What should you do when contracts, sales or purchases are cancelled?

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Contracts, sales or purchases are bound to be cancelled with financial uncertainty plaguing the economy as a result of COVID-19. To help you get through this, the ATO recommends making a goods and services tax (GST) adjustment when cancellations do occur.

In the event of contracts, sales or purchase cancellation, you can make a GST decreasing adjustment. A GST decreasing adjustment refers to when you originally paid for a product or service more than the amount payable after taking in an adjustment event into account. This also means you pay less GST for the reporting period.

For further clarification, the adjustment amount is a decreasing adjustment if you claimed less for the purchase in the earlier tax period than the amount you could have claimed if the adjustment event had been taken into account.

According to the ATO, GST adjustments can be made when:

  • The price of a taxable sale or purchase changes;
  • Taxable sales or a purchase you’re entitled to a GST credit for is cancelled;
  • You write off or recover a previously written-off bad debt, or
  • The actual usage purpose of a sales or purchase differs from your personal intended usage.

To make a GST adjustment, first look over your previous BAS and paid invoices and check if you paid GST, how much you paid in GST and when you paid. After that, you can make your adjustments for the amount paid in each previously lodged activity statement, provided that you are accounting for GST on a cash basis. In the case that you account for your GST on an accruals basis, make your adjustment during the activity statement period when you become aware of it.

When you become aware of a GST adjustment opportunity, you should report it in your activity statement for your current reporting period. The ATO provides you with adjustment reporting assistance in the form of worksheets designed for purchase recording purposes (for sales, purchases, bad debts and creditable purpose) and also brief guides on their website.

Keep in mind that you only need to adjust GST if the contract, sale or purchase was reported in a previous business activity statement. There’s no need to report an adjustment if your contract, sale or purchase occurred within your current business reporting period.

What record-keeping requirements does the ATO have in place?

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Record-keeping, if done well, can help running a business much easier. It gives you an overview of the business’ financial progress so that owners can assess their strengths and weaknesses and make decisions accordingly. Record keeping also enables owners to meet their tax and superannuation obligations easily – all the data and information required is readily available. Finally, record-keeping provides owners with a profile, of sorts, which demonstrates the financial position of the business to banks or other lenders. 

Record-keeping requirements related to tax and superannuation need to be met. The specifics will depend on the unique tax and superannuation and obligations your business may have and the structure of your business (sole trader, partnership, company or trust). 

The Australian Taxation Office (ATO), requires the following from all businesses: 

  • The records cannot be changed and further, the information should be kept so that it cannot be changed or damaged. 
  • The records must be kept for 5 years from the date they were prepared, obtained or a transaction was completed – or the latest act they relate to. The records might need to be kept for longer periods in certain circumstances. 
  • The business must be able to show the ATO their records if requested.
  • The records must be in English or easily translated into English.

The ATO will accept paper and electronic records. 

  • There has been an inclination towards electronic record-keeping for both tax and super requirements as this makes certain tasks easier and reduces workload after initial set up. There may be some laws which require paper records in addition to electronic ones. 
  • Businesses may also keep paper records electronically i.e. scan paper documents and store them on an electronic medium (and dispose of papers).
  • If records are stored electronically, then they should be on a device which owners have all access to, has been backed up, and allows the owner to have control over the information that is processed, entered or sent from the device. 

What makes a successful business plan

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When starting a new business, there are many elements you need to consider. Careful planning is essential to ensuring the longevity of your business, but what exactly goes into a good business plan?

A good business plan is one that is detailed. Sections should include; an executive summary, company description, market analysis, organization and management, service or product, marketing and sales, funding request and financial projections. These topics cover as much of the business as you can in the planning stage.

Showing attention to detail in your written plan demonstrates commitment to the business going forward. When writing a business plan, there are a few ways to ensure you are creating the best guide for your idea. Researching the industry and other companies in the market you are looking to step into can give you an insight into more than just the competition. As a business owner, it is your responsibility to know how and if audiences will respond to you.

Backup your information where you can with relevant files and supporting documentation. This provides sources to strengthen your plan and justify data. You should also keep records of your resume and any permits you may need if presenting your plan to an investor, this will help to support your commitment and ideas.

If you aren’t presenting your plan to investors or potential partners, determine what purpose your business plan will serve. A good business plan can be used not only as a sales document but a map for the business into its future. Writing a business plan that makes projections for the first five years can keep you on track and show you areas in which you need to focus on.

A business plan is a guide to help you create and maintain the best business you can. Even if things don’t go exactly as planned, a successful business plan is one that teaches you the things you want to get out of the business and ways in which you can achieve them.

What isn’t covered in a will?

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If you are thinking about writing a will, it can be helpful to know what not to include as much as it is to know what you do need to include.

