Business Tax Tips for 2019
End of Financial Year Tax Update!
Super Contributions pre 30 June – act now!
For super contributions to be deductible within the 2019FY, you must ensure your payments are received by super funds before 30 June 2019.
If you use the ATO Small Business Super Clearing House (SBSCH) though, the ATO have just advised that if you intend to claim a tax deduction for payments in this financial year they must be received by the SBSCH by COB Friday 21 June 2019. This is due to the ATO's annual system maintenance. Other clearing houses may have similar early dates, so it is best to check with your clearing house on when they may require payments to be received.
In short, ACT NOW to ensure a tax deduction in this year for employer contributions.
For ease of reference, here are a few types of other super contributions that are possible, aside from Employer Contributions:
Concessional Contributions - deduction can be made for Personal Deductible Contributions or additional Salary Sacrifice Contributions. This is limited to $25,000 (including employer contributions) per Financial Year.
Non-Concessional Contributions - (Personal) after-tax contribution. A cap of $100,000 applies per annum, and up to $300,000 using the bring-forward rule - dependent on previous Financial Year contributions, your age (ie. under or over 65) and work-status for those aged 65 and older.
(Note -If a lower income earner who earns at least 10% of their income from employment or running a business makes a non-concessional contribution, they may be eligible for a Government co-contribution of up to $500.)
Spouse Contributions - A tax offset is available of up to $540 on super contributions up to $3,000 which are made on behalf of a spouse, if the spouse’s income is $37,000 p.a. or less.
Remember that in order for your contribution to be counted in this Financial Year, it must be received by your Super Fund account before the 30th of June; and as that is a Sunday, it needs to be received by COB Friday 28th June.
We recommend seeking advice due to the complexities around super, so please contact us if you’d like to clarify anything.
Please contact us if you have any assistance or have any questions.
Reserve Bank leaves the cash rate on hold
At its meeting today, the Reserve Bank Board decided to leave the cash rate unchanged at 1.50 per cent.
The full statement supporting the decision by Philip Lowe, Governor of the RBA, can be found here
https://www.rba.gov.au/media-releases/2019/mr-19-11.html
The summary comments though are below, and state that the Bank will be paying close attention to the labour market for decisions in coming months. This would suggest they see the labour market as the key to shifts in the broader economy.
“The Board judged that it was appropriate to hold the stance of policy unchanged at this meeting. In doing so, it recognised that there was still spare capacity in the economy and that a further improvement in the labour market was likely to be needed for inflation to be consistent with the target. Given this assessment, the Board will be paying close attention to developments in the labour market at its upcoming meetings“
Single Touch Payroll (STP) - changes from 1 July 2019
Single Touch Payroll (STP) is a change to the way you report payroll information to the ATO.
STP will be extended to Employers with 19 or less employees from 1 July 2019.
This will mean all employers will need to have payroll software which facilitates STP reporting.
If you don’t have compatible software, you will need to subscribe to some.
There are a number of low cost options available. We are recommending, where possible, to have compatible accounting software which simply includes this as a feature. In that way all your accounts and payroll are in one system.
What is Single Touch Payroll
Each time you pay your employees you will also be sending your employee salary and wage information, pay as you go (PAYG) withholding and super information to the ATO. These will be year-to-date amounts.
You will need to make sure your current payroll software is updated by your digital service provider (DSP) to offer STP reporting, or choose payroll software that is STP-enabled.
Mandatory reporting items are covered in more detail below.
What the changes mean for you
Each time you run your payroll and pay your employees, you will also send STP data from your payroll software to the ATO. This will be done through a pay event.
If you need to, you will be able to make corrections to your employees' year-to-date (YTD) amounts in your next pay event, or through an update event.
Payment summaries
You will not be required to provide payment summaries (including part-year payment summaries) to your employees for the payments you report and finalise through STP.
The ATO will make this information directly available to your employees online through myGov. This information will be called an employment income statement. It is the equivalent of a payment summary.
Once you make a finalisation declaration, the ATO will notify your employees that their employment income statement is 'tax ready' in myGov and they can use it to complete their tax returns.
