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Tax Advice & Planning

End of Year Tax Planning 2017

By | Business Bookkeeping Services, External CFO, Tax Advice & Planning | No Comments

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.

We are always available to answer any queries.

INCOME

Deferral – You may be able to defer sales from the 2017 year to the 2018 year or bring forward sales into the 2017 year in appropriate circumstances
Company Tax Rate – Small Business Entities now include companies with turnover of under $10 Million and will be taxed at 27.5%
Unearned Income / Income In Advance – You should consider whether any income received is in advance of the goods or services being supplied and can therefore be taxable in a future year
Construction Contracts – The ATO allows construction contract revenue to be recognised under various methods and may impact when the revenue is taxable. The application of the different methods must be consistently applied
Interest and Dividends – Income is generally booked as revenue when received. If you have received a loan from a related company or trust you should consider whether a Division 7A dividend is likely to be paid
Personal Services Income (PSI) – If you provide services by yourself through a company or trust it is likely that you have derived PSI and any profits will be attributed to you directly

EXPENSES

Deductibility – You should check whether any expenses incurred during the year may not be deductible
Capital – SBE’s are entitled to an immediate deduction of all assets costing less than $20,000 excl GST, these assets should be bought and installed before 30 June 2017. Any assets over $20,000 will be depreciated in a pool at 15% for the 1st year and 30% for each year after. A pool balance of less than $20,000 can also be written off
Bad Debts – if you write off doubtful debts before 30 June you will be entitled to a tax deduction. You should consider whether you have made all necessary attempts to collect before writing off
Trading Stock – You should perform a stock take to ensure the correct gross profit is being taxed. As an SBE if your inventory movements is under $5,000 each year you are not required to perform a stocktake. You can choose to value your year-end stock as cost, market value or obsolete value
Employee Bonuses – If you are paying bonuses you should ensure that you are committed to paying them before 30 June and some documentation should be kept
Prepayments – As an SBE prepayments that have a period prepaid of 12 months or less are entitled to an immediate deduction

COMPANIES

Super Payments – Make sure all super payments are made and received by the Super Fund before 30 June 2017 to ensure deductible in the 2017 financial year
Maximise Deductible Super Contributions – The concessional cap for the 2017 year is $30,000 for persons aged under 49 at 30 June 2016 and $35,000 for persons aged 49 to 74, so you should consider maximising your contributions. Remember that your 9.5% is counted toward these caps. The cap drops to $25,000 per year for all ages from 1 July 2017
Division 7A Loans – You should review loans before year end to ensure you don’t accidentally trigger a debt forgiveness, deemed dividend etc and arrange a loan agreement with the company
Payment of Dividends – If you plan to pay a dividend or have paid a dividend you need to ensure the payment is allowed as well as documenting it via a Director Minute

TRUSTS

Trustee Resolutions – You should prepare a resolution or distribution plan before 30 June 2017 or earlier depending on your Trust Deed considering all types of income such as dividends, other income, capital gains. This will help to ensure income is not taxed at 49%
Meaning of Income – You should consider the definition of Income as per your Trust Deed to ensure your resolutions are effective in the distributions
Trust to Company Distributions – If these exist you need to consider Division 7A and whether all payments have actually been made to avoid any Unpaid Present Entitlements (UPE)
Family Trust Elections – You should review FTE requirements to ensure that franking credits can flow through and protect bad debts and carry forward losses
Trust Deed – Consider reviewing your Deed to ensure it is appropriate for the proposed distributions

CAPITAL GAINS

Timing of CGT Events – You should consider the timing of a capital gains tax event in respect to which financial year the event falls into noting that contract dates and not settlement dates are generally when the event occurs
Small Business CGT – Consider your ability to reduce any capital gains by applying the concessions
CGT Discount – Where assets are held for more than 1 year they may be entitled to a 50% discount on any CGT payable

Get expert advise

Your guide to the 2017 Federal Budget

By | Lending Advice, Tax Advice & Planning, Uncategorized, Wealth Management | One Comment

Budget Recap

In case you missed it, last night’s budget contained a number of measures aimed at stimulating the economy particularly through infrastructure spending. This spending will be in the vicinity of $75 billion. Despite these spending measures, the government is predicting that the budget will return to surplus in 2020-21.

