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Business Tax Tips – 14 End of Financial Year 2017 tips to PREPARE for 30 June! Time to ACT NOW!

Business Tax Tips – 14 End of Financial Year 2016 tips to PREPARE for 30 June! Time to ACT NOW!

14 End of Financial Year 2016 tips to PREPARE for 30 June! Time to ACT NOW!

Time to plan for a good finish for EOFY and here are 14 tips to get started and prepare for 30 June.

1. Consider the ideal timing for asset sales

If you are thinking of selling a profitable asset this financial year, but are likely to earn a lower income in the next year, it may be worth postponing the sale until after 30 June; however, if you expect an income windfall or higher from 1 July, it may be worth bringing the sale forward. As always, your decisions depends on your expectations for future asset prices, so don’t postpone a sale for tax purposes if you are expecting your investment to fall in value! Ask your Tax advisor.

2. Delay sales invoicing if in profit

Most businesses are taxed on income when it is invoiced (accrual). Some small businesses may be taxed only when income is received (cash basis). Income from construction contracts is generally taxed when progress payments are invoiced or received. If you are making a good profit (which is good if you want to sell) and want to reduce business tax, it may help to delay invoicing the June work until July, after 30 June – talk to your tax advisor for your situation.

3. Accounts receivable – write off by 30 June

If you have clients that have closed or all manner of collection has failed – sometimes it is best to move on and write off. Keep looking for better clients!

4. Spouse and family wages

Paying family must be reasonable and legitimate for work performed.

5. Super liabilities

Employer and/or self-employed superannuation contributions must be paid to, and received by, the super fund before 30 June and must be within the contributions cap ($35,000 for individuals aged 49 or over on 30 June 2016, otherwise $30,000)

6. Depreciation – Accelerated Write off – up to $20,000

The accelerated depreciation write-off for assets up to $20,000 acquired by small businesses was announced in the May 2015 budget and is available to June 30, 2017. The write off threshold was previously $1,000 and the concession only applies to businesses in 2016/17 with an aggregate annual turnover of less than $2 million. As a boost for small businesses, the Government will extend access to a number of small business tax concessions by increasing the annual turnover eligibility threshold from $2m to $10m. These measures will apply from July 1, 2016.

7. Pre-pay income protection premiums 

If you are a self-employed director or self-employed, income protection insurance provides peace of mind about the security of your income in the event you are unable to work due to illness or injury. Premiums for this insurance are generally tax deductible; prepaying your annual premium prior to 30 June will allow you to claim a full year of cover in advance as a tax deduction.

8. Get a super top up from the government

If you earn $35,454 – $51,021 pa, of which at least 10% is from employment or a business, and make a personal after-tax super contribution, you could qualify for a Government co-contribution of up to $500. 

9. Boost your partner’s super and reduce your tax

If you have a spouse who earns less than $10,800 pa, consider making an after-tax super contribution on their behalf, and you could receive a tax offset of up to $540.

10. Use super to manage capital gains tax

If you make a capital gain on the sale of an asset this financial year and earn less than 10% of your income from eligible employment, you may be able to claim a tax deduction for a contribution to superannuation, which could reduce or offset your capital gain. You will need to be eligible to contribute to superannuation (which means you are under the age of 65, or under 75 and meeting the work test (2017 now abolished), and be comfortable having your contribution preserved in super until you meet a condition of release (eg retirement decision).

11. Make tax deductible super contributions

If you earn less than 10% of your income from eligible employment (eg you are self-employed or not employed), you are generally able to claim a tax deduction for personal contributions to superannuation. As with super, you will need to be eligible to contribute to superannuation (which means you are under the age of 65, or under 75 and meeting the work test), and be comfortable having your contribution preserved in super until you meet a condition of release (eg retirement). If you claim a deduction for it, the contribution you make will be taxed at 15% in your super fund, so your tax saving will be the difference between your marginal rate and 15% – which could be up to 34%.

12. Review your portfolio

Review your portfolio and consider a strategic re-allocation of your investments. Consider portfolio allocations – is your portfolio heavily over- or underweight in specific industry sectors or stocks? Are you continuing to carry stocks that have exceeded your price targets or continue to under-perform – this may be an opportunity to re-balance. If you have an SMSF, now is the time to ensure your fund is invested in line with your documented investment strategy – your auditor will be confirming this after 1 July.

