Month: June 2023

Have You Taken The Time To Tax Plan This EOFY?

Posted on by Adam_Admin

As the financial year comes to a close, now is the time to visit your accountant or tax advisor to discuss tax planning for your business in 2023.

At the end of every financial year, business owners should be reviewing and measuring their performance in comparison to the previous year.

By regularly reviewing this information, a greater understanding of the basis for tax planning and budgeting can be determined more accurately. While tax planning is a process that should be continuously managed over the year for better and more adaptive results, it’s never too late to start.

This is especially relevant now as business owners need to understand the business’s current ability to move forward in the current economic circumstances and plan for the future. Otherwise, past mistakes could be repeated in the future.

Here are some general tax tips that business owners can take with them into the 2023-2024 financial year.

Timing Of Expenses

An expense is an allowable deduction that is necessarily incurred in carrying on a business or for the purpose of gaining or producing assessable income. Expenses should be recognised in the same period as the revenues to which they relate when it comes to lodging your tax.

Most prepayments that are made now are not deductible until the period to which they relate (though some exceptions may apply). Small businesses and individuals may be able to deduct 12 months of prepayments in the year paid, as an expense.

Payments to Workers

Deductions on payments to workers (whether they are employees, contractors, directors, etc.) can only be claimed when the business has complied with its PAYG withholding and reporting obligations.

Family businesses or businesses that employ family members should be especially concerned with preparing for this, as they have additional obligations to ensure that they are correctly paying the right amount of tax. If they have received wages or been given allowances below the tax-free threshold, they will need to be registered as a withholder and a PAYG summary provided.

Your business should already be in the position to process payments through Single Touch Payroll, as it was made mandatory for all businesses to use from 1 July 2021.

Bad Debts

Conduct a review of the debts that may be affecting your business. If any of these are unlikely to be recovered, the best course may be to write them off as ‘bad’ prior to the end of the financial year. You can speak with us about this process to ensure that it is performed correctly (and that you are able to do so). Writing off bad debts can reduce your income tax and generate a GST refund.

Bonuses

Businesses may have provided their staff with bonuses at the end of the calendar year for performance expectations being met or as a retention bonus. It is important to remember that bonuses are only deductible when they are actually incurred.

If you have concerns regarding your tax planning this year, why not speak with one of our trusted advisers? We have the knowledge and experience to assist you with your tax planning needs.

Creating New Roles In Your Business? Here’s A Few Tips

Posted on by Adam_Admin

As businesses grow, you will inevitably need to create new roles and hire new staff.

Adding a new member to your team is always challenging; when hiring someone to fill a new position, there is even more pressure to make the right call.

Business owners who can allocate workplace responsibilities efficiently and logically stand to reap significant benefits in the long run.

The challenge is not just choosing the right person but also making sure that you have clearly defined the new role and established your expectations. You should spend time thinking carefully about the skill set, experience and aptitude you will require from your new employee.

Even in times of high turnover, many owners are anxious about the financial commitment of taking on new staff members. While paying additional wages may seem like a gamble, failing to take on the extra labour you need will almost certainly damage your business.

You and your current employees will have much more stress to deal with, and chances are that efficiency and quality may suffer down the line.

In situations where you are worried about taking on a new staff member, it is important not to make the mistake of hiring an inexperienced person on the sole consideration that you are able to pay them a modest salary.

You need to think very carefully about what your business needs today and what you may require from your team as you continue to expand.

For example, as things get busier, you may find that you will need to devote more of your time to dealing with suppliers, and as a result, you will need someone you can trust to manage day-to-day matters at your store.

Hiring new staff and defining their roles within your business is incredibly important to your future success. Staff are the most important asset that a business has, and how management has defined roles and responsibilities can significantly impact employees’ abilities to perform.

Before you start recruiting a new staff member, you should write down all of the tasks you would require a new employee to complete and the responsibilities you may want them to take on in the future.

Once you have written down everything, you can think of, take a step back and look at the list.

At this point, you need to consider whether it will be in the business’s best interests to have a single person take on every task.

You may realise that some of the tasks are suited to an entry-level position, whereas others require specific skills and experience.

If this is the case, you should consider various options for restructuring the division of work between existing roles so that the new role will be suited to a specific type of candidate.

There is also always the option of creating a part-time position, or even two part-time positions,  instead of a full-time role as well, pending business budgets & expenses.

Many businesses will require extra help in busy periods such as the Christmas holidays. When hiring someone for a specific period, you should be upfront with them from the start and clearly explain the dates you have in mind.

Hiring and creating a new role for your business requires careful planning, particularly around payroll, classifying the employee, or even integrating and onboarding them into the pre-existing structure. Speak with a professional business adviser if you are unsure about any of the procedures you may need to implement during the hiring process.

Declaring Superannuation Contributions On Your Return

Posted on by Adam_Admin

In some circumstances, superannuation contributions can be claimed on your tax return if made to a super fund or retirement savings account. However, these circumstances are limited and may require professional advice to maximise the benefits.

Superannuation contributions paid by your employers directly to your super fund from your before-income tax cannot be claimed. These contributions include:

  • The compulsory super guarantee (increasing to 11% on 1 July 2023)
  • Salary-sacrificing super amounts
  • Reportable employer super contributions.

However, your superannuation contributions to your super fund from your after-tax income can be claimed. The personal super contributions you claim as a deduction will count towards your concessional contributions cap.