An “honest budget” as described by Treasurer Scott Morrison focused on health, home and housing. Keeping healthcare available to all Australians in the long term and living the dream of owning one’s home will be central issues for many Australians.

As is usual at budget time there was a range of taxation measures announced. A highlight for Small business is a reprieve on the $20,000 write off on capital expenditure. Here’s our summary of impacting measures;

Small Business

  • Extension of the small business instant asset write-off scheme allowing businesses with turnover up to $10 million to immediately write off expenditure up to $20,000 for a further year (originally due to finish on June 30, 2017).
  • Through the National Partnership on Regulatory Reform, the Government will provide up to $300 million over two years to States and Territories that reduce red tape for small business.
  • Amending the small business capital gains tax concessions to ensure that the concessions can only be accessed in relation to assets used in a small business or ownership interests in a small business.

Housing

  • Increase the capital gains tax (CGT) discount by 10% from 50% to 60% for affordable housing. As most people will be aware the CGT discount applies to most CGT assets disposed of by individuals and some trusts where the assets have been owned for more than 12 months.
  • An annual charge of at least $5,000 on residential property owned by foreign residents where the property has been vacant or not available for rent for at least six months of the year.
  • Foreigners and temporary residents will be denied the main residence exemption applying under the CGT law.
  • There is a range of other measures affecting foreign tax residents.
  • First home buyers will be able to save for a deposit through investing funds in superannuation. These amounts they will be able to withdraw when the deposit is required. To the extent that the withdrawn funds were contributed as concessional contributions thee will be some (reduced) taxation on the amount withdrawn. Withdrawals under this scheme may be made after 1 July 2018.
  • Form 1 July 2018, persons over 65 who downsize their home (held for more than ten years) may make an additional non-concessional contribution of up to $300,000 from the proceeds of the disposal of the home. A couple can contribute $300,000 each. This contribution will not be subject to the contribution and superannuation balance caps introduced earlier this year.
  • From 1 July this year, deductions for travel expenses to inspect, maintain or collect rent on investment properties will not be allowable deductions against the rental income. So the trip to the Gold Coast to check on the investment property will no longer be deductible.
  • Deductions for depreciation plant and equipment such as hot water systems and dishwashers installed in residential investment properties after 1 July 2017 will only be available to the owner who had them installed and not for any successive purchaser of the property.

Fringe Benefits Tax

  • The FBT rate will increase to 47.5% to take account of the increase in the Medicare levy. It is not clear when this will take effect but it will probably be in place by at least 1 April 2020.
  • A corresponding increase in the gross-up rate will be required for calculating the taxable value of fringe benefits.

Personal Taxation

  • The temporary budget repair levy of 2% for taxpayers earning more than $180,000 will expire on 1 July 2017. This means that ignoring Medicare the top marginal rate will drop from 47% to 45%.
  • However, the Medicare levy will rise from 2 to 2.5% from 1 July 2019. From 1 July 2017 thee will be modest increases in the Medicare low income threshold.
  • No changes were announced in the Federal Budget in relation to personal income rates. Personal income tax rates for the 2017-18 year will therefore remain the same as for the 2016-17 year (see table below).personal-tax-rates

Superannuation

  • Aside from the changes identified above, the Treasurer has confirmed the proposal applying from 1 July 2017 to ignore the amount of non-recourse borrowing by a self-managed superannuation fund in calculating a superannuation balance. This means that the member’s balance will be the gross and not the amount net of the borrowing.
  • There are some other changes to superannuation applying from 1 July 2018 in relation to related party dealings.

Indirect Taxes

  • From 1 July 2018 purchasers of new residential property will be required to withhold the GST payable on the transaction and remit it to the ATO. It will be interesting to see how this will work in cases where the margin scheme applies to the sale resulting on GST applying on a reduced amount. This will require the purchaser to determine their liability based on information provided by the developer. What if it is wrong?
  • From 1 July 2017 digital currencies like bitcoin will be treated as money and no longer subject to GST. Arguably it always was but the ATO had said that it was not money as defined.
  • For those who still light up, there will be changes to the tax treatment of roll your own and cigars to bring them into line with manufactured cigarettes. This will be phased in over the next four years.

