Reduce Tax

Key Actions That Business Owners Should Take Before 30 June to Reduce Tax

By Chris Smith

For businesses to maximise their cash position, they should consider the following tax planning opportunities before 30 June.

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Business Budget planning

The Importance of Budgeting in Business

By Chris Mandzufas

A realistic and detailed budget is crucial for guiding your business to tackle unexpected challenges and to ensure you stay on track to grow.  

It may seem obvious that business growth can only occur when there is money available for reinvestment, but it is surprising how many businesses do not budget and do not track their performance against a budget.

In the current environment, a realistic and detailed budget is a very important tool for providing valuable information, guiding your business to tackle unexpected challenges and most importantly to ensure you stay on track to grow.

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forcast

Why Preparing Three-Way Forecasts is So Vital

By Tony Monisse

Learn why it is important to forecast the profit & loss, cashflow and balance sheet.

As I see it, a budget is merely a forecast prepared at a point in time.  This point in time is usually tied to the end of the financial year and the business’ planning cycle.

In contrast, a forecast is frequently updated based on the changes in the operating environment e.g. winning a new contract, losing a key customer or a change in the staffing situation.

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Details of the JobKeeper Payment – eligibility, how to enrol & critical deadlines

From 20 April 2020, you can enrol with the ATO for the JobKeeper payment using the Business Portal and authenticate with myGovID.  You must do this by the end of May to claim JobKeeper payments for April.  Payments will start being made to businesses in May.

Summary of important updates to this article as of 29 April to the below since originally published on 20 April:

  • Due date for registration to apply from 30 March is now extended to 31 May (was 26 April, then 30 April)
  • Due date for top up of April fortnightly wages to $1,500 is now 8 May (was 30 April)
  • One-in-all-in – confirmation from the ATO that all eligible employees must be offered JobKeeper for businesses to be eligible for JobKeeper payments
  • Alternative test for turnover eligibility has been released by the ATO
  • Alternative test to be released soon for Service Entities
  • Clarification on Cash Basis and Accruals Basis when applying the turnover test

The steps below outline the process involved so that you do not miss out.

1. Register for Business Portal

If you have not already registered for the Business Portal, this will be required in order to lodge monthly reports with the ATO and claim the JobKeeper payments.
If you have not registered, please advise your accountant who the authorised contact person(s) should be for your business.

If you use the ATO Business Portal, you will need a myGovID linked to your ABN in relationship Authorisation Manager (RAM). To set up the Business Portal for your business, you can find detailed steps on how to set this up here.

Your registered tax agent can also enrol on your behalf (further information below).

2. Check you are an Eligible Employer

Check that you meet the eligibility requirements for JobKeeper, essentially:

  • On 1 March, you carried on business in Australia;
  • Your business has faced a minimum 30% decline in turnover (more information below).

More information on qualifying as an eligible business can be found here.

3. Apply the Turnover Test

The turnover test requires a self-assessment of the eligibility requirements.  These rules are complex and we recommend obtaining advice if there is any uncertainty.

Identify the turnover test period and relevant comparison period:

To work out your decline in turnover to be eligible for JobKeeper for the first fortnight starting 30 March 2020, under the rules outlined as the “Basic Test” you can compare either:

  • GST turnover for March 2020 with GST turnover for March 2019;
  • projected GST turnover for April 2020 with GST turnover for April 2019;
  • projected GST turnover for the quarter starting April 2020 with GST turnover for the quarter starting April 2019.

You can choose to test your decline in turnover on either a monthly or quarterly basis, regardless of how you report for your Business Activity Statement purposes.

To qualify at a later time you can rely on the turnover test for the months of May, June, July, August, and September, or the July to September quarter.  Note that in relying on this future date, eligibility will be deferred until the start of that period.

If you work out that you qualify for the JobKeeper payments for the first fortnight because your turnover has declined by the relevant amount, you remain eligible and do not need to keep testing turnover for following months.

There may be situations where the turnover in the corresponding period in 2019 does not provide an appropriate relevant comparison. In these situations, you will need to consider the alternative test, which has recently been released by the ATO.

