Posts Categorized: Tips of the week

A stinging case for reviewing your asset protection planning

An over-riding goal of asset protection planning is to split personal wealth assets from business risks. A common strategy has therefore been to have the non-working non-risk spouse hold the family home in their name.

This strategy has worked well.

Until that is the recently decided case of the Commissioner of Taxation v Bosanac.

In this case, the Australian Taxation Office was successful in recovering tax debts of Mr Bosanac against the family home despite the fact that Mr Bosanac’s name was not listed on title. And it never was from the time the house was bought 15 years ago in 2006.

The key facts were:-

The house deposit was paid from a joint bank account.
The house was subsequently used as security for other loans.
The couple lived in the house for 9 years until they separated. Thereafter the wife continued to live in the house.
The husband subsequently used the house as security to fund share trading.

The Federal Court decided that on the basis of what they saw as objective facts, the property had always been held by both husband and wife. Moreover, it seems unlikely that the case will be appealed to the next and highest court, the High Court, as the presiding Federal Court relied on precedents from the High Court.

It is of great concern that a prime asset protection strategy may no longer be effective. Asset protection (including estate planning) is never a set and forget matter. And with so much economic harm inflicted by covid on small business around Australia solvency risks have increased, arguably greatly so for some.

Now is a great time to review your asset protection strategies. We welcome the opportunity to assist you and ensure that your family’s wealth is not left open to creditors.

SG super reminder

Thursday 28^th October is the end date for satisfying Super Guarantee (SG) super obligations for the September 2021 quarter.

But as super clearing houses take up to 10 days to pass the money through to the super fund, it means that processing and payment to the clearing should be made no later than this Friday.

And please make sure you have been calculating super at 10% since it increased on 1^st July 2021.

And being the start of a new financial year, we take the opportunity t 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.
Remuneration of less than $450 in a month.
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 $58,920.
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.

Relief for commercial landlords

Relief is available to those commercial landlords who have given rent relief under the 2021 revised Commercial Rent Relief Scheme.

Under that scheme landlords are required to provide the following relief to their tenants:-

A reduction in rent commensurate with the decline in the business’s turnover.
Half of that reduction is to be waived permanently.
The other half is to be paid on a deferred basis.
Not evict any tenant.
Not to charge any outgoings where the tenant can’t occupy the building.
Extend the lease on the same terms as the period of rent relief.

You can read more at – https://www.mrsaccountants.com.au/rent-relief-2021/

As part of this process, landlords are required to issue an acceptance letter.

To support landlords, the State Government has announced the following relief:-

A 25% Land Tax Relief (which is additional to any previous reduction).
A deferral of any residual Land Tax for the 2020 and 2021 years until 31^st May 2022.
Small landlords who consequentially suffer hardship can receive up to $6,000 under the Commercial Hardship Fund #3. Small landlords are those with holdings of less than $3,000,000.
This grant can be increased to $10,000 where a landlord suffers acute hardship. Acute has been defined as where rent represents 70% or more of total gross income – with gross meaning income before deductions.

Applications close by 15^th January 2022.

At the time of writing, we are still awaiting the revised Land Tax application form.

We will be in touch when the Land Tax applications open.

Important actions to obtain Victorian Small Business Rent Relief

A new rent relief system is now open to Victorian small businesses.

Whilst it is similar to last year’s system, there are some important differences including:-

A tightened process (partly in light of the previous scheme relying on the fall in turnover as declared within the JobKeeper application).
Deemed acceptance of application for relief.
Mandatory re-assessment of rent relief (more later).
A two stage process.

What follows is a summary of the system and what you need to action; it is not a complete summary as that would cause this summary to lose clarity in favour of obscure scenarios not relevant to our clients. Please also keep in mind that there will no doubt be changes and clarifications to this system (of which we will keep you aware by blogs on our web page).

So what is the relief available where there has been a 30% or more fall in turnover?

A reduction in rent proportional to the extent that turnover has fallen.
Half of that reduction is to be waived; the other half is to be deferred (and this will be on top of any amount deferred from last year’s program).
No rent increases during the period of relief (being from 28^th July 2021 or latter qualifying date until 15^th January 2022).
Tenants cannot be evicted.

What is turnover?

Turnover is your income – sales, fees, commissions etc.
Turnover is measured as per your GST method. That will be cash for the vast majority of small businesses.

Tips and traps in respect of calculating turnover include

Make sure you test within your accounting software on your GST basis.
State covid grants are included.
Unlike the prior scheme, supplies within a GST group are now included.
Exclude input taxed supplies.
Includes GST free supplies.
For those on accrual for GST purposes, bad debts do not reduce turnover but discounts and credits do.
Beware of adjustment events and insurance settlements.

