Posted on 14 September '18, under Tax.
The Australian Tax Office (ATO) has released draft guidelines changing its previous stance on Fringe Benefits Tax (FBT) for utes. Amendments originated from reports that dodgy tax returns were responsible for a loss of $8.7 billion in income tax due to wrongful claims. Failure to comply with new requirements listed below may result in a 20 percent FBT imposed on the cost of the vehicle.
The requirement of a logbook
New rules require employers to ensure their workers using these vehicles keep detailed logbooks. Whether the logbooks are electronic or hard copy, it is vital that the process be effective for returns lodged in the 2019 FBT year, when the law takes effect. Employers receive confirmation via email from employees using the vehicles at the end of the 2019 FBT year with their logbook including all regulated diversions and private use.
Diversions and private use rules
The guidelines introduce capped limits for the log books to comply with. Professional travel means that the vehicle must not deviate more than 2km from its usual route. However, 1000 km of non-work related travel is allowed, provided that there is no single trip exceeding 200 km. Such regulations provide greater flexibility than previous guidelines. What the ATO deems “minor” or “irregular trips” like carpooling the children to and from school or an occasional trip to visit relatives will not render you non-compliant so long as it is recorded as non-professional use.
Posted on 14 September '18, under Super.
The Australian Tax Office (ATO) is reminding employers to check they are meeting their obligations when it comes to paying super to their workers.
To help you make sure you are meeting your requirements, consider this checklist:
- Are you paying the correct amount?
You are required to pay a minimum of 9.5 per cent of their ordinary time earnings to their superannuation fund.
- Are you keeping correct and up-to-date records?
It is important to maintain accurate record-keeping procedures, so you have evidence to prove you have been meeting your employer super obligations.
- Are you paying super to all eligible workers?
Like your employees, some contractors you hire may also be eligible for super contributions.
- Are you making payments to the right fund?
Unless a worker has not provided their details, you should be paying into their fund of choice instead of your default fund.
- Are you making payments on time?
The ATO allows employers to make contributions quarterly. Always ensure you make payments on time as late payments can incur a superannuation guarantee charge, which is not tax deductible. When making payments on time, they are tax deductible against your business income.
- Are you paying the right way?
It is important to send the payment and data electronically in a standard format (paying the SuperStream way). Your business may also be eligible to use the free Small Business Super Clearing House to distribute payments to your employees’ super funds.
Posted on 6 September '18, under Tax.
The time to report and lodge your annual tax return for your business is fast approaching. Remember, what you must report will depend upon the type of business entity you have.
As a sole trader, you are required to lodge a tax return even if your income is below the tax-free threshold. This will include:
– tax return for individuals including the supplementary section
– business and professional items schedule for individuals.
You must report:
– The business income minus the business deductions you are eligible to claim.
– The other income like wages and salary (from a payment summary), rental income and dividends, minus deductions against this income.
Partnerships and partners
The partnership must lodge a partnership tax return. This will include the partnership’s net income (assessable income less allowable expenses and deductions).
The ATO does not require the partnership to pay tax on the income it earns. Rather, every partner must pay tax on the share of net partnership income you each receive.
For you (as an individual partner) you must report:
– Your share of the partnership net income or loss.
– Any other assessable income like wages and salary (shown on a payment summary), dividends and rental income.
Trusts and Beneficiaries
When you operate your business through a trust, the trustee will be required to lodge a trust tax return. The trust reports its net income or loss (the trust’s assessable income minus deductions).
Each trust beneficiary must lodge their tax return, i.e., an individual or company tax return.
As a beneficiary of a trust, you must report:
– Income received from the trust.
– Other assessable income including dividends, salary and wages (on an individual’s payment summary), and rental income.
You must lodge a company tax return. The company is required to report its taxable income, tax offsets and credits, PAYG instalments and the amount of tax it is required to pay on that income or the amount that is refundable. Your personal income is kept separate from the company’s income.
With deregistered companies – ensure you lodge a final company tax return before it is deregistered by the Australian Securities and Investments Commission (ASIC). The ATO will be unable to process a company tax return if the company is deregistered.
Posted on 6 September '18, under Super.
The Tax Office is reminding individuals winding up a self-managed super fund (SMSF) that before lodging your final SMSF annual return, you must first have an audit completed by an approved SMSF auditor.
When lodging your SMSF annual return, answer Question 9 in Section A: ‘Was the fund wound up during the income year?’. You should also look to complete Question M in Section D: Supervisory levy adjustment for wound up funds. By doing so, you will reduce the SMSF supervisory levy you must pay, so you do not have to pay the levy the following year.
Remember also to pay any outstanding tax liabilities and lodge any outstanding returns. Otherwise, you may be subjected to compliance assessments and risk penalties.
The Tax Office will send you a letter of confirmation of your wound up fund, which will include:
– confirmation your SMSF’s ABN is cancelled, and
– your SMSF’s record is closed on the ATO’s system.
Avoid closing your bank accounts until all expected final liabilities have been settled and requested refunds received. You can pay outstanding tax liabilities, including the supervisory levy when you lodge your final SMSF annual return.
Posted on 6 September '18, under Business.
There is no weakness in a leader who asks for help. Maintaining success in your small business requires you to seek advice from your employees on a range of matters.
However, it is important to ask for help in the right way, so your team does not lose confidence in your leadership ability. You need to communicate that you are asking for input or advice rather than help because you are floundering.