The Alternative Test can apply in some of the following circumstances:

  • the entity commenced business after the relevant comparison period (the business did not exist in that period)
  • the entity acquired or disposed of part of the business after the relevant comparison period (the business is not the same business in that period as it is now)
  • the entity undertook a restructure after the relevant comparison period (the business is not the same business in that period as it is now)
  • the entity’s turnover substantially increased by:
      1. 50% or more in the 12 months immediately before the applicable turnover test period; or
      2. 25% or more in the 6 months immediately before the applicable turnover test period, or
      3. 12.5% or more in the 3 months immediately before the applicable turnover test period.
  • the entity was affected by drought or other declared natural disaster during the relevant comparison period
  • the entity has a large irregular variance in their turnover for the quarters ending in the 12 months before the applicable turnover test period, excluding entities that have cyclical or regular seasonal variance in their turnover, or
  • the entity is a sole trader or small partnership where sickness, injury or leave have impacted an individual’s ability to work which has affected turnover.

We are awaiting further updates from the ATO with respect to Service Entities and the alternative test that can be relied on to access the JobKeeper payment.

Calculate GST Turnover:

You need to determine:

  • for the turnover test period – what your projected GST turnover will be
  • for the comparison period – what your current GST turnover was in 2019.

In some circumstances the definition of GST turnover can be complex. More information can be found here.

If your eligibility requires a forecast of your projected GST turnover, we recommend this forecast is backed up with appropriate documentation that should be held for a period of 5 years.

Cash or accruals basis:

You can use accrual basis of accounting to calculate the current GST turnover and projected GST turnover.

If you prepare your BAS on a cash basis, you can also rely on the cash basis.  Recently updated ATO rules appear to show that the Cash Basis can now be relied on by all businesses.  You must apply the same basis to the current GST turnover and the projected GST turnover.

More information on the Basic Test for turnover test can be found here.

4. Determine who your Eligible Employees are

Your employee is eligible if they:

  • Are employed by you;
  • Were part-time, full-time or long-term casual (employed on a regular basis for at least 12 months) as at 1 March 2020;
  • Were at least 16 years of age on 1 March 2020;
  • Were an Australian resident as at 1 March 2020 and are one of an Australian citizen, the holder of a permanent visa, or a Protected Special Category Visa Holder.
    ~ Your employee can also be an Australian tax resident who is a Special Category (Subclass 444) Visa Holder.
  • Were not in receipt of these payments during the JobKeeper fortnight:
    ~ Government parental leave or Dad and partner pay, or, payment in accordance with Australian worker compensation law for an individual’s total incapacity for work;
  • agree to be nominated by you (further information below)

You cannot claim for any employees who:

  • were first employed by you after 1 March 2020, or
  • left your employment before 1 March 2020, or
  • have been, or have agreed to be, nominated by another employer.

More information can be found here.

5. Nominate your Eligible Employees (must be finalised by 31 May)

Before you enrol to receive JobKeeper payments, you need to notify each eligible employee that you intend to nominate them as employees under the JobKeeper scheme.

You must tell those employees that you have nominated them as an eligible employee to claim the JobKeeper payment.

They must agree to be nominated by you by completing the JobKeeper employee nomination notice and returning it to you for your records.

This must be received, signed back from your employees by the end of May for the payments to apply from 30 March.

The nomination form does not need to be provided to the ATO however employers are required to keep a copy of the completed form as part of their record-keeping obligations under the law.

If an employee is currently receiving an income support payment, they must notify Services Australia (Centrelink) of their new income to avoid incurring a debt they will have to repay.

All eligible employees must be nominated for the business to be eligible for the JobKeeper.  This includes any employees who have been stood down.  You must not pick and choose which employees you would like to receive the JobKeeper as this will exclude the business from being eligible.

6. Paying Employees

You will not be eligible for the JobKeeper payment if you pay your nominated employee less than $1,500 per fortnight.

You should pay your employees for each JobKeeper fortnight you plan to claim for (this period depends on the above eligibility timing).

The first fortnight is from 30 March – 12 April and each JobKeeper fortnight follows after that.

For the first two fortnights (30 March – 12 April, 13 April – 26 April), the ATO will accept the minimum $1,500 payment for each fortnight has been paid by you even if it has been paid late, provided it is paid by you before 8 May.

This means that you can make a combined payment of at least $3,000 per employee before 8 May.

If your eligible employees earn more than $1,500 per fortnight, you should continue to pay them their regular salary or wages. However, you will only receive $1,500 for each eligible employee.

Any amount you pay above $1,500 per fortnight is not subsidised by the JobKeeper payment.

Tax and Super Consequences

  • All JobKeeper payments are assessable income of the business
  • The normal deductibility rules apply to salaries and wages paid to the employees
  • No super is required on the additional payments made to employees as a result of JobKeeper (ie, on any top up to $1,500)

For further information, a guide from the ATO for Paying Employees.

