Monthly Archives

May 2016

Budget_Update_from_Ryan-Miller

How will the 2016 federal budget effect your business?

By | Tax Advice & Planning | No Comments

We have summarised the key points coming out of the May 2016 federal budget that we feel relate most to our client base. If you require any further clarification or have any questions please contact us.

SMALL BUSINESS

Increased turnover threshold for small business income tax concessions

The small business turnover threshold will be increased from $2M to $10M from 1 July 2016 meaning that entities with turnover of less than $10M can access

lower company tax rate ie reduced to 27.5% from 1 July 2016
Instant asset write off up to $20,000 from 1 July 2016 to 30 June 2017
Simplified trading stock rules
Can account for GST on a cash basis and pay GST/PAYG nstalments calculated by ATO

The above does not grant access to the small business CGT concessions which are still only available for entities with turnover less than $2M that satisfy the $6M net assets test.

Unincorporated small business tax discount

The discount will be increased in phases over the next 10 years from the current 5% to 16%. From 1 July 2016 it will increase to 8% with the $1,000 cap per individual being retained.

GST reporting requirements simplified for small business

A trial of the new simpler reporting arrangements will commence on 1 July 2016 and be in place by 1 July 2017 for all business with turnover less than $10M making it easier to prepare and lodge the BAS.

OTHER ENTERPRISES

Reduced company tax rates

The company tax rate will be progressively reduced to 25% over 10 years.

From 1 July 2016 the company tax rate will reduce to 27.5% for all entities with turnover less than $10M.

INDIVIDUALS AND FAMILIES

Marginal tax rate changes

The threshold at which the 37% marginal tax rate for individuals commences will increase from taxable incomes of $80,000 to $87,000 from 1 July 2016. This means the marginal income tax rate on taxable incomes between $80,000 and $87,000 will reduce from 37% to 32.5%.

Medicare levy

The increases take into account movements in the consumer price index (CPI) so that low-income earners generally continue to be exempted from the Medicare levy. This change sees the threshold for singles increase to $21,335 and for couples with no children, the threshold will increase to $36,001. For single seniors and pensioners, the threshold will be increased to $33,738 and for senior and pensioner couples with no children, the threshold will be increased to $46,966.

Medicare levy surcharge

The surcharge payable on taxable income for a person who is married to $21,335.

SUPERANNUATION

Div 293 tax income threshold reduced

The Div 293 threshold (the point at which high income earners pay addition contributions tax) will be lowered from $300,000 to $250,000 from 1 July 2017. The annual cap on concessional superannuation contributions will also be reduced to $25,000 (currently $30,000 under age 50; $35,000 for ages 50 and over).

Tax exemption on earnings supporting income streams removed

The tax exemption on earnings of assets supporting Transition to Retirement Income Streams (TRISs) will be removed from 1 July 2017 (ie income streams of individuals over preservation age but not retired).

A rule that allows individuals to treat certain superannuation income stream payments as lump sums for tax purposes will also be removed.

These changes will ensure that TRISs remain fit for purpose, are not accessed primarily for their tax advantage, and still meet the objective of supporting people who want to remain in the workforce.

Lifetime cap for non-concessional superannuation contributions

A lifetime non-concessional contributions cap of $500,000 will be introduced. The lifetime cap will take into account all non-concessional contributions made on or after 1 July 2007, from which time the ATO has reliable contributions records, and will commence at 7.30 pm (AEST) on 3 May 2016.
The lifetime non-concessional cap will replace the existing annual caps which allow annual non-concessional contributions of up to $180,000 per year (or $540,000 every three years for individuals aged under 65).

Contributions made before commencement cannot result in an excess. However, excess contributions made after commencement will need to be removed or be subject to penalty tax.

The measure which will be available to all Australians up to age 74 will provide support for the majority of Australians who make non-concessional contributions well below $500,000 and flexibility around when they choose to contribute to their superannuation.

