Author: Adam_Admin

Introducing ASFP

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Plans are underway to carry out a system change during the December closure of the ATO to introduce Activity statement financial processing (ASFP). This change will move the majority of taxpayer financial information into one accounting system that will have multiple accounts.

ASFP will shift activity statement and franking deficit tax accounts from the current ATO system into their primary accounting system, covering all the different taxes they administer. This change is intended to help improve ATO digital services by delivering simplified transaction descriptions and summary views of “statement of account transactions” with the ability to view full account transaction if required.

During the closure, a number of ATO online services will be unavailable. These include;

  • SuperMatch: A service that enables APRA-regulated funds to consolidate member accounts.
  • EmployerTICK: An online service employers can voluntarily use to validate employee details, prior to making the first contribution to a super fund.
  • Fund Validation Service (FVS): A service that enables employers and funds to obtain APRA-regulated funds’ e-commerce details that support SuperStream transactions.
  • Electronic portability form (EPF): An ATO-hosted form that can be used by fund members to transfer the whole balance of super accounts between APRA-regulated funds, or to member’s self-managed super fund.
  • Member Account Attribution Service (MAAS): A service for super providers and life insurance companies to report the opening and closing of accounts, and changes to a member’s account phases and attributes when they occur (event-based reporting).
  • Member Account Transaction Service (MATS): A service for super providers and life insurance companies to report member contributions or transactions more frequently and at a transactional level.
  • Small business superannuation clearing house (SBSCH): The superannuation clearing house is a free online super payments service that can be used by employers with 19 or fewer employees or have an annual aggregated turnover of $10 million or less, to pay super contributions in one transaction to a single location.

Businesses will still be able to report using STP, however, these records won’t be processed and displayed until the ATO systems are back up and running. The ATO’s “System maintenance page” and “Superannuation Dashboard” will be updated with dates of planned system outages.

Strategies to increase profit

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Whether you are struggling to keep up a steady income or wanting to grow your business, increasing sales revenue is often a central goal for businesses. Here are some strategies you can consider when looking to improve profit:

Redesign operations for maximum efficiency:
If you really look at the operation processes of your business, you’ll often find that there are certain systems and routines in place that may not be necessary. Try to eliminate the tasks and activities that do not make valuable contributions to the business. Look for any operation processes that can be streamlined to maximise efficiency and save time.

Increase marketing efforts:
Oftentimes, you’re going to have to spend money to make money. Many businesses benefit from investing in a strong marketing campaign or even looking for cost-effective marketing opportunities on social media. Giving your business an instant presence through online networks such as Facebook, Instagram, LinkedIn, or Twitter does not have to cost a fortune. Sharing regular updates on your business, pictures of your products or interesting content your followers will like is a great way to keep your business in people’s minds and build a rapport with your customers.

Get your staff more involved:
Your employees may be inclined to stick to the tasks they have been assigned and leave the business promotion to whoever has that job. Your employees are often the ones directly dealing with customers, engaging in meetings, and making phone calls. Therefore, it is important that you encourage the salesperson in your employees and motivate them to invest in the process of maximising sales revenue. Think about inspiring staff in meetings, providing them with commissions or benefits that will make them want to give back, training them on how to close a sale and how to deal with customers effectively.

Take care of existing customers:
While it is easy to get carried away with getting as many new customers and followers as you can, don’t forget that it is often easier and cheaper to make a sale to an existing customer than a new customer who you have not developed a relationship with yet. Existing customers will have more trust in your products or services if they have already had a positive experience with your business. Put effort into maintaining a good relationship with existing customers and focus on cross-selling and upselling products and services to them.

How to avoid non-paying clients

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Running a business is hard enough without having to chase up payments from your customers. Here are some measures you can take to prevent yourself from having to deal with the profitability imbalance, negative client relation, and legal ordeals that come with chasing up owed debt.