13. Offset capital gains with capital losses 

Generally, if you have incurred capital losses on your investments, you are able to offset these capital losses against any capital gains you have made. You can also use losses you have carried forward from previous years. Remember, income losses can only be offset against income; capital losses can only be offset against capital gains.

14. Best tip of all

Get advice specific to your business and situation that considers your personal position – both go together!

If you need a referral, call me – 0407 361 596 – plan NOW don’t delay!

Need help? Not sure? Call for FREE 30min advice / strategy session today!

Call 0407 361 596 Aust and also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right!


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Business Tax Tips – GST and Hire Purchase

Business Tax Tips – GST and Hire Purchase

GST and Hire Purchase

Many businesses acquire assets such as equipment by entering into hire purchase or leasing agreements to pay for and use the equipment over a period of time rather than paying the full cost up front. Then also they need to know how GST applies. Here is some information from the ATO website to explain –

How does hire purchase work?

Under a hire purchase agreement, you:

  • Purchase goods through instalment payments;
  • Use the goods while paying for them;
  • Do not own the goods until you have paid the final instalment.

Where the supply of goods to you under a hire purchase agreement is a taxable supply, the price you pay for the goods includes GST. If you use the goods in your business, you can generally claim a GST credit.

You treat a hire purchase agreement as a stand-alone sale or purchase in a tax period – that is, the same rules apply as they would for any sale and purchase of goods under an ordinary sale agreement. A hire purchase agreement is not treated as a sale or purchase made on a progressive or periodic basis.

Paying GST on hire purchases

If you enter into a hire purchase agreement on or after 1 July 2012, all components of the supply made under the agreement are taxable, whether or not the credit component is separately disclosed. Any associated fees and charges, such as late payment fees incurred under the terms of the hire purchase arrangement, are also subject to GST.

If you enter a hire purchase agreement before 1 July 2012, and the supplier:

  • Separately identifies and discloses the interest charge to you, you don’t have to pay GST on the interest as it is a financial supply;
  • Doesn’t separately identify and disclose the interest charge to you, you must pay GST on the total amount payable under the contract.

The interest charge is ‘disclosed‘ to you if the supplier tells you any of the following in the hire purchase agreement:

  • The dollar amount of the credit charge;
  • The interest rate;
  • The formula or formulas used to work out the credit charge amount;
  • Any other information sufficient to work out the credit charge amount.

A hire purchase agreement entered into before 1 July 2012 continues to be treated in this way even if there’s a subsequent change to the agreement, provided the change doesn’t result in a new agreement. That is, the supply of a separately disclosed credit component will continue to be an input taxed financial supply.

Claiming GST credits on hire purchases

If you account for GST on a NON-CASH (accruals) basis

You can claim the full GST credit on your hire purchase agreement in the tax period when either:

  • You make your first payment;
  • A tax invoice is issued to you, provided you haven’t already made your first payment.

For agreements entered into before 1 July 2012, you claim a GST credit only for the principal component of the agreement, not the credit component.

If you account for GST on a CASH basis

For hire purchase agreements entered into on or after 1 July 2012, you can claim input tax credits up front instead of waiting until each instalment is paid, in the same way as you would if you accounted for GST on a non-cash basis. As all components of a hire purchase agreement entered into on or after 1 July 2012 are subject to GST, you can claim one-eleventh of all components, including the credit component and any associated fees and charges that have been subject to GST under the agreement.

For hire purchase agreements entered into before 1 July 2012 you can claim one-eleventh of the principal component of each instalment in the period you pay it. If the supplier provides regular accounts or statements that show the principal and interest components for each instalment, you must use that information to work out GST credits in the relevant tax period. If you don’t know the principal component for each instalment, you need to take reasonable steps to find out from the supplier.

