Posts Categorized: Tax

Deadlines for Sep 15 quarter

For those of you who are employers, Wednesday 28th October is the end date for satisfying your SGC super obligation for the September quarter.  Late payments will attract substantial interest and penalties.  Consequently, SGC super should never be paid late.  In the past, payments made even a day late had to be paid directly to the ATO.  Now payments up to a month late can still be made to employees’ super funds.  Payments made more than one month in arrears must be paid to the ATO.  BAS’s and SGC liabilities that remain unreported and unpaid after 3 months automatically become personal debts of directors.

As per earlier reminders, the SGC rate increased from 9.25% to 9.50% as from 1st July 2014.  Please ensure that your system is calculating the SGC at this slightly higher new rate as we have found some clients have still been using the previous rate.

For those who lodge a quarterly BAS, your September quarter BAS is due for lodgement by Wednesday 28th October.  However, you will have to Wednesday 11th November if you are a registered user of the Tax Office’s Taxpayer Portal.  As per our June 2014 edition of Tips & Traps, we encourage you to register for the ATO Taxpayer Portal if you have not done so already; particularly as no further paper activity statements will be issued when an activity statement has been lodged electronically after 30th June 2014.

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

The 10 benefits of cloud accounting

One seemingly today can’t spend five minutes without hearing about cloud services and, in particular, cloud accounting packages.

However, we believe that there are now compelling reasons as to why most businesses should upgrade to a cloud-based solution if they have not done so already (please note the use of the words solution rather than version and most but not all clients).

Here are our top 10 benefits of using cloud accounting:-

  1. You can access your numbers anytime from anywhere and do so easily. So can we.  So can your bookkeeper.  So can someone else in another store.  So can anyone else that you need or wish to give access to.  Access can be granted with differing rights to access certain areas and perform various functions (such as access payroll records and generate a profit and loss).
  2. You can issue invoices from anywhere at anytime, even from a tablet or mobile.  No more waiting until you get back to the office.  You might even be able to speed up your cash flow by taking payments on the go.
  3. The three big players in this space, Xero, MYOB and Reckon Hosted (QuickBooks), all include the option to automatically upload bank transactions.  You don’t have to, but it does save time.  The first time a payee name appears in a data feed, you assign an account to it – so, for example, the first time Maggs Reid Stewart appears, you link our name to accounting fees.  Thereafter, Maggs Reid Stewart is automatically posted to accounting fees unless you otherwise edit the transaction.  As you can imagine, data entry progressively takes less and less time and it is for this reason that there are a lot of good bookkeepers out there scratching for work.  The fees for these bank transaction data feeds are now very reasonable.  So the benefit to you is that you either pay your bookkeeper less or spend less time yourself bent over the keyboard.
  4. With automatic bank feeds, it becomes much easier to keep your numbers up-to-date.  Remember that old saying – what you can measure you can manage (and by extension, what you can manage you can control and what you can control gets done).  You will have the power to know what is happening in your business at all times.  The days of business owners being in the dark as to their true situation until a Tax Return is prepared some time after 30th June should, finally, be a thing of the past.
  5. As multiple people can access the same file, gone will be the common problem of the client, the bookkeeper and the accountant all wanting to work on the file at the same time yet only one having the current file at any one time.  No more re-entering invoices, no more incorrect restores, no more avoidable time wasting, no more wasted and costly time in delivering or collecting a back-up of a desktop file and other such annoying problems.
  6. It is sometimes months after year end before we finalise a client’s financials (we only have two arms so we can’t finalise them all in July).  Cloud accounting packages allow us to access a client file at all times.  The closer we are to the time of each transaction, the greater value we can be to our clients.
  7. You don’t have to load upgrades to the software – it is done for you.
  8. No more version control problems between a client and their accountant.
  9. We have for some years used programs such as LogMeIn to access clients’ computers remotely whether that be to obtain reports, fix problems, etc.  Those remote access programs are comparatively cumbersome.  With cloud based programs, we can just login once you have set us up as a user.  We can then answer your queries far more quickly and efficiently.
  10. When up and running and used properly, cloud accounting should reduce accounting fees and, more importantly, enable us to provide a better service.

Is cloud accounting the way to go for your business.  And if so, which program will better suit your needs?  Call us fro a free initial meeting to discuss your business and its needs.

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

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:-

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.

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:-

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.

Small business CGT concessions

One of the pleasing announcements within the 2015 Budget was the proposal that a small business be able to restructure itself without any Capital Gains Tax (CGT) implications.

This is particularly important for start-up businesses.  Even with the best made plans, the performance of new business can prove to be way above or way below expectations.  It is therefore quite common to find that the initial structure is no longer beneficial.  This new proposal gives the option to ensure that the initial structure does not prove to be detrimental.  Please note though that stamp duty and other charges may be incurred in a restructure.

Budgets are notoriously thin on detail; this one in particular.  There are many definitions of a small business within the Tax Act and we await to see how a small business will be defined for this proposal.  That said, we expect that it will follow the most common definition being turnover of $2 million in the current or previous financial year.

What most people don’t know though is that there are already four Small Business CGT concessions which can be used where a business is being sold.  These concessions, either defer, reduce or eliminate any tax liability.  They can also be used to restructure.  These four concessions can be used by businesses with turnover in excess of $2 million provided the net asset value of the entity concerned, and anything else connected with it, is less than $6 million.

The Small Business CGT concession laws are quite complex.  Furthermore, they are a key ATO audit area.  It is therefore essential to ensure that all the T’s are crossed and the I’s are dotted when using any of these concessions.

Does your existing structure work for you?

We welcome the opportunity to discuss what you may be able to do in an obligation free first meeting.  Why not give us a call today to make an appointment.

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

Dividends v wages – a new ball game

We often recommend to our small and medium sized business clients with largish retained profits to cease paying wages and to pay dividends instead.

To pick some round numbers, a $7,000 net salary will require say $3,000 of tax to be paid thereon AND WorkCover AND may be Pay-roll Tax as well.  Of course, there is also 9.5% SG super but that is not a bad thing.  So the cost of getting $7,000 into a working shareholder’s hands is often close to or even exceeds $12,000.

This is a costly way of remunerating oneself when a company has large retained profits.  In Victoria, there is no WorkCover or Pay-roll Tax on dividends.  And as a franked dividend is using the credits from tax already paid, the cost of getting $7,000 into a shareholder’s name is just $7,000.

It is important to note though that whilst the company can save up to $5,000 in immediate cash flow by paying a dividend instead of a wage, the company will have a greater profit in the current year as it has less deductible wages.  It will therefore pay more income tax in arrears.  For someone approaching retirement this can lead to other tax and cash flow advantages.

In the 2015 Federal Budget, it was not only announced that the Company tax rate will fall to 28.5% but that the dividend franking credits would remain at 30%.  So in my example above, you can add another $150 saving to receiving dividends over wages.

So what’s best for you?  Ask us.

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