7. Enrol for the JobKeeper Payment (required by 31 May if claiming from start)

You only need to complete this step once.

  • Log in to the Business Portal using myGovID.
  • Select ‘Manage employees’ then the link for the JobKeeper payment.
  • Fill in the JobKeeper enrolment form by confirming the required fields.

Required responses:

  • Fall in turnover
  • Month
  • Expected number of employees
  • Eligible business participant (further information below)
  • Contact details
  • Bank account details

8. Identify and Maintain your Eligible Employees

You or your registered tax or BAS agent can:

  • identify each eligible employee that you will claim the JobKeeper payment for, and
  • maintain their details each month

You can identify your eligible employees in one of the following ways:

9. Make a Business Monthly Declaration

Each month, you must reconfirm the eligibility of your business and your reported eligible employees.

You must also provide information as to your current and projected GST turnover.

This is not a retest of your eligibility, but rather an indication of how your business is progressing under the JobKeeper Payment scheme.

You or your registered tax or BAS agent can make the business monthly declaration.

Each month you must:

  • Ensure you have paid your eligible employees at least $1,500 per eligible employee per fortnight
  • Log in to the Business Portal to
    • review the number of eligible employees for each JobKeeper fortnight
    • update your eligible employees if any of your eligible employees change or leave your employment
    • provide your current and projected GST turnover
    • reconfirm your contact and bank details for payment.

More information can be found relating to steps 7 – 9, here.

10. Eligible Business Participant:

For business owners who are not receiving a salary, however are remunerated via share of profits, distributions or dividends, then the JobKeeper payment may apply to one individual who is considered to be an eligible business participant.

There are some complexities on how this rule applies, particularly for Unit Trusts and Discretionary Trusts, and we recommend obtaining advice specific to your circumstances.

More information:

The rules regarding the JobKeeper payment are regularly being updated and there are some time critical deadlines to be met.

We will continue to keep this article updated.
The ATO is posting regular updates at this website.

Should you have any questions regarding this stimulus package, eligibility requirements or any other questions, please do not hesitate to contact us on (08) 6212 7200 to discuss.

Updated 29 April 2020.

JobKeeper Package

Details of the WA State Government’s Second Economic Relief Package

On 31 March 2020, the WA State Government announced economic relief measures for West Australians.

Key details of the package are:

Small and medium businesses:

  • $2,500 one-off credit to Synergy and Horizon customers who consume less than 50 megawatt hours per year (expected to help 95,000 businesses)
  • Payroll tax waived for 4-month period from 1 March to 30 June 2020 for businesses with taxable wages less than $7.5m.  This replaces the previously announced deferral of payroll tax.
  • Range of license fees to be waived for four months for small and medium businesses
  • Businesses impacted by COVID-19 can apply for interest-free payment arrangements and penalty remissions for payroll tax, transfer duty, landholder duty, vehicle duty and land tax
  • Small businesses impacted by COVID-19 will not be disconnected from water or electricity due to late payments, and no interest will be charged on deferred payments.

Household assistance:

  • Eligibility for the previously announced Energy Assistance Payment boost has been expanded to include new eligible applicants until 30 September 2020.  This means those who are unemployed due to COVID-19 who become eligible for a concession card will receive an upfront $305 credited against their electricity bill (from 11 May 2020) and up to a further $305 credited over the course of the next year.
  • No water and electricity disconnections, and no interest charged on deferred payments
  • The same interest-free deferral of payments referred to above for small businesses.

Should you have any questions regarding this relief package, please do not hesitate to contact this office on (08) 6212 7200 to discuss.

Details of the Government’s Second Stimulus Package

On 22 March 2020, the Federal Government announced further economic stimulus measures for individuals, businesses and the banking sector, to support Australia through the unprecedented impact of COVID-19.

This economic plan will provide significant benefits to small and medium-sized businesses and households in addition to the stimulus package announced on 12 March.

The key announcements relate to:

  • Additional payment to small businesses (up from $2k-$25k, to $20k-$100k)
  • SME loan guarantees
  • Temporary relief under ASIC and Corporations law requirements
  • Early release of Super benefits
  • Reduction in minimum pension payments
  • Increased access to welfare

More details below:

Read more

$25,000 cash booster for your business: Details of the government’s $17.6 billion coronavirus stimulus package

The Federal Government last week unveiled their $17.6 billion stimulus package — which includes grants of up to $25,000 for small business, support for those employing apprentices and accelerated depreciation amongst other measures.