Company Tax Rate

  • The government is committed to pushing for a reduction in the corporate tax rate to 25% with the objective of making Australian businesses globally competitive.

Banks

  • The major banks are targeted for levy in respect of some of their liabilities such as corporate bonds, commercial paper, certificates of deposit and Tier 2 capital instruments. This will take effect from 1 July this year.

The tax position described in this blog is a general statement and for guidance only. It is important to note the policies outlined in this publication are yet to be passed as legislation and therefore may be subject to change or further refinement.

 

Interest Rate Hold

By | Lending Advice, Tax Advice & Planning, Wealth Management | No Comments

At its May meeting, the Reserve Bank of Australia chose to keep the official cash rate on hold at 1.5 per cent.

What this means for you?

Interest rates remain low, so it’s still a great time to invest in property or to purchase a home! Despite some lenders raising interest rates on both owner-occupier and investment loans in recent months, interest-only and investor loans remain cheaper than a year ago.

The debate about housing affordability, negative gearing, capital gains tax discounts and borrowing through Self-Managed Super Funds has dominated the news in recent months, and it will be interesting to see what the federal budget holds next week.

Interest rates are really on the move outside of the RBA’s decision, so now more than ever is the time to seek expert advice about your home loan or investment property. We can compare hundreds of different loan products to find you a competitive deal that suits your budget and financial goals. Please give us a call today!

PS. Do you know a family member, friend or colleague looking to buy their first home? Or next home? Or an investment property? Please just let us know, we’d be very happy to help!

Source

Disclaimer: Your full financial situation would need to be reviewed prior to acceptance of any offer or product.

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.

It’s BAS time, here’s what you need to know

By | Tax Advice & Planning | No Comments

Business Activity Statement (BAS) is a tax reporting requirement for all business. The BAS is used to report and pay Goods and Services Tax (GST), PAYG Instalments, PAYG Withholding tax and other tax obligations.

How often must you lodge your BAS?

The BAS is required to be lodged either monthly or quarterly. If you are a monthly lodger the due dates are 28 days after the end of the month, for example, January BAS is due for payment and lodgement 28 February.

If you are a quarterly lodger the reporting dates are July-September, October-December, January-March and April-June. The due dates for these BAS are 28 October, 28 February (an extra month due to Christmas) and 28 April.

If you use the services of a BAS or Tax Agent then you will be entitled to an additional month’s time for lodgement for each BAS, apart from the December quarter/month when everyone is entitled to the additional month extension.

If you have turnover of less than $20 million you have the choice to either lodge monthly or quarterly. It is common practice, if you have the choice, to choose quarterly, this will mean less compliance costs from your accountant or bookkeeper as the number of BAS each year is 4 and not 12.

Who must register for BAS & GST?

You are required to register for the BAS and GST if your total business turnover is greater than $75,000 or $150,000 if you are a tax exempt / not for profit organisation or if you provide taxi travel regardless of your turnover.

How do you account for GST?

You can also choose to account for GST on cash or accrual basis. Cash is available to those businesses with a turnover of less than $2 million and means that you only pay GST when you receive income or pay expenses. Accrual means you pay GST when invoices are issued (by invoice date) or received (by invoice date). If you have trade debtors it is better to pay on cash method so you are not having to pay GST before you are paid.

How do you prepare your BAS?

In order to prepare your BAS timely and accurately you will need to be using an accounting software that reconciles all GST transactions, PAYG withholding from wages and other tax obligations.

What are the risks of being late with BAS?

It is also important to ensure that your lodgements are made on time otherwise you could be up for late lodgement penalties or general interest charge for overdue amounts. The current penalty for late lodgement is $170 per month and the General Interest Charge rate is 9.15%, so it is important to be on time!

Easily track, calculate and meet your monthly and quarterly complinace obligations such as BAS with MYOB AccountRight. AccountRight is powerful accounting with business management capabilities.

Looking for even more help?

MYOB does classroom training on end of period reconciliation and BAS reconciliation.

