Author: Adam_Admin

The Shortcut Method: Claiming Your Work From Home Deduction

Posted on by Adam_Admin

There’s a new normal towards how Australians are approaching their work, with remote working now a more viable option for businesses and their employees, and it’s affecting the way that Australians now make claims for tax.

With many businesses affected by city-wide lockdowns during parts of the 2020-21 financial year, and some whose employees preferring to remain as work-from-home or remote workers after theirs had ended, it’s more important than ever for work tax deductions to be correctly claimed and the process duly followed.

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”.

To simplify the process of claiming these expenses, the ATO introduced a “shortcut method” applicable to the 2020-21 financial year as a result of the impact COVID-19 has had. This method is only applicable from 1 March 2020 through 30 June 2021. Depending on an individual’s circumstances, it may be a better alternative to employ when claiming home office expenses than the fixed rate method or actual cost method.

Essentially, individuals can claim a fixed rate of $0.80 per hour worked from home, with the aforementioned shortcut method covering expenses such as phone, internet, depreciation on furniture & equipment. No other expenses can be claimed for working from home if this shortcut method is employed.

To use this method to their benefit when claiming home office deductions, individuals must keep a diligent record of the actual hours worked at home. This is a simpler process than claiming on the actual expenses incurred. Claiming on the actual expenses incurred requires individuals to comply with the necessary and more complex record-keeping requirements outlined by the ATO.

It is important that Australians are aware of their entitlements and tax deductions when working from home/remotely. Speak with us to ensure that you are in compliance with your tax return obligations when claiming.

Super For Contractors

Posted on by Adam_Admin

Contractors who run their own business and sell their services to others have different obligations to their super than what employees in a business may usually have.

A contractor (also known as an independent contractor, a subcontractor, or a subbie) who is paid wholly or principally for their labour is considered to be an employee for super purposes, and may be entitled to super guarantee contributions under the same rules as other employees.

A contract may be considered ‘wholly or principally for labour’ if:

  • You’re paid wholly or principally for your personal labour and skills
  • You perform the contract work personally
  • You’re paid for hours worked, rather than to achieve a result

If hiring a contractor to perform solely their labor for a fee, the employer may also have to pay super contributions on their behalf.

In this sense, if you are a contractor who is being contracted to an outside business than your own to perform your usual work or labour, your employer must contribute to your super the same way they would any other employee.

This could be seen in an example of an electrician who runs their own small business, or is employed by a small business who has been hired by another business to supplement their workforce and perform a specific role that they can fit to.

Say the electrician who runs their own business has been subcontracted by the larger business.

They are performing labour but also providing materials (ie, themselves plus a toolbox plus a van full of powerpoints and wiring etc), they would be seen as a contractor and not an employee for super purposes. They must pay themselves super, in this case.

However if they are sub-contracted to perform labour only then the company that has sub contracted them may be liable to pay super on the amount that they pay to their contractor.  This would be the case where the electrician just turns up with their tool box and everything else is provided by the “employer”.

If they are in an employment-like relationship with the person that they entered their contract into, they may need to have their super paid to them by their contract employer. In order for super to be applied from what you earn, the contract must be directly between you and your employer. It cannot be through another person or through a company, trust or partnership.

It is important that both parties in the process are aware of their super obligations during the contracted period. There can be significant penalties for employers who use contractors if they fail to correctly pay super. Each case regarding contractors and super needs to be assessed independently to ensure that you are doing the right thing. There is no definitive black and white line between a contractor and a contactor in an employment-like relationship that can be obviously seen after all.

If you’re unsure about whether or not you’re meeting your obligations as an employer, or are a contractor looking to make sure their super is being correctly paid into, speak with us.

Consequences Of Improperly Lodged Tax Returns

Posted on by Adam_Admin

With tax return season approaching quickly this year, you may have already started looking into lodging your income tax return. Ensuring that your details are correct and that any information about your earned income from the year is lodged is the responsibility of the taxpayer and their tax agent. However, if during this income tax return process the tax obligations of the taxpayer fail to be complied with, the Australian Taxation Office has severe penalties that they can enforce.

Australian taxation laws authorise the ATO with the ability to impose administrative penalties for failing to comply with the tax obligations that taxpayers inherently possess.

As an example, taxpayers may be liable to penalties for making false or misleading statements, failing to lodge tax returns or taking a tax position that is not reasonably arguable. False or misleading statements have different consequences if the statement given results in a shortfall amount or not. In both cases, the penalty will not be imposed if the taxpayer took reasonable care in making the statement (though they may still be subject to another penalty provision) or the statement of the taxpayer is in accordance with the ATO’s advice, published statements or general administrative practices in relation to a tax law.

