Month: July 2020

JobKeeper to be extended

Posted on by Adam_Admin

The Australian Government has announced that JobKeeper payments will be extended for a further six months after the initial 28 September 2020 deadline. However, the extended JobKeeper program will have substantial payment reductions compared to the original JobKeeper amounts, as well as revised eligibility requirements.

The new JobKeeper flat-rate payment after September will be reduced from $1500 per fortnight to $1200 a fortnight for eligible employees who were working an average of 20 hours per week in the four weeks before 1 March 2020. The rate for employees who were working less than 20 hours per week for the same period will be reduced to $750 a fortnight. These rates are set to apply until the end of 2020.

A further reduction in JobKeeper payments will be administered from 4 January 2021. After this date, eligible employees who were working more than 20 hours per week in the four weeks before 1 March 2021 will receive a flat rate of $1000 per fortnight, while employees who were working less than 20 hours per week for the same period will receive $650 per fortnight.

The JobKeeper extension shares a similar eligibility criteria as the initial JobKeeper program, however, it will be targeting support to businesses and not-for-profit organisations that are facing continual impacts from COVID-19. Those seeking to claim the JobKeeper extension payments must reassess their eligibility by demonstrating that they have met the decline in turnover test for the new required periods. Businesses who have experienced either one of the following will meet the decline in turnover test:

  • A 30% fall in turnover for an aggregated turnover of $1 billion or less.
  • A 50% fall in turnover for an aggregated turnover of more than $1 billion.

To be eligible for JobKeeper from 28 September to 3 January 2021, the decline in turnover test must be met for the June and September quarters 2020. Businesses must reassess their eligibility again in January 2021 to be eligible for JobKeeper from 4 January to 28 March 2021. To remain eligible for the March 2021 quarter, businesses will need to demonstrate that they have met the decline in turnover test in each of the previous three quarters.

The extended JobKeeper program is set to end on 28 March 2021.

How well are you using your email list?

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Every business owner’s dream is a marketing strategy that is highly efficient while still being cost-effective. Email marketing is one such strategy that has seen a huge return on investment for businesses. Consider implementing the following strategies to get the most value from your email marketing campaigns.

What is an email list?
An email list is a set of names and email addresses of those who have given you permission to keep them informed about any promotions your business has to offer. This is a customer registering their interest in your brand, and are therefore more likely to be converted into loyal customers.

How can you build an email list?
Offering your customers incentives to join your mailing list is considered one of the most effective ways to grow your email marketing audience. Consider giving your customers discounts off their first orders if they subscribe to your mailing list. This can actually boost your email list while also giving you additional sales. Free shipping, exclusive and early-access deals are all incentives to motivate your customers to subscribe to your mailing list.

Categorisation
Segmenting your emailing list based on some set of demographics can make optimisation easier when you send out content.

Categorisation relies on the type of content you want to deliver through your email marketing strategy.

If you are promoting store-specific information or targeting audiences within a particular area, segmenting customers based on geographic locations might be more useful. Consider demographic-based segmentation if your content is based on age, gender and other similar factors.

Using emails to convert customers
Most emails are opened through mobile devices, so consider optimising your website and your email content for mobile phones. Provide easy, direct ways to access your website through the emails. An important aspect of email marketing is frequency. While overly frequent emails can be annoying to customers, too few can make your email marketing less effective. Consider allowing your customers to select their preferred frequency.

Content
Email marketing performs best when it comes with engaging, personalised content. Frequent emails dominated by promotions and sales can prompt customers to unsubscribe. Consider adding in people-focused content showing new hires and behind the scenes content, or product information like video guides on using your services. It may be more helpful to prioritise valuable content over promotional content, to keep customers engaged and interacting with your brand.

Getting your money back from late-paying customers

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Businesses can be heavily impacted by customers who cannot, or simply will not pay when payment is due. A single unpaid invoice can cause issues, and the longer this debt is left uncollected, your chances of getting your money back become slim. Consider these tips to avoid and manage debt recovery to save your business from major losses.