Harmonising contribution rules for people aged 65 to 74

The current restrictions on people aged 65 to 74 from making superannuation contributions for their retirement will be removed from 1 July 2017. People under the age of 75 will no longer have to satisfy a work test and will be able to receive contributions from their spouse.

Currently, there are minimum work requirements for Australians aged 65 to 74 who want to make voluntary superannuation contributions. Restrictions also apply to the bring-forward of non-concessional contributions. In addition, spouses aged over 70 cannot receive contributions.

The government will remove these restrictions and instead apply the same contribution acceptance rules for all individuals aged up to 75 from 1 July 2017. The measure will allow people aged 65 to 74 to increase their retirement savings, especially from sources that may not have been available to them before retirement, including from downsizing their home.

Catch-up concessional superannuation contributions

Individuals with a superannuation balance less than $500,000 will be allowed to make additional concessional contributions where they have not reached their concessional contributions cap in previous years, with effect from 1 July 2017. Amounts are carried forward on a rolling basis for a period of five consecutive years, and only unused amounts accrued from 1 July 2017 can be carried forward.

The measure will allow people with lower contributions, interrupted work patterns or irregular capacity to make contributions, eg women or carers, to make “catch-up” payments to boost their superannuation savings. It will also apply to members of defined benefit schemes, with consultation undertaken to minimise additional compliance impact for these schemes.

Restrictions on personal superannuation contribution deductions eased

From 1 July 2017 all individuals up to age 75 will be allowed to claim an income tax deduction for personal superannuation contributions.

This effectively allows all individuals, regardless of their employment circumstances, to make concessional superannuation contributions up to the concessional cap. Individuals who are partially self-employed and partially wage and salary earners, and individuals whose employers do not offer salary sacrifice arrangements will benefit from these changed arrangements.

Individuals that are members of certain prescribed funds would not be entitled to deduct contributions to those schemes.

Prescribed funds will include all untaxed funds, all commonwealth defined benefits schemes, and any state, territory or corporate defined benefits schemes that choose to be prescribed.

Low income superannuation tax offset introduced

A low income superannuation tax offset (LISTO) will be introduced to reduce tax on superannuation contributions for low income earners from 1 July 2017.

The LISTO will provide a non-refundable tax offset to superannuation funds, based on the tax paid on concessional contributions made on behalf of low income earners, up to a cap of $500. The LISTO will apply to members with adjusted taxable income up to $37,000 that have had a concessional contribution made on their behalf.

The measure will effectively avoid the situation in which low income earners would pay more tax on savings placed into superannuation than on income earned outside of superannuation.

Superannuation transfer balance cap introduced

A balance cap of $1.6m on the total amount of accumulated superannuation an individual can transfer into the tax-free retirement phase will be introduced from 1 July 2017. Subsequent earnings on these balances will not be restricted. This will limit the extent to which the tax-free benefits of retirement phase accounts can be used by high wealth individuals.

Where an individual accumulates amounts in excess of $1.6m, they will be able to maintain this excess amount in an accumulation phase account (where earnings will be taxed at the concessional rate of 15%). Members already in the retirement phase with balances above $1.6m will be required to reduce their retirement balance to $1.6m by 1 July 2017. Excess balances for these members may be converted to superannuation accumulation phase accounts.

A tax on amounts that are transferred in excess of the $1.6m cap (including earnings on these excess transferred amounts) will be applied, similar to the tax treatment that applies to excess non-concessional contributions.

Anti-detriment death benefit provision removed

The anti-detriment provision in respect of death benefits from superannuation will be removed from 1 July 2017.

The anti-detriment provision can effectively result in a refund of a member’s lifetime superannuation contributions tax payments into an estate, where the beneficiary is the dependant of the member (spouse, former spouse or child). Currently, this provision is inconsistently applied by superannuation funds.

Removing the anti-detriment provision will better align the treatment of lump sum death benefits across all superannuation funds and the treatment of bequests outside of superannuation. Lump sum death benefits to dependants will remain tax free.