The penalty base rate for statements that resulted in a shortfall amount is calculated as a percentage of the tax shortfall, or in the case of no shortfall amount, as a multiple of a penalty unit. This percentage is determined by the behaviour that led to the shortfall amount or as a multiple of a penalty unit, which are as follows:

Failure to take reasonable care – 25% of the shortfall amount or 20 penalty units
Reasonable care is not taken if the taxpayer failed to do what a reasonable person in the same situation would have done.
Recklessness – 50% of the shortfall amount or 40 penalty units
Recklessness is determined as disregarding or showing indifference to a real risk of a shortfall amount arising that a reasonable person would have been aware of.
Intentional Disregard – 75% of the shortfall amount or 60 penalty units
Intentionally disregarding the law occurs if there is full awareness of a clear tax obligation, and the obligation is disregarded with the intention of bringing about certain results (underpaying tax or over-claiming an entitlement).

If a statement fails to be lodged at the appropriate time, you may be liable for a penalty of 75% of the tax-related liability if:

A document that is necessary to establish tax-related liability fails to be lodged
In the absence of that document, the tax-related liability is determined by the ATO.

To ensure that the statements, returns and lodgements are done correctly, and avoid the risk of potential penalties, contact us today. We’re here to help.

Achieving Your Strategic Goals While Keeping Business Costs Down

Posted on by Adam_Admin

If a business cuts costs, it’s usually to save on the money that is being spent. However, cutting costs too deeply may actually impact employee and customer satisfaction, and overall harm the success of the business that has been built thus far. In saying that, if cost-cutting measures aren’t employed enough, that can also be a threat to the business’s very viability.

There are a number of ways through which businesses can attempt to optimise and achieve a balance in their cost-cutting strategies, without sacrificing or reducing their overall success.

When beginning the cost-cutting process, align with what the business strategy actually needs to be cut. Rather than approaching the budget with a hacksaw method of reducing the most expensive items, consider optimising the cost against what the business strategy requires from it, and consider the inherent value of what could be cut. Is it something that adds value to the business, despite the cost? Will this cost return on investment against what the strategy purports?

Similarly, do not simply approach cost-cutting with a reduction in staff as a solution to the issue. Reducing staff is merely a short-term approach to cost-cutting that may have a long-term impact on the resources that the business will have available for use.

Instead, aim to optimise the staff available in the business. Consider the expertise that the business will require in moving forward, and plan accordingly. Retain the talent from the existing pool of staff, fill any existing vacancies and consolidate roles where people may be being underutilised. If people involved in the business are underperforming, consider culling these specifically.

Ensuring that employee satisfaction is being fulfilled by the business can assist in cost-cutting, as higher employee satisfaction leads to lower turnover for employees. This measure should cost businesses far less in the long run.

Similarly, in this constantly changing business environment, the impact of COVID-19 has furthered the question of whether or not the way that businesses can operate should remain the common practice. If housed in an office (and it is practical to do so), consider employing remote work as an option or alternative for employees. It can bring down the rent, energy, and other office expenses significantly, while also potentially give you better access to talent.

The overall finances of the business should be looked into as well, to ensure that the costs of financing are not severely impacting the business. Simple measures that can be employed include changing banks to a more cost-effective facility, consolidating credit cards into one with a lower rate, or other changes that may reduce fees and improve access to capital. Similarly, paying bills early or switching to a monthly fee can also improve financial performance, as it can assist in getting the cash flow of the business under control.

Removing non-essential expenses (such as gifts and entertainment) can also be a cost-cutting measure to employ in business. Going paperless, becoming more energy efficient in the office or negotiating with suppliers for more cost-effective alternatives are other similar, simple measures that can be made use of in the cost-cutting approach to business.

Cost-cutting for your business does not have to be a particularly painful process. By looking at your business with a critical, and strategically aligned eye, you can optimise the cost-cutting process to suit what your business needs. For assistance with business planning, cost-cutting, or other business-related advice, speak with us today.

Paying Off A Mortgage Debt Quicker

Posted on by Adam_Admin

Paying off the mortgage may sound like a dreary trudge to the end of a marathon’s finish line. However, there are options available for those who currently have a debt from a loan for their mortgage, and wish to reduce the time they spend paying it off. Here are a few simple ways to ensure that your mortgage debt decreases over less time.

