications of incorrect reporting may often by minor – but with Fair Work scanning reported pay information the ramifications could prove to be most unpleasant.
Please ask us if you like a referral to a payroll specialist.
Where do I stand to win and lose from the Budget?
Shades of déjà vu
Just like the last Budget handed down by the Liberals in May 2022, there is less change than normal. This is evidenced by research houses analysis papers again being a third if not half the size of normal budget analytical papers.
But there remain significant matters of interest for all.
Some losers.
But a few wins.
So here is our analysis of where you stand to win, where you will lose and what we will be discussing with you as part of pre year tax planning and beyond. And as I remarked in our initial Budget paper on Wednesday, for most there is more interest in what wasn’t announced or clarified.
So what won’t be continuing?
The following are arguably the biggest impacts following this Budget:-
- The instant asset write-off will end on 30th June 2023. The good news is that we will now not returning to a $1,000 limit – it will be $20,000. More on this later.
- It was surprising and arguably unjustified that previous government extended the 50% minimum pension requirement into 2022/23. But there is no change to the position that minimum pension payments return to full rates for the 2022/23 and beyond. This means self managed super funds will need to be more careful about being cashed up enough (noting we track that minimum pensions have been paid and follow up those who are still underpaid close to 30th June). Whether you need that extra money or not the minimum must be paid – and careful analysis of whether you can re-contribute it will be required before doing so.
- Many of our clients have benefited from the Low Middle Income Tax Offset (LMITO). The Liberals had already legislated that it ended 30th June 2022 – and that hasn’t changed. Consequently many taxpayers’ 2023 tax refund will be $1,500 less (but $3,000 to many dual income families) – which could come as a rude shock to those battling the cost of living.
Businesses
$20,000 instant asset write-off
This is welcome news to all as a $1,000 limit from 1st July 2023 was not going to give much of a tax break.
For the 2023/24 gear, a $20,000 threshold will apply.
TIP It applies per asset. Nor are like assets grouped. So you could spend $100,000 on multiple assets and claim $100,000 for tax (so if your business is operated via a company it will pay $25,000 less tax).
TRAP The $20,000 includes GST – so the threshold is really $18,181 (but $20,000 if buying an asset from a business which is not registered for GST or from the public).
TRAP A group turnover test of $10,000,000 now applies.
TRAP Although more applicable to the open limit instant asset write-off, it would be remiss not to mention the upcoming sting in the tail for some businesses. It has been great for cash flow to write-off the cost of say a $50,000 car. However, the day may soon come when that car is sold. And given the ever lingering supply chain problems, one may be able to sell it for $35,000 or $40,000. And that will be straight profit – as the car has already been written down to nil. So a car traded in during June 2024 will see a couple of weeks depreciation being claimed but the entire ex-GST proceeds of the traded in car being fully taxable.
TIP For some, it may be best to delay the sale by say a couple of weeks into a new financial year (which is not that far away).
TRAP If your company will make a loss for 2023/24 or has carried forward losses, there will be no immediate tax saving (not until future profits exceed losses).
New energy incentive for small & medium businesses
Business with group turnover under $50,000 will be able to deduct an extra 20% on up to $100,000 of expenditure on eligible depreciating assets. Qualifying assets are:-
- More efficient electrical goods (eg fridges).
- Assets that support electrification (eg heat pumps and cooling systems).
- Demand management assets (eg batteries).
TIP Must be installed between 1st July 2023 and 30th June 2024.
TRAP Electrical vehicles don’t qualify for this incentive.
Lodgement program amnesty
An amnesty will open from 1st June 2023 for businesses with group turnover under $10,000,000 that haven’t lodged activity statements that were originally due between 1st December 2019 to 28th February 2022. A concession if you will to covid in an attempt to get businesses back into the tax system. Failure to lodge penalties will be remitted under this amnesty.
It would be unfortunate if a company found themselves qualifying for this as GST, PAYG WH and SG super that remain unreported and unpaid for longer than 3 months leave a director open to the ATO issuing a Directors Penalty Notice against a director. Effectively, a DPN makes the company’s debt a personal debt of a director – and the only way out is to pay it.
TIP If a business owner has unlodged activity statements from that period they would be mad not to ensure they were lodged under the amnesty. Not only does it remove the possibility of being served a DPN but amnesties such as these are followed by audit programs.
