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Changes to business practices and TPAR

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COVID-19 has forced businesses to adapt their practices to cater for social distancing measures and sanitary precautions. As a result, many businesses have taken on contractors to assist with these changes.

Businesses who have made payments to contractors in the last year may need to lodge a Taxable payments annual report (TPAR) by 28 August. This applies to the following contractor services:

  • building and construction,
  • courier, delivery or road freight,
  • cleaning,
  • information technology,
  • security, surveillance or investigation.

In response to COVID-19 restrictions, providing additional cleaning and courier services to customers have become particularly popular for businesses. For example, businesses with limited access to physical stores due to social distancing restrictions may have paid contractors providing courier services to deliver goods to customers on behalf of the business. If the payments received by the business for courier or cleaning services provided by contractors amounts to 10% or more of their total GST turnover, they will be required to complete a TPAR. Businesses can still lodge a TPAR even if they don’t think they need to or if they are unsure if they meet the 10% GST turnover threshold.

Businesses providing courier or cleaning services using their existing employees and not contractors will not need to lodge a TPAR.

TPAR lodgements can be made using SBR-enabled business software, the ATO Business Portal, through a tax or BAS agent, or by ordering a Taxable payments annual report (NAT74109) paper form.

Tax-deductible super contributions

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Individuals may be able to claim tax deductions for personal superannuation contributions they make. Personal super contributions are made after-tax, not to be confused with the pre-tax contributions made by employers. This includes contributions made using inheritance money, savings, proceeds from the sale of assets, or from a bank account directly into a super fund. To be eligible, individuals must receive their income from:

  • salary and wages,
  • super,
  • personal businesses,
  • investments,
  • government pensions or allowances,
  • partnership or trust distributions,
  • a foreign source.

A valid notice of intent to claim or vary a deduction must be provided to and acknowledged by your super fund before being able to claim a deduction for personal super contributions.

A valid notice may be:

  • A Notice of intent to claim or vary a deduction for personal contributions form (NAT71121).
  • A form that your super fund provides.
  • A written statement to your fund explaining your wish to claim a deduction for your personal super contributions.

Deductions claimed for a super contribution will result in the contribution being subject to 15% tax in the fund. As well as this, after-tax contributions that have been successfully claimed will not be eligible for a super co-contribution from the government.

Individuals who are eligible to contribute to super will be able to claim a deduction, however, some age restrictions may apply. Those aged 65 or over must meet a work test before voluntary super contributions can be made, while those under 18 years of age may only be able to claim a deduction if they have earned income as an employee or business operator during the year.

Individuals claiming deductions for their personal contributions should also keep in mind that their contributions will count towards their concessional contributions cap of $25,000 a year. Penalties may apply if this amount is exceeded.

Amending fringe benefits tax return and updated exemptions

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The Government has updated fringe benefits tax (FBT) exemptions to include travel in ride-sourcing vehicles under the existing taxi travel exemption. In the case that your business has been providing employees with such travel options and would like to amend your FBT returns to include the new exemption, the ATO has also updated 2020 FBT return amendment instructions.

New FBT exemption
Ride-sourcing vehicles are now included in the FBT taxi travel exemption. Business owners will be eligible for the exemption for travel provided to their employees in a single trip to or from the workplace:

  • On or after 1 April 2020, and
  • In a licenced taxi or other vehicle involving the transport of passengers for a fare, such as a ride-sourcing vehicle (excluding limousines).

Ride-sourcing FBT exemptions also apply to travel in relation to the sickness or injury of an employee.

Amending your FBT return
In the event that you have already lodged your FBT return but are eligible to be exempt from FBT due to the addition of ride-sourcing vehicles, there are a number of ways you can amend your FBT return.

An amendment to your FBT return can only be made if it is requested within three years from the date the FBT return was lodged. In the case that tax has been avoided, the amendment can be made within six years of lodgement. You can amend your FBT return by:

  • lodging electronically using Standard Business Reporting enabled software,
  • requesting an amendment assessment in writing through the ATO’s Business Portal or by post, or
  • working with a tax accountant to submit your request.