Switching to fortnightly repayments from monthly could potentially increase the amount you are actually paying back on your mortgage. By paying half the monthly amount every two weeks, you’ll be making the equivalent of an extra month’s repayment each year (due to there being 26 fortnights in a year, as opposed to paying once a month over the year).

If the interest rate of your mortgage loan is too high, it may be worthwhile finding a lower interest rate in an alternative loan. Work out what features of the loan are ons that you would like to keep, and compare the interest rate on similar loans. If you can find a better rate elsewhere, you can ask your current lender to match it or offer you a cheaper alternative. Shop around to see what the best options for your particular loan may be. If you choose to switch your home loan to another lender, ensure that the benefits from that loan will outweigh the fees that you will have to pay to close your current loan and apply for another.

If you can afford to do so, making extra repayments on your mortgage can often cut your loan repayment time by years. If your mortgage is a typical 25-year principal and interest mortgage, most of your payments during the first five to eight years will go towards paying off the interest from your loan. If you put in extra payments during that period of time, you could potentially reduce the amount of interest that you pay and shorten the loan’s lifespan overall. Simple ways to make these extra repayments could include putting your tax refund or bonus into your mortgage. These extra repayments could incur a fee though, so always check with your loan provider if that could be the case.

You can also choose to make higher repayments, as though you had a loan with a higher rate of interest. If you switch to a loan with a lower interest rate, you can continue to make those repayments at the same value of the higher interest rate repayments. This method again can decrease the overall time you will spend paying off a home loan.

An offset account is something that you can also consider creating to assist in paying off your mortgage debt. It is a savings or transaction account linked to your mortgage, where the balance of the offset account reduces the amount that you owe on your mortgage. It helps to pay off the mortgage faster and reduces the amount of interest that you will pay overall.

Most home loans are principal and interest loans, which means that any repayments reduce the principal (amount borrowed) and cover the interest for the period. An interest-only loan means that you will only be paying the interest on the amount that you have borrowed, over a set period of time. The principal does not reduce during the interest-only period, which means that the debt does not reduce and you will in fact end up paying more interest. Paying both the principal and the interest is a simple and the best way to get your mortgage paid off faster.

You can also speak with your accountant or your lender about other options for paying back mortgage debt a little quicker.

How Different Trust Types are Taxed

Posted on by Adam_Admin

A tried and true method of investment, trusts are generally and commonly known as being for the wealthier elements of society. A trust however is a highly versatile tool that individuals and businesses can use to align with and achieve their particular investment, financial or personal goals. They can also incur a number of taxable concessions, depending on the type of trust that has been established.

Trusts are a type of business structure that holds income, property or assets for the benefit of others (known as the beneficiaries of the trust). To establish a trust, a legal document called a trust deed is created to bestow upon the beneficiaries (be they a company, individual or a group) the power needed to deal with the trust’s contents.

In Australia, trusts are established as fiduciary relationships. This means that the two parties involved are bound legally and ethically to act in the best interests of the other, and particularly when acting on behalf of them. A trustee of a trust is responsible for managing the trust’s tax affairs, including registering the trust in the tax system, lodging trust tax returns, and paying some tax liabilities.

Some of the more common types of trust funds include unit trusts, managed investment trusts, family trusts, deceased estates, super funds, charitable trusts, family trusts, deceased estates, super funds, charitable trusts & special disability trusts.

Each type of trust has special tax rules mandated by the Australian Taxation Office.

Unit Trust

Unit trusts are used in many commercial arrangements, including managed investment schemes. Units can often be bought and sold in a way similar to shares in a company. Some unit trusts are taxed like companies and their unit holders like shareholders.

Managed Investment Trusts

Managed investment trusts are a type of managed investment scheme, which had a new tax system come into effect in 2016. The new tax system was designed to reduce complexity and increase certainty for MITs and their investors.


Family Trusts

Trusts that are qualified as family trust for the purposes of the trust loss provisions may benefit from concessional tax treatment. However, family trust distribution tax (FTDT) will apply to distributions made from these trusts if the trustee confers a present entitlement or distributes income or capital, makes concessional loans or otherwise provides or allows the use of income or capital of the trust for less than its market value to a person or entity that is outside of the trust’s family group. FDTD is payable by the trustee of the family trust at the highest marginal rate plus the Medicare levy. Beneficiaries that receive distributions on which FTDT was paid receive the distribution as non-assessable non-exempt income (against which they can’t deduct expenses).