See some working examples further down the page at the ATO site HERE

Get a FREE 30 min answer to your query, and FREE ongoing email or phone support

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Business Tax Tips – Instant asset write off 2017 – $20,000 claim limit ends 30 June 2017

Business Tax Tips – Instant asset write off 2017 - $20,000 claim limit ends 30 June 2017

Instant asset write off 2017 – $20,000 claim limit ends 30 June 2017

If you are a small business (aggregated turnover of less than $2 million) contemplating buying machinery or equipment, be aware that these are final months of the $20,000 instant asset write-off 2017.

With a final date of 30 June 2017, you may consider bringing forward any planned asset investments to the next few months – particularly in this current low interest-rate environment.

The ATO says

Small businesses can immediately deduct assets costing less than $20,000 purchased since 7.30pm 12 May 2015.

You can use the new threshold amounts in claiming deductions in your 2015 and 2016 income tax returns.

The deduction is claimed in the income year in which the asset is first used or installed ready for use.

What’s changed?

The instant asset write-off threshold has increased to $20,000 (up from $1,000). This allows you to immediately deduct the business use portion of a depreciating asset that costs less than $20,000.

The changes apply

  • To assets acquired after 7.30pm on 12 May 2015 until 30 June 2017
  • On a per asset basis, so several assets each costing less than $20,000 would qualify
  • To new and second hand assets.

Assets that cost $20,000 or more (which can’t be immediately deducted) will continue to be deducted over time using a small business pool.

The low pool value threshold will also increase to $20,000. This means that an immediate deduction is available if the pool balance is less than $20,000 at the end of an income year.

What’s not included?

There are a small number of assets that aren’t eligible for accelerated depreciation, for example horticultural plants that have specialised depreciation rules.

Record keeping

Just like any other business asset, you’ll need to keep records to support any claims for a deduction.

Find out about:

Simplified depreciation for small business where we read –

You can choose to use the simplified depreciation rules if you have a small business with an aggregated annual turnover (the total normal income of your business and that of any associated businesses) of less than $2 million.

Under these rules, you:

  • Immediately write-off – deduct their full cost in the year you buy them – most depreciating assets that cost less than $20,000* each that were bought and used, or installed ready for use from 7.30pm (AEST) on 12 May 2015 until 30 June 2017
  • Pool most other depreciating assets that cost $20,000 or more in a small business asset pool and claim
  1. A 15% deduction in the first year (regardless of when you purchased or acquired them during the year)
  2. A 30% deduction each year after the first year
  • Write-off the balance of your small business pool at the end of an income year if the balance – before applying any other depreciation deduction – is less than $20,000.

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Business Tax Tips – Keeping Records and Receipts for Business Expenses

Business Tax Tips – Keeping Records and Receipts for Business Expenses

Keeping Records and Receipts for Business Expenses

The ATO (Australian Tax Office) gives good instructions on keeping records and receipts for Business Expenses.

At Record Keeping for Small Business it says –

By law your records must:

  • explain all transactions;
  • be in writing (electronic or paper);
  • be in English or in a form that can be easily converted;
  • be kept for five years (some records may need to be kept longer).

If you don’t keep the right tax records, you can incur penalties.

How to keep records –

You can keep invoicing, payment and other business transaction records electronically or on paper. The principles are the same for each, but keeping electronic records will make some tasks easier.

With the right electronic record-keeping software you can:

  • automatically tally amounts and provide ready-made reports;
  • produce invoices, summaries and reports for GST and income tax purposes;
  • keep up with the latest tax rates, tax laws and rulings;
  • report certain information to us online;
  • save on physical storage space;
  • back up records in case of flood, fire or theft.

If you intend to use a bookkeeper or accountant, get their advice about the best system for you – choose a system you can understand and operate easily.

Record keeping

Generally, for tax purposes, you must keep your records in an accessible form (either printed or electronic) for five years.

