Month: March 2023

If I’ve Lost My TFN, What Can I Do?

Posted on by Adam_Admin

Your tax file number (TFN) is a critical piece of information in your possession and should be a constant companion throughout your life. However, there are times when a TFN is misplaced or forgotten. What are you supposed to do?

If you forget your TFN or lose it, this can be a significant issue.

A TFN can be used for opening bank accounts, tracking super savings, applying for government benefits, and giving to higher education providers. If a TFN is stolen, it can be used to create these accounts in your name, increasing the chances of identity theft.

It’s also required if you begin new employment, as you have 28 days to provide your new employer with your TFN before they start withholding tax from your pay at the maximum rate.

What Can You Do?

Your first avenue of inquiry, if you use the services of a tax agent or accountant, will be to ask them for your tax file number, as you will have previously provided it to them. If not, however, you can call the Australian Taxation Office (ATO) to find out what you can do to get your TFN.

The ATO will need to make certain you are who you say you are and that you’re the correct person to discuss your tax affairs with (identity theft can and does occur) – so be ready to answer a few identifying questions.

You may also (if you haven’t done so already) be invited to record a short “voiceprint”, which is another security layer that can identify you the next time you call. Another option is to fill in a form provided by the ATO to apply for or inquire about a TFN. But as the ATO will only process the paperwork it provides taxpayers, you will need to order an actual paper form.

Check The Document Trail

Before you grab the phone to track down your lost TFN, you should check other places it may have been entered into. You might want to rifle through your paperwork and check the following, as your TFN should be on them:

  • your income tax “notice of assessment” for a previous year
  • any correspondence sent to you from the ATO
  • a payment summary from your employer
  • an account statement from your superannuation fund.

If you have a physical folder or file that you keep your important information in, make sure to check it as well.

What If Your Tax File Number Was Stolen?

If your TFN has been stolen or accessed by an unauthorised third party, inform the ATO as soon as possible. Your TFN can be used for identification purposes and may be used to steal your identity. The ATO’s Client Identity Support Centres can give you further information, advice and assistance to re-establish your identity. They may also apply security measures to monitor any suspicious activity on your account.

You can speak with your registered tax agent (like us) as we may have it on file and be able to assist you with locating it.

How Do Partnerships Operate?

Posted on by Adam_Admin

Starting a partnership may be a high-yielding decision whether you are in the business game or setting your sights on a new business venture.

A partnership business structure is an incorporated business with 2-20 owners. The individual owners work together to achieve the business’s goals, sharing responsibility and profits.

In a partnership, control or management of the business is generally shared. A partnership is not a separate legal entity, so you and your partners are liable for all debts and obligations of the business. A formal partnership agreement is common but not essential (it is a recommended course of action though).

The specifics of partnership laws will vary depending on your state or territory.

There are two types of partnerships – general and limited. A general partnership is where all partners are equally responsible for the day-to-day management of the business.

Whereas a limited partnership has at least one general partner who is responsible for controlling the day-to-day operations and is liable for the debts and obligations of the business.

The passive partners in this type of partnership are called limited partners. Limited partners generally contribute a defined amount of capital, and their liability is limited to the amount of capital that is contributed.

Consider the following advantages and disadvantages before starting or joining a partnership:

Advantages

A partnership structure is easy and inexpensive to set up. Unlike operating as a sole trader, there is increased opportunity for income splitting, more capital available and higher borrowing capacity.

Working as a team can also provide more perspective than working as an individual. High-performing employees can also be made partners.

From a tax perspective, partnerships do not need to pay taxes on their income. Each partner pays tax on the share of the net partnership income they receive. Paying superannuation is the responsibility of each individual partner, as partners are not considered employees.

Additionally, there are limited external regulation and reporting requirements.

Removing partners is generally straightforward. The only condition is that at least two partners are left in the business. If a partner wishes to resign from the partnership, it is relatively simple to dissolve the partnership and recover their share.

Disadvantages

This type of business structure carries unlimited liability, meaning the business owners are liable for the business’s debts. They are subject to reasonably cover what is owed or risk seizure of their personal assets.

Each partner is responsible for the debts and liabilities of the business (with the extent depending on the type of partnership), including the actions of other partners.

This can cause disputes and friction among partners, resulting in unfavourable circumstances. For example, one partner may have a different vision or opinion on administrative control or profit sharing for the business compared with the other partners.

Although adding and removing partners is simple, partners will most likely need to value partnership assets which can be expensive.

If choosing to structure a business as a partnership, it is important to consult with an advisor to ensure that it is done correctly and compliantly to maximise the benefits (such as concessions, liability etc.) that could be infringed upon otherwise.

If you’re not certain of where or how to start your partnership, come speak with us as your business advisers. We’re ready and willing to help.

New Work From Home Rules For Claiming Tax Deductions

Posted on by Adam_Admin

With a new norm surrounding how Australians work (hybrid, remote or office-based), there has been a change in how work-related expenses will be claimed this year during tax season.