Reduce credit terms
If late payments and managing bad debt is a regular occurrence, consider reducing your credit terms. You may want to remove your credit terms entirely, but it is important to look at your customer base, the services you offer, and whether there is an average credit term that is expected by your clients. If you offer credit terms shorter than your competitors, you may end up losing valuable customers. However, if your credit terms are too spacious, your cash flow will be slow, putting you at financial risk.

Encourage timely payments
Your business might require a set credit term to meet the industry average. In these situations, consider offering discounts on payments made early or within a set date from invoicing. An alternative is to charge a late fee to encourage your clients to pay on time. In these situations, it is necessary to first make your customers aware of the introduction of this policy clearly through your terms and conditions. To maintain good customer relationships, try to limit overdue fees to repeat offenders. You may want to monitor incoming payments to see if these policy changes are reducing your late payments.

Hire a debt collection agency
Efforts to pursue your late-paying customers may not always be successful. If the debt amount is less than $1000, it may not be financially viable to pursue legal action for violation of your credit terms. In such situations, consider outsourcing your debt collection to professional collectors. However, timely involvement is key to getting your money back. Give your clients sufficient time to make a payment, and if over two times the trading terms have passed, hire a collection agency to prompt your clients into making defaulted payments.

How to avoid SMSF disputes

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Self-managed super funds (SMSF) can be vulnerable to disputes, especially when family members are involved.

SMSF disputes may be caused by a number of reasons such as relationship breakdowns, (common in funds where parents and siblings are in a member and trustee relationship) and fundamental differences in opinions. Other common triggers for SMSF disputes include:

  • investment strategy disagreements,
  • differences in opinions over the payment of benefits, especially in SMSFs involving both parents and their children,
  • payment of death benefit disputes, and
  • disagreements on the distribution of SMSF death benefit payments between surviving members.

Consider the following methods to avoid SMSF disputes.

Clear decision-making procedures
Disagreements are bound to occur when it comes to money, so it is important to include concise decision-making provisions to keep things fair for all parties involved. For example, trustee decisions can be made by a simple majority rather than unanimously, and a particular trustee may be provided a casting vote in the case that a deadlock occurs. Provisions could also include voting rights that are based on the value of a member’s account balance within the SMSF to avoid situations where a member with minority interest out-votes a member with a large fund account balance.

Updating your SMSF regularly
An SMSF trust deed will provide provisions which determine the trustees’ rights, obligations and options. It is important to keep your SMSF and trustee information up to date to prevent any unwanted beneficiaries and claims. For example, in the case of an unfinalized divorce or legally unchanged relationship status, a former spouse can claim the others’ superannuation death benefits. To prevent such situations and avoid their inevitable disputes, be sure to update your super fund regularly.

What types of income do you need to include in your business’ tax return?

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Due to changing economic circumstances, businesses may be receiving income from sources they have never received from, and may be unaware of their tax implications. In the event that they are listed below, you will need to include them in your business’ tax return.

Government payments
Due to COVID-19, many government grants and payments have been made to businesses this year. Businesses receiving the following grants will need to report them as part of their assessable income in this year’s tax return:

  • JobKeeper payments,
  • Supporting Apprentices and Trainees wage subsidy,
  • Grants under the Australian Apprenticeships Incentives Program,
  • Subsidies for carrying on a business.

Keep in mind that COVID-19 cash-flow boost payments are non-assessable and non-exempt income, meaning they do not have to be included as part of your assessable income.

Crowdfunding income
Crowdfunding refers to the usage of the internet or social media platforms, mail-order subscriptions, benefit events or other methods to find supporters and raise funds for your business’ projects and ventures. Profits made through crowdfunding are considered part of your business’ assessable income in the case that you have:

  • used crowdfunding in the course of your employment,
  • entered into a transaction with the intention of making a profit
  • received money or property in the ordinary course of your business.

Income from online activities
The current pandemic may have also forced you to move your business operations online for the first time. The ATO provides a clear distinction between online selling as a business or hobby. In the event that you meet the following circumstances while selling online, you will need to report your earnings as part of business’ assessable income:

  • Your main intention is to make a profit,
  • You sell items online on a regular basis,
  • The items or services you are selling are commonly available in a physical store, and
  • You pay for your online-selling presence.

Other basic income streams such as cash income, investment earnings and capital gains and losses also need to be reported in tax returns as usual.