Basic records tells us

Some of the basic records you may need to keep are:

  • governing documents (for example, constitution, rules, trust deed);
  • financial reports (for example, financial statements, annual budgets, reconciliations, audit reports, accounts payable and accounts receivable);
  • cash book records of daily receipts and payments;
  • tax invoices and income tax records, such as debtors and creditors lists, stocktake records and motor vehicle expenses;
  • records relating to employees (for example, TFN declarations, pay as you go (PAYG) withholding, superannuation and fringe benefits provided);
  • records of payments withheld from suppliers who do not quote an Australian business number (ABN);
  • banking records (for example, bank statements, deposit books, cheque books, bank reconciliation);
  • grant documentation (for example, when funding will be received, when acquittals need to be made, application deadlines);
  • registration, certificates and accompanying documents to regulators (for example, ATO, Australian Charities and Not-for-profits Commission, and state regulators);
  • contracts and agreements (for example, cleaning, maintenance and insurance contracts, finance or lease agreements);
  • copies of reviews of entitlement to tax concessions;
  • records to help prepare tax statements and returns.

And also further down that page –

Invoices you receive

A tax invoice of more than $75 (excluding GST) must contain enough information to allow key information to be clearly determined, for example, your supplier’s ABN. Otherwise, you generally need to withhold 46.5% from your payment to the supplier.

If you receive a document from a supplier that is missing key information, you may still be able to treat the document as a tax invoice if the document makes clear that it is intended as a tax invoice and the missing information can be obtained from other documents issued by the supplier.

You cannot claim a GST credit in an activity statement unless you have a tax invoice. If you obtain a tax invoice later, you can claim the GST credit in the activity statement for the tax period in which you obtain the tax invoice.

Tax invoices are not required if the GST-exclusive value of the sale is $75 or less. However, you should have some documentary evidence to support all GST credit claims.

(NOTE – The only thing is this is under the Non-Profit section!)

In the Business Section we read –

Allowable deductions

Most expenses you incur in running your business are tax deductible. You claim these deductions in the annual tax return for your business or, if you’re a sole trader, in your personal tax return.

What you can claim

You can only claim expenses that are directly related to earning your assessable income.

If you make a purchase or use an asset for both business and private purposes, you can only claim a deduction for the business portion of the expense. If you use an item in your business for only part of a year, you may need to restrict your claim to the period it was used for the business.

What you cannot claim

You can’t claim a deduction for the goods and services tax (GST) component of a purchase if you can claim it as a GST credit on your business activity statement. You also can’t claim:

  • private or domestic expenses, such as childcare fees or clothes for your family;
  • expenses relating to income that is not taxable, such as money you earn from a hobby;
  • expenses that are specifically non-deductible, such as entertainment and parking fines.

Expenses you can claim in the year you incur them

Working or operating expenses you incur in the everyday running of your business – such as office stationery, renting office premises, and salaries or wages – are called revenue expenses.

You can generally claim a deduction for most revenue expenses in the same income year you incur them, including:

  • advertising and sponsorship costs;
  • bad debts;
  • bank fees and charges;
  • business motor vehicle expenses (see Motor vehicle expenses);
  • business travel expenses (see Business travel expenses);
  • clothing expenses (corporate wardrobes and uniforms, and occupation-specific and protective clothing);
  • depreciating assets that cost less than $1,000 if you are a small business (between 1 July 2012 and 31 December 2013, the threshold was $6,500) (see Depreciating assets);
  • education, technical or professional qualification expenses;
  • electricity expenses;
  • fringe benefits – the cost of any fringe benefit provided and the fringe benefits tax on the benefit;
  • home office expenses when your home is used as a business premises (see Running your business from home);
  • insurance premiums, including accident or disability, fire, burglary, professional indemnity, public risk, motor vehicle loss of profits insurance, or workers’ compensation;
  • interest on money borrowed for income tax obligations, employer super contributions, or late payment or lodgment of tax – or to produce assessable income or purchase income-producing assets;
  • land tax on business premises;
  • legal expenses, such as those incurred defending future earnings, borrowing money, discharging a mortgage or obtaining tax advice;
  • losses from a previous year (see Claiming tax losses);
  • luxury car lease expenses;
  • stationery expenses;
  • costs for running a commercial website, such as site maintenance, content updates and internet service provider fees;
  • parking fees;
  • public relations expenses;
  • phone expenses;
  • rates on business premises;
  • registered tax agent and accountant fees;
  • renting or leasing a business premises;
  • repairing and maintaining income-producing property (see Repairs, maintenance and replacement expenses);
  • salaries, wages, bonuses or allowances (see Salary, wages and super);
  • small-value items costing $100 or less;
  • subscription costs for business or professional journals, information services, newspapers and magazines;
  • costs for sunglasses, sunhats and sunscreen when your business activities require outdoor work;
  • super contributions for employees, and some contractors paid primarily for their labour (see Salary, wages and super);
  • tax-related expenses, such as –

