Posts Categorized: Tips of the week

Tips and traps in the 2024 Federal Budget

So for the second year in a row we have a Federal Budget with few announcements and therein little of significance.  That said, there are a number of matters not publicly discussed within the Budget which need to be considered.

The following examination of the 2024/25 Federal Budget is not a full analysis of all announcements within the Federal Budget.  Rather this Tips & Traps edition is limited to exploring those matters of relevance to our clients.  Please refer to the Budget paper we issued last Wednesday for all announcements.

 

 

INDIVIDUALS

Revised Stage 3 tax cuts
Further to their revised policy announced earlier in the year, the revised Stage 3 tax cuts will take effect from 1st July 2024 with changes marked in yellow.

 

 

For employees, correspondingly less tax will be deducted from pay packets.  And those paying PAYG Instalments will see those instalments reduced as from the September 2024 quarter activity statement.

$300 energy rebate

All households will receive a $300 reduction in their electricity bills.  This will be passed on by electricity suppliers (who need to amend their systems) in the form of 4 quarterly $75 credits.  The $300 is not income tested.  Furthermore, as the grant is to be applied to every household – so those who own a holiday home will receive $600.

HELP indexation

As previously announced, with effect from 1st June 2023, HELP debts will be indexed by the lower of CPI or Wage Price Index.

This will reduce last year’s indexation from 7.1% to 3.2% and reduce next month’s indexation from 4.7% to about 4%.

TIP     With both these indices running now at high levels, those soon to clear their remaining HELP debt should consider paying it out before 1st June 2024.

Centrelink deeming

The current deeming rate will be frozen for another 12 months.

 

 

 BUSINESSES

$325 energy rebate

Similar to the household rebate, small businesses will receive $325 off the next year’s electricity bills.  A qualifying small business will be one that:-

  • Has a turnover (gross income) of less than $10,000,000 (but it is unclear how an electricity company will know whether to apply the grant or not) and
  • Have annual electrical consumption under 40 MWh.  It is unclear why small businesses with greater consumption (manufacturers and the like) won’t receive a benefit.

$20,000 asset write-off

The $20,000 asset write-off will be extended for another 12 months from 1st July 2024 for small businesses with turnover under $10,000,000.

That said, the bill to extend the $20,000 write-off for this financial year ending 30th June 2024 has yet to be passed.  As annoying as that is, it must also be said there are two proposed amendments – to increase that limit to $30,000 for this 2023/24 year and be extended to businesses with annual group turnover under $50,000,000.

TIP     The $20,000 is the ex GST amount.

TRAP           An asset costing more than $20,000 is subject to depreciation under the Simplified Tax System – 15% in the year of acquisition followed by 30% of the remaining balance in following years.

TIP     If you are thinking of buying a $40,000 asset you need for your business and the price is good, buy it before July – that way your business can claim 15% in this tax year (even though owned for a few weeks) and the 30% of the residual 85%.  So your business is able to claim $16,200 of depreciation in the first 54 weeks of ownership – but only $6,000 if bought in the first week of July.

TIP     The asset must be installed ready for use by 30th June 2024.

TIP     There is no grouping of like items – your business could claim the cost of 30 lap-tops costing $1,500 each.

TRAP           The write-off threshold is set to return to $1,000 from 1st July 2025 – but history has shown that both left and right wing governments love to extend it.

Retaining BAS refunds

The period in which the ATO can retain a BAS refund will be increased from 14 to 30 days.  As unwelcome as that sounds, the reality is that it gives the ATO a better opportunity to detect fraud (and therefore protect the public purse).

Building cyber resilience for small business

I remain sceptical about the millions spent within Canberra on committees and reviews staffed by bureaucrats without any real input sought from industry bodies and small businesses.  But it is pleasing to see 3 announcements in respect of cyber protection:-

  • Cyber wardens to provide free on-line training.
  • The introduction of a Small Business Cyber Resilience Service to both help small businesses build their cyber resilience and moreover provide support in response to a cyber incident.
  • The introduction of an online Cyber Health Check so small businesses can self assess their situation and exposure.