For most it should be relatively straight forward. For others turnover for this scheme will not be the same as reported at G1 on a BAS.

What is the qualifying test?

For business trading before 1^st Aril 2019 – compare three whole consecutive calendar months from 1^st April 2021 to 30^th September 2021 to the same three months in 2019.
For business that started trading between 1^st Aril 2019 and 31^st March 2020 – compare three whole consecutive calendar months from 1^st April 2021 to 30^th September 2021 to the average monthly turnover to 31^st March 2020.
For business that started trading between 1^st Aril 2020 and 31^st March 2021 – compare three whole consecutive calendar months from 1^st April 2021 to 30^th September 2021 to the average monthly turnover to 31^st July 2021.
For business that started trading after 1^st April 2021 – parties must negotiate in good faith.
There are again alternative tests (which we briefly summarise as applying where natural disasters or sole trader unable to work).

Other key features of the system

Must be running a small business (turnover under $50,000,000).
Non for profits and charities also qualify.
Must have a lease agreement.
A business need not be registered for GST.
Landlords are under an obligation to consider waiving outgoings during the relief period if the tenant is unable to occupy the property.
A landlord must offer an extension to the lease term proportional to the period of rent relief.

What are the two steps I must satisfy in order to obtain rent relief?

Lodge an application.
Then provide
supporting evidence within 14 days of lodging the application.

The Victorian Small Business Commission has provided two letters with which to lodge an application

A letter for both applying and submitting required information – you can access it by clicking here.
A letter with which to make the initial application and a further letter with which to subsequently supply the required information – you can access it by clicking here.

We are unable to link the documents at this time so please ask us for a copy.

One or more of the following items of information need to be supplied

Extracts from accounting records.
Bank statements.
A BAS or BAS’s that cover the period
Statement from a practising accountant.
AND a statutory declaration signed by yourself attesting that the information provided is true.

It is your choice as to what you release so you can rightly elect not to release one of these items if you consider it too sensitive. Furthermore, you are not under any obligation to release financial statements if requested.

A major change within this scheme is the introduction of a mandatory re-assessment. By 31^st October the tenant and landlord must check in and assess whether circumstances have changed (such as ending or extending lockdown) and adjust the rent relief accordingly.

Of utmost importance is the need to apply by 30^th September to have any relief back dated to 28^th July. Applications after that date will only receive relief from the date of application.

Two words of warning

So what if you have only suffered a decline in turnover since July or August? You might not have qualified yet but may well do so by the end of this month. Perhaps it is best to apply to ensure you are entitled for back dated relief should you qualify. If it turns out that you don’t qualify then you can withdraw your application and/or fail to supply the required information meaning that your claim is annulled.
If this system proves to be like JobKeeper, then we can expect modifications and clarifications. Please return to our web page blogs for updates.

Please note that we will shortly set out the relief available to landlords.

Who is to apply?

As an accountant and tax agent, we are registered at act on your behalf with bodies such as the ATO and ASIC. We don’t though have any dealings, association or authority with your landlord. So as with last year’s rent relief system¸ we won’t be acting on your behalf unless you instruct us to do so and notify your landlord of our engagement. If we do assist you with one or more parts of this process you will still need to sign a statutory declaration.

Please do act promptly to ensure any current entitlement is secured by the cut off date of 30^th September.

We welcome any question you may have.

The rundown on the expanded covid business grants

In a joint press release yesterday, the state and federal governments announced an expansion to the state covid business grants.

There is no across the board support. Rather the payments to existing covid business grants will be increased.

The key takeaways are as follows.

Small Business Covid Hardship Grant

The one-off payment entitlement has been increased from $14,000 to $20,000.
The press release stated that the application deadline of this coming Friday would be extended – but then went on to say that applications will close on 10^th September! The state web page still states 10^th September (or until allocated funds run out). Whatever it is the sooner the application goes in the sooner it gets paid. And that all said, if the deadline is extended then more business will qualify.
The program was designed to cover those who “slipped through the cracks” but many small business that are suffering miss out on this as there turnover has not fallen by more than 70% over a two week period and done so due to covid. That said, if you pay your GST on cash basis, don’t assume you don’t qualify. One new client we picked up during the week was told by their accountant that they did not qualify – but they genuinely did!

Business Costs Assistance Program

Businesses that are closed and appear on set list of industries can receive weekly payments of either $2,800, $5,600 or $8,400 (depending on payroll size). The funds are paid to cover the cost of wages, rent, utilities, etc.

