Posts Categorized: Tax

2018 Company Tax rate

At last we know what the 2018 Company Tax rate will be for small and medium size businesses!  So whilst the House of Reps was in uproar today, at least the Senate did something.

What a joke it is that only now do we know with certainty what tax rate applies from 1st July 2017.

Finally we can finalise Tax Returns with certainty!

If you would like to read more about this, please refer to our August edition of Tips & Traps.

 

Pay-roll Tax and the danger of grouping provisions

It is now time for Victorian employers to lodge their annual Pay-roll Tax declaration. One of the dangers of Pay-roll Tax is not complying with grouping provisions.

The grouping provisions assess a number of employers against the remuneration threshold (now $650,000). Remuneration in excess of that threshold is subject to Pay-roll Tax at 4.85%.

Employers can be assessed as a group where:-

  • There is common ownership and control, or
  • Where an employer performs duties for another business.

The latter one is commonly misunderstood. Having a larger business answer the phone of a smaller business (with unrelated owners) for 30 minutes over lunchtime can be enough to treat a business as grouped.  So it could be that a small business with remuneration of only $100,000 has to pay Pay-roll Tax of $4,850 for the sake of 2 ½ hours a week of phone minding.  A phone answering machine or service would seem to make more sense!

If you would like to know more about grouping, you can go to:-

https://www.sro.vic.gov.au/grouping

You can also watch the Victorian State Revenue Office’s video on grouping at:-

https://www.sro.vic.gov.au/videos/payroll-tax-grouping-provisions-webinar

With we welcome any question you may have in respect of this or any other employment related matter.

Last minute tax saving tips

 

 

 

 

 

Are you a business owner who wants to legally minimise your tax? Or perhaps you’re an individual who wishes to legally minimise your tax?  Our June edition of Tips and Traps (being our monthly newsletter) explored last-minute tax saving tips.

If you would like a copy that newsletter setting out those tax savings tips then please email admin@mrsaccountants.com.au

We have a thorough tax planning process to ensure clients avoid pitfalls and take advantage of any opportunity that is legally available. Our process is to:-

  • Review year-to-date numbers to the end of May.
  • Understand what may have happened or will happen during June.
  • Run through our seven page tax planning checklist.
  • Identify all opportunities.
  • Identify pitfalls that may require corrective action either now or shortly after year-end.
  • Set out our recommendations in a clear and concise report. That report also addresses the timing the future payments or refunds.
  • Discuss those recommendations with you in either a face to face or Skype meeting.

The end result to you is that you:-

  • Are left in the best position.
  • Have our advice presented to you in an understandable report (backed up with a discussion).
  • Know the timing of your future tax payments – and are not left with any shocks when the Tax Returns are finalised.

Today, our process and tax savings tips have saved our clients over $400,000.  This doesn’t take into account the value of other advice given throughout the year.

If you feel that your accountant is just filling in your Tax Returns and not looking after your long-term interests, then call Alex Stewart on 03 9899 7511. Our initial meeting is free of cost of obligation so you have nothing to lose (and maybe a lot to gain).

How do you find lost super?

The ATO has reported that at 30th June 2017, there was $18,000,000,000 of lost super within 6,300,000 lost super accounts.  That’s an average of almost $3,000 per account!  So how do you find lost super?

Whilst super funds hold lost uncontactable and lost inactive accounts, the ATO holds unclaimed super monies.

You currently have two ways to find lost super:-

  1. Complete and send off the Searching for Lost Super form – which you can access at https://www.ato.gov.au/Forms/Searching-for-lost-super/
  2. Log into your or open a myGov account – https://my.gov.au/LoginServices/main/login?execution=e1s1

Most of these unclaimed super accounts tend to belong to younger people. Perhaps you may wish to check whether your kids know where all their super is.  Or perhaps they should just lodge an enquiry anyway – they have nothing to lose and the application won’t cost anything.

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

 

Downsizing the family home

In our 2017 Federal Budget briefing party, we outlined the proposed downsizing the family home super concession. The proposal is designed to increase housing stock by encouraging retirees to move out of their family home earlier than they may otherwise do.