Are you eligible for the small business income tax offset?

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The small business income tax offset can be used to reduce the tax you pay by up to $1,000 a year. Also known as the unincorporated small business tax discount, the offset is worked out on the proportion of tax payable on your business income.

The rate of offset is 13% for the 2020-21 financial year and 16% for the 2021-22 financial year and onwards. The offset is only available to entities with an aggregated turnover of less than $5 million (from 2016-17 financial year onwards) and is capped at $1,000.

The ATO will work out your offset based on your income tax return and uses your:

  • Net small business income you earned as a sole trader, or
  • Share of net small business income from a partnership or trust.

Conditions for sole traders

The offset is calculated based on net small business income for sole traders (which is the sum of your assessable income from carrying on your business, minus any deductions). Sole traders are not entitled to the offset in the event that their net small business income is a loss.

Income and deductions that you need to include in your net small business income include:

  • farm management deposits claimed as a deduction,
  • repayments of farm management deposits included as income,
  • net foreign business income related to your sole trading business, and
  • other income or deductions such as interest or dividends derived in the course of conducting your business.

Conditions for partnership and trust distributions

You may be eligible for the tax offset if:

  • you have a share of net small business income distributed from a partnership or trust that is a small business entity,
  • you were a partner or beneficiary of that small business partnership or trust,
  • the business income was derived by the small business partnership or trust from carrying on its own business activities, or
  • your assessable income includes a distribution or share of net income from that partnership or trust.

Keep in mind that there are income and deductions that you cannot include when working out your net small business income for the small business income tax offset. Such income amounts include wages, government allowances and net capital gains you made from carrying on your business. Discuss with a financial advisor or accountant for more information on the offset conditions for your business.

Debt financing vs equity financing

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Gathering funding is a challenge that almost all business owners face at some point. Financing can come in two forms – debt financing and equity financing.

Debt financing is money that you borrow and plan to pay back within an agreed time frame and interest rate. Common forms of debt financing include bank loans, mortgages and credit cards. This may appeal to business owners that wish to maintain complete control and ownership over their business, without having to manage the expectations of investors. Debt financing also means that business owners do not have to share any profits made by the business, as their only obligation to their lender is making payments on time. As well as this, debt financing methods are usually tax-deductible, unlike private loans.

However, debt financing also has its downsides as the cost of capital is higher. Loans from official lenders such as banks typically come with interest rates that also need to be paid in addition to regular repayments.This means that your business must generate enough income to meet the requirements of the debt, which can affect cash flow and could even result in bankruptcy if the business fails and is not able to repay the debt. As well as this, new businesses may struggle to secure a bank loan, as banks often have a strict protocol regarding who can receive a loan.

Equity financing, on the other hand, is when you invest your own money or someone else’s money (usually family and friends, venture capitalists, business angels, or public floats) in your business. As a result of this, the investor of your business partially owns your business and shares the profits you make. This method of financing may be more suitable for business owners who can accept sharing their profits and not having complete ownership and control over their business.

One advantage of equity financing is having freedom of debt as repayments do not have to be made on investments. As well as this, equity financing methods can potentially expose business owners to additional funding opportunities if investors decide to provide more support for the business as it develops. However, business owners considering equity funding should also keep in mind that these methods can often put a strain on personal relationships if the financing was sourced from family and friends, depending on if the business succeeds or fails.

The benefits of hiring older workers

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Increasing life expectancy and late retirements mean that businesses need to be ready to welcome more mature-aged workers into their organisation. Workers aged 50 and over are often overlooked by hiring managers, but diversifying your workforce to include this age group could be greatly beneficial to your business.

Saving costs

Businesses are likely to see lower rates of sick leaves and higher loyalty rates amongst mature-aged workers. These low turnover rates can save your business costs relating to recruitment and training, and increase productivity within your workforce.

Customer representation

If your target audience includes an older age demographic, it may be more beneficial to have older employees working for you. By including mature-aged employees, you gain their perspectives of your product, and key insights into how to make your business more attractive to an older customer base.