Reporting superannuation information
You will continue to report and pay your employees' superannuation entitlements through your existing SuperStream solution (including the Small Business Superannuation Clearing House). This does not change as a result of STP.
What will change is the requirement to report your employees' super liability or ordinary time earnings (OTE) each pay day. This is based on the amounts you currently provide on an employees' payslip.
Super funds will report to the ATO when you make the payment to your employees' super fund.
This will provide the ATO with visibility of an employer's super obligations and payments.
Online employee commencement forms
Some digital service providers will offer online employee commencement forms through their software, including the Tax file number declaration, Superannuation (super) standard choice and Withholding declaration forms.
If this is available you will have the option to invite your employees to complete the forms online through your STP-enabled software. The employee information captured within the online form will also be collected by your payroll software.
Online employee commencement forms are not compulsory through STP.
Even if your software offers these services, you can continue to provide these forms as you do now (for example, as papers forms).
Mandatory reporting
These withholding payments are required to be reported under STP. They are generally paid through a payroll process by employers to your employees.
If you report these payments (and amounts withheld from them) throughout the year and complete a finalisation declaration you will not need to provide the corresponding payment summaries to your employees or a PAYG Withholding payment summary annual report to the ATO.
A finalisation declaration is a declaration in the approved form given to the Commissioner of Taxation by 14 July stating you have fully reported for the financial year and for each of your employees using Single Touch Payroll. You are then not obliged to give payment summaries to your employees (although you may still choose to) or a payment summary annual report to the Commissioner.
If you do not report and finalise these amounts through STP you will continue to be required to give a payment summary to your employees and a payment summary annual report to the Commissioner.
Mandatory reporting labels
Please contact us if you require assistance or more information.
Fringe Benefits Tax – ATO “Radar” items – Year ending 31 March 2019
The ATO has released their annual list of Fringe Benefits Tax (FBT) 'What attracts our attention' items for the FBT year ending 31 March 2019.
This year there are six items that are being targeted more specifically, including
failing to report car fringe benefits, incorrectly applying exemptions for vehicles, or incorrectly claiming reductions for these benefits
mismatches between the amount reported as an employee contribution on an FBT return compared to the income amounts on an employer's tax return
claiming entertainment expenses as a deduction but not correctly reporting them as a fringe benefit, or incorrectly classifying entertainment expenses as sponsorship or advertising
incorrectly calculating car parking fringe benefits due to:
significantly discounted market valuations
using non-commercial parking rates
not having adequate evidence to supported the calculated rates
not applying FBT to the personal use of business assets provided for the personal enjoyment of employees or associates
not lodging FBT returns (or lodging them late) to avoid or delay payment of tax.
They are reminding all employers to be mindful of FBT matters, in particular the items that attract their attention, and to make sure they identify fringe benefits correctly. This will help employers stay off their radar!
Federal Budget 2019-20 Summary
Last night, April 2, the Federal Treasurer Josh Frydenberg released the Coalition’s budget, earlier than usual ahead of the impending Federal Election, which is set to be held some time in May.
Below is a summary of some of the key elements of the Budget:
More than doubling of the low and middle income tax offset to $1,080 from 2018-19. Taxpayers earning up to $126,000 a year will receive this tax cut.
Forecast budget surplus of $7.1 Billion for 2019-20 and further surpluses in the following 3 years (a total of $45 Billion over 4 years)
Economy is forecast to grow by 2.75% in 2019-20 and 2020-21
Lowering the 32.5% tax rate to 30% from 1 July 2024. This will cover all taxpayers earning between $45,000 and $200,000 and would mean that 94% of taxpayers will pay no more than 30 cents in the dollar
From 2024-25, there would only be 3 personal income tax rates – 19%, 30% and 45%
Increasing the instant asset write-off from $25,000 to $30,000, with effect from 7:30pm (AEDT) on 2 April 2019. The write-off threshold will also be extended to apply to businesses with a turnover of up to $50 million - this will only apply to 30 June 2020.
$100 billion on infrastructure over the next decade to reduce congestion and improve links between Australia's cities and regional towns (a lot of which has already been announced)
An immediate one-off rebate on energy costs to pensioners, of $75 for an individual or $125 for couples.