Common tax mistakes that businesses make

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Meeting tax obligations as a business owner can be stressful and potentially expensive if done wrong. Certain mistakes warrant severe action, so you can expect the ATO to take a closer look at them if you’ve failed to identify these errors before lodging tax returns for your business. Most mistakes made with regards to tax filing often revolve around poor administrative knowledge of tax laws. Ensure that you are aware of potential mistakes you could be making that might cost you your business.

Inconsistent declarations

The ATO gathers data from numerous businesses across a particular industry to create a benchmark showing a band of percentages within which businesses in that industry should typically fall under. Businesses that fall outside this band can expect delays and a closer look from the ATO inspecting reasons for inconsistencies within your business’ declarations. However, these can also be sources of mistakes from the ATO’s part as some inconsistencies can be very real – such as demographics or personal situations – that can cause variations in data. Ensure that you are declaring all your sales, and that any inconsistency can be justified to the ATO.

Poor bookkeeping

A majority of tax mistakes committed by small businesses revolve around poor bookkeeping. Businesses are required to maintain all financial transactions made – but forgetting to put the purchase through the register or taking money out of the register for personal use without replacement of the difference can show varying cash register tapes that can be problematic when filing your tax returns. You may be missing out on valuable tax credit claims by not keeping proper records of your financial transactions.

Employee payments

Businesses may assume that superannuation payments need not be made if they are employing subcontractors. This can be an expensive mistake, as if the worker has standard hours and is expected to work consistently for your business under your direction, they need to be treated as employees. Businesses may leave superannuation guarantee payments until the end when cash flow becomes restricted – but avoid late lodgements to prevent penalties from the ATO.

What circumstances permit early access to your super?

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Early access to your superannuation is permitted under a few limited circumstances outlined by the ATO. In the case that you are experiencing financial struggle and would like to withdraw from your super, be aware of the particular circumstances that will allow you to do so.

Compassionate grounds:

Withdrawing super on compassionate grounds is permitted in the event that you need money to pay for:

  • medical treatment and medical transport for you or your dependant,
  • palliative care for your or your dependant,
  • making a payment on a home loan or council rates so that you don’t lose your home,
  • accommodating a disability for you or your dependant, or
  • expenses associated with the death, funeral or burial of your dependant.

Severe financial hardship:

You can also be permitted access to your superannuation due to severe financial hardship. However, when requesting withdrawals under severe financial hardship, individuals need to contact their super provider for access rather than the ATO.

Both of the following conditions must be met for you to be eligible to withdraw some of your super:

  • you have received eligible government income support payments continuously for 26 weeks, and
  • you are unable to meet reasonable and immediate family living expenses.

Superannuation that is withdrawn due to severe financial hardship is taxed as a super lump sum. You can withdraw up to $10,000 from your superannuation (minimum of $1,000) and in the case that you have less than $1,000 in your super funds, you can withdraw up to your remaining balance after tax.

Terminal medical condition:

You may be eligible to request access to your super (approval by your super fund) in the event that you have a terminal medical condition and all the below conditions are met:

  • two registered medical practitioners have certified that you suffer from an illness or injury that is likely to result in death within 24 months of the date of signing the certificate,
  • at least one of the two registered medical practitioners is a specialist in the area related to your illness or injury, and
  • the 24-month certification period has not ended.

Temporary incapacity:

Those who are temporarily unable to work as a result of physical or mental medical conditions may be eligible for early access to superannuation. Access is dependent on the insurance benefits linked to your super account. Any withdrawals you receive are taxed (with regular rates) as a super income stream.

Permanent incapacity:

Permanent incapacity, also known as disability super benefit, allows for early access to super in the case that a permanent physical or mental condition is likely to stop you from ever working again, in a job you were previously qualified for.

Individuals can choose to receive permanent incapacity super withdrawals as regular payments (income stream) or as a lump sum. Unlike temporary incapacity, permanent incapacity super withdrawals are subject to different tax components, based on:

  • the tax-free component of your super funds,
  • the taxable component your super provider has paid tax on (tax element), and
  • the taxable component your super provider has not paid tax on (untaxed element).

To receive concessional tax treatment, your permanent incapacity must be certified by least two medical practitioners.