TIP     Upcoming government support should not let you decide to deal with this later.  And in particular, seriously consider adding cyber insurance cover to your existing business policy(ies).

TIP     The best policy is not the cheapest; the best policy is the one that will cover you for what you need when you need it.

Unpaid super entitlements on liquidation

Currently employee’s pay and leave entitlements are protected under a federal scheme.  That scheme however doesn’t extend to unpaid superannuation.  From 1st July 2024, directors of companies which have entered liquidation can be pursued for unpaid super.

ATO will cease chasing old tax debts

Out of the blue, the ATO started chasing old tax debts they had previously written off; debts that had long since been forgotten and did not show in either Tax Agent Portal or Taxpayer Portal.  Tax debts that had been “put on hold” before 1st January 2017 can no longer have a tax refund offset against those debts.

 

 

RECENT CHANGES NOT ANNOUNCED OR
NOT SUBJECT TO ANNOUNCEMENTS WITHIN THE BUDGET

Increase in super contribution limits

On-going indexation will see contribution limits increase from 1st July 2024:-

  • Concessional (deductible) – will increase from $27,500 to $30,000.
  • Non-concessional (non-deductible) – will increase from $110,000 to $120,000.

No increase in Transfer Balance Cap (TBC)

Indexation of the TBC (the maximum starting amount of any new super pensions) will not see an increase until 1st July 2025.  However, at that time, the $1,900,000 threshold could well be indexed to $2,100,000.

TIP     Those considering starting a super pension will need to receive financial planning advice to determine whether it is best to start a pension now, after June 2025 or sometime in between.

Pay day super payments

Quarterly super payments will soon be a thing of the past.  From 1st July 2026, super is to be paid to be paid on pay day.

TIP     All employers paying weekly should seriously switch to fortnightly pay runs.

Increase in SG % rate

From 1st July 2024, the SG contribution rate will increase from 11.0% to 11.5%.

TIP     Employers using common accounting software programs such as Xero, QuickBooks Online and MYOB on line versions need not do anything – those software programs will update the required SG %.

$3,000,000 super balance tax

The bill to introduce Division 296 which taxes the unrealised gains assets for super interests in excess of $3,000,000 is being considered by a Senate Committee and appears to be following party lines.

It is novel, unprecedented and in my mind an alarming development to tax the rise in value of assets that haven’t been sold.

But of more concern is that the $3,000,000 threshold will not be indexed.  This means that my daughter who has only recently started work will almost certainly breach the $3,000,000 threshold in her working life just based of employer SG contributions alone.  And she is nowhere near what a tradie earns; most tradies will breach the unindexed threshold way before age 65.

Some odd Budget facts

Here are some numbers of interest within the Budget

  • Net foreign liabilities as a % Gross Domestic Product          32.3%
  • Australia’s population                                                         26.8 million
  • Resources as a % of total exports                                        62.5%

 

 

CLOSING WORDS

There is comparatively less change to address as we enter the most important time of the year – pre year end tax planning.  We have a terrific and robust process to ensure you maximise your opportunities, have clarity of your future tax payments and attend to matters that require rectification.

This process will kick off at the end of the month.  We will be amending our pre year end tax planning checklist in response to the above budgetary matters and from what we learn at tax seminars in the weeks ahead.

Please ensure your accounting records are up to date so we can quickly and reliably predict your position and thereby enable us to identify opportunities and matters that require rectification.

We look forward to maximising your tax situation with you in the lead up to 30th June.

March super payment reminder

Friday 26th April is the end date for satisfying Super Guarantee (SG) super obligations for the March 2024 quarter.

But as super clearing houses may take up to 8 days to pass the money through to the super fund, it means that processing and payment to the clearing house should be made no later than Tuesday 16th April.

Please note the ATO’s Small Business Clearing House has a much shorter clearance period – read more at https://www.ato.gov.au/businesses-and-organisations/super-for-employers/paying-super-contributions/how-to-pay-super/small-business-superannuation-clearing-house/clearing-house-terms-and-conditions

And please make sure you have been calculating SG super at 11% since it increased on 1st July 2023.