Changes to Work test for Super contributions for those aged 66 and 67
EMDG scheme - extra $60 million in funding over the next 3 years to help more businesses export their products and services around the world.
For further information, please see our more detailed analysis paper here
Personal Income Tax Changes
The Government's Personal Income Tax Plan, as announced in the 2018-19 Federal budget, has been passed by Parliament.
There will be:
changes to income tax rate thresholds in the 2018-19, 2022-23 and 2024-25 income years
a new low and middle income tax offset to reduce the tax payable by low and middle income earners in the 2018-19, 2019-20, 2020-21 and 2021-22 income years
a new low income tax offset from the 2022-23 income year (to replace both the new low and middle income tax offset and the current Low Income Tax Offset ).
The following table outlines the updated rates and thresholds along with the updated offset entitlements linked to these changes.
Detail of these changes
Increase to income tax rate thresholds
2018-19, 2019-20, 2020-21 and 2021-22 income years
Increase the top threshold of the 32.5% tax bracket from $87,000 to $90,000
2022-23 and 2023-24 income years
Increase the top threshold of the 19% tax bracket from $37,000 to $41,000.
Increase the top threshold of the 32.5% bracket from $90,000 to $120,000.
2024-25 income year onwards
Increase the top threshold of the 32.5% tax bracket from $120,000 to $200,000.
New low and middle income tax offset
2018-19, 2019-20, 2020-21 and 2021-22 income years
Australian resident individuals (and certain trustees) whose income does not exceed $125,333 are entitled to the new low and middle income tax offset. Entitlement to the new offset is in addition to the existing Low Income Tax Offset.
If your income:
does not exceed $37,000 you are entitled to $200
exceeds $37,000 but does not exceed $48,000 you are entitled to $200 plus 3% of the amount of the income that exceeds $37,000
exceeds $48,000 but not $90,000, you are entitled to $530
exceeds $90,000 you are entitled to $530 less 1.5% of the amount of the income that exceeds $90,000.
New low income tax offset
2022-23 and later income years
A new low income tax offset replaces both the current Low Income Tax Offset and the low and middle income tax offset.
Consistent with the current Low Income Tax Offset, individuals with taxable income that does not exceed $66,667 (as well as certain trustees taxed on behalf of individuals) will be entitled to the new low income tax offset.
The amount of the new low income tax offset is $645 reduced by:
6.5% of the amount by which your income exceeds $37,000 but does not exceed $41,000 and
a further 1.5% of the amount by which your relevant income exceeds $41,000.
New industries entering the taxable payments reporting system : Road freight, information technology (IT), security, investigation, and surveillance services
From 1 July 2019, businesses that provide road freight, information technology (IT), security, investigation, or surveillance services, will need to lodge a Taxable payments annual report (TPAR) each year to advise the ATO of payments made to contractors.
This is necessary even if these services are only part of the business’s activities.
The first TPAR will be due by 28 August 2020 for payments made from 1 July 2019 to 30 June 2020.
The information required to be compiled and reported is as follows:
ABN (if known)
name
address
total amounts paid during the financial year (including GST).
It is important to make sure appropriate systems are put in place to capture this information as payments are made. Most commercial accounting packages have the required functionality to capture, and then report this information.
Please contact us if you require further information or assistance.
Exemptions from lodging monthly activity statements electronically have ended
The ATO previously granted some of our clients a temporary exemption from lodging their monthly activity statements electronically.
This exemption was for taxpayers who were lodging monthly activity statements by paper and having us lodge quarterly activity statements electronically on their behalf.
The exemption was given to allow these clients to transition to lodging online.
The temporary exemption has now been removed and therefore paper activity statements will no longer be received.
Action to take
Register for an AusKey and lodge monthly activity statements electronically. Alternatively, we can lodge these on your behalf.
The ATO app has a key dates reminder feature also, so you can keep an eye on due dates.
Single Touch Payroll for Small Employers
Parliament passed legislation on 12 February to extend Single Touch Payroll (STP) reporting to include all small employers (those with fewer than 20 employees) from 1 July 2019.
STP is pay day reporting by employers to the ATO as it happens. This reporting already started on 1 July 2018 for large employers (20 or more employees).