Where once the expenses and claims that needed to be made during tax return season could be more clearly defined in terms of business or pleasure, work-related expenses or personal expenditure, remote working and work-from-home employees need to keep careful records of what they can and cannot claim as “home office expenses”.

Previously, this could be claimed through the COVID-simplified 80 cents per hour, work-from-home method (known as the shortcut method and no longer available for the 2022-23 financial year), the ‘fixed method’ (previously 52 cents per hour, now 67 cents per hour) and the ‘actual method’.

With new changes to the methods in place from 1 July 2022, it’s essential that work tax deductions are correctly calculated and claimed and the process is duly followed.

Shortcut Method Is No Longer Available

The shortcut method introduced to simplify the process of claiming work-from-home expenses during the pandemic is no longer available.

Through this method, individuals could claim a fixed rate of $0.80 per hour worked from home, with the aforementioned shortcut method covering expenses such as phone, internet, and depreciation on furniture & equipment. If this shortcut method was employed, no other costs could be claimed for working from home.

Remember that for the 2022-23 financial year, you must claim any work expenses through the fixed rate or actual methods, not the shortcut method.

Revised Fixed Rate Method

The fixed method will increase from 52 cents per hour to 67 cents per hour. The ‘actual method’ can also still be used. You no longer need a dedicated workspace at home, but you must have a representative four-week diary of the hours worked from home between 1 July 2022 to 28 February 2023.

Many taxpayers will already have kept records, but if you haven’t, one way to do this would be to look back over your diaries for the past four weeks.

You may also be able to use other similar records you already have as evidence as long as they represent the hours they worked from home during those eight months.

From 1 March 2023, the record-keeping requirement has changed again, and you will be required to record all your hours worked from home in a diary or some other format as they occur. This can be in the form of timesheets, diaries, time recording apps, or any other similar document, provided it is kept as they occur.

How Does The Fixed Rate Method Work? 

To use the revised fixed rate method, you must:

  • incur additional running expenses as a result of working from home
  • have a record of the total number of hours you work from home and the expenses you incur while working at home
  • have records for expenses the fixed rate per work hour doesn’t cover and show the work-related portion of those expenses.

You can claim 67 cents per hour you work from home during the relevant income year. The rate includes the additional running expenses you incur for:

  • home and mobile internet or data expenses
  • mobile and home phone usage expenses
  • electricity and gas (energy expenses) for heating, cooling and lighting
  • stationery and computer consumables, such as printer ink and paper.

The rate per work hour (67 cents) includes the total deductible expenses for the above additional running expenses. You can’t claim an additional separate deduction for these expenses using this method.

Australians must know their entitlements and tax deductions when working from home/remotely.

Speak with us to ensure you comply with your tax return obligations when claiming or for assistance with your tax return this financial year.

Announcement Made About $3 Million & Over Superannuation Balances

Posted on by Adam_Admin

Last week, the government announced a change to superannuation, introducing a new tax that will apply to member balances above $3 million.

From July 1, 2025, super earnings over $3 million will be taxed at 30 per cent, double the current rate of 15 per cent. According to the government, this change aims to ensure that sustainability and fairness remain central to the system.

To put it into perspective, the average Australian super fund contains an average balance of $150,000, and about two-thirds of Australians have less than $100,000.

This new tax concession increase will affect about 80,000 people, who will continue to have more generous tax breaks on earnings from the $3 million below the threshold (which will not rise over time). This will not be retrospectively applied and will only apply to future earnings.

A person with $3 million in super will likely receive a tax benefit at 30% still. However, serious thought could be given to leaving money in superannuation, where the tax rate is the same as putting it into a company.

Other considerations that may need to be thought through include

  • If you die and leave that super to non-death benefits dependent, they will pay 15% on the entire taxable component, leading to an effective tax rate of 45% on the earnings.
  • Taking money out of the company will come with franking credits but may put you in a position of paying top-up tax. Conversely, leaving it in the company and leaving the shares to a testamentary trust may allow you to pay dividends without further tax.
  • A company does not need to comply with any SIS rules so that you can have in-house assets, loans to members etc.

Any actions taken should be done with consultation with a professional adviser to comply with legislation and regulations.

As these changes to super balances of over $3 million will not take effect until after the next election, there is plenty of time to plan and model out the best path for your situation (if you are one of the few who this will affect). You will need an actuarial certificate to determine what percentage of the fund’s income will be taxed at 0%, 15% and 30%.

While the average Australian super fund may be far below this threshold, that doesn’t mean a fund cannot be increased. Through voluntary contributions, including concessional and non-concessional contributions, you can help to boost your nest egg to a comfortable level.

Do you want to know more about tax breaks, concessions, or ways you could contribute to your superannuation? Speaking with a licensed professional is the best way to start.