Posts Categorized: General
Avoid the avoidable
The ATO is progressively becoming more and more active in demanding the lodgement outstanding documents and issuing fines.
Fines have become more expensive from last month as the basic penalty unit has increased from $170 to $180.
By way of example, this means that:-
- A small business which lodges a BAS will be fined $180 for every month that it is lodged late up to a maximum of $900.
- Under the trustee penalty regime that has applied to self managed super fund trustees since July 2014, the maximum fine per trustee (and which must be paid from their own funds, not the super funds) has increased to $17,000 from $18,000. So, for say a mum and dad fund for which they are trustees in their own name which commits two serious breaches, the fines are $34,000 to both trustees. If a company was trustee, then the directors would collectively be fined $34,000.
Some people decide not to lodge as they can’t pay the tax then and there. This is not the best course of action. It can be said that the ATO issue fines and interest to encourage people to lodge as they just want to know who owes them what. They are actually quite reasonable in offering payment plans for up to six months and to do so on an interest free basis.
So don’t be afraid of lodging – and avoid the fines.
ATO targeting rental properties
As reported in The Age today, the ATO is on the war path over rental properties, particularly those in holiday locations. Their activity will be focused on properties generating low rent but comparatively high outgoings, repairs & improvements, travel claims and apportionment of private use.
If you are unsure what you can and can’t claim, you can refer to the ATO’s guidebook which can be found at:-
http://tinyurl.com/npm6hjy
Or, if you can’t be bothered reading it or can’t understand those 44 pages, ask us.
And if you are thinking of buying an investment property, we have a calculator which models out what your future income / net tax loss will be as well as growth in equity in the property over 10 years. We also have a guidebook that steps you through all the things you need to know and do.
At MRS, we will spend today planning for your success tomorrow.
Why are the global share markets so volatile?
If you have some experience with the share market, you will know that it is always volatile. However the market has recently been very sensitive mainly due to:-
- The contraction in China’s manufacturing sector.
- Turbulence in Europe.
China has been re-balancing its economy towards services and consumption while trying to maintain its growth rate. Recently, it has taken steps to flood banks with liquidity to increase lending. While some markets are relieved that Beijing has finally stepped in, others are focusing on the dimming growth prospects for the world’s No. 2 economy. Its slowdown poses challenges to global growth, particularly to emerging markets. This is not new news. It didn’t suddenly hit the market on Monday as some sort of new development.
That said, we can expect more volatility because:-
- The possible rise in US interest rates (which would be the first time since 2006) as its economy remains strong,
- There are still questions about Chinese growth, and
- The resulting ongoing weakness in commodity prices (especially iron ore and energy).
Through this time, it will remain important to stay calm and to focus on fundamentals.
Avoid reacting to sensationalised news headlines.
Why is it that every significant fall is a front page story yet a recovery the next day or by the next Monday is on page 32 or not even mentioned on the nightly news? It’s no wonder so many fall into the trap of selling on down days and only buy in when the market is near the top. What is that saying from Warren Buffett – be fearful when others are greedy and be greedy when others are fearful.
A missed opportunity – no fries with that
I am amazed how often this happens.
During a break at a seminar the other day, I went outside for some fresh air and wandered, as I do, into a golf shop that was next door (some would say I still would have found it if it was three blocks away).
This was most fortunate as they had a great sale on a named brand of golf trousers– for those non-golfers, they were tailored specifically to the game of golf with an expandable waist, an outside tee pocket for tees (thereby saving the wear and disfiguration on traditional pockets), protruding and accessible pockets for scorecards and golf glove as well as other attractive features.
I digress slightly as the real point is they were cheap for their high quality. I thought this was as good as Christmas.
I therefore bought three pairs – and without my asking, he reduced the price further (therein lies a story for another day).
But an easy opportunity was lost.
I wasn’t asked if I would like to buy a belt or belts with those (nor indeed anything else for that matter). Golf shops sell belts. How easy would it have been to suggest buying a matching belt (particularity given one pair of trousers was a different colour from my existing golf trousers and shorts). Asking the question wasn’t going to stop me from buying the trousers which I had already decided to buy anyway. The question would have taken 5 seconds. The question would not have offended or annoyed me. Perhaps they had some belt with special features – waterproof whatever – that I may have happily bought.
For the sake of spending 5 seconds asking a question and perhaps making a recommendation, the chance to sell something else, at a normal margin mind you, was lost.
So who is at fault here?