The intention is that from 1st July 2018, those aged over 65 can take up to $300,000 and contribute it into super (where the tax rate is lower than the first personal marginal tax rate).  There is no maximum age limit and no work test need be satisfied.  Any such contribution is non-concessional (meaning it is not a taxable contribution).  It also doesn’t count against one’s non-concessional contribution limit.

Couples can both utilise this even where a property is only one person’s name.  This means that a couple can contribute up to $600,000 between themselves.

However, it seems as though the Greens and Labour are against this initiative. We will keep you posted of whether this proposal is legislated and in what form with all of the conditions.  We also remind you that the proposed start date is still seven months away.

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

Estate planning lessons

Last Wednesday, we ran a seminar which explored estate planning, at home aged care solutions, ways to deal with family members suffering from dementia and the various types super death benefit nominations. We had an almost full house despite the stormy weather and despite the fact that we last ran an estate planning seminar just two years ago.  We are so pleased that so many saw the wisdom to learn, and for some, re-visit key estate planning lessons.

Simply put, estate planning is the process of ensuring that the right assets get to the right people in the most efficient manner.

This process requires the consideration of both state and federal laws (such as Capital Gains Tax).

The process also considers that the following assets which must be addressed separately as they do not come into an estate and therefore cannot be dealt with by a will:-
  • Jointly owned assets.
  • Assets held within a discretionary trust.
  • Superannuation (unless addressed via a death benefit nomination).
  • The beneficial owner of a life insurance policy.

Although a will is usually the main estate planning tool, it is just one of many estate planning tools.

Sadly, less than half of the population have a will; these people are said to die intestate. I say sad as intestate provisions, even with upcoming changes to the way default provisions will distributes assets, rarely deliver anything close to an optimum outcome.

It is my personal belief that one has a moral obligation to ensure one has an effective will as:-

  • Those left behind at a time of grieving prefer to have a set of instructions to follow. They also prefer not to second guess what you would have preferred.
  • It prevents disputes. I know of cases where improper estate planning has ended in court costs of over $300,000. One should also read this as years of delay and family members that no longer speak to each other.
  • It ensures family complexities are best handled such as second marriages, kids getting divorced or having addictions such as drugs, spending or gambling as well as protecting inheritances being claimed by business creditors.
  • It greatly diminishes the likelihood that someone will be able to contest an estate.

Estate planning is your opportunity to ensure your life’s work, sacrifice and your intended legacy is carried out.   The more complicated your structure, the more professional assistance you will require from lawyers, accountants and financial planners.  It may cost money to properly implement but it can save a great deal more in the long run.  And it is the right thing to do.

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

$20,000 asset write-off

The $20,000 asset write-off is due to end on 30th June 2018.  Thereafter, small businesses will return to the old system of only being able to write-off the cost of an asset costing less than $1,000.

June will soon be here so best to start planning as to what you need to buy. Best also to keep out an eye for any specials in the meantime.

And don’t leave it too late. There will no doubt be a rush in June and perhaps there might some inflated prices for some assets as there was in 2009 with the 50% investment allowance.  There are also other traps to be aware of.

Won’t to know more? Then go to our previous blogs at:-

http://www.mrsaccountants.com.au/20000-asset-write-off/

and

http://www.mrsaccountants.com.au/20000-asset-write-off-part-2/

We will also be happy to answer any questions you may have. Call us on 9899-7511.

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

 

17 things you must have addressed

So what are the 17 things you must have addressed?

As Benjamin Franklin once rightly noted, the only things certain in life are death and taxes. We most certainly help all of your client with the second matter. We also do our best to guide clients to undertake proper estate planning as it is something that will eventually affect everyone..

Simply put, estate planning is the process of ensuring that the right assets get to the right people in the most efficient manner.  It requires thought and consultation.

So, will your estate planning ensure the best outcomes?

If you haven’t addressed the following points, then your estate planning is likely to lead to less than optimal outcomes, possible disputes and be more financially and emotionally costly to administer.