Keep in mind that the ATO has also announced a new set of rules for the early release of superannuation due to COVID-19. Individuals who have been adversely affected by the pandemic may be eligible to access some of their superannuation early.

What is the criteria for a complying loan agreement?

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Private companies may be incentivised to make loans to a shareholder or their associate during the income year in an effort to save on income tax. In order to remedy any inequities as a result of making shareholder loan agreements, the Government enforces compliance through a set number of rules. Loans which follow such rules under the Income Assessment Act 1936 will also be exempted from being a dividend.

Minimum interest rate

Loans must have an interest rate greater than or equal to the benchmark interest rate outlined in Division 7A of the Income Tax Assessment Act 1936, published by the ATO annually. The benchmark interest rate for 2020 is 5.35% (under bank variable housing loans interest rates) and is 4.52% for 2021. This interest rate needs to be applied for each year after the year in which the loan was made.

Maximum term

The maximum term for a complying loan agreement is seven years. In the case that the loan is secured by a registered mortgage over real property, the maximum term is 25 years. For a maximum term of 25 years, the market value of the property (not including any other liabilities for securing the property prior to the loan) must also be at least 110% of the amount of the loan.

Written agreement

In addition to meeting the minimum interest rate and maximum term criteria, complying loan agreements need to be made under a written agreement before the private company’s lodgement date. Loan agreements that meet such requirements will not be treated as a dividend in the income year the loan is made.

There is no prescribed form for the written agreement. However, as a minimum, the agreement should:

  • identify the parties,
  • set out the essential terms of the loans (for example, the amount and term of the loan, the requirement to repay and the interest rate payable under the loan), and
  • be signed and dated by all parties involved.

The Government introduces JobTrainer and wage subsidies

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The Government has introduced a $2 billion JobTrainer scheme, which aims to help businesses train or re-skill workers in Australian industries of high demand.

What is JobTrainer?

The new scheme will create 340,700 job opportunities nation-wide and will be open to recent school graduates and workers looking to re-skill in a new industry. Industries that will be covered by the JobTrainer scheme include:

  • healthcare and social assistance
  • Transport
  • Postal
  • Warehousing and manufacturing
  • Retail trade and wholesale trade

The JobTrainer job positions will be distributed in proportion to unemployment levels per state, with New South Wales receiving the most training places (108,600) and the Northern Territory receiving the least (3,200).

Further subsidies for apprentices and trainees

Out of the $2 billion, $1.5 billion will be distributed to subsidising existing apprenticeships to keep workers employed and trained. Subsidies will be available to cover 50 per cent of an apprentices’ or trainee’s wages (up to $7,000 per quarter) who were employed from 1 July 2020. The Government encourages businesses to continue applying for the apprenticeship and traineeship subsidies to keep their employees working in light of Australia’s 7.4% unemployment rate.

How to build a successful virtual team

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As the pandemic pushes businesses to run their usual operations online, it can be hard to make sure that your virtual teams are working efficiently and productively. Here are some tips to ensure your employees are communicating and working effectively despite being physically distanced.

Use multiple communication tools

The best way to make sure your team members are staying vocal and communicating with each other while physically apart is to use online communication tools. With the surge of digital communication technologies, remote team-building has become much easier as there are a multitude of social platforms to choose from.

Using business messaging platforms as well as programs for conference calls and screen records is helpful in establishing methods for how employees can share their ideas. Setting up different communication channels for separate teams and projects can also help in keeping your digital workplace organised yet communicative.

Include overlapping work hours

Although it may be tempting for employees working from home to work around their own personal schedule with flexible hours, it is important to schedule your employees with overlapping hours so that they can communicate effectively, similar to regular in-office operations. Having your employees work in-real-time together will help prevent miscommunication problems, quick task completion and bring them closer together.

Work with a schedule

Similar to overlapping working hours, the flexibility that comes with working from home may mean employees become unorganised and unaware of their team member’s roles and tasks. As a result, it is important to create a working schedule which all employees have access to and must follow. Constructing a routine for employees to work with, especially in the case of regularly scheduled meetings, reviews and catch-ups, will help employees remain productive and conscious of usual business operations despite being online.