We take the opportunity to remind you that SG super is payable on all forms of remuneration including:-

  • Commissions.
  • Bonuses (but see below).
  • Directors’ fees and all other forms of remuneration to directors.
  • Allowances (except where fully expended).
  • Individual contractor paid mainly for their labour.

But excluding the following forms of remuneration:-

  • Overtime.
  • Reimbursements.
  • Unused annual leave on termination.
  • Bonuses that are only in respect of overtime.
  • Bonuses that are ex-gratia but have nothing to do with hours worked (harder to satisfy than what you might think).
  • In respect of employees younger than 18.
  • Employees carrying our duties of a private or domestic nature for less than 30 hours in a week (such as nannies).
  • On quarterly remuneration greater than $62,270.
  • Non-residents performing work for an Australian business outside Australia.

SGC super should never be paid late as late payments attract substantial interest and penalties.  Furthermore, and SG (and BAS) liabilities that remain unreported and unpaid after 3 months automatically become personal debts of directors.

We welcome any question you might have.

 

SG deadline reminder for Dec 23 qtr

I trust you had an enjoyable festive season – but it is now time to focus on time critical obligations.  So here is a quick SG deadline reminder.

With the 28th falling on the weekend and the Australia Day public holiday on the 26th, Thursday 27th January is the end date for satisfying your Super Guarantee (SG) super obligations for the December 2023 quarter.

Please make sure you do not confuse this obligation with the December quarter BAS.  The December quarter BAS automatically has a one month extension to 28th February .  There are no extensions for reporting and payment of SG super.

Please note that super clearing houses can take up to 8 days to pass the money through to the super fund.  It therefore means that processing and payment to the clearing should be made as soon as possible.

And please make sure you have been calculating super at 11%% since it increased on 1st July 2023.

Please refer to our previous quarterly reminder as to what forms of remuneration are subject to and not subject to Superannuation Guarantee.

SG super should never be paid late as late payments attract substantial interest and penalties.  Furthermore, SG (and BAS) liabilities that remain unreported and unpaid after 3 months automatically can become personal debts of directors.

We welcome any questions you might have.

Christmas & tax (& FBT & GST)

Entertaining and providing gifts at Christmas time to staff, customers and suppliers is a cost of doing business.  However, there are some important FBT, GST and income tax considerations and outcomes to keep in mind.

As an employer, you need to be careful at what you provide at Christmas.  The rules are complex and the costs of getting it wrong can prove very expensive.

We will outline some of the more common scenarios and what to be careful of.

Under-pinning the implications are the following key points:-

  • Christmas parties, entertainment and gifts are all treated under entertainment tax rules.
  • FBT applies to benefits given to employees.
  • There are no FBT implications on entertainment and gifts given to customers, clients and suppliers.
  • A business can adopt one of three methods to quantify the taxable components of any entertainment expenditure – in fact there are 38 permutations depending on who is entertained where, how and with whom.  We will largely address the actual method which is the one used by most small businesses (as it usually results in the best outcome).  It is beyond the scope of this briefing to address the 12 week log method and we will only touch upon the 50/50 method where relevant.
  • Christmas comes but once a year and to the best of my knowledge and experience does so on 25th Nevertheless, the ATO treats Christmas parties and gifts as being what are called minor, infrequent and irregular benefits.
  • Such minor benefits are FBT exempt where they cost less than $300 (including GST) provided the actual method is used to quantify entertainment.

