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Employees vs. Contractors: More Clarity Coming

The High Court recently handed down a significant decision dealing with the distinction between employees and independent contractors. The case concerned an “independent contractor” and a labour hire company. Although the ATO was not a party to either case, it has since released a decision impact statement as the High Court’s decisions impact on the ordinary meaning of the term “employee”.

In the case, a labourer had signed an Administrative Services Agreement (ASA) with a labour hire company to work as a “self-employed contractor” on various construction sites. The Full Court had initially held that the labourer was an independent contractor after applying a “multifactorial” approach by reference to the terms of the ASA, among other things. The High Court however, overturned the Full Federal Court’s decision and held that the labourer was an employee of the labour hire company.

The majority of the High Court stated that where the parties have comprehensively committed to the terms of the relationship to a written contract, and no party is disputing the validity of that contract, the characterisation must proceed based on the legal rights and responsibilities established in that written contract. It thus concluded that a multifactorial approach examining the relationship between the parties over the entire history of their dealings was unnecessary and inappropriate. In certain circumstances however, an examination of post-contractual conduct may be permissible, such as when the contract is not in writing, is oral/partly oral, being challenged or varied.

The minority view of two of the Judges considered the multifactorial test to be a well-established principle for characterising the totality of the legal relationship and that they were permitted to look at the whole employment relationship and not be restricted to the written contract. Even though there were different approaches taken in the judgement, the High Court agreed that the critical question in these circumstances was whether the supposed employee performed work while working in the business of the engaging entity.

“That is, whether the worker performed their work in the engaging entity’s business (i.e. the labour hire firm) or in an enterprise or business of their own.”

In its decision impact statement, the ATO noted that the High Court has not disturbed the well-established practice of examining the totality of the relationship. While the multifactorial test was rejected by a majority, there are still instances where it could be applied

In addition, the ATO noted that the decision recognised that long-established employment indicia are still relevant, although they must now be viewed through the focusing question of whether the supposed employee is working in the business of the employer. This, according to the ATO, reflects its current understanding of the application of the business integration test that the High Court has now elevated as one of the primary aspects of contractual examination.

As a result of the decision, the ATO will review relevant rulings that may be impacted by the High Court’s decision in the case, including super guarantee rulings on work arranged by intermediaries and who is an employee, as well as income tax rulings in the areas of PAYG withholding and the identification of employer for tax treaties.

Need help?

If you run a business and have dealings with contractors, we can help you understand how this decision will affect you. If you would like to keep up to date with any developments or changes to ATO’s rulings impacted by the High Court’s decision, contact our office today.

Disclaimer: The content of this summary is general by nature. We therefore accept no responsibility to persons acting on the information herein without consulting with DSV Partners. Liability limited by a scheme approved under Professional Standards Legislation.

COVID-Related Support for SMSFs Rental Relief

Your fund, or a related party of your fund, may have offered rental relief to a tenant due to the financial impacts of COVID-19.

If rent was reduced or waived, the ATO will not take any compliance action against your fund and/or ask your approved SMSF auditor to report any contraventions, as long as the relief is provided on comparable terms to relief offered by other landlords to unrelated tenants in similar circumstances. If rent was deferred, relief granted by the ATO will ensure that the deferral does not cause a loan or investment to be an in-house asset of the fund in 2019-20, 2020-21 or 2021-22, and future financial years, provided certain conditions are met.

Temporary changes to a lease agreement to provide for rental relief need to be properly documented, together with the reasons for those changes.

Please contact us as a formal variation of the lease may need to be executed.

In-house Asset Relief

If the value of your fund’s in-house assets exceeds 5% of the fund’s total assets as at 30 June of an income year, you are required to prepare and execute a written plan to get below 5% by the end of the following income year.

However, if you have not been able to execute the plan because of the financial impacts of COVID-19:

  • the ATO will not take any compliance action against your fund; and
  • your approved SMSF auditor will not need to report any contravention of the in-house asset rules to the ATO.

Loan Repayment Relief

If your fund has offered loan repayment relief because the borrower was experiencing difficulty repaying the loan due to the financial impacts of COVID-19, the ATO will not take any compliance action and your approved SMSF auditor need report any contravention of the super laws provided:

  • the relief is offered on commercial terms; and
  • the changes to the loan agreement are properly documented.

Other Relief

SMSF residency relief – may be available where your fund no longer satisfies the residency rules because you were stranded overseas for an extended period.

Loan repayment relief – may be available if your fund offered loan repayment relief because the borrower was experiencing difficulty repaying the loan due to the financial impacts of COVID-19.

LRBA relief – may be available if your SMSF has a limited recourse borrowing arrangement (LRBA) in place with a related party lender and the lender have offered loan repayment relief to the fund due to the financial impacts of COVID-19.

Disclaimer: The content of this summary is general by nature. We therefore accept no responsibility to persons acting on the information herein without consulting with DSV Partners. Liability limited by a scheme approved under Professional Standards Legislation

Four priorities of the ATO this tax time

The Australian Taxation Office (ATO) has announced four key focus areas for Tax Time 2022.

The ATO will be focusing on:

  • record-keeping
  • work-related expenses
  • rental property income and deductions, and
  • capital gains from crypto assets, property, and shares.

These ATO priority areas will ensure that there is an appropriate level of scrutiny on correcting reporting of deductions and income, so that Australia continues to have a strong tax system that can support the Australian community. Taxpayers can take steps to lodge right the first time.