– having a bookkeeper prepare your business records

– preparing and lodging tax returns and business activity statements

– objecting to or appealing against your assessment

– attending an ATO audit

– obtaining tax advice about your business

  • tender costs, even if the tender is unsuccessful
  • trading stock, including delivery charges
  • transport and freight expenses
  • travel expenses for relocating employees
  • union dues and periodical subscription fees to trade, business or professional associations
  • water expenses on business premises.

Are Receipts Under $75 required to KEPT??

According to the ACCC (Australian Competition and Consumer Commission)

Businesses must always give you a receipt or proof of purchase for anything over $75. If they don’t, ask for one. You also have the right to request a receipt for anything under $75 and the receipt must be given within seven days of asking.

A receipt or proof of purchase must include the:

  • supplier’s name and ABN or ACN;
  • date of supply;
  • product or service;
  • price.

In Summary –

So the ATO doesn’t mention under $75 receipts for business, only for Non-Profits,

and the ACCC says over $75 a receipt is Required!

Need help? Not sure? Call for FREE 30min advice / strategy session today!

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Business Tax Tips – Tax on Temporary Residents or Foreign Workers or Non-resident Worker Tax

Business Tax Tips – Tax on Temporary Residents or Foreign Workers or Non-resident Worker Tax

Tax on Temporary Residents or Foreign Workers or Non-resident Worker Tax

If you have employees that are temporary residents or foreign workers, it is important to know the tax that applies and conditions the worker must meet, such as current work VISA – here is what the ATO says

What you need to work in Australia –

To work in Australia you need a visa that allows you to work here. You should also have a tax file number (TFN).

Visas are issued by the Department of Immigration and Border Protection. You can check if your visa allows you to work by using the department’s free Visa Entitlement Verification Online (VEVO) serviceExternal Link.

Your TFN is your personal reference number in our tax system. You can apply for a TFN online once you have your work visa and have arrived in Australia. You should apply for your TFN before you start work or soon after.

Apply for a TFN

You don’t have to have a TFN, but you pay more tax if you don’t have one. Getting a TFN is free.

If you think someone else has used your TFN or it has been stolen, phone ATO on 1800 467 033 (within Australia), between 8.00am and 6.00pm, Monday to Friday.

When you start a job –

Complete a Tax file number declaration

Your employer will ask you to complete a Tax file number declaration, which tells them your TFN and whether you are an Australian or foreign resident for tax purposes.

Your employer uses the information to work out how much tax to withhold from your wages. They should also provide your TFN to your superannuation fund so it can accept your superannuation contributions and pay the correct tax on them.

You have 28 days to provide a completed Tax file number declaration to your employer. If you don’t, they must deduct a higher rate of tax from your pay.

You should give your TFN to your employer only after you start work for them. Never give your TFN in a job application or over the internet.

Your employer deducts tax

Your employer will deduct tax from your pay and send it to us. This is called ‘pay as you go withholding’.

You can check how much tax should be taken from your pay.

Note: New working holiday makers tax tables apply from 1 January 2017

If you employ working holiday makers, new tax tables apply from 1 January 2017.

Working holiday makers include individuals who hold either a:

  • working holiday makers visa (subclass 417)
  • work and holiday makers visa (subclass 462)
  • associated bridging visa.

For more information refer to Tax table for working holiday makers.

Superannuation entitlements

Superannuation (or ‘super’) is Australia’s retirement savings system. If you are a temporary resident, your employer should pay super contributions for you just as they do for eligible Australian resident employees.

It doesn’t matter whether you work full time, part time or casually.

Your employer must pay super contributions into a super fund on your behalf if you are paid A$450 (before tax) or more in a calendar month and you are either:

  • 18 years or older, or
  • under 18 and work more than 30 hours per week.

