Month: October 2022

Binding Death Nominations Are An Important Part Of Your Estate Planning

Posted on by Adam_Admin

You must make a binding death benefit nomination to maintain control and certainty over who will inherit your superannuation assets after you pass away.

Contrary to what you may think, your will does not automatically control the payment of your death benefits. If you do not make a binding death benefit nomination, your super trustee will decide who your super passes onto.

Familiarise yourself with the death benefit nomination rules, so your super assets are paid on your terms after you are gone.

Binding And Non-Binding Death Benefit Nominations

You can make a binding or non-binding death benefit nomination depending on your super fund. A binding death benefit nomination provides the greatest certainty as the legal document binds the trustee to pay your death benefits to the beneficiaries you have nominated.

Some super funds do not offer binding nominations, so individuals make non-binding nominations instead. Non-binding nominations act as a guide to your trustee that they will take into consideration but are not obliged to follow. Your trustee may pay your death benefit to an individual you did not nominate if they feel they are more appropriate.

Lapsing And Non-Lapsing Nominations

Understanding your fund’s options for lapsing and non-lapsing nominations will help you keep your nominations up-to-date and binding. Lapsing nominations typically expire after three years and must be renewed. If your binding nomination lapses without renewal, it will be considered a non-binding nomination upon your death. Non-lapsing nominations are permanent unless you change them.

Changing Death Benefit Nominations

Life circumstances like divorce, marriage or the death of a nominated individual may trigger you to change your nominations.

You can amend, cancel or replace your death benefit nomination at any time, provided the nomination is validly concluded. Remember that a power of attorney can renew lapsed binding nominations if you are mentally incapacitated or unable to sign.

Eligible Beneficiaries

You cannot pay your superannuation death benefits to just anyone, as there are strict eligibility requirements. You may only nominate your dependents or personal legal representative.

Dependents are strictly defined by law. According to the legislation, dependents include

  • Your spouse, whom you are legally married to, in a registered relationship with or live with on a genuine domestic basis
  • Your child (including adopted and foster children) or your spouse’s child
  • Anyone in an interdependent relationship with you at the date of your death
  • Other persons who the trustee deems were financially dependent on you at the date of your death

You can also have your superannuation death benefit paid directly into your estate.

Validity Requirements

Whether you are making a new binding death benefit nomination, replacing an old one or cancelling altogether, you must meet these requirements to make your nomination valid:

  •     Nominate eligible beneficiaries
  •     Clearly allocate your benefits amongst your beneficiaries
  •     Allocate 100 per cent of your death benefits
  •     Sign and date your nomination in the presence of two witnesses who are legally adults and not nominated to receive your death benefits

Ensure your witnesses sign and date the notice in your presence

Is Your Limit To Claiming A GST Refund Approaching?

Posted on by Adam_Admin

Small businesses entitled to refunds of GST may not be aware of the four-year
time limit on claiming those refunds. Your entitlement to a GST credit ends four years from the due date of the earliest activity statement in which you could have claimed it.

GST refunds are claimed under the indirect tax concession scheme (ITCS), which also covers luxury car tax (LCT), wine equalization tax (WET) and excise.

They are a form of “outstanding indirect tax refunds”, which are tax refunds that are entitled to the taxpayer but are yet to be claimed.

“Outstanding indirect tax refunds” can be claimed in the following cases.

Refund Of A Net Amount For A Tax Period:

This applies to those that have yet to lodge an activity statement for a tax period. Small businesses with GST entitlements that amount to $2,500 (which exceeds the net GST, WET and LCT liabilities for that period $2,000), can claim an outstanding indirect tax refund of $500.

Refund Of An Overpayment Of A Net Amount:

Due to a clerical error, a business owner reports and pays $4,600 net GST for a tax period instead of the actual amount of $4,060. The excess amount of $540 is an outstanding indirect tax refund which the business can claim.

  • ETP cap: this is indexed each year, so for 2022- 23 the cap is $230 000. This cap is reduced by any earlier ETPs paid in the same income year.
  • Whole-of-income cap: this cap is $180 000 (2021-22 tax rate), and is reduced by any other taxable payments given to the employee in the same income year.

The concessional tax rate is 17% for employees who have reached their preservation age, which is determined by when they were born (if they were born after 30/6/1964, their preservation age is 60).

