Author: Adam_Admin

Restoring damaged tax records after a natural disaster

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In the event that your records have been damaged or destroyed in a natural disaster, such as bushfires, there are a number of ways you can reconstruct them. The ATO is able to help with reconstruction in the event tax records have been lost or damaged.

Where the tax records are lost or destroyed as a result of a natural disaster, the ATO will allow time for individuals to get their more pressing issues in order. They provide support by:

  • Allowing lodgment deferrals of activity statements or tax returns without penalties.
  • Allowing additional time to pay tax debts without incurring general interest charges.
  • Making arrangements for tax payments to be done by instalments.
  • Fast-tracking refunds.
  • Arranging field visits to help with reconstructing tax records.

The ATO holds and can re-issue or supply copies of tax documents, such as:

  • Income tax returns.
  • Activity statements.
  • Notices of assessment.

If you have lost your TFN, you can still access your tax information by phoning the ATO. They will allow for other information to verify identity, such as an individual’s date of birth, address or bank account details.

Employers should have copies of individuals PAYG payment summaries and banks should be able to provide bank records that have been destroyed. Registered agents may also have copies of individual records. In the event your bank charges a fee for replacing bank records and other services to help reconstruct records or provide information due to a disaster, individuals can claim a deduction in the income year that those fees are charged.

If you are unable to substantiate claims made in your tax returns or activity statements because records have been damaged or destroyed, the ATO can accept the claim without substantiation, where it is not reasonably possible to obtain the original documents.

Bad money habits that are getting in your way

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How you spend your money determines how well you can save you money. Spending more than you have or buying unnecessarily can severely impact how efficiently you can save. Sometimes you aren’t even aware of the small habits that are actually limiting your savings capabilities. Here are a few bad money habits that are getting in your way.

Not having a budget:
Spending a substantial amount of money each month on purchases and experiences adds up. Not preparing and sticking to a budget is a common mistake, as many people believe that a budget isn’t necessary for their lifestyle and income. Regardless of how much you earn, individuals need budgets to know where their money goes and what needs to be set aside to achieve their goals.

Eating Out:
Dining in restaurants or grabbing take away most nights in the week is a good way to deplete your finances. Save money by eating out one or two nights and cooking the rest of your meals in bulk at home. Preparation of food will help on those nights when you don’t want to cook and stops you from ordering food.

Impulse Buying:
Purchasing items without a second thought is an easy way to lose money. A good way to avoid this can be to ask yourself if you are buying something because you ‘want’ it, rather than if you ‘need’ it? Learn how to recognise when you do the action and force yourself to wait. You can then consider if you have the extra money to spend on that item, giving you time to properly think about your decision.

Credit Cards:
A credit card is an easy way to spend money you may not have. Living beyond your means is a fast way to fall into debt and is one of the worst things you can do for your finances. Remember, if you don’t pay the card in full each month, every dollar you put on a card will cost you many times more in interest charges. Avoid this problem by thinking of your credit card as an emergency-only option.

What happens to your super in a divorce?

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Divorce or separation can be emotionally draining and stressful as it is, but the legal and financial responsibilities you also need to think about add an extra burden to dealing with the spit. One key area that needs to be considered to protect your financial future is your superannuation and what happens to it after your divorce.

The superannuation splitting law treats superannuation as a different type of property. This means that like any other asset it can be divided between partners who were in a marriage or de facto relationships either through:

  • A formal written agreement where both parties sign a certificate confirming that independent legal advice about the agreement has been provided.
  • Seeking Consent Orders to split the superannuation.
  • Seeking a court order to split the superannuation in the event you cannot reach an agreement.

Splitting the super does not automatically give you a cash asset as it is still subject to superannuation laws.

There are three main options for dealing with your super in a split:

  • A payment split: this is the most common way of dealing with super at the end of a relationship. If you are not yet eligible to withdraw your super, the benefit will be split whilst remaining in the super system. If you have retired or are eligible to withdraw your super, your split can be done as a payment.
  • Payment flag: you can defer your decision if you want to wait for a specific event to occur, such as retirement or the maturation of an investment. Flagging allows you to protect the interest in your super fund and prevents the super fund from making a payment out of the super account until the flag is lifted.
  • No split or flag: this is when you choose to treat super as a financial asset instead of splitting or flagging the super. The super is then a relationship asset that can be divided between the parties. This option is often used by de facto relationships in Western Australia as their super cannot be split, making it their only legal option.

If you run a self-managed super fund (SMSF), then your situation can often be more complicated, particularly if your former spouse is also a trustee of the SMSF. Trustees must continue their responsibilities as a trustee and act in the best interest of all members in accordance with super laws. You must not exclude another trustee from making decisions or ignore requests to redeem assets over to another complying super fund. Dealing with SMSFs in the event of a divorce are often done with professional legal advice.