The Christmas party

Where entertainment is calculated under the actual expenditure method (which is the most common method for small businesses):-

  • A Christmas party is held on-site on a work day, the whole cost for each employee will be an exempt fringe benefit.  So too will the spouse’s cost provided the cost per spouse is less than $300.  No income tax deduction can be claimed for the cost of the party including that in respect of any family members that may attend.  Taxi travel to or from the workplace (not both ways) will be exempt from FBT and not tax deductible.
  • When a Christmas party is held off the work premises, then the whole cost will be exempt from FBT provided the party costs less than $300 per person (employees and their spouses).  No income tax deduction can be claimed for the cost of the party including that in respect of any family members that may attend.
  • If an external Christmas party costs more than $300 or more per person then the total cost is subject to FBT.
  • The cost of any entertainment provided during the party (whether that be at the work premises or outside) will be exempt if it costs less than $300 per head – for example a DJ, musician, clown and comedian.
  • The cost of entertaining clients, customers and suppliers is not subject to FBT and is not tax deductible.
  • Where any exemption is exceeded then FBT is payable.  Consequently, an FBT Tax Return must be lodged and FBT paid (the FBT tax rate being the same as the top marginal tax rate).  Please keep this in mind when completing the 2018/19 FBT Questionnaire in early April 2019.
  • All other entertainment during the year will be subject to FBT on a case by case basis.

 Where entertainment is calculated under the 50/50 method:-

  • 50% of the cost will be subject to FBT and this portion will be tax deductible.  The other 50% will not be subject to FBT and will not be tax deductible.  An FBT Tax Return must be lodged and FBT paid.
  • Only taxi travel from home to the venue will be FBT exempt and not deductible for tax.
  • 50% of all other entertainment during the year will be subject to FBT.

Gifts

The following gifts are exempt from FBT and are tax deductible:-

  • Hampers, bottles of wine, gift vouchers, a pen set costing less than $300 (inclusive of GST).

The following gifts are subject to FBT and are not tax deductible:-

  • Tickets to a sporting event or theatre, holiday, accommodation, etc.

The GST treatment of gifts is:-

  • That the GST component of any tax deductible portion can be claimed back.
  • But the GST component that relates to the non tax deductible portion can’t be claimed.

Please do not hesitate to call us should you have any queries.

 

Small businesses protection against unfair contract laws

Unfair contract laws to protect small businesses were introduced in 2016.  We are pleased to report that as of Thursday 9th November, they have substantially tightened.

One of the main changes is that fines can now be imposed against those enforcing unfair contract terms on small businesses.  Those fines are up to $2,500,000 for individuals and $50,000,000 for corporations.  Previously there were no fines.  Now these laws have some teeth!

Furthermore, a person who breaches the new rules can be disqualified from being a director for up to 6 years.

Following are some examples of unfair contract laws (where it gives one party but not the other):-

  • Vary the terms of a contract.
  • Terminate a contract.
  • Renew or not renew a contract.
  • Apply penalties to the other party for a breach of contract.
  • Vary the price payable without the other party having the right to terminate the contract.
  • Vary the characteristics of the contracted goods or services.
  • Restrict one party’s right to the sue the other party.
  • Another important change is the definition of a small business has been increased from 20 to 100 full and part time employees.

The somewhat recent small business protection now really has some teeth.  Moreover, it will act as a deterrent against those who have unfairly acted against small businesses in the past.

Please contact us if you would like a referral for a unfair contract matter to a qualified lawyer.

You can also read more at posts by ACCC and ASIC

SG super payment reminder

Friday 27th October is the end date for satisfying Super Guarantee (SG) super obligations for the September 2023 quarter.

But as super clearing houses may take up to 8 days to pass the money through to the super fund, it means that processing and payment to the clearing house should be made no later than this coming Wednesday.

And please make sure you have been calculating SG super at 11% since it increased on 1st July 2023.

And being the start of a new financial year, we take the opportunity to remind you that SG super is payable on all forms of remuneration including:-

  • Commissions.
  • Bonuses (but see below).
  • Directors’ fees and all other forms of remuneration to directors.
  • Allowances (except where fully expended).
  • Individual contractor paid mainly for their labour.