Learn how to reconcile your company file and prepare for regular periodic and end-of-year reporting, including completing your BAS using BASlink, correcting data imbalances, reconciling GST and super, preparing d ata for your accountant and more. And if you book more than one course you could save up to 20% of the total cost. Book here.

By Ryan Miller on 15th Jul 2015. Read more here.

The information provided here is of a general nature for Australians and should not be your only source of information. Please consult an experienced and registered tax agent as each small business’s circumstance will vary.

Understanding luxury car tax

By | Tax Advice & Planning | No Comments

Luxury Car Tax (LCT) is a tax of 33% on any luxury car sold in Australia or imported into Australia greater than the LCT threshold. A car is considered to be a motor vehicle designed to carry less than 2 tonnes and 9 passengers, however, Limosuines are included no matter how many passengers they carry.

The threshold for the 2014/15 year is $75,375 for a fuel efficient vehicle and $61,884 for any other vehicle. These rates are $75,375 and $63,184 respectively in the 2015/16 financial year.

If you are required to be registered, or registered for GST and you import or sell a luxury car you must be registered for LCT. If you are a private buyer and import a luxury car you will also be required to register.

LCT is paid through the Business Activity Statement (BAS) and once registered Labels 1E and 1F will appear on the BAS. You can produce instant BAS reports through MYOB Essentials, it’s easy online accounting.

The value of a Luxury car will generally include the accessories and modifications.

How to work out the LCT on a sale?

The formula is (LCT value – LCT threshold) x 10/11 x 33%

The LCT value is the retail price of the car minus LCT included in the sale. The retail price includes GST, customs, dealer delivery, warranties, fleet rebates and incentive payments. The LCT value doesnt include stamp duty, transfer fees or registration.

How to work out the LCT on an import?

The formula is (LCT value – LCT threshold) x10/11 x 33%

The LCT value of an importation includes the customs value of the car, any parts or accessories or attchments imported at the same time, customs duty, GST and insurance for the transport.

If you have sold a Luxury car which is less than 2 years old and has previously paid LCT, the LCT can be reduced by the amount already paid.

By Ryan Miller on 30th Jun 2015. Read the full article here.

MYOB Essentials is the fast and easy way to manage your cash flow, particularly on purchases such as luxury cars, and easily manages your ATO compliance requirements such as BAS and GST reports.

 

The information provided here is of a general nature for Australia and should not be your only source of information. Please consult an experienced and registered tax agent as each small business’s circumstance will vary for end of financial year.

Common tax minimisation strategies for small business

By | Tax Advice & Planning | No Comments

It’s tax planning time! If you’re a small business owner you don’t want to have to pay more tax than you have to. The following tips will ensure you get the most bang for your buck come tax time.

1. Take advantage of the $20,000 immediate asset write off

Unless you have had your head in the sand for the past month, you would know that the Federal Government announced in the budget released on 12 May 2015 that all eligible small businesses would be entitled to an immediate deduction for asset purchases costing less than $20,000. This measure replaces the $1,000 threshold which was in existence up to the announcement and will be in existence until 30 June 2017.

You will need to ensure that the assets are installed and ready for use by 30 June 2015 in order for the deduction to be available for the 2015 financial year. If you do not require any assets or haven’t got the cash flow to afford them before year end, it is really important to remember that you are able to write off the balance of any small business pool with a written down value of less than $20,000 and get an immediate deduction!

You will need to ensure that your assets are eligible assets as, for example, capital works are not subject to the simplified depreciation rules and are subject to different rates, which are much less than the general pool and immediate write off.

2. Maximise superannuation contributions

As a small business owner, you should be planning for your future, and that means superannuation. The concessional cap from 1 July 2014 is $30,000 for all individuals unless you were 49 years of age or older on 30 June 2014 which means your cap is $35,000. 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.

3. Make Prepayments

If you have the available cash, making prepayments is a no-brainer. Businesses are entitled to a deduction for prepayments made for greater than $1,000 as long as the eligible service period is less than 12 months. You may consider prepaying a portion of rent or interest on borrowings. Prepayments under $1,000 are deductible regardless of the service period.

4. Consider the timing of Capital Gains Tax events

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, such as Active Asset or Rollover relief. If you are considering the disposal of an asset, you would be wise to contact your tax adviser so that they can help you to understand the consequences of the transactions and the concessions that may be available.

