Posts Categorized: General

Reasonable travel allowances

Getting receipts whilst travelling can be hard and at times bordering on next to impossible. Getting your employees to do so can be even more difficult.  Fortunately, the ATO recognises this and provides relief through what are called reasonable travel allowances.

One can claim travel expenses in one of two ways:-

  • Have your Company or Trust keep all receipts and claim the deduction in the entity’s Tax Return.
  • Have your Company or Trust pay you an amount no greater than the ATO set travel allowance.  This allowance will be deductible to your Company or Trust.  It will be income within your personal Income Tax Return against which you can claim an amount of not greater than the allowance without being required to substantiate it.  Being an allowance, it is to be included on a PAYG Payment Summary.

Reasonable travel rates are set for:-

  • Domestic travel – amounts in respect of overnight stays for accommodation, food & drink and incidentals.  These amounts vary for each major centre and high cost remote areas. 
  • Overseas travel – amounts for food & drink and incidentals (receipts must be kept for all accommodation).  Allowance rates vary for each country and the employee’s salary level.

The ATO have recently released the rates for 2017/18 in TD 2017/19 which you can access at http://tinyurl.com/ybclevu8

Please don’t hesitate to call if you would like to discuss how you may be able to benefit from using this system.

Finally, please always remember that an overseas travel claim is not deductible unless it is supported by a travel diary or record.  The same applies in respect of a domestic trip which is for 6 or more nights.

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.

 

Getting your stocktake right

Getting your stocktake right is critical in order to understand how your business is performing. In order to be able to report correctly and properly understand how your business is performing you need to:-

  • Count your stock accurately and

  • Value your stock correctly and

  • Have your cost of goods sold section properly include all those expenses directly related to producing the goods you sell

Get any of these wrong and you won’t know where you are at (and heading). It is not uncommon to hear of small businesses who have taken on a large contract at a discounted price only to make less profit than they were before or even go out of business.  Our clients don’t have this problem as we focus on ensuring their accounting system correctly states their true cost of goods sold.  Consequently, we can then show our clients from our powerful analysis tools such things as how fast they can grow before running of cash and how much more cash will sit in the bank account if they reduce their average stock holding by say 10 days.

We issue our clients with a stock take checklist. Please ask us for a free copy.

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

Our $1,000,000 challenge

We have embarked upon our financial year end tax planning review process after modifying our year end checklist following our attendence at a number of seminars and webinars on recent tax changes.

Our pre year tax planning checklist addresses dozens of issues but in summary identifies what benefits and savings you can take advantage of and highlights the areas that require rectification. We then set out a summary of the savings, the actions you need to undertake and the timing of your future tax payments.

This year we at MRG have collectively set the challenge to save our business clients and their families collectively $1,000,000 of tax and other benefits.

We only exist because we have clients and we are firmly focused on delivering them an optimum outcome. With look forward to sharing the final scorecard with you.

At MRS, we will spend today planning for your future success

The super co-contribution scheme

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 (meaning that one would need to contribute $1,000 to receive the maximum entitlement of $500). 

To be eligible for this fantastic freebie, 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 received from employment and/or a business.
  • 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 $51,021.
  • Have paid a non-deductible contribution into superannuation from after tax money by 30th June 2017 – that is, you make the contribution out of a personal bank account.
  • Be less than 71 at the end of the financial year.
  • Lodge a Tax Return for the year ending 30th June 2017.
  • The maximum co-contribution for a personal contribution of $1,000 is $500 if your combined assessable income is under $36,021.  Thereafter it progressively reduces by 3.333 cents for every dollar in excess of $36,021 – there is no entitlement if your combined assessable income exceeds $51,021. 

If you want to find out what you might be entitled to, click on the following link to the ATO’s calculator.   https://www.ato.gov.au/Calculators-and-tools/Super-co-contribution-calculator/

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 2017 Tax Return with the information provided by one’s super fund(s).  It is therefore likely that the vast majority of contributions will not be credited until at least January 2018.  
    • If you wish to make the contribution into a public or employer superannuation fund, you will need to ensure they accept such contributions and obtain the appropriate form and do so well before 30th June.  For those with your own self managed super fund, 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). 
    • For some people, this may the last year they can receive a co-contribution. From 2017/18, one can only receive a co-contribution (and indeed make the triggering personal non-concessional contribution itself) if their total super balances are less than $1,600,000 as of 30th June prior to the year in question.

At MRS, we will spend today planning for your future success

 

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.

Should you elect for CGT relief

Should you elect for Capital Gains Tax (CGT) relief? This is just one of the crucial questions facing those who are either commuting part of their pension to come under the $1.6 million pension cap or are ceasing a Transition To Retirement Pension.

