Posts Categorized: News
Pay tax and earn frequent flyer points
In our September edition of Tips & Traps (*) we explored the ability to maximise your frequent flyer points from using a credit card (wisely).
Another way to maximise your points is to pay your business or personal tax debts by credit card. Whilst the ATO do charge credit card payment fees, they are the same that they are charged by the various card providers. As such, the rates charged are very low.
You can pay by credit card by:-
- Calling the ATO on 1300 898 089.
- Individuals can pay on-line at http://tinyurl.com/p8uyft5
- Businesses can pay on-line at my Gov at http://tinyurl.com/qck48u6
At MRS, we will spend today planning for your success tomorrow.
(*) Tips and Traps is a free quarterly newsletter issued to our business clients full of, as the name suggests, tips and traps. Please call Alex Stewart if you would like to be added to the mailing list.
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…
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.
Employer reporting obligations for June 2015
For those of you who are employers, Tuesday 28th July is the end date for satisfying your SGC super obligation for the June 2015 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 Tuesday 21st July.
For those who lodge a quarterly BAS or IAS, your June quarter activity statement is due to be lodged by Tuesday 28th July (but 25th 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 $170 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.
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.
WorkCover finally saw sense a few years ago and now issue staggered lodgement dates for the annual Certificate of Rateable Remuneration. This Certificate advises WorkCover of the exact remuneration for the prior year which triggers a reconciliation process against premiums paid during the 2014/15 year. The Certificate also serves to advise the expected remuneration for the forthcoming 2015/16 year. Non-lodgement may result in an excess assessment as their default assessment may increase remuneration by some 20%. Employers with a March 2016 lodgement date who expect to have lower remuneration in 2015/16 will need to lodge their 2015 Certificate before the end of August to ensure that are not levied an excessive premium in 2015/16. Please contact us should you have any queries or require assistance.
The government had previously scheduled the introduction of the Single Touch Payroll (STP) reporting for all employers on an progressive basis from July 2016 (with all employers required to adhere to electronic notification by July 2018). They have deferred the first introduction date of July 2016 as they now (finally) understand that businesses are largely unprepared for such a system and the associated costs. Under this system, each payment to each employee will be reported to the ATO at the time of payment (including super thereon). We had been developing package to our clients who would have been unable or not willing to attend to this real time reporting but will now defer any further action until we have a concrete start date.
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.
The $20,000 instant asset write-off
It’s still not law.
That said, the Labour Party has given their consent to it and the bill passed the Lower House of Parliament at the end of last week. Hopefully the Senate will see fit to pass it.
I therefore now take this opportunity before year end to set out our understanding of how this will work.
What is it
- A small business buying an asset to use in its business will be able to claim the full cost of that asset as a tax deduction provided the asset itself costs less than $20,000.
It appears to be available to
- Small businesses only.
- It appears that a small businesses will be defined as one with turnover under $2,000,000 (excluding GST) in either the current or preceding year. Under this definition, it doesn’t matter if the current year’s turnover is $5,000,000 provided the previous year’s turnover was under $2,000,000. Please note that this is the expected definition of a small business being the core definition – there are other definitions of a small business within the Tax Act for different provisions therein.
- The turnover of related entities will be taken into account for the purposes of the $2,000,000 turnover threshold.
- Assets costing less than $20,000 (excluding GST).
- If your business is not registered for GST then the cost limit appears to be $20,000 including GST.
- It appears not to matter whether the asset is new or second hand.
Things to watch out for and to take advantage of
- The cost of the asset must be under $20,000 (excluding GST). So, if one buys a new car for $25,000 ex GST and gets a trade-in of $6,000 for an old vehicle, then one will not be entitled to claim the full cost of the deduction – one’s entitlement is measured solely against the cost of the acquired asset itself.
- If an asset is used partly for business and partly for private purposes (like a passenger car or laptop computer) then only the business portion can be claimed as a deduction.
- The benefit is the cost of the asset which can be claimed as an expense. So, for a company, the saving on the purchase of a $10,000 asset (excluding GST) is $3,000 of tax that would otherwise be paid.
- If an entity has current year and/or carried forward losses in excess of the cost of the asset(s) acquired then there will be no tax benefit in the current year.
- The asset must be acquired and installed ready to use by the end of the year for a tax deduction to be claimed in this financial year. A simple order cannot be deducted nor can an asset that has yet to be installed ready and available for use.
- Please consider whether you really need the asset. In the case of an asset costing $10,000, the best result is that a company saves $3,000 in tax; it is still $7,000 out of pocket.
- If you really need to buy an asset costing less than $20,000 (excluding GST) now is the time to do so.
- Be careful not to spend too much to the detriment to your cash flow. It may be best to consider finance.
- Don’t lease an asset though. A lease is a rental contract. As such, one is not the owner of a leased asset until the last payment is made or the contract is paid out early. Under hire purchase or chattel mortgage contracts though, one is the owner of the asset from day one.
- The $20,000 limit applies to each individual asset; like or similar items need not be grouped. A small business can claim a $40,000 deduction should it see fit to buy 20 $2,000 lap-tops.
Thinking of buying a new car? Click on the following link to an article in last week’s Age which listed cars under $20,000.
http://www.theage.com.au/drive/motor-news/feature-20000-tax-bargains-20150602-ghf2xi.html
So, if you really need an asset for your business, now is the time to buy it if you are a small business. Even if these laws aren’t passed, a small business under current laws will be able to claim 15% deprecation in this financial year even if an asset is bought in the last week of June with a further 30% deduction of the residual balance in 2015/16. On the other hand, an asset bought in July 2015 will only result in a 15% deduction for the whole of the 2015/16 year.
Please call us should you wish to discuss your situation at greater length.
At MRS, we will spend today planning for your future success.