Posts Categorized: Tax

ATO’s Taxable Payments Annual Report

28th August is the end date for lodging the ATO’s Taxable Payments Annual Report.  This form requires those businesses within the building and construction industry to report all payments to contractors within the building and construction industry.

Building and constructions includes more services than one might think as evidenced by the following link – http://tinyurl.com/y7hrnfxm

You need a good accounting system to simplify the reporting as you need to report the following for each contractor:-

  • Name
  • ABN
  • Address
  • Gross payment including GST as well as the total GST amount. It is important to note that for those who run an accrual accounting system, reporting is based not off the date of the contractor invoices, but they year in which they are paid.

If you are struggling with this reporting requirement, we would be happy to help you or refer you to a good book-keeper.

So what to the ATO do with all this data? They crossmatch all payments reported to each business within the building construction industry to their reported income.  The ATO had a field day some years ago with a pilot program of plasterers within the Hunter Valley.  Obviously it is paying dividends if the ATO still requires this reporting.

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

Small business tax breaks

Now that a small business is defined by the ATO as one with group turnover under $10,000,000, there are many more businesses that can avail themselves of the many and valuable small business tax breaks.

The tax breaks can be summarised as follows:-

  • A company tax rate of 27.5%. Please note that companies with non-business income (that is “passive” income from investments, rents and trust distributions) will continue to pay company tax at 30%. Please also note though that small businesses will only be able to frank dividends at 27.5% so any tax saving is short lived if most profits are paid out as dividends.
  • The Small Business Income Tax Offset of up to $1,000 for non-corporate businesses (that is sole traders or those who receive a share of partnership or trust business income).
  • The choice to use the simplified depreciation rules. This is important for those businesses who wish to purchase assets costing less than $20,000 (ex GST) before July 2018. Please see our past blogs for further details.
  • The choice to use a simplified trading stock rules under which one can estimate their stock if they believe it is not changed by more than $5,000 (which probably means you need to do a stock take anyway).
  • The ability to claim prepayments (such as insurance and prepayments rents & interest).
  • 100% write-off of start-up expenses.
  • The ability to elect to pay GST on a cash basis.
  • The option to pay fixed dollar instalment amounts of GST.
  • The option to pay fixed dollar amounts of PAYG Instalments.
  • Access to the FBT car parking exemption.
  • The ability to provide employees with multiple work related portable electronic devices (lap-tops, tablets, calculators, GPS navigation receivers and mobiles) within the one year and free of FBT.
  • The ability to use the free ATO Small Business Superannuation Clearing House.
  • The ability to restructure under the new small business CGT restructure rollover relief provisions. Please note though that the small business CGT concessions are still only available to those businesses with group turnover under $2,000,000 and/or net asset value under $6,000,000.

So what does this mean to you?

It depends on what you are trying to achieve. There are occasions where we have and haven’t used these rules depending on the short and/or long-term benefits to our clients.  Grabbing at shiny red apples hanging on a tree is no substitute for proper planning.  We address these opportunities throughout the year, particularly so when undertaking pre year end tax planning review of our clients.

If this is all news to you then you should be looking  for a new accountant.  We welcome your call.

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

A welcome change to super

There has been a welcome change to super. Without going through all the rules and a carve out, there was a basic prohibition against employees obtaining a tax deduction for personal contributions into super.  However, from July an employee can claim a deduction for personal super contributions (and the 10% rule has been removed).

How will this work? Say Fred is employed by Turnbull Wind Farms Pty Ltd.  If Fred’s salary was $100,000 the SG super thereon would be $9,500.  Fred could make a personal contribution of up to $15,500 so that he uses all of his $25,000 concessional contribution cap.

A word of warning though – the $25,000 is measured on contributions received by your super fund.  As such, one needs to be aware of contributions for the June 2017 quarter which can legally be paid as late as 28th July 2017 and/or whether an employer has changed from making contributions at the end of each quarter to doing so on a monthly basis.  You need to check with your super fund before making any final contribution(s) as you might be closer to your contribution cap thank you think.

In Fred’s case, he may not need the last $15,500 of income. Paid as a salary, it is subject to tax and Medicare Levy of 39% whereas the tax on the super contribution would only be 15%.  Fred will save tax of $3,720 by making a personal contribution.

So those who will benefit from this welcome change include:-

  • Those whose employer who won’t allow an employee to salary sacrifice into super. You would be surprised how common this is.
  • Those whose employer legally follows the book and bases SG super off the after super salary sacrifice pay. This too is surprisingly common.
  • Those employers who charge through a packaging provider for a super salary sacrifice arrangement.
  • Where a client could better use the cash during the year and only make a contribution at year end.
  • An employee of one’s business who doesn’t wish to incur WorkCover and Pay-roll Tax on employer contributions in excess of SG super.There have been some other welcome changes to super which will outline in future weekly blogs.The removal of the basic prohibition against employees obtaining a tax deduction for personal contributions into super is a welcome change .

There have been some other welcome changes to super which will outline in future weekly blogs.

What should you do? You should discuss your situation, needs and goals with a financial planner to ensure making a personal super contribution is in your best all round interests.

How much do you need to retire with?

How much do you need to retire with? It is a question that many think about without ever really doing anything about it.

So how much do you need?

The Association of Superannuation Funds of Australia (AFSA) releases quarterly moderate and comfortable living expenses for both singles and couples. In its latest release, it has measured that a single person requires $43,655 and a couple $59,971 to fund a comfortable retirement.

So much do you need to have invested to generate at least that level of income? For a couple earning an average of 6% (including franking credits & capital gains net of tax), they will need approximately $1,000,000.  However, if a couple invests only in term deposits earning 2.5%, then assuming an average tax rate of 15%, they will need more than $2,800,000.

It is becoming a more important question as the population ages and consecutive governments struggle with funding the age pension. I was born in the early 60’s when there was 7 people working for every age pensioner.  Today there are only 4.5 workers funding every age pensioner.  Even more alarming are the predictions that there will be only 2 & 1/3rd workers supporting every age pensioner.  Do you think the amount of the age pension and the levels at which one becomes entitled are going to rise or fall? 

And then there is longevity risk. We are living longer than our parents and grand parents – meaning our investment capital has to last longer.

So what are you going to do?  Speak to a financial planner.  A financial planer will take into account your needs, wants & resources and then advise you what is best for you in terms of the best tax structures, strategies and investments (notice that investments is listed last as it is my experience that strategy, structure and the way and timing as to how they are implemented usually delivers greater results and savings than the investment themselves). 

As accountants, we are prohibited from providing this service to you – but our separate financial planning firm can.  Why not call them today.

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

 

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.

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.