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Federal Budget update

Federal Budget Update – Key Takeaways

On 2 April, the Government released the Federal Budget for 19/20.

Below are the key takeaways that may be relevant to you and your group:

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Christmas tree with presents

Season’s Greetings & Best Wishes from Brentnalls WA!

Season’s Greetings & best wishes for a happy, healthy and prosperous New Year from your team at Brentnalls WA!

 

P.S. Please note that our office will be closed from1:00pm on Thursday, 20 December 2018 and will re-open at 8:00am on Monday, 7 January 2019. In case of emergency, please leave a message at our office number 08 6212 7200. We will be checking our messages over the holiday period and will get back to you as soon as possible.
Newsletter

November 2018 Newsletter

Focus on Your Cashflow in the Lead up to the Christmas & New Year Holiday
Brentnalls Affiliation National Conference 2018
My Learnings from China – What Makes a Success Business & Do You Measure Your Competitive Advantage?
Proposed Changes to Division 7A
Practical Advice on Agile Leadership
Brentnalls Affiliation in the Top 100 Accounting Firms for 2018
Every Bit Counts
Did You Know We’re on LinkedIn?

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Targeted amendments to Division 7A – Treasury consultation paper

Today, Treasury has released a consultation paper relating to the proposed amendments to the Div 7A rules that are due to apply from 1 July 2019.

 

The release of this paper is significant as it is the first detail provided by the Government on how the new proposed rules are intended to apply.

Prior to today’s release, the Board of Taxation’s report outlining recommendations to Government (finalised in 2014) was all we had available as a guide on how the new rules may be applied. Treasury has made substantial changes from those original recommendations.

The notable points that may affect your group are:

  • New Div 7A loans will be straight line 10 year – principal and interest paid each year (previously 7 years)
  • Interest rate will increase from current ATO benchmark rates, and will be the “Small business; Variable; Other; Overdraft – Indicator Lending rate most recently published by the Reserve Bank of Australia prior to the start of each income year”. This will result in substantially higher interest and repayments over the term of the loan
  • Existing Div 7A loans will transition to new rules, however loan terms will not be extended
  • 25 year loans WILL NOT be grandfathered. Transitional rules will allow for 2 years to transfer the loan to a new 10 year loan. Failure to convert these loans will result in a deemed dividend
  • The concept of “distributable surplus” is being removed – this will result in previously exempt loans and payments being captured by the Div 7A rules and triggering tax that previously would not be payable
  • Self-correction mechanism will apply to rectify Div 7A breaches – make good catch up payments will be allowed
  • Amendment period relating to Div 7A loans, payments and forgiveness will extend to 14 years as an integrity measure (up from 5 year amendment period)
  • Post December 2009 Unpaid Present Entitlements (UPE’s) will be captured by the new Div 7A rules (this includes Sub Trust arrangements set up under the Practice Statement 2010/4)
  • IMPORTANTLY, IT IS STILL NOT YET CLEAR whether Pre December 2009 Unpaid Present Entitlements (UPE’s) will be included in the new rules. The consultation paper is specifically asking feedback asking “Should UPEs arising prior to 16 December 2009 be brought within Division 7A?”
    The proposed changes will affect a large number of taxpayers and in some instances will require proactive tax planning to ensure tax effective structures are maintained during the transition.

We will continue to keep you informed of the changes as further updates come to hand.

August 2018 Newsletter

The latest edition of our Newsletter is on its way to your Inboxes! In it, you will find our Director’s reflection on the current financial market situation, Levi’s take on the importance of understanding the numbers, GrowthCon update & more.

Follow the link to access the Newsletter Download PDF of our August newsletter.

Why establish an estate/business succession plan?

Despite the fundamental importance of succession planning, it is often neglected in current business/farming management practice.

Business owners/farmers should recognise that the need for a fully discussed succession plan is paramount in any business/farming situation. A natural progression from one generation to the next (or in case of unexpected or premature death) through the deceased’s Will. Poor succession planning is the cause of much “hurt in business/rural Australia.” Read more

What Is A Self-Managed Super Fund

A Self Managed Superannuation Fund (SMSF) is a type of super fund set up for those who wish to manage their own superannuation assets privately, rather than be a part of a larger fund where members pool their super funds and these are managed by professional fund managers. It gives the members much greater control over the investment decisions, but also require far greater input by the members of the fund. All super funds are required to comply with their relevant regulatory bodies and with SMSF‘s, trustees are required to oversee these compliance requirements. Read more

Traits of a Successful Business

We want to be the Accountant who will Challenge, Attack, Question, Confront, Dare, Provoke, Contest, Assault, Invade, Blast you on the way you operate your business.