Licensed Hospitality Venue Fund

Payments are being automatically made to those previous recipients.

Covid Disaster Payment

Employees who have lost hours of work can receive a weekly payment under this federal payment.
It can also be claimed by micro businesses that do not qualify for the Hardship Grant.

In these difficult and uncertain times we welcome any question you may have.

In the meantime, we will continue to work through our client base to make sure all small businesses receive the grants they are entitled to.

And may I take the opportunity to remind you to support your local small businesses. Not only do they employ two-thirds of the workforce, they are the ones who support all the local sporting clubs, school fetes and the like. Now is the time to return the favour!

Re-instated commercial rent relief

On 28^th July, the Victorian state government announced a re-introduction of a covid rent relief system for commercial tenancies.

A business must have suffered a 30% decline in turnover to qualify. We are still awaiting legislation so it is not yet known what period is measured.

The rental relief is commensurate with the decline in turnover. So as per the government’s example, if your business suffered a 40% decline in turnover, then you your business will be entitled to a 40% reduction in rent.

Please contact us if you need help in quantifying this.

It is also unclear as to whether the rent reduction is in part a deferment. We will post an update when details come to hand.

Where a landlord doesn’t agree to provide the requested rent deduction then the matter can be referred to Victorian Small Business Commission.

To support landlords who have suffer from their decline in income, assistance can be received under a $80 million Landlord Business Support Package. One would think that allocation will be quickly exhausted so we would recommend applications being made properly.

Survive & Thrive webinar

In these difficult times it is crucial to have your finger on the right button.

And with that in mind we welcome you to join our next Survive & Thrive webinar.

The webinar will feature the usual Things To Do over the next month and a case study section (which this time will be planning).

Our guest speaker Peter Sleight will discuss Eating for Better Health.

The webinar will run for 25 minutes from 5.30pm on Thursday 5th August. You can reserve your place by clicking here clicking here

We look forward to seeing you on the night and we welcome your passing this invitation on to family, friends and business associates.

Lockdown #5 government grants

The state and federal governments today announced their support packages in respect of covid lockdown #5 government grants.

Put simply, most incentives are a doubling of what was offered for the last lockdown. As such, most businesses will receive nothing.

The Licensed Hospitality Venue Fund recipients will again receive $3,000 and Business Costs Assistance Program recipients $2,000. Recipients is perhaps not the best term as whilst some 86,000 businesses applied, one quarter of those are still awaiting payment. That said, those that received a payment need to not re-apply; they will simply receive a further amount.

Major event organisers will receive up to $250,000. Cinemas though will only receive $12,000.

Significantly, workers who lose hours of work will be compensated – $600 if lose more than 20 hours during the lockdown; $375 if between 8 and 20 hours are lost. Presumably this only relates to casuals as they have no leave to be stood down with. Interestingly, the federal government will fund the payments to those within hot spots; the state government will fund payments to all other qualifying employers.

We will keep you posted if further details are announced or extra support is announced. We also welcome any questions you may have.

Payroll reporting deadlines

With the progressive roll-out of Single Touch Payroll, year end finalisation deadlines are tightening. It’s not like the “good old” Payment Summary days were one had to the 14^th August to return the stationery. Employers are now required to complete the Single Touch Payroll finalisation step by 14^th July.

Thankfully though two extensions are available this year:-

In response to demands caused to business owners, 31^st July
For closely held employees (family members) 30^th September

Those larger employers that are subject to Pay-roll Tax are due to certify the 2020/21 remuneration by 21^st July. This is not just a matter as in addition to wages, salaries, commissions, directors fees, bonuses and so on, Pay-roll tax is also payable on:-

Superannuation
Some fringe benefits
Payments to certain contractors (including some corporates).

Whilst 28^th July is the end date for paying the June quarter SG super, payments through clearing houses can take up to 10 days. We therefore recommend that the June quarter super be processed no later than Friday 16^th.

We welcome any question you may have about these matters.

Important SG super changes

As you will have read in our Budget analysis and no doubt been notified by your software provider, please ensure that you are calculating SG super as from July at 10%.

It is opportune to remind you that SG is payable on what is called Ordinary Times Earnings (OTE). OTE is not calculated on a number of items including overtime and some bonuses. You can read more here.

And in closing just a reminder that the removal of the $450 monthly; threshold is due not to be removed until 1^st July 2022.

Payroll processing is complicated. Moreover errors can prove costly. We are therefore pleased that Xero now interacts with KeyPay (QuickBooks Online has used a limited version for 5+ years). Please ask us if you would like a review of your payroll system.