Things to consider before hiring an intern

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Hiring an intern can sound like a win-win situation; the intern gets an opportunity to learn and boost their career, you get some extra help generally at a lower wage rate than regular employees. However, it is important to first think about if an intern would be right for your company before you make the commitment.

Ask yourself why you need an intern:
If you’re looking for an intern for a short-term solution to help with your daily tasks, think about if it would really be the best solution before putting up a job ad. Hiring an intern also means that they should be trained and monitored, which also takes up resources and time. Additionally, interns nowadays often want to do more than admin tasks such as getting coffee. A good internship usually means that the intern gets industry experience and mentorship.

Consider remuneration:
If an intern is hired in accordance with the law, then they do not always require compensation. Think about what kind of tasks they would do, how much they would work and their academic and professional experience to help you decide on appropriate remuneration. Many companies choose alternatives to regular payment, such as gift cards, free lunches, public transport remuneration or free company products.

Think about resources:
Do you have the time and resources to train and mentor an intern? Often, interns are part of educational programs which means they may also have to commit to their studies as well as the internship. This requires more flexibility as to which days they can work each week, as well as periods they wish to take off to study for exams. It is therefore important to think about if you have enough resources to not become dependant on the intern for certain tasks.

Updates to the unclaimed superannuation money protocol

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The Superannuation (Unclaimed Money and Lost Members) Act 1999 (SUMLMA), more commonly known as the unclaimed superannuation money protocol, has been updated recently to provide a clearer structure going forward.

SUMLMA provides guidance on in relation to unclaimed money, lost member accounts, superannuation accounts of former temporary residents and their associated reporting and payment obligations. The update has now added content on inactive low balance accounts.

The act now clearly defines what is an inactive low-balance account, how statements and payments work, the registering of lost members and various rules for special cases.

It is important to note that the information in the protocol does not apply to super providers that are trustees of a state or territory public sector super scheme, in which:
The state or territory has laws requiring the reporting and payment of unclaimed super money to the state or territory government. Or;
The state or territory public sector super scheme complies with relevant state or territory laws.

The protocol provides administrative guidance only and should not be taken as a replacement for the law or technical reporting specifications.

The importance of keeping business records

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Businesses operating in a fast-paced and dynamic environment, the task of keeping records can fall secondary to everyday business operations. However, failing to efficiently keep up-to-date and comprehensive records can hurt your business’s long term operations.

Probably the most important reason behind sound record-keeping is that it allows you to learn and grow from your own business experiences. Keeping your records in check will help you understand the current situations of your business and also project future profit or losses. In addition, good record keeping will also show you where your business needs improvement or re-invention. Here a few records to keep that will prove invaluable in the future.

Financial Statements:
Keeping accurate and up to date financial statements will help you at a time of lending applications. These finances include income statements as well as balance sheets that show assets, liabilities and the equities of your business at a specific date.

Purchases and expenses:
The items you buy and sell to your customers and the costs of running your businesses. Supporting documents for both of these include invoices, email records, credit card slips, cancelled cheques, cash registrar tapes and account statements. These can help you to determine whether your business is improving, which items are selling, or what changes you may need need to make.

Deductible expenses:
At tax return time it’s handy to have an assortment of receipts and documents that outline your
deductible expenses. These can be costs of travel, transportation, uniform and entertainment.

Assets:
The properties that you own and use in your business. These records verify information regarding your business assets, such as when and how you acquired these assets. They will also help you to determine the annual depreciation when you sell the assets. Examples of these records include the purchase or sales invoices and real estate closing statements.

Should you work with family and friends?

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One place small business employers often fail to search for new job applicants is the families and friends of their best employees.

Before rushing headlong into hiring family or friends, consider the people and all areas of business that will be affected. Hiring friends and relatives can be a balancing act. If not handled well, it can sour the working environment. But hiring friends and family can have great benefits too, as long as you proceed carefully with these following points:

Business is not a charity:
Don’t hire an employee’s relative just because they ‘need’ a job. If someone has trouble holding down a job, you don’t want them either. Make it clear that if the relative or friend doesn’t perform as expected, he or she will have to go. Hire on a probationary basis, establishing a two-week or month-long period to see how things work out.

Hire for the right reasons:
People rarely see their own relatives clearly and are therefore likely to make general and positive statements that don’t tell you if they have relevant work experience or training, rather than analysing their capabilities. With this in mind, ask specific, detailed questions about their qualifications before you agree to interview them.