I would suggest the store manager as they should better train their staff. McDonalds worked this out long ago as the simple question do you want fries with that adds MILLIONS to their collective bottom line. I would like to think our clients wouldn’t fall for the same mistake as we have software we use with your clients that shows the gain from increasing the number of transactions by each customer and increasing the average transaction value of those transactions. There is also the true cost of giving discounts – but as I said above, that is a story for another day…
Keeping pay records
Well last week’s blog on pay slip requirements created some traffic.
In light of that, this week it is opportune to remind employers that an employer is required to keep their time and wage records for 7 years.
They can be in electronic form or paper based. They must also be legible, in English and accessible to a Fair Work Inspector if they come knocking.
One common oversight is that when a business is sold, the new employer has three months to request the employment records form the former employer – you would be surprised how many times that a sale of business contract fail to address this handover.
For details on what you are required to keep (including leave records), go to:-
http://www.fairwork.gov.au/pay/pay-slips-and-record-keeping/record-keeping
At MRS, we will spend today planning for your success tomorrow.
Pay slips – what you must do
It always alarms me in discussions with new clients just how many of them don’t satisfy employment laws and obligations.
In particular, it amazes how many don’t provide complying pay slips to their employees. Many employers don’t even realise it is mandatory to issue all employees within 1 day of their payment.
Fair Work Australia provides all the information you need in respect of what employers are required to do in respect of pay slips (and related matters). They even provide a template for those who do not have a computerised payroll system.
Click on the following link to make sure that you are complying with your obligations.
http://www.fairwork.gov.au/pay/pay-slips-and-record-keeping/pay-slips
At MRS, we will spend today planning for your success tomorrow.
What are you going to do?
During the week, I read PWC’s 2015 Stem report (aka Future-proofing Australia’s workforce by growing skills in science, technology, engineering and maths {STEM}/April 2015).
The headline finding was that 44% of all jobs performed in Australia are at risk from digital disruption. That’s 5,100,000 jobs! And accountants top PWC’s list with 97.5% of all existing jobs at risk of automation.
So whilst this raises some series questions for myself and my colleagues, what does it mean for you and your business?
Will your existing business model be economical in the not too distant future? Will your competitors find new and better ways to provide your good and service at much lesser cost? Will your competitors be able to provide a superior product or service? Or both?
And then there’s the one fundamental hurdle raised upon the report’s release made by PWC’s Chief Executive Luke Sayers is that “business is already struggling to find the right skilled talent for their workforce.”
So how much time to you take out of working in your business to work on your business? The world is changing at an unprecedented rate and most businesses need to change with it to survive. Are you setting time out of every week or month to address these issues?
In writing this, I’m reminded by what I once heard John Bertrand state as the secret to the success of the 1983 America’s Cup campaign. As you will remember, the key to their success was the technological approach that was taken and which was manifested in the famous winged keel. Underpinning this approach was the initial framework of working within the mantra of what it would take to win the cup in 20 years’ time from then.
What will your industry look like in 5, 10 and 20 year’s time? Hard to say. But even if you don’t get it right, you will be heading in the right direction and ahead of most of your competitors. For some, this will mean cleaning up; for others this mean getting out of a dying industry before it is too late.
We can help you address these issues, whether that be from using our collective years of experience from clients in your industry or just general experiences from all of your clients (and our own).
At MRS, we will spend today planning for your success tomorrow.
Last minute tax saving tips
The following is a listing of assorted tax saving opportunities.
- Buying items such as stationery, printer cartridges, stamps, etc by Tuesday 30th June. Those of you who entered the Simplified Tax System (STS) by 30th June 2005 (and are therefore automatically assessed on a cash basis) may wish to pay any bills not due until July like your phone bill, rent, insurance etc. Paying your accounting fees is also recommended!
- Superannuation is of course a major deduction provided it is paid by 30th June. Contributions into super are taxed at only 15% whereas your marginal tax rate may be much higher at 19%, 32.5%, 37% or 47% – as well as Medicare Levy at 2%. As we have highlighted in previous correspondence, be careful with the 30th falling on a Tuesday. A June contribution that doesn’t clear until July will be not be deductible in 2014/15 and will count against next year’s contribution limit. It is now too late to make payment by B-Pay. And beware of making EFT payments after your bank’s night time cut off.
- Whilst there are minimum levels of super to be paid by employers on behalf of employees under SGC provisions, your own business conducted through a company or trust can claim a deduction up to $30,000 ($35,000 if you were 49 on 1st July 2014 – i.e. those who now 50 or older).
- For those who are self employed, the same limits apply.