But excluding the following forms of remuneration:-

  • Overtime.
  • Reimbursements.
  • Unused annual leave on termination.
  • Bonuses that are only in respect of overtime.
  • Bonuses that are ex-gratia but have nothing to do with hours worked (harder to satisfy than what you might think).
  • In respect of employees younger than 18.
  • Employees carrying our duties of a private or domestic nature for less than 30 hours in a week (such as nannies).
  • On quarterly remuneration greater than $62,270.
  • Non-residents performing work for an Australian business outside Australia.

SGC super should never be paid late as late payments attract substantial interest and penalties.  Furthermore, and SG (and BAS) liabilities that remain unreported and unpaid after 3 months automatically become personal debts of directors.

We welcome any question you might have.

 

Two important WorkCover obligations

It’s a busy time of year and therefore timely to remind you of two important WorkCover obligations.

Injured at work posted

One of the fundamental WorkCover obligations is to display the If you are injured at work poster.

If a Victorian WorkCover official visits you then they ask to see it.  And you will be fined if you don’t have it displayed.

Please note that this poster is to be displayed at each work location.

If you don’t have a copy you can download a copy at – click here

If you employ workers (and some types of contractors) interstate then you will also need to comply with that state or territory’s obligations.

WorkCover remuneration certification

It may be time to complete your 2023 WorkCover remuneration certification.

Large employers are required to submit early.  Other employers have delayed lodgement dates. That said, it still may be in your interest to lodge soon.  This is particularly the case if your remuneration will be significantly less in 2023/24 than for 2022/23.

You will get back what you over pay based off their estimate; but why over pay in the first place.

You will also ensure it is lodged.  Many employers forget to lodge and suffer from WorkCover’s default 20% annual increase.  So get it done now when you have finalised and issued the PAYG Payment Summaries.

Casual employee obligations

Casual employee – probably the most misunderstood employment term!

Whether your employee is causal or not is a question of fact.  Yet stories abound about employers wrongly classifying employees as casual.  As soon as there is regularity of days and/or hours then they are not casual.  In particular, someone who works say Tuesdays, Thursdays and Fridays is not a casual employee; they are permanent part time.

So what is the risk of classifying someone incorrectly as a casual employee?

You might well have paid them a 25% loading – but if they go off to Fair Work Australia and win then you will have to pay leave entitlements on top of that 25%.

It may have been lost during covid, but employers are now required annually to offer casual employees full or part time work.  You can read more at – https://www.mrsaccountants.com.au/important-action-if-you-employ-casual-employees/

Employees have the right to request full or part time work.

Employers with more than 15 employees are required to:-

  • Offer casual conversion at least annually.
  • Make a written offer within 21 days of anniversary.
  • If not offering conversion, notify the employee within 21 days (including reason).

These requirements provide a clear framework for employers to adhere to.  Don’t expect to win any dispute if you have not followed these rules.

Please contact us if you would like a referral to an employment specialist.

Reminder about new home office deductions rules

We are returning to the important changes to home office deductions; in particular, how the ATO now requires you to prove the hours you have worked from home to continue to claim under the cents per hour / fixed rate method.

You need to comply with the new requirements in order to make a claim for this 2023/24 year. We cannot emphasise enough the requirement to keep actual records of all hours worked at home or have access to timesheets or roster records (if kept/accessible).

What are the key changes?

The ATO has re-set the rules for taxpayers who are working from home and wish to claim deductions based on either:

  • actual expenses, or
  • revised fix rate method of 67 cents per hour.

A key and indeed welcome change is that you do not need to have a separate home office or dedicated work area set aside in your home in order to rely on the fixed rate method.

Also, if more than one individual is working from home at the same time, each individual will be able to apply the fixed rate method if they each meet the requirements listed above.