So have you understood and considered:-

  1. My Will still reflects my wishes and considers my current assets, extended family and any entities that I have established or control.
  2. I have taken steps to prevent inheritances falling into other people’s hands due to divorce, bankruptcy, drug and gambling debts.
  3. Everyone knows where my Will is.
  4. There is proof that my last Will was written at a time when I had the mental capacity to make such decisions.
  5. I have clearly set out which personal items and family heirlooms are to be left to whom.
  6. Dying intestate (without a Will) really does matter as it rarely provides an optimal outcome.
  7. I still wish that my named executor/executrix is to administer my estate.  Are they still alive?  Are they capable of administering the complexities of my estate?  Are they still living in my home town?  Do they know they are the named executor/executrix?  What if they reject the appointment?
  8. I understood and have considered all Capital Gains Tax implications including utilising existing capital losses which may otherwise be lost.
  9. I understand that a Will dictates what happens to assets that are owned by an individual.  I therefore understand that assets owned jointly as joint tenants, the owner of life insurance policies and my superannuation cannot be dealt with by my Will.
So want to know what the other 8 matters are? You can check back for Part 2 to this blog topic or attend our upcoming seminar.

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

 

How do you claim your mobile and internet costs?

So how do you claim your mobile and internet costs? You have to be careful as the ATO is quite strict.  In fact they are even more onerous than for car claims.

Any expenditure is deductible:-

  • To the extent that it relates to earning income, and
  • Can be proved (or in ATO language, can be substantiated).

So how do you substantiate mobile and internet deductions?

  1. There is a safe harbour method for phone claims. Under this method, you can make an estimate if your phone claim is less than $50 and is based off rates of 25c for calls from landlines, 75c from mobiles and 10c for texts.
  2. Where phone and internet usage is itemised on a bill, then you can claim a % based off a 4 week analysis of your bills. Identifying work calls is easy. What isn’t so easy is analysing the data downloaded as a percentage of total downloads.
  3. Where usage is not identified on a bill(s), you need to keep a register for 4 weeks.

One could argue that this too onerous as one can keep a log book for a car in one year and use it for as many as the next four years – provided there has been no major change in the pattern of ravel such as change of job and house. But we don’t write the rules – it is our duty to explain them to you so that you can legally claim everything you are entitled to.

So what if you have a bundled plan? The ATO requires apportionment determined by:-

  • A supplier’s breakdown,
  • Based on the relative cost if they were purchased separately, or
  • A breakdown based off a comparable supplier.

In addition to keeping bills and diary records, it is also advisable to keep any acknowledgment from your employer. As a side issue, the ATO has taken the approach with travel claims to contact a taxpayer’s employer directly asking them whether there was a legitimate and deductible approved trip.

It doesn’t matter how genuine your claim may be, if you can’t substantiate it, the ATO will deny the claim (and possibly charge both interest and penalties).

Please e-mail accountants@mrsaccountants.com.au if you need a diary record register and declaration to evidence your phone and internet claims.

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

PAYG Instalments options

PAYG Instalments are income tax payments paid during the year by companies, super funds and individuals.  In respect of individuals, it is levied on income not taxed upon receipt with common examples being interest, dividends and trust distributions.  It is not assessed on wages or capital gains.  With the September BAS being the first one for the year, one can choose how to calculate your PAYG Instalments.

We usually prefer that clients use the instalment amount method.  In the majority of cases, it will not result in an over-payment that can so often arise under the instalment rate method.

In some cases though, the % rate method may enable one to pay a lesser amount.  If the instalment income is nil or negligible in the first couple of quarters or much less than the year before, then no or little tax will be paid.  A significant payment will only be required at such time as income is received.

It is critical with PAYG Instalments (and indeed GST Instalments) that any downwards or indeed upwards variation be made cautiously.  If a variation results in the instalments paid being 15% less than the actual liability then the ATO will issue a fine.

Please do not hesitate to call us should you wish to discuss your own situation.

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