Upskilling the team

Teams with diverse age groups perform better in the workplace. Older workers are equipped with a wealth of knowledge and skills that younger workers may not have. Less experienced members on your team are likely to learn new skills faster with older mentors on board. This can also help prevent the loss of key skills when older employees transition out of the workforce.
As a result of their experience, older employees are also more adaptable to change and high stress situations, and fill skill gaps in the workplace which leads to more well-rounded teams.

Work ethic

Older employees have a more stable work-life balance. Years of working has provided them with a strong work ethic, and an awareness of their strengths and weaknesses. Their work experience helps them perform better in diverse environments, and they have high conflict resolution skills. If your business involves meeting clients, older employees might be more successful by being confident and reassuring from a customer perspective.

Tax on super death benefits for dependants vs non-dependants

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A super death benefit is the super paid after a person’s death, usually to a nominated beneficiary. These benefits are subject to different tax treatments, depending on whether the beneficiaries are dependant or non-dependant.

Superannuation death benefits will generally be received tax-free by tax dependants, who are considered to be:

  • A child of the deceased who is under 18 years of age,
  • A spouse or former spouse of the deceased,
  • A person who has an interdependency relationship with the deceased (e.g. if they live together or have a close personal relationship),
  • A financial dependant of the deceased.

Dependants will not have to pay tax on the tax-free component of their super in the event that they:

  • Withdraw it as a lump sum, or
  • Receive an account based income stream.

However, they will be taxed at their marginal rate if they receive a capped benefit income stream and:

  • The deceased was at least 60 years of age at the time of death
  • The dependent is over 60 years of age and the total of their tax-free component and taxed element exceeds their defined benefit income cap.

Not all super death benefits are subject to tax; for non-dependants, there is a taxable portion. This component is largely made up of after-tax super contributions that the deceased member has made.

Super death benefit payments are subject to tax when:

  • The payment is made as a result of the SMSF member passing away,
  • The payment is provided to a non-dependent for tax purposes,
  • The payment has a taxable component.

Non-dependants must calculate how much money in the super account is a:

  • Tax-free component,
  • Taxable component the super provider has paid tax on (taxed element),
  • Taxable component the super provider has not paid tax on (untaxed element).

The amount of tax non-dependants pay will be based on their marginal tax rate, however, this amount may be reduced by tax offsets. For the taxed element of the taxable component, the effective tax rate is your marginal tax rate of 17% (whichever is lower). For the untaxed element of the taxable component, the effective tax rate is 32% or your marginal tax rate (whichever is lower).

How to make your marketing emails stand out

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Email marketing is becoming an increasingly popular way for businesses to reach their customers. However, this means it’s likely that customers are also getting marketing emails from a range of other companies – it’s therefore crucial that your emails are designed to stand out.

Promise value in the subject line

The subject line of your email is often what determines whether a customer will click on the email or ignore it. Don’t just summarise the content of the email, but focus on an aspect that will be valuable or attention-grabbing for the customer. This could mean that the subject line offers a benefit to the reader, offers to solve a problem, or provides relevant information. Promising the reader that the email content contains something of value will increase the chances of them opening it, and delivering the promise of value in the email contents will motivate them to also open your next emails.

Focus on design

Aside from looking pretty, having a well-designed email can also make your content easier to read, get your message across, and encourage actionability. Modern email designs are generally simple with easy to read fonts. Having a consistent colour scheme that reflects the branding of your business can create a cohesive and neat design while promoting brand recognition. It’s also important to make it easy for the reader to contact you or visit your website.

Using images as links to your website allows the reader to easily access your products or services without compromising the design of your email with visible link addresses.

Ensure mobile accessibility

Most emails are designed on a desktop, but this doesn’t mean that they should only be designed for a desktop. Studies have shown that the majority of emails are now viewed on a mobile device, so it is essential that your emails are able to adapt to a mobile user interface. Having overflowing text on a mobile device can discourage the customer from reading all your content, and can make your email look unprofessional.

Personalise content

Many email marketing platforms allow you to use the recipients’ first name in the subject line. This personalisation can increase the chances of drawing the customer’s attention to your email as they naturally gravitate towards the familiarity of their name.