Deceased Estates

A deceased estate is technically not a trust while it is being administered, but is treated as a trust for tax purposes, with the executor or administrator of the estate taken to be the trustee

Super Funds

Self-managed super funds, in essence, are trusts, with trustees and beneficiaries (members) of the funds. However, these super funds are taxed differently from other types of trusts.

The income of an SMSF is generally taxed at a concessional rate of 15%, but the fund needs to be a complying fund that follows the laws and rules for SMSFs to be entitled to that rate. If they are a non-complying SMSF, they could be taxed at 47% instead. The certain assessable contributions that can comprise an SMSF fund include:

  • Employer contributions
  • Personal contributions that a member has notified as being intended to be claimed as a tax deduction
  • Generally, any contribution made by anybody other than the member, with limited exceptions such as spouse contributions and government co-contribution.

Charitable Trusts

Some types of charitable funds must be established as trusts in order to qualify for charity tax concessions.

Special Disability Trusts

Immediate family members and carers can set up a special disability trust to provide for the future care and accommodation needs of a person with a severe disability. The trustee is taxed at individual marginal rates.

For more information about trusts and taxable concessions, speak with us.

Corporate Social Responsibility, and Your Business’s Social-Cause Branding

Posted on by Adam_Admin

When branding your business, it’s important to consider all aspects of marketing. Businesses should utilise their marketing and branding strategies effectively to promote not only their business but also the values that the business holds true to.

In a socially conscious world, consumers are moving towards businesses whose business values align with their own moral, social, and environmental values. Effective marketing and branding strategies are often used by businesses to promote their image, boost their reputation, convey a specific message to their customers or impart their values.

Social branding is no different to most marketing campaigns – it simply conveys the business’ commitment to social and environmental responsibility, and creates visibility and transparency around how they are doing so. Social-cause branding as it is also known is furthered by the concept of Corporate Social Responsibility.

Corporate Social Responsibility is a concept that began to emerge over the past decade, where a company, business, or organisation markets with or alongside morally or socially just causes to promote their support and remain relevant in a constantly changing world.

Incorporating Corporate social responsibility into a business does not have to start at a global or macro level. Businesses can address their social, ethical, and environmental responsibility by beginning with their local community or smaller causes. This can be a more effective strategy for smaller businesses.

Social branding driven by corporate responsibility can be engaged by businesses for strategic or ethical purposes. It can aid in adding to a business’s profitability and relatability to its shareholders, as well as promote positive and negative outcomes of their endeavours from this engagement. It also addresses the loyalty of a customer base, as shared business values and personal values for a customer may result in a more stable consumer base beyond what was initially forecast. If your business is not seen as socially or ethically conscious, it can attract negative feedback and impact your business reputation.

Some notable examples of the ways in which corporate social responsibility is expressed by businesses include fair trade coffee beans, Pride Month branding of products, recycling resources to repurpose for other goods (e.g. recycled paper cups).

Here are a few tips on how to adjust your marketing strategy to reflect your business’ diverse social branding, and show your consumers that you are in alignment with their values:

If you are a local business, showing support to identified causes that are relevant to your community can kindle a sense of belonging and solidarity towards the community.

  • Creating and finding partnerships with similarly like-minded businesses that share your corporate social goals can shine more light on the social and moral values your business takes pride in.
  • Marketing the successes of your business in achieving corporate social responsibility is a good way to ensure that your targets are being met and that your consumers are seeing the results.
  • By committing to a social or environmental cause, and using it to promote awareness, your appeal should increase to consumers who value that aspect or cause highly.

By increasing the visibility of your business’s corporate social responsibility, you are more likely to engage with consumers beyond your initial target. Consider what best suits your business’ products when it comes to championing a cause to support. Your messaging is impacted by how your product is seen and conveyed and choosing an improper way to relate to a cause will minimise the effect it could otherwise have had.

Corporate social responsibility could be as simple as being against domestic violence and supporting local charities, using your position as a corporate body to promote this message in your sponsoring of, for example, sports teams, or donating to worthy causes to gain recognition of the good deed.

As a business, consider your marketing strategy and whether or not you should address causes in your branding. Can you use it effectively? And if so, how? Discuss with your marketing manager or team whether or not this could be a viable plan for your business potential to be maximised.

Superannuation Funds For Children – Why It’s A Good Idea?

Posted on by Adam_Admin

It’s likely that you’re already aware that people can put money into their super up until they reach 67 years, and probably already do so yourself. But did you know that you can put money into your children’s superannuation for them, if they are under 18 years old?