5. Write off those bad debts that will never be collected

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.

6. 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.

Improve your tax planning this end of financial year with MYOB AccountRight online accounting software, it’s the power to manage business, your way. For further information or assistance with setting up or upgrading please contact Keeping Company on 1300 533 787.

By Ryan Miller on 17th Jun 2015.  Read the full article here.

The information provided here is of a general nature for Australia and should not be your only source of information. Please consult an experienced and registered tax agent as each small business’s circumstance will vary for end of financial year.

most common tax minimisation strategies

By | Tax Advice & Planning | No Comments

Well it’s that time of year again when we focus our attention on tax planning before 30th June.Tax Minimisation Strategies

There are a number of tax minimisation strategies that are often forgotten or overlooked by small business taxpayers. These tax minimisation strategies also help you better understand your business. I will discuss six that I have found taxpayers could take better advantage of.

Six Tax Minimisation Strategies

1. Bad debts

It is essential that bad debts are written out of your debtors listing before 30th June. Be aware though
that the debt must be bad, which means you have taken all reasonable steps to recover the debt. For example: sending reminder letters, follow up calls, taking legal action, getting liquidator advice and etc.

2. Prepayments

As a small business with an income less than $2 million per annum, your business is entitled to claim the prepayment of 12 months of expenses in advance, or longer, if the amount prepaid in total is less than $1,000. For example, in June 2014 you could prepay your small business’s rent for the 12 months to 30 June 2015. Alternatively or as well, you could pay for a 2 year magazine subscription for $900 and claim the cost in full in the year of payment.

3. Income protection insurance

On a number of occasions, I have become the accountant for clients who had not claimed their income protection insurance for a number of years. As you now only have the ability to amend the last 2 year’s income tax returns, it is essential that these types of claims are not overlooked. Of course, the policy must be for the replacement of your income as a result of illness or disability. Any claim will be assessable and accordingly, it makes sense that the premiums are deductible.

4. Obsolete inventory

If you sell product, it is important to review your stock on hand prior to 30th June in order to determine whether there are items of stock that are obsolete. By writing these obsolete items out of your MYOB stock inventory module you immediately create a deduction and tidy up your perpetual inventory records.

5. Plant and equipment past its use by date

Prior to 30 June you should review your depreciation schedule and write off/scrap plant and equipment that is no longer useful to your small business. We all have them, it is simply a matter of taking the time to review, write off and benefit from a deduction for the written down value of the defunct equipment.

6. Superannuation

How often have you had to ask the question – “so how much can I put into my super fund this year”?

Yes, I agree it’s a bit of a moving feast but in summary, if you were 49 or older at 30th June 2013 you can contribute $35,000 into super in the 2014 tax year. If you are under 49, you are entitled to contribute $25,000 ($30,000 from 1 July 2014).

Perhaps the biggest misconception is that the 9.25% employer contributions are not included in the above contributions caps. In fact, the caps include your superannuation contributions from all sources, so you should be careful to include all employer 9.25% contributions (9.5% from 1 July 14 but subject to Parliamentary Approval) and any salary sacrificed amounts in your relevant contributions limits.

If you are a sole trader and you receive employment income as well, if the employment income is greater than 10% of your assessable income (ie., your business income, interest, dividends, capital gains etc) you will more than likely NOT be able to claim personal tax deductible contributions.

If this is the case you could consider asking your employer to make salary sacrifice contributions up to your annual contributions cap. Make sure you have a prospective agreement in place with your employer. You should also be aware, if you exceed this limit, the excess contributions will be taxed at your personal marginal rate of tax.

MYOB AccountRight accounting software helps you track your purchases and payments. When implementing tax minimisation strategies but don’t forget to check that you meet all your tax and compliance obligations.

tax deductible expenses – how much are they worth?

By | Tax Advice & Planning | No Comments

Tax deductible expenses

Although we have just started a new tax year, it is still important to understand the value of your tax deductible expenses and the benefit of that spending on your disposable income.