Research the customer:
Before you enter into an agreement with a client or other businesses, make sure that you know who you’re dealing with and do some research. There are government certified websites available to check whether a company is registered and legitimate. Find out about their history, make sure they are reliable, still in operation and to look for any bad reviews and other people’s experiences with them. Look out for those who ask for discounts or complain that your fees are too high. If you get the idea that the client may not pay, consider avoiding the job instead.

Have a signed contract:
Regardless of how much you trust your client, it is still a good idea to have a written contract in place so that everyone is on the same page and you have evidence to refer to in the case of a dispute or confusion. The contract should consist of the terms and agreements, payment schedule, preferred payment method, the exact product or service to be completed and late payment policy. This will encourage your client to make their payments on time, and will also come in handy if any legal action is required in the event that payment isn’t made.

Have a good invoicing system:
Make sure that you invoice customers quickly with professional and easy to understand statements. This helps you keep track of your customers and helps your customers understand the payment requirements. You can set payment terms and policies to ensure that you will be paid how you and your customer agreed.

Ask for deposits or instalment fees:
If you ask for a deposit and the client does not want to pay, it shows that they are probably not trustworthy and may not be willing to make a full payment. If the client does pay you a deposit or instalment fees but does not make a final payment, then you will not have wasted as much time and effort on this work than you would have otherwise.

Proactive consolidation with ILBAs

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Inactive low-balance accounts (ILBAs) are a new category account that needs to be reported and paid to the ATO. This was introduced in the Treasury Law Amendment (Protect Your Superannuation Package) Bill 2019 that came into effect on 1 July 2019 after first being announced in the 2018-19 Federal Budget.

ILBAs are designed to protect accounts from fee erosion. Where possible, the ATO will proactively consolidate super on behalf of an individual.

A superannuation account is considered an ILBA if the following criteria are met:

  • No amount has been received by the fund for crediting to that account for an individuals benefit within the last 16 months.
  • The account balance is less than $6,000.
  • A prescribed condition of release has not been met.
  • The account is not a defined benefit account.
  • There is no insurance on the account.
  • The account is not held in a self-managed super fund (SMSF) or small Australian Prudential Regulation Authority (APRA) fund.

An account will not be considered an ILBA if, in the last 16 months, the individual has changed investment options, insurance coverage, made or amended a binding beneficiary nomination, declared that they are not a member of an ILBA or there was an amount owed to the super provider on behalf of the individual.

Funds are required to identify ILBAs on 30 June and 31 December each year, then report and pay them to the ATO by the statement date.

  • 31 October in the same year for accounts identified on 30 June.
  • 30 April of the following year for accounts identified on 31 December.

Individuals that have an account that they do not want to be transferred to the ATO as an ILBA, can:

  • Consolidate super accounts using ATO online services through myGov.
  • Contact their super fund for more information. Or;
  • Authorise their super fund to provide a written declaration to the ATO.

Time limit on GST refunds

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Small businesses entitled to refunds of GST may not be aware of the four-year time limit on claiming those refunds. Your entitlement to a GST credit ends four years from the due date of the earliest activity statement in which you could have claimed it.

GST refunds are claimed under the indirect tax concession scheme (ITCS), which also covers luxury car tax (LCT), wine equalization tax (WET) and excise. They are a form of “outstanding indirect tax refunds”, which are tax refunds that are entitled to the taxpayer but are yet to be claimed. “Outstanding indirect tax refunds” can be claimed in the following cases.

Refund of a net amount for a tax period:
This applies to those that have yet to lodge an activity statement for a tax period. Small businesses that have GST entitlements that amount to $2,000, (which exceeds the net GST, WET and LCT liabilities for that period $1,500), are able to claim an outstanding indirect tax refund of $500.

Refund of an overpayment of a net amount:
Due to a clerical error, a business owner reports and pays $4,600 net GST for a tax period instead of the actual amount of $4,060. The excess amount of $540 is an outstanding indirect tax refund which the business can claim.