These two situations mean that asset sales which would have been CGT tax free or largely tax free will be taxable. In recognition of this, The ATO is granting CGT relief.  This relief is optional but only obtained if an election is made.  It is also irrevocable.

It can also be chosen on an asset by asset basis – which means down to individual purchases of listed shares. This is an important point as it is quite common to see a holding that has unrealised capital gains on some purchases but unrealised losses on others – this would be the case if one bought shares in say BHP or Woolworths 10 years ago but had bought further shares last year.

If CGT relief is chosen, the asset is deemed to be sold and repurchased at financial year-end. The tax-free portion (based of the exempt current pension income %) of any gain is ignored.  The taxable portion can either be declared within the 2017 Tax Return or can be deferred for payment until the asset is sold.

So should you elect the CGT relief? Well it depends.

Most self managed super funds are unsegregated so we will limit our comments to that scenario.

One should first determine whether CGT relief is indeed available. It can only being claimed for assets that were held from November 9 2016 through to July 1 2017.  The asset(s) in question must also have been supporting an existing pension during this period.

What is best for each SMSF will depend upon:-

  • What is the exempt current pension income now and what will it be in the eventual year of sale.
  • Does the fund have significant capital or revenue losses?
  • Could the value of the asset actually fall after June 2017?
  • Has the share been held for 12 months by the end of June 2017? If not, then electing to obtain CGT relief will mean that the one third CGT discount will not be allowable within the calculation of the gain to be deferred.
  • Will the share be sold within 12 months? If so, electing to obtain CGT relief will mean that the 12 month CGT one third discount period starts again as from July 2017.

It is highly unlikely that the members of any two funds will be in the same situation. This is a quintessential example of the dangers of following a mate’s advice.  These changes are also dangerous in that there are more considerations than just this CGT relief.  We cannot stress the importance of seeking advice from a licenced financial planner (in this regard as Maggs Reid Stewart as an accounting firm can’t help you but our separate financial planning company can).

Transfer Balance Cap and the cost of doing nothing

July is almost here and many are still to resolve what they are going to do in response to the $1,600,000 Transfer Balance Cap (pension balance limit). This is rather scary as the cost of doing nothing can be very expensive. 

Take this notional case of Ms She Willbe Right-Mate who does not grasp the opportunity to act and has $3,200,000 in pension mode on 30th June 2017.

The ATO will force her to:-

  1. Remove the excess balance of $1,600,000 from pension mode.
  2. Assess her Excess Transfer Balance Earnings (ETBE). ETBE is an amount of income deemed to have further accrued within pension mode and must also be removed from pension mode. It is calculated on a daily basis at the ATO’s GIC interest rate (currently 8.76%). If we assume the monies remain in pension mode for 5 months after year end, then the ETBE will be $1,600,000 * 8.76% * 5/12 = $58,400. In all likelihood, she is not earning 8.76% on that excess balance so it has forced extra monies out of pension mode than if she had acted before July.
  3. An Excess Transfer Balance Tax (ETBT) will then be applied. This is a penalty payable by the member and which can’t be paid from super fund monies. First time breaches are taxed at 15% (30% for a subsequent breach) so in this case it will equate to $8,760.
  4. If she is particularly lazy and doesn’t act on the ATO demand within 60 days, the fund will be deemed not to be in pension mode in the year prior. Wow! In this case a pension balance of $3,200,000 earning say 6% (including franking credits) would have derived tax free income of $192,000. Having the ATO now deem that year as taxable would result in a tax impost of $28,800.

A lack of action has become rather costly!

So what does one do? One should obtain financial planning advice (which an accountant can’t provide).  It will be highly unlikely that anyone you know will be in a similar situation – there is no cookie cutter approach / copy what your mate is doing.  This in part due to the fact that the $1,600,000 pension is just one of the changes and considerations to be addressed. 

So if you haven’t received personal financial planning advice focused and tailored to your circumstances, jump to it.

The $20,000 instant asset write-off continues

One of the good news items in the 2017 Federal Budget is that the $20,000 instant asset write-off will continue until June 2018.

So small businesses which buy assets costing less than $20,000 (excluding GST) will be able to deduct the cost in full. This is great for cash flow as the tax deduction will match the expenditure.  So an asset costing say $10,000 excluding GST will reduce a Company’s tax liability by $2,750 (meaning that the net cost to a company will $7,250).  For those undertaking their business in their own name or via a trust or partnership will save tax at their marginal tax rate (which could be as high as 49%).

What makes this news so welcome is that a small business is now defined as one with group turnover under $10,000,000 (previously $2,000,000).

So should you jump at this opportunity? Be careful as there are a number of matters to consider and traps to be aware of.  To read more, go to http://www.mrsaccountants.com.au/the-20000-instant-asset-write-off/

At MRS, we will spend today planning for your future success