I think in general, we tend to view that if we spend a dollar on tax deductible expenses or assets, it will save us a dollar in tax. Sadly, the tax man is not that generous. In fact, with the ongoing changes to marginal tax rates, there is less advantage given to lower income earners.

Individual taxpayer and the marginal tax rates

To illustrate, let’s consider you, as an individual taxpayer and the marginal tax rates that apply to you for the 2014 tax year:

0 – $18,200 $Nil
$18,200 – $37,000 $Nil plus 19 cents for each dollar over $18,201
$37,001 – $80,000 $3,572 plus 23.5 cents for each dollar over $37,000
$80,000 – $180,000 $17,547 plus 37 cents for each dollar over $80,000
$180,000 and over $54,547 plus 45 cents for each dollar over $180,000

If your taxable income is less than $18,200 per year, you will not pay any tax. Technically, if you buy that tax deductible subscription, you will not have any tax deductible expenses because hey, you’re not paying tax anyway.

But let’s imagine you earn more than $180,000 and you spend a dollar on the same tax deductible subscription. How much tax will you save and get back from the tax man? Any income earned over $180,000 attracts tax at 46.5 cents in the dollar (including the Medicare levy of 1.5%), so a $1 tax deduction will give you a tax saving of 46.5 cents. But what is the actual cost of the subscription once tax is accounted for? The $1 for the subscription less a 46.5 cents tax saving equals an out of pocket cost of 53.5 cents.

Not bad! It’s no wonder those who have taxable incomes over $180,000 say, “I love being in partnership with the Taxman!”

Why do you think people who earn over $180,000 do negative gearing with residential property? It’s because every dollar they lose, the taxman pays nearly half of that loss in tax savings. For the uninitiated, negative gearing involves investing in property or shares etc where the expenses of ownership such as, interest paid, rates, insurance, agent’s commission etc. exceed the rental / dividend income, with the resulting loss being tax deductible expenses claimed against your other income.

But, even though the taxman is paying for nearly half the loss, the investment in the property or shares is only worthwhile if the property or shares go up in value and recover the after tax costs of the years of ownership plus some. Remember, tax is a consideration when negative gearing into assets, but it’s not the only consideration.

So where does that leave you if your taxable income is less than $180,000? Well, it will depend on what your taxable income is. If your taxable income is between $37,001 and $80,000, every dollar you spend on tax deductible costs will earn you a tax saving of 25 cents including the Medicare levy.

Should you rush out and start spending?

Well, the higher your taxable income the more the ATO will shelter the cost, but I would suggest that at lower taxable incomes, incur the cost only if you really need to.

Self Managed Superannuation Fund (SMSF)

Your tax paying entity/company will also have an impact on your tax saving. For example, a company is taxed at 30 cents in the dollar and a self managed superannuation fund (SMSF) is generally taxed at 15 cents in the dollar assuming it is in accumulation phase.

So a dollar spent on a tax deductible expense in a company or SMSF will cost the company 70 cents after tax and the SMSF a significant 85 cents after tax.

It begs the question why negative gearing into property in an SMSF is considered so attractive when you consider that every dollar lost after rental income, the taxman only pays 15 cents. The SMSF funds every dollar lost to the tune of 85 cents. All I can say is that the investment had better be a good one, if it is to recover the after tax losses over the period of ownership and still provide the SMSF with a solid capital gain.

Other tax concessions

Don’t forget there are other tax concessions available that will impact your decision on whether you incur a cost or not. Obtaining a tax deduction in June 2013 will mean that you will receive the tax credit for that cost in your 2013 income tax return, and accordingly you will receive the refund for the expense when you lodge your 2013 tax return. Incurring the cost in July 2013 will mean that you will not receive the tax saving until you lodge your 2014 income tax return and that is at least another 11 months. In essence, timing is a consideration, but only if you really need that tax deduction.

For other tax compelling ways to save tax, read Ryan Miller’s blog, “Want to reduce tax? The tax write-off way”. Always think about the need, the timing and the tax saving (based on the applicable marginal tax rate) when offloading those hard earned dollars of yours.

Small business owners need to meet all their tax and compliance obligations. Visit MYOB’s Tax Changes Information section, specifically prepared to assist startups and small businesses to stay on top of their game with tax changes.

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