This is a big change and will generally be much easier to comply with if using some kind of accounting or payroll software.
The ATO Commissioner Chris Jordan has announced that the ATO wants to help with the transition and has outlined the following :
“The ATO will offer micro employers (1 to 4 employees) help to transition to STP and a number of alternative options – such as allowing those who rely on a registered tax or BAS agent to report quarterly for the first two years, rather than each time payroll is run.
Small employers can start reporting any time from the 1 July start date to 30 September 2019. We will grant deferrals to any small employer who requests additional time to start STP reporting.
There will be no penalties for mistakes, missed or late reports for the first year.
We will provide exemptions from STP reporting for employers experiencing hardship, or in areas with intermittent or no internet connection.”
For more information please contact our office.
Vacancy Fee for foreign owners
Foreign owners of residential dwellings in Australia are required to pay an annual vacancy fee if their dwelling is not residentially occupied or rented out for more than 183 days (six months) in a year.
The vacancy fee return must be lodged by foreign owners of residential dwellings who:
made a foreign investment application for residential property after 7.30pm AEST on 9 May 2017
purchased under a New Dwelling Exemption Certificate that a developer applied for after 7:30pm AEST on 9 May 2017.
The vacancy fee may also apply where a foreign person failed to submit a foreign investment application but purchased a residential property before 9 May 2017.
Foreign owners of vacant land do not have to lodge a vacancy fee return until a dwelling has been constructed on the land. Returns need to be lodged even when the dwelling has been occupied or made available for rent.
For the purpose of applying the vacancy fee rules, a vacancy year is each successive period of 12 months starting on the occupation day for the dwelling during which you have continuously held an interest in the dwelling.
Vacancy fee returns must be lodged within 30 days of the end of each vacancy year.
The vacancy fee will generally be the same amount as the foreign investment application fee paid at the time you submitted your foreign investment application.
WHOLESALER TURNAROUND
Wholesaler fell into significant financial problems and major losses due to external factors and poor internal management decisions. We identified some issues and contacted the owner, subsequently unravelling the extent of the problems.
We worked closely with the owner and other advisers, working out a sustainable budget, restructuring the business including embarking on significant diversification activities.
Outcome: Financial issues worked through, profitable business and has experienced significant continual growth ever since. Continue to work closely with the owner and management.
SERVICE INDUSTRY TURNAROUND
Client suffered heavy losses in the post GFC period, with market downturns throughout their industry. Worked closely to establish a sustainable business model, identified and removed unnecessary costs to retain workforce. This included a significant premises negotiation which culminated in a significantly improved, contemporary space at a lower cost per month.
Outcome: Business returned to healthy profitability which was further enhanced as the industry in general rebounded.
INTERNATIONAL EXPANSION
Client with international operations : Developed rolling Profit & Loss and cash flow forecasts across multiple business units. Implemented monthly reporting with suite of reports circulated to executive team. Developed consolidated Financials from accounting software in liaison with trusted associated programming firm.
Developed & compiled Adjusted earnings schedules for successful business sale with summarised financials across multiple years – identifying adjustable items is critical in ensuring the fair & equitable value of a business and a sale price which both parties were happy with.
TURNAROUND / NEW TECHNOLOGY
Trade business client suffered significant losses over a couple of years due to top heavy management costs and downturn in work. Business scaled back due to financial position. Worked with client to establish a budget & get accounts in order. Recommended new cloud based Job Management and Invoicing system which synced to the existing accounting package, which we also moved online. Job Management system has resulted in huge efficiencies. Business on track with budget and over achieved with revenue.
Outcome: Business back on track financially, and growing again. Now on a sustainable footing - lean, efficient and profitable.
MOVING BUSINESS PREMISES TO SELF MANAGED SUPER FUND - NO CGT
This is an opportunity we have used several times for clients.
Background – clients owned commercial premises and wished to transfer to their Self Managed Super Fund. Issue – capital gains tax on “disposal”.
We advised on Small Business Concessions and this resulted in NIL capital gains tax payable on the transfer. The premises were then held in the tax preferred superannuation environment.
There are also situations where there has been no Stamp Duty payable on the transfer.