GST

GST extended to low value goods imported by consumers

GST will be extended to low value goods imported by consumers from 1 July 2017.

The intent of this measure is that low value goods imported by consumers will face the same tax regime as goods that are sourced domestically.

Tobacco excise to increase

Tobacco excise and excise-equivalent customs duties will be subject to four annual increases of 12.5% from 2017 until 2020.

That’s all for now.

Need assistance or advice? We’re here to help.

Contact our friendly team now.

1300 533 787 . service@keepingcompany.com.au

 

year-end tax planning

Year End Tax Planning 2016

By | Tax Advice & Planning | No Comments

Key year end tax planning strategies as 30 June approaches

With 30 June fast approaching, now is the time to consider your year end tax position. We have compiled the following list of items to assist in the year end tax planning process.

Purchasing fixed assets

Entities with turnover less than $2M are able to claim an immediate tax deduction for assets costing less than $20,000 as long as they are installed and ready for use before financial year end.  If you have a turnover that is less than $2M and you need to buy assets we recommend that you consider purchasing these before year end to obtain a tax deduction in the 2016 year.

If you have a turnover greater than $2M you are only entitled to an immediate tax deduction for assets costing less than $100 so the above concessions are not available to you for the 2016 year.  However, in the budget released in May 2016 the $20,000 immediate tax deduction will be extended to entities with turnover between $2M and $10M from 1 July 2016. Based on this we are strongly recommending to hold off purchasing higher value assets until the 2017 financial year.

Claiming depreciation – less than $2M turnover only

Under the simplified depreciation rules you are entitled to have all of your assets depreciated at 30% (15% first year) for those assets greater than $20,000. You should ensure that all qualifying assets are identified to ensure that the maximum depreciation deduction is claimed.
You are also able to write off a pool balance if it is less than the $20,000 threshold so please consider reviewing all asset classes.
For cars, the maximum cost you can depreciate for the 2015/16 year is $75,375 including GST for fuel efficient vehicles and $63,184 including GST for others.  You must also ensure that depreciation is only claimed on the business use portion.
Capital Works are an exception to the Simplified Depreciation Rules and are generally depreciated at 2.5% per annum.

Superannuation – payment of liabilities

Superannuation is only deductible to the business when it is paid and also it must be paid on time. It is advisable to ensure that the superannuation liability relating to the June 2016 quarter is paid before year end, this will ensure a full deduction. You should also ensure that all other outstanding payments relating to previous quarters are made before 30 June and that the Superannuation Guarantee Charge forms are lodged for overdue payments.

Superannuation – maximising contributions

Business owners should also ensure that they have maximised their concessional contributions before year end if there is available cash in the business. The concessional contributions cap from 1 July 2015 is $30,000 for all individuals, unless you were 49 years of age or older which means your cap is $35,000. This amount is coming down to $25,000 for all people as of 1 July 2017 as per the recent budget.
When maximizing the concessional contributions you need to remember that the limit includes your compulsory 9.5% and that all payments must be received by the super fund prior to 30 June.

Deferral of taxable income

You should take care to identify which of your sales will fall in June and which will fall in July or later.  Sales that occur in July or later will be taxed in the following year. This will also ensure that you pay less company tax as the tax rate for business with turnover less than $2M is reduced from 28.5% to 27.5% from 1 July.  If you are a cash basis taxpayer for tax purposes and a sole trader, the income will be derived in the year in which the cash is received.  If you are an accruals basis taxpayer the income will be derived in the year in which you issue an invoice.
Further, as part of the May 2016 budget, the 27.5% company tax rate will also be extended to businesses with turnover of less than $10M from 1 July 2016.

Make prepayments – less than $2M turnover only

Business with less than $2M turnover are entitled to a deduction for prepayments made for greater than $1,000 as long as the eligible service period is less than 13 months. You may consider prepaying a portion of rent or interest on borrowings. Prepayments under $1,000 are deductible regardless of the service period.

Write off obsolete stock

Make sure you conduct a stock take before the end of the financial year. Any obsolete stock that is identified should be written off.   This will reduce your tax liability.