FBT exemption for electric cars
This exemption announced last year was indeed welcome news. Perhaps understandably the exemption for plug-in hybrid cars will cease from 1st April 2025.
PAYG Instalment relief
Inflation has reared its head in so many unwanted ways. One such manifestation is that the ATO formula has seen the indexation of the instalments increase to 12%.
The rate for small businesses and individuals will be reduced to 6%.
TIP Our pre year end tax planning checklist of some 67 items reviews current profits against instalments paid to date and the June one to determine whether the June instalment can be varied.
TRAP This relief only applies to small businesses. Businesses with group turnover over $50,000,000 will continue to be assessed under a 12% uplift factor.
Technology investment boost
This was announced in last year’s Budget – but it remains unlegislated. It grants an extra 20% deduction on expenditure up to $100,000 incurred between 29th March 2022 to 30th June 2023.
TRAP A company only stands to benefit up to $5,000 given the 25% company income tax rate. Savings to trust will depend on the beneficiaries’ marginal tax rate.
TRAP With few sitting days until 30th June this may well fail to be enacted.
TRAP If your company will make a loss for 2022/23 or has carried forward losses, there will be no immediate tax saving (not until future profits exceed losses).
Cyber security funding
A funding program will be set up to assist small businesses protect themselves against cyber threats. But don’t get too excited as the funding allotted won’t be enough to support less than 1% of all small businesses in Australia.
Individuals
PAYG Instalment relief
The indexation formula will be halved as per above for businesses.
Short term rental properties
A program will be set up to review deductions claimed against short term rental income.
Superannuation
Removal of delayed quarterly payment of SG super
Currently, employers have until 28 days after the end of each quarter to pay their employees super.
From 1st July 2026, employers will be required to pay the super on the day of the pay run.
TRAP Employers will need to ensure that have sufficient funds to pay the super at every pay run (noting that the penalties are huge for paying SG super late). Business funding assessments will become more stringent.
TRAP Employers will need to ensure their pay run calculations are correct each and every time (too bad if you make a mistake if say under the weather with the flu). No longer will you have the luxury of checking the super at quarter end when you know all of the last quarter’s pay runs are correct before paying the super.
Taxing of super balances in excess of $3,000,000
We have addressed this at the time of its announcement. No new details are to hand.
What concerns us is the advice that effects very few. In time it won’t. $3,000,000 may sound a lot but without any indexation the number of people who will fall foul of this will be in the millions.
Of particular concern is that it is wealth tax and moreover an unrealised wealth tax. It doesn’t tax income – it taxes the growth in your super over $3,000,000. You pay tax even if you haven’t sold the offending assets. One would get to $3,000,000 alone just by having invested $45,000 in After Pay at the float by the time of its peak (and then its value halved).
Closing remarks
And are we really going to have a surplus?
By a technicality or rather accounting tweak, yes we are.
From 2020/21 the budgetary surplus or deficit includes the growth in the Future Fund. That was rather a cheeky change as it’s like saying my overspending is OK cos I’m able to tap my super fund. Without its inclusion, this budget would be in deficit (and 2018/19 would have been in surplus – which kind of makes one wonder why the change in 2020/21).
Next steps
We welcome any question you may have.
We will though be undertaking more training on the Budget and thereafter update our pre year end tax planning checklist.
And this year’s tax planning will become a whole lot more interesting given the ATO’s new stance on distributions to adult children, the recent state case which alarmingly required a trust distribution to be overturned and the new requirements for professional firms to pay certain amounts to its principals (with a rather surprising definition on whom qualifies as a professional firm).
Is your ute or van subject to FBT?
Is your ute, van or workhorse vehicle subject to Fringe Benefits Tax (FBT)?
Workhorse vehicles have always been treated favourably.
However the ATO now has safe harbour provisions which you need to test against.
If those safe harbour provisions are satisfied for each vehicle, then no FBT is payable. This means that you have to have the necessary proof and declarations.
If those safe harbour provisions are not satisfied, then you will have a very hard time forming an opinion that FBT does not apply.
So that you can better understand your position, you can read more by clicking on the following link – click here.
This matter has become even more important pursuant to the ATO’s more aggressive approach in reviewing car claims and employer provided cars.
We welcome any question you may have.