Your employer does not need to pay super for you if you are doing work of a private or domestic nature for 30 hours or less each week – for example, if you are employed as a nanny.

Compulsory employer super contributions are in addition to your salary. Most people can choose which Australian super fund these contributions are paid into.

You can use the Employee superannuation guarantee calculator to work out if you are eligible for super payments and how much your employer should contribute.

See also:

Cash payments and ‘contractor’ payments

Some employers prefer to pay in cash instead of to a bank account. This is okay, provided they still:

  • deduct tax from the money they pay you
  • give you payslips showing how much tax has been deducted
  • pay super contributions on your behalf (if you’re entitled to super).

If they don’t do these things, you could get less pay and super than you’re entitled to.

Some employers may incorrectly treat you as a contractor or even encourage you to get an Australian business number (ABN). Having an ABN doesn’t make you a contractor. Only people who carry on a business can have an ABN.

If an employer offers to pay you in cash without deducting any tax or paying contributions into your super fund, report them to us by phoning 1800 060 062 (within Australia) between 8.00am and 6.00pm, Monday to Friday. You don’t have to give us your name.

When you leave a job

After the end of the income year (30 June), your employer will give you a payment summary. This shows how much you earned and how much tax was deducted from your wages. If you leave a job during the year, you can ask for your payment summary when you leave. Your employer must give it to you within 14 days.

After 30 June you lodge an annual tax return to tell us how much income you received and tax you paid. This information will be on your payment summaries. We then send you a notice of assessment and your tax refund if you are entitled to one.

If you’re leaving Australia permanently you may be able to claim your super.

Next steps:

o    Paying tax and lodging a tax return

o    Returning to your home country

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Business Tax Tips – Tax on Commissions & Bonus Payments

Business Tax Tips – Tax on Commissions & Bonus Payments

Tax on Commissions & Bonus Payments

Does tax apply on commissions and bonuses paid to your staff?

The Australian Tax Office (ATO) has a great page that summarises when tax and super applies in neat easy-to read tables. Here we focus in 2 main payments that employers are often unsure about.

Bonuses

There is PAYG (Pay as you go) tax as well as super on bonuses which are still income for the employee.

tax-super-on-bonuses

Commissions

There is PAYG (Pay as you go) tax as well as super on commissions which are still income for the employee, like ordinary hours, see further down this table.

tax-super-on-commissions

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Business Tax Tips – What if you consider not paying tax to the ATO and help with paying tax owed

Business Tax Tips – What if you consider not paying tax to the ATO and help with paying tax owed

What if you consider not paying tax to the ATO and help with paying tax owed

Business can be hard – do I spend money to grow such as advertise or pay the tax bill? What if you consider not paying tax to the ATO (Australian Tax Office), and how do I get help with paying tax owed?

The ATO explains –

If you don’t pay –

If you don’t pay on time:

o    interest will accrue on your tax debt

o    we’ll use any refunds to reduce your debt.

If you don’t pay, we will:

o     contact you soon after the due date

o     refer selected debts to external collection agencies for collection on our behalf

o     take stronger action against taxpayers who are unwilling to work with us to address their tax debt or repeatedly default on agreed plans.

Make sure you lodge your activity statements and tax returns on time, even if you can’t pay by the due date. You’ll avoid a penalty for failing to lodge on time and show us that you’re aware of your obligations. Read More.

Help with paying tax owed

If you can’t pay on time, we can help you.

You still need to lodge your activity statements and tax returns on time, even if you can’t pay by the due date. You’ll avoid a penalty for failing to lodge on time and show us that you’re aware of your obligations and doing your best to meet them.

If you require a payment plan, for debts:

o   $100,000 or less – set up online and automated payment plans

o   over $100,000 – phone us.

Online and automated payment plans

If you’re an individual or a sole trader with an income tax or an activity statement debt of $100,000 or less, you may be eligible to use our online services for individuals to set up a payment plan. You’ll need a myGov account linked to the ATOExternal Link.

Read more on Help options and instructions.

Need help? Not sure? Call for FREE 30min advice / strategy session today!

Call 0407 361 596 Aust and also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right!