Stock take concession – less than $2M turnover only

If your turnover is less than $2M you do not have to perform a stock take if you assess that the value of your inventory will not vary by more than $5000 in the tax year. Also, consider the best method to value your trading stock either by choosing cost, sales value or market value.

Write off bad debts

If you are an accruals basis taxpayer and have bad debts, you should consider writing them off before 30 June to ensure a tax deduction is claimed in the current year.  If you pay your GST on an accruals basis, any bad debt adjustment is likely to result in a refund of GST that has already been paid on a previous BAS.  When writing off bad debts, make sure you follow the rules to ensure that the debt is bad and that the necessary steps have been followed to collect the debt.

Timing of disposal of assets

If you are planning to scrap fixed assets, consider doing it before 30 June to ensure a deductible adjustment.

Donations to charity

If you plan to make donations to your favourite charity, ensure you do so before 30 June. Remember, if you are expecting a tax loss, your donations will not be tax deductible in the year paid.

You can choose to spread the tax deduction over a period of up to five income years if it was a gift of money of $2 or more, a property valued at more than $5,000 or a property under the Cultural Gifts Program.

Capital Gains Tax

If you are trading as an individual or through a trust you should check whether the 50% General Discount is applicable for any proposed asset disposal.  This requires that you have held the asset for at least twelve months.  This means that you need to consider the timing of the disposal.  In addition you may be entitled to further small business concessions and discounts.  If you are considering the disposal of an asset, you would be wise to contact us so that we can help you to understand the consequences of the transactions and the concessions that may be available.

Shareholder loans

If you or any of your associates have received a benefit, had a debt forgiven or borrowed money from your company or trust then Division 7A rules may apply to you.

In today’s complex business environment, getting the right advice can mean the difference between success and failure. We are here to help! Empower your business and contact our team with any questions or to arrange a meeting to review your tax planning options.

xero software training group 1

Workshops and Xero Software Training at Vibewire

By | Xero Training | One Comment

Community Engagement – XERO software training

vibewire workshop group 1On Thursday, 12 May 2016 Keeping Company launched a new concept of education workshops with a group of talented and passionate youth at Vibewire headquarters in Ultimo going over XERO software training and other accounting and tax problems that Start ups face.

Vibewire, established by Tom Dawkins (@tomjd) in his uni days back in 2000, is a co-working environment for creative entrepreneurs. This Sydney not-for-profit organisation, acts as a launch pad for young people to provide the resources, networks and programs needed to enable them to do “awesome things” with their business ideas.

Sharing Tom’s beliefs, the first instalment “Accounting and Tax for Start-Ups” was presented to this group by our Director, Ryan Miller. The topics covered included and Introduction to Cloud Accounting and XERO, obligations and dealing with the ATO, what structure is best for me, contractors and superannuation.

Accounting and Taxation for Start-Ups

The Keeping Company program has been put together by experts and contains core elements, strategies and insight from accounting, taxation and business management.

The aim is to equip these young people with the skills necessary to manage the finances of a small to medium business using the world’s most beautiful accounting software, Xero. Use Xero to quickly create sales invoices, purchase orders, manage inventory and to take care of tax and compliance obligations such as the Business Activity Statement (BAS).
vibewire workshop1st vibewire group workshopFuture workshops have been scheduled at the request of enthusiastic attendees to include topical matters such as tax deductions, depreciation and fixed assets, business names and registrations, employing people, tax invoice layout, ASIC and more….

Information and Training

Keeping Company are XERO Gold Partner representatives and Certified Advisors. We are experts in Cloud Accounting and use the best add-on software’s available to help our clients do better business by improving efficiency, saving time and costs.

We offer specialised one-on-one XERO software training with one of our XERO Certified Advisors which can be customised to your individual needs.

For more information, please visit our website or send us your details so we can have an expert answer all your questions.

GET THE WORKSHOP NOTES HERE.

Empowering your business with one more click.

 








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