Be aware of spouses:
Spouses or domestic partners working together can present a number of difficulties. There are logistical issues that can arise, such as holidays or family emergencies, which could leave you doubly short-handed. There are behavioural issues to consider as well, a terrific, eager worker may change dramatically with a spouse around. The dynamics of a couple’s relationship is stronger and usually more emotive than an employer/employee relationship.

Never play favourites.
Be toughest on your own relatives. Before you hire a relative, make it clear to them that they are going to have to prove themselves, and they will be held to the highest standards. Make sure all the rules apply to all employees. Everyone has to be qualified and they have to do their jobs well. Otherwise, they’re not hired.

What are franking credits?

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Franking credits are a kind of tax credit that allows Australian companies to pass on the tax paid at a company level to shareholders. Franking credits can reduce the income tax paid on dividends or potentially be received as a tax refund.

Where a company distributes fully franked dividends (and those dividends are included in the taxable income of the taxpayer) the taxpayer can claim a credit against their taxable income for the tax that has already been paid by the company from which the dividend was paid.

Since the 2016-17 income year, the standard formula for calculating the maximum franking credits is:

Franking credit = (dividend amount / (1-company tax rate)) – dividend amount

Franking credits are paid to investors in a 0-30% tax bracket, proportionally to the investor’s tax rate. If an individual’s top tax rate is less than the company’s tax rate, the ATO will refund the difference. Therefore, an investor with a 0% tax rate will receive the full tax payment paid by the company to the ATO as a tax credit. Franking credit payouts decrease proportionally as an investor’s tax rate increases. Investors with a tax rate above 30% do not receive franking credits with dividends and may even have had to pay additional tax.

There can be eligibility requirements that must be met before franking credits can be paid, such as that you must hold the shares ‘at risk’ for at least 45 days to receive a total franking credits entitlement of $5,000 or more. There are also rules that can apply to buying, holding and selling shares with franking credits attached.

Can you change your business or company name?

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Changing your business or company name can be an exciting leap. You can find yourself thinking about things like redesigned logos, rebranding and new customers, but before that, you have to think about the steps required to officially change your name.

You cannot request to change the name of your existing business once it has already been registered under the Australian Securities and Investments Commission (ASIC). If you decide you want to trade under a new name, then you must register a new business application through the Australian Government Business Registration Service. If you choose to register a new business, you can cancel the existing registration through ASIC, however, the fees for a cancelled name will not be refunded.

If you’ve realised that a legitimate mistake has been made in your existing business name, then you can request for a correction to be made if there is a typographical error, the name of a place is incorrect, or the date of birth is incorrect. To support your correction request, you must provide evidence of the error, for example, a driver’s license or passport. You can request a correction through your ASIC Connect account.

If you have a company, which is a separate legal entity registered with ASIC, then you are able to change the name of your registered company without applying for a new company for a fee of $408. The new name you choose in this case is still subject to be rejected if it does not meet the following criteria:

  • It cannot be identical to an existing company name.
  • It must not contain any restricted words, e.g. consumer, bank or ANZAC, unless Ministerial or Public Authority consent has been granted.
  • It cannot suggest a connection to the government or other organisations if the connection doesn’t exist.
  • It must not be offensive to members of the public or suggest illegal activity.

Tax implications of buying a holiday home

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Buying a holiday house can seem appealing, whether it’s to rent out for income, for your own holidays or both. However, it is important to be aware of the different tax implications for how you choose to use your holiday house.

If you own a holiday house and do not rent it out, you cannot claim any expenses relating to the property. If you decide to sell the property, you will need to calculate your capital gain or loss. Even though you don’t need to include anything in your tax return while you own the property, it is still important to keep all records to determine the capital gains tax implications for when you sell it.

If you own a holiday house and rent it out to others, you have to include the income you receive from rent as part of your income in your tax return. Deductions can be claimed on expenses incurred for the purpose of producing rental income, such as cleaning, advertising costs, pest control, insurance, maintenance and repairs. The cost of repairs and renovations cannot be claimed immediately, but are deductible over a number of years.

You are only able to claim deductions for the periods the property is rented out or genuinely available for rent. A holiday house may not be considered genuinely available when:

  • It has none or limited advertising, e.g. when you only advertise by word of mouth or restricted social media pages.
  • It is rented out free or discounted to family and friends.
  • You use the property for yourself.
  • There are unreasonable conditions for renting, e.g. restricting children and pets and only being available during off-peak holiday seasons.

If a holiday house is shared between two owners, then the deductions need to be split accordingly. For example, if the house is owned 50-50, then the owners can claim equal shares of the expenses. If one partner owns 20% of the property, they can only claim 20% of the expenses.