For genuine redundancy payments and early retirement scheme payments, there is a tax-free limit depending on the employee’s service amount with the employer. The tax-free amount is not part of the employee’s ETP and is provided as a lump sum in their PAYG payment summary.

Any amount above this tax-free limit is part of the employee’s ETP.

  • The tax-free limit is calculated through the formula: Tax-free limit = base amount + (service amount x years of service).

The ETP payment summary that reflects the payment amount and any associated withholding must be supplied to the employee within 14 days of the employer making the payment.

Refund Due To An Underreported Initial Net Refund Entitlement:

A business claims a net GST refund of $3,000 for the tax period and receives the refund. Afterwards, however, it is realised that the actual refund entitlement was $3,200, the excess $200 represents an outstanding indirect tax refund that can be claimed.

Refund Of Indirect Tax Relating To An Importation:
For example, $200 GST is overpaid for an importation. This $200 represents an outstanding indirect tax refund that can be claimed.

Marketing For Your Business In 10 Points To Achieve 4 Steps

Posted on by Adam_Admin

Simply put, marketing your services should consist primarily of four steps:

  • Informing as many people as possible of your existence
  • Leading them to develop an interest in your services
  • Persuading them to meet with you
  • Move from client enquiry to client engagement

Here is a simple ten-point strategy for achieving these objectives:

Emphasise Persuasion

Making people aware of your existence is fairly straightforward. It is largely a matter of advertising revenue. What takes skill is implementing the last three steps. Most businesses ignore these and concentrate on the first.

Establish A Niche

By establishing a unique marketing sector for your business, you are making your solution to the client’s problem or needs unique. If you are the only firm providing that solution, you will never need to discuss fees. Without a niche, your only option is to compete on price.

Develop Market Credibility

To convince prospective clients to sign with your services, you need credibility in their area. You need to be able to demonstrate familiarity with their sector by showing you have a good track record in it. Inform prospects of other businesses in similar positions for which you already act and convince them that you have the necessary expertise.

Don’t Bore The Prospect With Detail

Businesses often try to convince prospects by talking in detail about the services they can provide. This is of little interest to the prospect. What they want to hear about are the benefits you will bring to them. This is what a good salesperson will emphasise. For your business to excel in sales, staff sales training is essential.

Develop Your Prospecting Skills

To build up a database of genuine prospects, you must establish a coherent system for identifying them. You should identify target areas, begin a series of selected mailings to them, carefully monitor the results, and record these results on your database. Your long-term prospecting activity should focus on those who respond positively. As you gradually build up a prospect profile, you can target him or her with a precisely focused sales strategy.

Research Prospects Before Making Specific Proposals

Making a specific proposal is a critical stage in the sales process. It is essential that the solution you propose be tailored to the prospect’s specific needs. Get to know what the prospect has in mind, who is the real decision maker, what are the company goals, what are the individual’s goals, and who the competition is.

Present A Flexible, But Focused Proposal

Once you are sure what the prospect is looking for, present your proposal by beginning with an analysis of the problems and outlining the possible solutions you can offer. Be clear about your fees for each option and discuss the various pros and cons with the prospect.

However, from the beginning, you should know which options you would like to see implemented and gradually steer the prospect in that direction during your presentation.

Be Sure To Close The Sale

After the presentation, ask the prospect directly if they agree that this proposal covers the points they want to be addressed. Obtain explicit agreement that he or she will run with your business, and will engage you to implement a specific solution.

Be Prepared To Handle Objections

Often the prospect will raise objections to your proposal, and you should be prepared with considered responses. For crucial meetings, it is a good idea to rehearse the encounter with a colleague beforehand. Have your colleague play devil’s advocate and throw objections at you. If you cannot give an immediate and convincing response, prepare one before you go to the meeting.

Maintain A Positive Attitude

A positive attitude is not shallow optimism but a constructive outlook that enables you spontaneously to transform setbacks into opportunities. To win at sales, you have to be doggedly positive in both your thoughts and actions.

Self-Employed Individuals & Super Aren’t Mutually Exclusive

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Superannuation may not be the first thing that springs to mind as a self-employed individual, but just like how looking after your tax and business expenses benefits you, superannuation is an important subject to consider.

While you don’t need to pay super to yourself, it might help you feel more secure about your finances during retirement. You can make regular or lump sum payments, can usually claim a tax deduction on contributions, and may be able to save tax.