To be eligible to claim tax deductions for working from home expenses, you must:

  • incur additional running expenses as a result of working from home
  • be working from home to fulfil your employment duties, not just completing minimal tasks
  • keep records at the time you work to prove you incur the cost.
Revised Fixed Rate Method

The revised fix rate method:

  • has increased from 52 cents to 67 cents per hour worked from home
  • removes the requirement to have a dedicated home office space
  • includes claims for:
    • data and internet
    • mobile and home phone usage
    • electricity and gas
    • computer consumables (e.g. printer ink)
    • stationery
  • allows taxpayers to separately claim the work-related portion of:
    • immediate deduction for items that cost less than $300 (e.g. keyboards, computer mouses, power boards, desk lamps and chargers)
    • depreciation of office furniture and computers (items that cost more than $300)
    • repairs and maintenance of these assets
    • cleaning (only if you have a dedicated home office)
Actual Cost Method

The actual cost method allows you to claim a tax deduction for the actual expenses you incur as a result of working from home.

Using this method, you are required to keep an invoice/receipt for every expense you claim.

Expenses You Can’t Claim

The ATO has stated that you can’t claim a tax deduction for:

  • coffee, tea, milk and other general household items, even if your employer may provide these at work
  • costs that relate to your children’s education, such as equipment you buy – for example, iPads and desks, subscriptions for online learning
  • items your employer provides – for example, a laptop or a mobile phone
  • expenses where your employer reimburses you for the cost.

VERY IMPORTANT: The records you need to keep for the fixed rate method

You need to keep record of the total number of actual hours you worked from home to prove your fixed rate method working from home tax deductions for the 2024 financial year onwards.

To claim your working from home deduction using this method, you must keep:

  • a record of the number of actual hours you work from home during the entire income year – for example, a timesheet, roster, diary or other similar document.
  • at least one record for each of the additional running expenses you incur that the rate per work hour includes – for example, if you incurred electricity and stationery expenses keep one quarterly bill for your electricity expenses and one receipt for your stationery expenses.

Next steps

It has come to our attention that some clients have not been keeping record of the hours worked at home – that being one of:-

  • timesheets
  • rosters
  • a diary or similar document kept contemporaneously.

We have therefore built a spreadsheet for you to use and which you can download here – 2023-24 Home Office Expenses – hours worked log

You must also keep evidence for each of the additional running expenses that you incurred. The documents you need to keep in order to demonstrate that you have incurred additional running expenses must show what the expense is and that you incurred the expense.

For energy, mobile and/or home telephone and internet expenses, you must keep one monthly or quarterly bill. If the bill is not in your name, you will also have to keep additional evidence showing you incurred the expenses; for example, a joint credit card statement showing payment or a lease agreement showing you share the property, and therefore the expenses, with others.

For stationery and computer consumables, which are occasional expenses, you must keep one receipt for each item purchased.

Please feel free to contact our office and speak with one of our expert accountants if you need any assistance with this so we can help you to maximise your tax deductions in your 2024 and future year Tax Returns.

Can I claim the super co-contribution?

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.  So if you wish to target the full $500, you will need to contribute $1,000.

To be qualify, 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 coming from employment and/or a sole trader business.
  • Be less than 71 at the end of the financial year.
  • 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 $57,016.
  • Have paid a non-deductible contribution into superannuation from after tax money by 30thJune 2023.  This means the contribution must be made from a personal or joint bank account.
  • Not be a temporary visa holder.
  • Lodge a Tax Return for the year ending 30thJune 2023.
  • The maximum co-contribution for a personal contribution of $1,000 is $500 if your combined assessable income is under $42,016.  Thereafter it progressively reduces by 3.333 cents for every dollar in excess of $42,016.  There is no entitlement if your combined assessable income exceeds $57,016.
  • Not have contributed more than your non-concessional cap.
  • Have a total super balance under the Transfer Balance Cap (between $1,600,000 and $1,700,000).

If you want to find out what you might be entitled to, click on the following link to the ATO’s calculator here

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 2023 Tax Return with the information provided by one’s super fund(s).  Consequently, most co-contributions will not be credited until at least January 2024.
  • If your super is with a public or employer superannuation fund, you will need to ensure they accept such contributions.  You also need to obtain the appropriate form.
  • You will need to make your contribution well before 30th For those with your own SMSF, 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.

What is best for you depends on your circumstances and take into account a large number of considerations.

You should therefore seek financial planning advice to ensure such a contribution will work as intended and is in your best overall interests.