Refund due to an underreported initial net refund entitlement:
A business claims a net GST refund of $3,000 for the tax period and receives the refund. Afterwards, however, it is realised that the actual refund entitlement was $3,200, the excess $200 represents an outstanding indirect tax refund that can be claimed.

Refund of indirect tax relating to an importation:
$100 GST is overpaid for an importation. This $100 represents an outstanding indirect tax refund that can be claimed.

Preventing cybercrime on your business’ social media

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Having a digital presence nowadays is crucial to getting the most out of marketing your business. However, being online puts you at risk of being a target for cybercrime, which means that you and your customers are at risk of being scammed, hacked, harassed or stalked. Business owners have legal responsibilities to ensure that their business and customer information is safe. For this reason, it is vital that you take precautions when putting anything online.

While social media platforms such as Facebook and Instagram have policies in place to prevent people being victim to cybercrime, it is still possible for hackers to dodge these measures and attack your business. It is therefore important that you implement your own safety measures to reduce the risk of being targeted.

Many cybercriminals target business’ social media accounts to get access to a large following of people they can trick or manipulate. It is crucial that your business account has a strong password consisting of at least 8 characters, with a mix of upper and lower case letters, numbers and symbols. Ensure that only authorised users have access to the business’ social media accounts.

Create a social media use policy for your staff to ensure that they are aware of the consequences and risks of sharing account information and being careless with social media handling to reduce the risk of misuse and security breaches. It is also useful to provide a cybersecurity incident response management plan to help your business prepare for security breaches and know how to respond to them quickly and effectively to prevent them from escalating.

When planning a social media campaign, think about ways you can prevent your campaign from being hijacked by hackers to keep you and your followers safe. For example, if your campaign is a competition that involves participation from your followers such as them uploading a photo, think about ways to keep them safe from hackers. Perhaps you can provide guidelines for entering the social media competition, such as discouraging them from geotagging their location and ensuring they don’t have their house or any other personal details evident in the picture.

Moving your business online 

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In order to keep up with the growing demands of digital accessibility and convenience, many businesses decide to partially or completely move their business online. This can help with extending customer reach beyond the geographical boundaries of a physical business, offering customers easy access to your products or services, scaling and growth, and reducing costs on rent, staff, and marketing. Here are some steps to get started on building the digital side of your business:

Plan:
Shifting from a physical business to an online one can be stressful and often puts you in an awkward transition period where you and your customers are unsure of how to go about the usual business while everyone is adjusting to the change. Having a strategic plan of how you’re going to go about the change will encourage a smooth transition and help you avoid any unexpected issues and complications that can slow down business processes and annoy customers.

Set up a website:
The first thing you should do is create a fully functional website. Register a domain name that is original and represents your brand, as this will be part of your online identity. Your potential clients will often be getting their first impression of your business from your website, so it is important that you have an effectively executed layout, user interface and design. On top of your products or services, make sure your website includes key information about your business, such as an about page, contact details, FAQs, social media links, or call to action prompt. Make sure your website is continually updated to provide fresh, relevant contact and correct information.

Build a social media presence:
If you’re not already on social media platforms, or if your social media presence is weak, focus on creating engaging and relevant social media content for your audience. This can help you build a stronger relationship with your clients, share content they would find interesting and useful, and establish a brand image.

Keep customers updated:
Clients can get frustrated and feel uncared for if they are not told about important changes to your business that will affect them. Whether you’re moving partially or completely online, it is important that you keep your clients updated. This can be done through a simple email, having a sign in-store, and verbally telling them when you interact with them.

Approaching difficult conversations at work

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Difficult conversations are apart of every aspect of life, including work. Employers and employees all face having to initiate difficult discussions at some point during their working life and avoiding these conversations can increase the potential for issues in the workplace or in extreme cases, legal claims.

Sensitive topics may initially be uncomfortable to approach but they can end up being important learning experiences for everyone involved. Addressing issues head on can allow people to work better together, understand different perspectives, practice empathy, and grow as individuals. As this is easier said than done, here a few ways you can prepare for a difficult conversation in the workplace.