Contributions you make to your super will only be taxed at 15%. Depending on which tax bracket you fit into, this might be a concession compared to your usual tax rates. Additionally, investing in your super will most likely yield a higher return than if you put your money into a bank savings account.

You may be able to contribute to your pre-existing super fund after becoming self-employed. All you need to do is provide the fund with your tax file number (TFN) so that your contributions can be added to the fund. Alternatively, you can choose a new fund.

There are two ways you can contribute to the fund which are dependent on how you receive income:

  • Wage: Make regular transfers to the super fund from your pre-tax income (such as by salary-sacrificing).
  • Income from business revenue: Transfer lump sum amounts when there is sufficient cash flow from your business.

If you make contributions to the super fund from your pre-tax income, then you can claim tax deductions for them. Your overall taxable income is reduced as well. Ensure you complete a ‘Notice of intent to claim’ to receive this deduction.

There are limits to the amount of money you can contribute to your super every financial year:

  • Up to $27,500 in concessional contributions (from pre-tax income, so you can claim a deduction)
  • Up to $110,000 in non-concessional contributions (from after-tax income)

As an example, employers contribute a minimum of 10.5% of an employee’s earnings to their super (since July 2022) – if you are not sure how much to contribute, this could be a starting point.

For Example – How Your Concessional Contribution Can Work

You claim a tax deduction for your superannuation contribution above what your employer paid, up to the limit (currently $27,500), and will receive a refund of your marginal tax rate. In this example, we’ll say that it’s 34%.

But, your fund pays 15% tax. So if you put in $10,000 into your fund, you should receive a tax refund of $3,400 (34%) cash into your pocket. However, the fund pays $1,500 (15%) in tax, which comes from your contribution.

This 15% will go up to 30% when your adjusted income is above $250,000, but your savings will be 47% instead of 34%.

If you are a low to middle-income earner, then you may meet the eligibility criteria to receive government super contributions. The government will determine how much you are entitled to when you lodge your tax return. If you’re eligible, the government will pay the co-contribution directly to your fund.

Although it may be challenging to make super contributions when self-employed, consider starting off the process so that when you are in your retirement period, you have some financial security.

3 Things To Know Tax-Wise Before Buying A Car For Your Business

Posted on by Adam_Admin

Regardless of whether or not the owner is a company or an employee, a car purchased for business use can provide tax benefits to the owner.

However, there are also tax implications that can impact these supposed benefits. Certain advantages and disadvantages to purchasing a car for a business may not necessarily apply to your business or impact your decision, but they can assist in informing it.

The key question is: should I buy my car under the name of my business?

When you buy a car under a business name, you can deduct depreciation, minimising your earnings tax liability. Furthermore, the purchase will be a fixed asset for the company that was made with earnings.

According to the ATO, as a business owner, you can claim a tax deduction for expenses related to motor vehicles — cars and certain other vehicles – used in the operation of your business.

Depending on your business structure, the way you can claim your deductions and entitlements may change. This may include:

  • How you can claim the business-use percentage of each car expense (for some structures, this may be through a logbook or the cents per kilometre method, or by actual receipts).
  • How you can claim a deduction on the depreciation of a motor vehicle

Car Expenses

If you drive a car for both business and personal purposes, you must be able to appropriately identify and justify the percentage you claim as business use. The percentage for personal usage is not claimable. This is an area where mistakes are frequently made.

Common types of motor vehicle expenses that can be claimed include:

  • Fuel and oil
  • Repairs & servicing
  • Interest on a motor vehicle loan
  • Lease payment
  • Insurance
  • Registrations

Depreciation Of A Motor Vehicle

Suppose you work out your deduction for expenses using the logbook method or actual costs. In that case, you can generally claim a deduction for capital costs, such as the purchase price of a motor vehicle, over a period of time. This is known as depreciation.

If you have an aggregated turnover of less than $10 million, you can use simplified depreciation rules (such as temporary full expensing).

If you are a sole trader or a partnership, there are specific rules about how you can claim depreciation. If you use:

  • the cents per kilometre method, you cannot make a separate claim for depreciation of the vehicle as this is already taken into account
  • the logbook method, you can only claim depreciation on the business portion of the motor vehicle’s cost.

Record-Keeping

Regardless of the method you use, you will need to keep:

  • loan or lease documents
  • details on how you calculated your claim
  • tax invoices
  • registration papers

If purchasing a car for your business is still on the cards, consult with a professional tax adviser as they can model different tax positions and work out what’s best for you.