One of the advantages of doing this early on is that that money will accrue until your child reaches their preservation age, which will help them with their retirement. Additionally, the compound interest that superannuation funds with as little as $5,000  for example, accumulating at 7% per annum until the child reaches their preservation age could increase exponentially.

Compound interest on these superannuation funds could assist them year after year with increased gains and profit.

With that previous example of a child’s superannuation fund of $5,000, if that amount of money accrued interest at the 7% per annum interest rate over 55 years, the result could be that that amount in the super fund may total over $200,000.

This idea is not always suited for everyone. The funds to start the super account need to be readily available, and for many people that might not be an option. If the money is available through other investment opportunities (i.e. a grandparent wishing to leave their grandchildren money), this could be a means through which that money is tucked away, ready for their superannuation

If you’re looking for a way for your children or grandchildren to be looked after when you are not around, investing in superannuation is a smart way to look towards the future.

Seek further information and advice from your accountant about what we can do for you to get this started.

How Does A No Interest Loan Work?

Posted on by Adam_Admin

Sometimes there are a few unexpected expenses that can impact on our financial situations, and make things just a little more difficult to deal with. The refrigerator breaking down the same week that the car registration is due could be too much of a financial burden for many individuals. With many credit-providing schemes and dubious loans advertised to the public, there is a simpler way to solve your financial issue if you are applicable.

The No Interest Loan Scheme is provided by the Australian government for individuals and families to have access to safe, affordable credit.

No interest loans are designed to assist people in getting back on a more stable footing financially, allowing them to borrow up to $1,500 to pay for essentials. The term for this loan is between 12 and 18 months, with no credit checks, interest, fees or charges. Repayments for no interest loans are affordable as you are only paying for what is borrowed.

To receive a no interest loan, you must:

  • Have a Health Care Card, a Pensioner Concession Card or an income less than $45,000
  • Have lived at your current address for more than 3 months
  • Show that you can repay the loan.

There are only a couple of steps that need to be completed to apply for a no interest loan under the scheme. A meeting must be arranged with a NILS provider through a telephone or website enquiry, in which you will be interviewed and helped through the application process. Then they will assess your eligibility and present you with an outcome. Loan assessments generally take between 45 and 90 minute, with the loans being approved within 2 days. If all paperwork is provided on the day, it can sometimes be same-day approval.

No interest loans can only be used for essentials. These can include:

  • Household items, like a fridge, washing machine, computer or furniture
  • Educational materials e.g. tablet or textbooks
  • Some medical and dental services
  • Car repairs and tyres

What Is A Retirement Planning Scheme?

Posted on by Adam_Admin

With a significant number of Australians approaching retirement and looking at the best ways to maximise their retirement assets and income from their super for it, retirement planning makes sense.

Unfortunately, there are those who want to target people approaching and planning for their retirement with schemes designed to ‘help’ retirees and prospective retirees avoid paying tax by channelling their income through a self-managed super fund.

Retirement planning schemes are designed to help people avoid paying tax on the income earned through their assets (often in an illegal manner). Those schemes may seem like a simple get-rich-quick solution in maximising assets and income for retirement but can put people’s entire retirement savings at risk.

Anyone can fall prey to a retirement planning scheme. Anyone who is looking to put significant amounts of money into superannuation can be at risk of being ensnared, particularly those who are over 50, and who are:

  • SMSF trustees
  • Self-funded retirees
  • Small business owners
  • Professional service providers
  • Individuals who are involved in property investment

Checking for standard features of retirement planning schemes can be an excellent way to avoid becoming tangled in one. Retirement planning schemes usually:

  • Are artificially contrived and complex, with SMSF members often targeted and encouraged to use their SMSF as part of the scheme
  • Involve a lot of paper shuffling
  • Are designed to leave the taxpayer with a minimal or zero tax, or even a tax refund
  • Aim to give a present-day tax benefit by adopting the arrangement
  • Sound too good to be true – in most cases, they are.

Currently, there are a number of schemes targeted towards those individuals who currently have an SMSF, as they have a high level of control and autonomy in the way that their retirement savings are invested (subject to applicable tax and super laws).

Some examples of retirement planning schemes include:

  • Some arrangements involving SMSFs and related-party property development ventures.
  • Refund of excess non-concessional contributions to reduce taxable components
  • Granting legal life interest over a commercial property to SMSFs
  • Dividend stripping
  • Non-arm’s length limited recourse borrowing arrangements
  • Personal services income
  • Liquidating an SMSF

To avoid becoming a part of a retirement planning scheme, seek professional advice on super or SMSFs from an accountant.