The key areas of any Business that require ongoing maintenance to ensure the Health and Wealth of your business are: Read more

Strategic Planning – 10% Strategy 90% Execution

Where are you on the strategy and execution axis with your business?

It has often been said that an average strategy well executed will always outperform a superior business strategy which is poorly executed. In fact in terms of effort, the development of thebusiness strategy is 10% of the effort and the execution of the business strategy is 90% of the effort. Read more

Improving Value At All Stages Of Your Business

Improving the value of your business is not just about selling. It’s about running the most successful business you can.

The Theory

There are many ways to value a business, however the most commonly used valuation methodology for a profitable trading business is the Capitalisation of Profits Methodology.

This methodology is based on the average earnings of the business (before interest and tax – EBIT) multiplied by a capitalisation rate.

Therefore to increase the value of your business, a business owner should focus on: Read more

Funding Requirement Report

Is it time to visit the Bank?

Visiting your bank is often like visiting the dentist:

• You need to go yearly but you delay it for as long as you can
• Your past sins are obvious as soon as you open your mouth. They can be even worse when the dentist digs a little deeper and does an x-ray!
• The feeling of an unknown outcome – will you get the all clear?
• Feeling like you can’t get your point of view across even when they ask you questions
• The expensive bill at the end of the visit
• The ongoing maintenance and review so you don’t lose all of your teeth. Read more

Fringe Benefits Tax (FBT) and Salary Packaging

The 2011 Federal budget signaled significant changes to the way Fringe Benefits Tax will be calculated on the use of motor vehicles. Traditionally, motor vehicles have formed an essential part of many remuneration packages and it was initially feared that the changes to the legislation would make it prohibitive for employers to use this carrot to entice and retain employees. However, closer analysis suggests that there continues to be scope to tax effectively package motor vehicles into employee’s salary under the new regime.  Read more

What is a Bonus Plan?

Many exceptional companies have bonus plans to reward employees.

Why would you consider a bonus plan?

Advantages include:

  • Staff retention, attraction and motivation.
  • Added incentives to complete jobs on time and achieve agreed milestones.
  • Assists cash flow in the company by minimising annual salary increases.

Read more

Contractors vs Employees: Under the ATO Spotlight

Why Consider the Contractor issue now?

The contractor issue is not at all new, nor has it been subject to any dramatic recent change.  However there are a number of diverse factors that have brought this issue back to the spotlight.

  1. Growth in the number of Contractors: The attractions of contractors are many: a substantial release from the growing obligations that employers face and the flexibility which comes with being able to gain or shed resources in line with needs and the business cycle, just to name a couple.
  2. Government / Treasury Attention: The new contractor reporting regime which will apply to the building and construction industry from 1 July 2012 is the most obvious example of measures to examine contractor arrangements.
  3. Tax Office Attention: The Tax Office’s compliance plan for 2012 is reason enough to note how important the contractor issue has become.
  4. Institutional attention:  It is reasonable to expect that union scrutiny of contractor arrangements will continue.

Read more

The Budget Surplus – Illusion or Reality?

The Government released their Mid-Year Economic and Fiscal Outlook (“MYEFO”) report and announced the following key changes:

  • Corporate PAYG Tax Instalments

Companies with a turnover in excess of $20 million per annum will be required to make PAYG Income Tax instalments on a monthly basis.

  • In-House Fringe Benefits

Under the current legislation, the taxable value of an in-house fringe benefit under a salary sacrifice arrangement would be reduced to 75% of the lowest price at which an identical benefit would be sold to the public or under an arm’s length transaction. This taxable value would then be eligible for a further $1,000 reduction in determining the FBT payable. Read more

New LAFHA Regime Kicks In From 1 October 2012

The new legislation containing changes to the current Living Away From Home Allowances (“LAFHA”) regime was recently passed.

For employers with LAFHA arrangements entered into after 8 May 2012, the new rules will apply from 1 October 2012.
The new rules require the following from the employers and/or employees: Read more

Excess Super Contributions: Once Only Refund Offer

The ATO has started offering refunds to some individuals who have exceeded their annual superannuation concessional contributions cap.

From the 2011-2012 year, there is a once-only opportunity to have excess concessional contributions refunded. Read more