Consider these ways when asking for advice from an employee:
Ask a ‘specific’ question
Avoid asking a vague question and get specific. What exactly do you need from this employee? If you are vague, it will communicate to your staff you are unsure of what you want. When you are specific, they can complete the task quickly and conveys that you are seeking their professional advice, rather than a helping hand.
Offer something in return
When you need help, it might be better to turn it into a negotiation. They advise on a matter, and you do the same in return.
Check you need help
Ensure you have tried to complete the task before asking for help. Asking for help straight away may risk others perceiving you as less competent or even lazy if they point out a simple or obvious way to solve the issue.
Posted on 6 September '18, under Money.
Working capital is the money needed for day-to-day business operations and is often a measure of a business’s liquidity, efficiency and financial health.
To ensure your business has adequate working capital, the working capital cycle should be applied. The working capital cycle is the length of time from the purchase of inventory to the receipt of cash from customer sales.
The cycle comprises four elements: cash (funds available), creditors (accounts payable), inventory (stock on hand), and debtors (accounts receivable). Maintaining good cash flow requires control over each component. Ways to improve working capital:
To collect payments from debtors early, consider:
– establishing a credit policy
– invoicing early
– reducing payment terms
– stop supplying credit to debtors that do not pay
– following up on overdue accounts
– offering early settlement discounts
Inventory can tie up a large sum of your working capital; reducing inventory through the just-in-time model can increase efficiency and eliminate waste. The just-in-time inventory model is beneficial as it allows for quick changes to customer needs and frees up working capital to better meet financial obligations.
Managing cash outflows
Managing the money you owe to creditors is just as important as managing your accounts receivable.
To ensure your cash outflow meets your obligations:
– consider early payment discounts
– prioritise suppliers
– ensure the accuracy of invoices before making a payment
– only make payments when they are due
Posted on 29 August '18, under Business.
Creating a new business is an exciting time for any first-time entrepreneur, but it also comes with making big decisions – one of these will be when you must choose which structure your business will take.
Whether you are looking to form say a company or a partnership, it is important to know that there are varying legal and financial requirements that surround each one. Ask yourself which structure will best help your business to grow and flourish?
For instance, many small businesses are set up as a sole trader. A sole trader is one individual who owns the business.
However, choosing the business structure, you will use will predominantly depend on your situation and the structure that best suits your needs and that of your business.
Always look at what is involved with starting up, operating and closing a structure before making your final decision. You can also choose to change your business structure throughout the life of your business.
If you are unsure which structure will best suit your business, it may be helpful to seek professional advice.
Posted on 29 August '18, under Super.
Any ordinary and statutory income a self-managed super fund (SMSF) earns from assets held to support retirement phase income streams is exempt from income tax – this income is commonly referred to as Exempt current pension income (ECPI).
This form of income does not include assessable contributions or non-arm’s length income.
Individuals can choose to claim their ECPI in the SMSF annual return. However, to do so, they must ensure their SMSF assets are valued at current market value. This requirement also applies when a transition to retirement income stream (TRIS) moves into retirement phase.
There are two methods an individual can use to calculate their ECPI – they are the segregated method and the proportionate method.
Generally, an individual uses the segregated method when their fund is 100 per cent in retirement phase (provided the assets are not disregarded small fund assets). If the fund has disregarded small fund assets, then the proportionate method must be applied.
Posted on 29 August '18, under Tax.
From 1 July 2018, businesses that supply cleaning or courier services must report payments made to contractors (if payments are for cleaning or courier services) via the Taxable payments annual report (TPAR) each year.
However, the ATO does not require taxpayers to lodge their TPAR during the period up until the proposed law change is passed by Parliament.
Instead, they are expected to keep appropriate records to ensure a TPAR could be prepared and lodged as soon as practical (after the law is enacted).
After the new law is enacted taxpayers will need to check payments, they have made to contractors from 1 July 2018 and then complete and lodge a TPAR for the 2018-19 income year.
The ATO does not require those taxpayers who recorded their payments and lodged their TPAR (in accordance with the changes) to do anything else. Those who did not record their payments (to contractors) must review their records and form a summary of all payments made after 1 July 2018 and the required details for each payment.
Businesses who also supply road freight, security, investigation, surveillance or IT services must report payments made to contractors (if payments are for road freight, security, investigation or IT services) from 1 July 2019.
Similar to cleaning or courier service payments, taxpayers are expected to report these payments using the TPAR each year.
Posted on 22 August '18, under Super.
With recent regulatory changes to super contributions, it is easier than ever to ensure your employer is paying you the super you are entitled to.
There are specific steps you can take to ensure you are being paid correctly. Consider the following:
Understand your entitlements
Employers have to put 9.5 per cent of an employee’s wage into their superannuation account. As of July 2017, these contributions must be made quarterly through the super clearing house. This was introduced by the ATO to prevent dishonest employers from ripping off their employees. If you have not received a quarterly payment by the 28th of the following month, contact the ATO, and they will investigate this on your behalf.
Consolidate your accounts
If you have had various jobs throughout your working life, there is a good chance you have more than one super account. If you do, you will be paying excess account fees. You should look to roll over your funds into one account and close the leftover accounts.
It is advantageous to do your research and be informed regarding your super. This will guarantee you a fund that will provide you with the financial security you deserve when it comes time to retire. You can do this by researching the product disclosure statement of various funds and investigating where your contributions are being invested as well as what kinds of fees you are being charged.
Making regular personal contributions to your superannuation account can mean the difference of over $100,000 when you retire. Form a plan that works for you, such as setting up a direct payment of $20 a fortnight or $100 a month. This is a great way to take ownership over how comfortably you want to retire.