The following are things which you should not include in your will:

  • Wishes: Conveying your wishes is of course important, however, they should not be included in your will. If you have any specific wishes that you would like to be passed to your family members upon your death, you will need to do so outside of your will.
  • Conditions: You should not include conditions in your will. For example, you cannot state that your daughter needs to be married before she receives what you have allocated to her.
  • Gifts for pets: Your pets are surely important to you, but unfortunately, as much as you would like to leave a gift for them, remember that they cannot hold ownership of it. Instead, consider finding someone you trust to leave your pet with and put money aside that could contribute to your pet’s care.
  • Funeral instructions: Placing your funeral instructions in your will might mean that your family does not see them after your funeral has already been completed. This is because funeral arrangements occur before attention is paid to legal matters. Instead, discuss your funeral wishes with your family members.

What is the transfer balance cap?

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The transfer cap refers to the amount of money that can be transferred from your superannuation account to your tax-free ‘retirement phase’ account.  

At the moment, the transfer balance cap is $1.6 million and all individuals have a personal transfer balance cap of $1.6 million. 

Exceeding the personal transfer balance cap means that you have to:

  • Commute the excess from one or more retirement phase income streams. 
  • Pay tax on the notional earnings related to that excess

The amount in your retirement phase account may grow over time, due to investment earnings. Although this may grow beyond the personal transfer cap, you will not exceed the cap. However, if you have already used all your personal cap, and then your retirement phase account goes down, you cannot ‘top it up’. 

The rules applied to capped defined benefit income streams are different from other income streams – this is because you can’t usually transfer or commute excess amounts from other streams. 

What Is The Small Business Superannuation Clearing House?

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For small businesses in Australia, managing superannuation payments for employees can be a time-consuming and complex task.

Super guarantee payments must be made quarterly, with the next due date being the 28 April.

However, the Australian Taxation Office (ATO) offers a solution in the form of the Small Business Superannuation Clearing House (SBSCH).

This online service simplifies paying super contributions for employees, providing small businesses a convenient and efficient way to meet their super obligations.

Let’s explore the SBSCH’s features and benefits and how small businesses can use this tool to streamline their super payments.

What is the Small Business Superannuation Clearing House (SBSCH)?

The Small Business Superannuation Clearing House is a free online service the ATO provides to help small businesses meet their superannuation obligations.

It allows employers to pay super contributions for their employees in one transaction, regardless of the number of funds they contribute to.

The SBSCH acts as a central hub where employers can lodge their super payments, which are then distributed to the respective employees’ super funds.

You’re eligible to use the Small Business Superannuation Clearing House (clearing house) service if your business has either:

  • 19 or fewer employees, or
  • annual aggregated turnover of less than $10 million.

You must meet one of these eligibility criteria each time you use the service.

Features and Benefits of the SBSCH:

  • Consolidated Payments: Employers can consolidate all their super contributions into a single transaction through the SBSCH instead of making separate payments to multiple super funds. This simplifies the payment process and reduces administrative burden for small businesses.
  • Accessibility: The SBSCH is accessible 24/7 through the ATO’s online services portal. Employers can log in to the portal anytime to submit their super payments, providing flexibility and convenience.
  • Secure and Confidential: The SBSCH employs strict security measures to ensure the confidentiality and integrity of employers’ financial information. All transactions are encrypted and protected by robust security protocols, giving employers peace of mind when making super payments.
  • Compatibility with Different Payment Methods: When using the SBSCH, employers can choose from various payment methods, including electronic funds transfer (EFT), BPAY, and direct debit. This flexibility allows businesses to select the best payment method for their needs and preferences.
  • Integration with Business Accounting Software: The SBSCH is compatible with most business accounting software, making it easy for employers to integrate super payments into their existing financial workflows. This seamless integration reduces manual data entry and streamlines the payment process for businesses.

How to Use the SBSCH

Using the Small Business Superannuation Clearing House is straightforward and user-friendly.

Employers can follow these simple steps to make super contributions for their employees:

  1. Register: Employers need to register for the SBSCH through the ATO’s online services portal. Registration is free and only takes a few minutes to complete.
  2. Log In: Once registered, employers can log in to the SBSCH portal using their unique credentials.
  3. Enter Payment Details: Employers need to enter the payment details, including employee information, contribution amounts, and payment method.
  4. Submit Payment: After verifying the payment details, employers can submit the super contribution payment through the SBSCH portal.
  5. Receive Confirmation: Upon successful submission, employers will receive a confirmation receipt confirming that the super contributions have been lodged with the SBSCH.

The Small Business Superannuation Clearing House (SBSCH) is a valuable resource for small businesses in Australia. It offers a simple and efficient way to manage employee super contributions.

By leveraging the SBSCH’s features and benefits, businesses can streamline their super payment process, reduce administrative burden, and ensure compliance with their superannuation obligations.

For small business owners looking to simplify their superannuation management, the SBSCH is a practical and accessible solution provided by the ATO. 4

Need further assistance with meeting your superannuation guarantee payment dates and submitting? Speak with a trusted advisor.

What is the criteria for a complying loan agreement?

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Private companies may be incentivised to make loans to a shareholder or their associate during the income year in an effort to save on income tax. In order to remedy any inequities as a result of making shareholder loan agreements, the Government enforces compliance through a set number of rules. Loans which follow such rules under the Income Assessment Act 1936 will also be exempted from being a dividend.