Super contributions that can be claimed as deductions may include

  • contributions made prior to 1 July 2017 if
    • they were made to a complying super fund or a retirement savings account (we’ll refer to both as ‘your fund’)
    • your earnings as an employee were less than the maximum allowed
  • for contributions made on or after 1 July 2017, you made contributions to your fund that was not a
    • Commonwealth public sector super scheme in which you have a defined benefit interest
    • Constitutionally protected fund (CPF) or another untaxed fund that would not include your contribution in its assessable income
    • super fund that notified us before the start of the income year that they elected to either treat all member contributions to the
      • super fund as non-deductible
      • defined benefit interest within the fund as non-deductible
  • you meet the age restrictions
  • you have given your fund a Notice of intent to claim or vary a deduction for personal contributions (NAT 71121)
  • your fund has validated your notice of intent form and sent you an acknowledgment.

Specific contributions cannot be claimed as tax deductions. These include:

  • a rolled-over super benefit
  • a benefit transferred from a foreign super fund
  • a directed termination payment paid into a super plan by an employer under transitional arrangements that applied until 30 June 2012
  • contributions paid by your employer from your before-tax income (including the compulsory super guarantee and salary sacrifice amounts)
  • First Home Super Saver (FHSS) amounts that you have re-contributed to your super fund(s)
  • contributions to
    • a Commonwealth public sector super scheme in which you have a defined benefit interest
    • a super fund that would not include the contribution in their assessable income, such as an untaxed fund or a constitutionally protected fund (CPF)
    • other super funds or contributions specified in the regulations
  • contributions made from 1 July 2018 to a super fund that are identified as downsizer contributions
  • re-contribution of COVID-19 early release of superannuation amounts.

When deciding whether to claim a deduction for super contributions, you should consider the super impacts that may arise from this, including whether:

  • you will exceed your contribution caps
  • Division 293 tax applies to you
  • you wish to split your contributions with your spouse
  • it will affect your super co-contribution eligibility.

If you exceed your cap, you must pay extra tax, and any excess concessional contributions will count towards your non-concessional contributions cap.

Your super fund must be notified before claiming the tax deduction against your personal super contributions. You must give a notice of intent to claim or vary a deduction to your fund by the earlier of either the:

  • day you lodge your tax return for the year in which you made the contributions
  • end of the income year following the one you made the contributions.

Your fund must send you a written acknowledgment telling you they have received a valid notice from you. You must receive the acknowledgment from your fund before you claim the deduction on your tax return.

Maximising your superannuation’s potential could start with boosting your savings with contributions. However, seeking professional advice or guidance before commencing is advisable, as failure to lodge a notice of intent to claim or vary can become an issue.

Why not start a conversation with us to see how we can assist?

Don’t Forget To Declare All Investment Income In Your Return!

Posted on by Adam_Admin

If you’ve made a major investment in the last financial year, any income made from it will need to be included on your tax return.

Any income earned from investments and asses must be declared in your tax return. This may include amounts from interest, dividends, rental income, managed investment trust credits, crypto assets and capital gains. Whether you receive it directly or via distributions for a partnership or a trust, this income needs to be declared.

If you, for example, hold the assets that earn the investment income jointly (with another person), it is assumed that the asset’s income is divided equally between you, unless it can be proven that the asset is held in unequal proportions.

Six items must be declared in your tax return as income this financial year, including the following:

Interest Income

Interest income includes:

  • interest you earn from financial institution accounts and term deposits
  • interest you earn from any other source, including penalty interest you receive on an investment
  • interest you earn from children’s savings accounts if you
    • open or operate an account for a child and the funds in the account belong to you
    • spent or use the funds in the account
  • interest we pay or credit to you – for example, interest on early payments, interest on overpayments and delayed refunds
  • ife insurance bonuses (you may be entitled to a tax offset equal to 30% of any bonus amounts you include in your income)
  • interest from foreign sources (you can claim a foreign income tax offset for any tax paid on this income).

Dividends

Dividend income may come from a:

  • listed investment company,
  • public trading trust,
  • corporate unit trust, or a
  • corporate limited partnership (in the form of a distribution).

Some dividends may have imputations or franking credits attached. The franked amount and the franking credit must be declared if you receive franking credits on your dividends. If a company pays or credits you with dividends that have been franked, you’ll generally claim a franking tax offset.

Rental Property Income

You must declare the full (gross) amount of any rent and rent-related payments you receive. This includes amounts you receive from overseas properties. You must work out and declare the monetary value if you receive goods and services instead of rent.

It’s best to consult with a tax adviser to avoid making mistakes involving rental property. This is usually a major red flag area for the ATO, so don’t hesitate to ask for help to avoid compliance issues or declaring for things you shouldn’t.

Managed Investment Trusts

You must show any income or credits you receive from any trust investment product in your tax return. This includes income or credits from a:

  • cash management trust
  • money market trust
  • mortgage trust
  • unit trust
  • managed fund – such as a property trust, share trust, equity trust, growth trust, imputation trust or balanced trust.

Crypto Asset Income

You must declare rewards received for staking crypto assets (often in the form of additional tokens from holding the original tokens. The money value of the additional tokens needs to be calculated and then converted into Australian dollars at the time they were received. These are reported in ‘other income’ in the tax return.

If you receive crypto via airdrop, this is income when you receive them based on the money value of the already established tokens. Occasionally, some crypto projects ‘airdrop’ new tokens to existing holders to increase the supply. Whatever amount is received needs to be converted into Australian dollars and declared as other income.

Capital Gains

Any capital gains that are made when you sell or dispose of capital assets must be declared. This may include investment property, shares or crypto assets. The capital gain is the difference between:

  • Your asset’s cost base (what you paid for it)
  • Your capital proceeds (the amount you receive for it)

Report capital gains and capital losses in your tax return. You can offset any allowable capital losses against your capital gains to work out your net capital gain or loss. You pay tax on a net capital gain. If you have a net capital loss, you can retain the loss to offset capital gains in future years.

To avoid any issues with your tax return this financial year, especially involving investment-related income, start your tax journey with us today. We can help uncomplicate the process for you.