- STS taxpayers are now known as Small Business Taxpayers (SBTs). SBTs also include taxpayers with an annual turnover under $2,000,000. As we have previously highlighted, SBTs can claim a full deduction for any assets acquired costing less than $1,000 (meaning $1,100 including GST). That limit is $20,000 (excluding GST) for assets bought after 12th May.
- Furthermore, SBT taxpayers can claim half a year’s depreciation on acquired assets that cost more the above limits – even if the asset is purchased on the last day of the year.
- SBT taxpayers can also claim a full deduction for payments such as insurances, rent and the like which cost more than $1,000 even though the service period runs past 30th June and into the next financial year.
- For those of you who receive this e-mail that are employees or rental property owners, you can claim a complete write off for assets costing less than $300.
- If a property is jointly owned, then you can claim the full cost of assets costing less than $600 (meaning you claim less than the $300 limit each).
- Investors can claim prepayments in full. An investor with a property or share loan can claim a deduction for 12 months prepaid interest. Please note that the ATO requires that for the prepayment to be claimed, one must benefit through a lower interest rate (for which you need to keep proof).
- For those who have already generated a large capital gain, consideration should be given to selling other investments that have an unrealised capital loss. Those with no or minimal employer SGC support should consider making a deductible contribution into superannuation to offset the tax on the capital gain (but speak to us first).
- From 1st July 2004, persons under 65 no longer need to be working or have ceased employment within the last two years in order to make a deductible super contribution. Consequently, those with large incomes can greatly reduce their tax burden by putting monies into superannuation. With super pensions paid to those older than 60 now being tax free, the tax savings are greater than ever before.
- Please note that those over 65 but under 75 can only contribute into super only after they have satisfied a work test.
- If you are about to sell an asset which will generate a capital gain, consideration should be given to selling it after 30th June. This will defer the payment of any capital gains tax liability until after 30th June 2016.
We have considered these matters when undertaking your pre year end business reviews with our clients. However, do not hesitate to contact us should you wish to clarify any matter.
We take this opportunity to remind all employers to attend our HR Myths and Secrets seminar. There is much that most employers don’t know – sometimes at great cost when an employee or contractor makes a claim for unpaid entitlements (arguments which employers never win). I strongly encourage all employers to attend so that they can ensure that they are compliant and not an accident waiting to happen.
The $20,000 instant asset write-off now law
The tax bill tax which included the provisions for small businesses to be able to claim a full tax deduction for assets costing less than $20,000 was passed by the Senate on Monday 15th June.
So if your business does need a small asset, now is the perfect time to buy it.
But before doing so, please note 5 critical factors and considerations:-
- Only buy an asset you need. So if a company buys and asset for $11,000, it will get back $1,000 of GST and will have a tax deduction of $10,000. It will pay $3,000 less company income tax. It will still be $7,000 out of pocket.
- You need to elect or have previously elected to use the small business general pooling depreciation method. If not, the $20,000 provisions do not apply.
- Your small business must own the asset. It either needs to pay for it or finance it by a loan, hire purchase or by way of a chattel mortgage contract. Leased assets do not qualify for the write-off as one does not own the asset until the final payment is made or the lease contract is paid out early.
- If you trade-in an asset, it is the cost of the new asset that qualifies. So if your business buys a car for $30,000 and trades in an old car for $12,000, there is no entitlement as the cost of the new asset exceeds $20,000.
- The $20,000 refers to the GST exclusive price. If however, a business is not registered for GST, it is the cost of the asset including GST.
Please contact us if you have any questions.
At MRS, we will spend today planning for your success tomorrow.
Going overseas for a holiday?
Do you have any overseas trips planned?
If so, please take note of the following tips to make sure your trip doesn’t cost you more than it need to.
Some clients decide to cancel their private health insurance for the period they are overseas. This might save some premium but it can cost much more with the imposition of the Medicare Levy Surcharge (which is charged proportionally on the number of days for which private health insurance is not held at rates from 1% to 1.5% depending one’s level of income). This is subject to an income threshold of $90,000 for singles and $180,000 for couples (add $1,500 for every child after the first child).
Senior Health Concession Card holders also need to be aware that they will have their card cancelled when they are overseas for more than six weeks. This happens automatically as the Passport Control pass on their data to Centrelink.
Or perhaps your kids are going off to explore the world for a year. The trip could cost them less of they go at the right time. If they left in July and returned in June, then they would have a year with no income and waste the tax free threshold of $18,200. If they leave in January and return in December, they will be able to use two tax free thresholds and not leave the first tax bracket in either year. If your child is earning $50,000, leaving in January rather July will save them almost $7,000.