Minimum interest rate

Loans must have an interest rate greater than or equal to the benchmark interest rate outlined in Division 7A of the Income Tax Assessment Act 1936, published by the ATO annually. The benchmark interest rate for 2020 is 5.35% (under bank variable housing loans interest rates) and is 4.52% for 2021. This interest rate needs to be applied for each year after the year in which the loan was made.

Maximum term

The maximum term for a complying loan agreement is seven years. In the case that the loan is secured by a registered mortgage over real property, the maximum term is 25 years. For a maximum term of 25 years, the market value of the property (not including any other liabilities for securing the property prior to the loan) must also be at least 110% of the amount of the loan.

Written agreement

In addition to meeting the minimum interest rate and maximum term criteria, complying loan agreements need to be made under a written agreement before the private company’s lodgement date. Loan agreements that meet such requirements will not be treated as a dividend in the income year the loan is made.

There is no prescribed form for the written agreement. However, as a minimum, the agreement should:

  • identify the parties,
  • set out the essential terms of the loans (for example, the amount and term of the loan, the requirement to repay and the interest rate payable under the loan), and
  • be signed and dated by all parties involved.

What is replacing AUSKey?

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The ATO is developing new online services systems to replace AUSKey, which is due to retire in March 2020. Taking the place of AUSKey will be myGovID and Relationship Authorisation Manager (RAM).

MyGovID is an authentication service that will allow individuals to prove who they are online. This system will work by establishing your identity once online and then using your myGovID credentials to access government services you need online. The myGovID will feature facial recognition, the ability to scan identity documents and options to add or remove multiple devices.

Relationship Authorisation Manager (RAM) is an authorisation service that allows you to link your myGovID to an ABN, managing authorisations across government services for businesses and their staff. RAM gives you the ability to add multiple businesses, access the business portal on behalf of multiple businesses, modify authorisations, customise and delegate the level of business authorisation for employees and nominate who can act on behalf of your practice.

MyGovID and RAM are currently available in a public beta for eligible businesses to access the ATO Business Portal and will soon be available for online services for agents. AUSkey can still be used to access online ATO services while myGovID and RAM are being developed.

The ATO advises that in preparation for the changes you should check your ABN details are up-to-date in the Australian Business Register (ABR).

What is Organisational Culture?

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Understanding what organisational structure is can help with making decisions about your business in all areas. Organisational culture is multifaceted, it consists of the shared values, beliefs and norms in the workplace, and determines employee interactions as well as customer interactions.

There are four types of organisational cultures.

  • Clan Culture: Focussed on collaboration between teams to form a family-like relationship.
  • Adhocracy Culture: Focussed on creativity and innovation and open to continual change.
  • Market Culture: Focussed on achieving goals through competitive drive amongst employees.
  • Hierarchy Culture: Focussed on formal procedures and guidelines and maintaining power structures.

The organisational culture reflects in all aspects of the business. It can help with determining which potential employees may be more suitable than others and the way that those in leadership positions communicate with employees.

The way a business communicates and interacts with their customers is also influenced by organisational culture. Businesses may desire friendly and informal relationships, or formal and reserved relationships. Communication methods may also change, such as preferring email interaction as opposed to utilising chat functions.

Of course, the culture of an organisation can have overlap of the different types. More important than focussing on one type of culture, is recognising what works best for your business and trying to foster values and norms that embody that.

What is an SMSF auditor and what do they do?

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Self-managed super fund (SMSF) trustees are required to appoint an ATO-approved SMSF auditor no later than 45 days before lodging their SMSF annual return. An SMSF auditor is a professional who assesses your fund’s compliance with superannuation law and examines your fund’s financial statements.

SMSF auditor eligible requirements
Your SMSF auditor must be:

  • Independent. SMSF auditors cannot audit a fund that they hold financial interest in, or have a close personal or business relationship with the SMSF members or trustees.
  • Registered with ASIC (Australian Securities & Investments Commission) and holds an SMSF auditor number for you to provide on your annual return.

What will your SMSF auditor do?
An SMSF auditor provides you with an independent opinion on the existing assets in your SMSF and whether or not your fund complies with the rules outlined in the Superannuation Industry (Supervision) Act 1993.

When preparing for an audit, an SMSF auditor will issue a Terms of Engagement Letter to the trustee(s) of the fund, which includes the roles and responsibilities for parties involved in the audit as well as the range of the audit. In the case that your SMSF auditor’s primary contact is your accountant, your accountant will be issued a separate Terms of Engagement Letter.

By clearly outlining each parties’ capabilities, a Terms of Engagement Letter helps you, your accountant and your auditor to avoid any misunderstandings and also protects audit evidence provided by your auditor from unintended alterations. In turn, SMSF auditors who fail to follow standards or take shortcuts can be sued or imposed penalties by the Court.

The Terms of Engagement Letter also acts as a contract to keep parties accountable during compliance breaches and prevents cases of ‘opinion shopping’ where trustees look to other auditors for unqualified opinions. Trustees may end up being audited by the ATO in the event that they breach the Terms of Engagement Letter and ‘opinion shop’, as it comprises auditor independence.