Prepare:
Going into a difficult conversation prepared can help you cover the areas ou wish to discuss and possible solutions you can present. This will help you present issues in a calm and positive way. Before approaching the conversation, ask yourself questions like;

  • What is the purpose of the conversation? Establishing to yourself what you wish to achieve can help you direct the conversation to an outcome.
  • What attitude are you going to have? Depending on what outcome you are looking for will dictate what mood to enter the conversation in. Going in with a heated or negative stance will intimidate the person you are talking to whereas a gentler attitude will encourage conversation.

While planning can help you prepare for a difficult discussion, completely scripting your interaction can often create a disadvantage for you. Overly prepared responses can appear disingenuous, instead, prepare questions that can elicit discussion.

Listen:
The point of difficult conversations is to resolve an issue that is affecting the workplace. Listening to the person you are discussing this with is the first step to fixing the problem. Communication in the workplace needs to go both ways for a cohesive environment so listening to the other persons’ point of view or suggestions will reflect positively on you and the situation.

Solve:
Don’t leave a difficult conversation unresolved. This will only mean having to revisit the same issue at a later point, only this time everyone involved will have preconceived ideas of how the discussion will go and the lack of outcome. Having a clear plan moving forward helps ensure accountability and acts as a reference should something arise again.

Commutation authorities for SMSFs

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Commutation authorities are issued by the ATO when a member of a SMSF has exceeded their transfer balance cap. A commutation authority will be issued after the member has received an excess transfer balance determination alerting them they have passed the cap.

The transfer balance cap is currently $1.6 million and is applied to the combined total of all superannuation accounts held by an individual. To receive a commutation authority, a SMSF member has either;

  • Not commuted the excess amount in the determination in full by the due date, or;
  • Has made an election for the ATO to send a commutation authority to their fund to have the excess amount commuted.

After receiving a commutation authority, individuals must then;

  • Pay a superannuation lump sum by way of commutation. The commutation authority will detail the amount that must be commuted from a specified income stream for that SMSF member. Or;
  • Choose not to comply with the commutation authority because the member is deceased or the ATO issued in relation to an income stream that is a capped defined benefit income stream.
  • Send the ATO a transfer balance account report (TBAR) stating the details of the commutation or why you have chosen not to comply with the commutation authority.
  • Notify your member in writing that you have complied or not complied with a commutation authority.

This will need to be done within 60 days of receiving the commutation authority. Though the Commissioner of Taxation issues the authority, they do not have the power to grant an extension of time to respond. If you fail to commute or respond to the ATO regarding the authority, the income stream will stop being in retirement phase, affecting the fund’s entitlement to exempt current pension income. You may also be liable for penalties or subject to compliance action.

Limiting tax deductions for holding vacant land

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On the 28 October 2019, The Treasury Laws Amendment (2019 Tax Integrity and Other Measures No.1) Bill 2019 received royal assent. The new tax law creates limitations for deductions related to the expenses of holding vacant land from 1 July 2019. This is likely to affect those who acquire land for investment purposes and begin developing for rental investment purposes.

The amendments will only apply to holdings on ‘vacant land’, meaning that it will not apply to any land that has a substantial and permanent structure in use or ready for use, or is a residential premise that is lawfully able to be occupied. Land is considered vacant if both of these are not true.

The changes will not apply to vacant land held by ‘excluded entities,’ which are:

  • Corporate tax entities.
  • Managed investment trusts.
  • Public unit trusts.
  • Superannuation plans other than self-managed superannuation funds (SMSFs).
  • Unit trusts or partnerships where all members are of the excluded entities listed above.

The law will also be inapplicable if:

  • Structures affected by natural disasters or similarly exceptional situation.
  • The land is in use or available for use in carrying on a business by the taxpayer or their affiliates, connected entities, spouse or child under 18.

The land is in use or available for use for business purposes under an arm’s length rental arrangement.