What are the different types of cashless payment methods?

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In an effort to minimise physical contact during the global pandemic, most businesses are making the switch to cashless payments. While contactless credit cards and mobile wallet applications remain the most common type of cashless payments, many other methods have emerged in recent times. In the event that your business is also looking to make the switch, here are a few cashless payment types to be aware of.

Radio-frequency identification (RFID):

RFID uses radio technology to track tags containing electronic payment and banking information. RFID tags are most commonly attached to wristbands, watches or badges and can be scanned using mobile phones and RFID system technologies.

RFID tags can also be used at business events or service-providing organisations to keep track of clients while also acting as their digital wallet.

Unstructured Supplementary Service Data (USSD):

USSD services are another real-time cashless payment method which require a mobile network. With the USSD method, clients must dial a USSD code on an interactive menu provided by the business (could be a mobile phone), which will then allow clients to make payments to chosen recipients. The USSD code is dependent on a client’s mobile network and in order to make successful payments, clients must have their bank accounts correctly linked to their mobile phone number.

Quick Response (QR) Codes:

A QR code is a two-dimensional gridded pattern of black squares and is a viable cashless payment method as long as both clients and businesses have modern image-reading and camera technologies. Payments made through QR codes require a user to scan the QR code of a merchant to complete the transaction and can be done through banking apps or third-party payment applications on mobile phones.

While it may be tempting to make an immediate switch into cashless payment methods, the technology required to support cashless transactions is a costly investment. Before jumping the gun and spending money you do not need to, take note of which cashless payment methods would best accommodate your clients’ needs and fit into your existing business operations.

COVID-19 factors to remember when filing your tax return

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The end of the financial year has rolled around again, but this time, COVID-19 may affect the way you fill out your tax return. The ATO has released a range of methods to make tax time easier for businesses and individuals experiencing unprecedented circumstances.

How JobKeeper will affect tax returns

Sole traders receiving JobKeeper payments on behalf of their business are required to include these payments as assessable income for the business. Employees receiving JobKeeper will see that those payments have been automatically filled out in their tax return.

Individuals who have had their wages increase due to JobKeeper should identify whether they have been bumped into a higher tax bracket as a result. If an individual is working multiple jobs and receiving JobKeeper at one of these positions pushes them into a new tax bracket, they may be faced with a higher tax bill on their return if their other employers had continued deducting tax at their original lower rate.

How JobSeeker will affect tax returns

JobSeeker payments are considered taxable income. The ATO will automatically upload JobSeeker details in the ‘Government Payments and Allowances’ section of recipients’ tax returns. However, recipients are advised that there may be a delay in these JobSeeker details being updated, potentially until the end of July. The ATO recommends delaying tax return lodgements until these details are finalised. Recipients that wish to complete their returns prior to this must ensure they include these details themselves, as leaving out assessable income can slow down the return process or result in a bill later.

COVID-19 protective equipment

Occupations that require public interactions may be able to claim personal protective equipment (PPE), including:

  • Face masks
  • Sanitiser
  • Anti-bacterial spray
  • Gloves.

This would typically apply to industries such as healthcare, retail and hospitality. Many workplaces now have this PPE available for employees, however, employees who must pay for their own COVID-19 PPE and are not reimbursed for it will be able to make a claim.

Working from home

The ATO has introduced a new ‘shortcut method,’ which applies from 1 March 2020 to 30 June 2020. Under this new method, employees working from home as a result of COVID-19 can claim expenses incurred at a rate of 80 cents for each hour worked from home. Employees must keep a record of the hours they worked from home as evidence to support their claim.

Deductible running expenses include:

  • Utilities such as heating, cooling and lighting.
  • Cleaning costs for your work area.
  • Mobile or landline phone expenses for work calls.
  • Internet connection.
  • Computer consumables and stationery.
  • Repair costs for home office equipment and furniture.
  • Depreciation of home office equipment, computers, furniture and fittings.
  • Small capital items such as a computer (purchased for the purpose of working from home) can be claimed if they cost under $300. If the cost exceeds $300, the decline in value can be deducted.