It is important to rethink your claims and ensure you satisfy the following golden rules:

  1. You must have spent the money yourself and weren’t reimbursed.
  2. If the expense is for a mix of income producing and private use, you can only claim the portion that relates to producing income.
  3. You must have record to prove it.

Record-keeping

We know there are still some weeks left until tax time, but if you start organizing the income and deductions records you’ve kept throughout the year, this will guarantee you a smoother tax time and ensure you claim the deductions you are entitled to.

For those people who deliberately try to increase their refund, falsify records or cannot substantiate their claims the ATO will be taking firm action to deal with these taxpayers who are gaining an unfair advantage over the rest of the Australian community who are doing the right thing.

Work-related expenses

To claim a deduction for your working from home expenses, there are three methods available depending on your circumstances. You can choose from the shortcut (all-inclusive), fixed rate and actual cost methods, so long as you meet the eligibility and record-keeping requirements.

Everyone’s work-related expenses are unique to their circumstances. If your working arrangements have changed, don’t just copy and paste your prior year’s claims. If your expense was used for both work-related and private use, you can only claim the work-related portion of the expense. For example, you can’t claim 100% of mobile phone expenses if you use your mobile phone to ring your family.

Rental income and deductions

If you are a rental property owner, make sure you include all the income you’ve received from your rental in your tax return, including short-term rental arrangements, insurance payouts and rental bond money you retain.

It is encouraged to keep good records, as all rental income and deductions need to be entered manually. You can ask us for assistance. If the ATO notices a discrepancy it may delay the processing of your refund as the ATO may contact you or your registered tax agent to correct your return. The ATO can also ask for supporting documentation for any claim that you make after your notice of assessment issues.

Capital gains from crypto assets, property and shares

If you dispose of an asset such as property, shares, or a crypto asset, including non-fungible tokens (NFTs) this financial year, you will need to calculate a capital gain or a capital loss and record it in your tax return.

Generally, a capital gain or capital loss is the difference between what an asset cost you and what you receive when you dispose of it.

Crypto is a popular type of asset and it is expected that more capital gains or capital losses will be reported in tax returns this year. Remember, you can’t offset your crypto losses against your salary and wages.

Through data collection processes, it is known that many Australians are buying, selling or exchanging digital coins and assets, so it’s imperative that people understand what this means for their tax obligations.

Disclaimer:

The content of this summary is general by nature. We therefore accept no responsibility to persons acting on the information herein without consulting with DSV Partners.

Liability limited by a scheme approved under Professional Standards Legislation

Home as a place of business: CGT implications

The COVID-19 pandemic has resulted in more employees working from home than ever before. This, in turn, has resulted in such people being able to claim a range of deductions for various “running expenses” associated with working from home. These expenses include electricity, phone service, cleaning, decline in the value of equipment, furniture and furnishing repairs, and so on. To make things easier, the ATO even provided several “short-cut” options to claim “working from home” expenses (as opposed to claiming the relevant proportion of the actual costs).

In addition, many people who operate a business (e.g. as a sole trader or in partnership) have been required to use part of their home as a place of business – or may have been doing so for many years anyhow. They, too, are entitled to claim various “running expenses” associated with working from home.

Moreover, if part of the home has the character of a place of business and is set aside as such, then such persons would generally also be able to claim a portion of occupancy expenses (such as mortgage interest or rent, council rates, land taxes, house insurance premiums) in addition to running expenses. This is because part of the home is an asset that is used in carrying on their business. However, where part of a home is being used as a business to generate assessable income, the homeowner will not be able to sell their home CGT-free. Instead, a partial CGT main residence exemption will apply on the basis that part of the home has been used to produce assessable income (in the same way it would apply if part of the home had been rented at arm’s length).

The rules for calculating a partial CGT main residence can be difficult to apply – particularly in determining the appropriate apportionment and correctly applying any exclusions. A professional’s expertise here is invaluable.

More importantly, in cases where a partial exemption may apply because of part-business use of a home, then the CGT small business concessions may be available to eliminate, reduce or roll over any assessable capital gain. The ATO accepts this as being possible: “You may be able to apply one or more of the small business CGT concessions to reduce your capital gain unless the main use of the house was to produce rent.” (See the ATO website here).

However, the CGT small business concessions are difficult to apply at the best of times – let alone in the case where part of a home is used as a place of business. For example, issues may arise as to whether the homeowner meets the basic threshold requirement for the concessions (including the holding period rule), the effect of joint ownership of the home and, in the case of the 15-year exemption, whether the sale of the home (or CGT event) that gives rise to the capital gain is made in connection with the retirement of the taxpayer.

And of course, where a company or trust carries on the business, a crucial issue also arises as to whether the part of the home used in the business qualifies as an active asset, which is required for the CGT small business concessions to apply.

These (and related) issues require the expertise of a professional. So if you find yourself in this position, your first port of call should be your trusted accountant.

The content of this summary is general by nature. We therefore accept no responsibility to persons acting on the information herein without consulting with DSV Partners.

Liability limited by a scheme approved under Professional Standards Legislation.

ATO Turns Its Attention To Crypto

The meteoric rise of cryptocurrency (crypto) and NFTs (non-fungible tokens) has raised many eyebrows and has now also caught the attention of the ATO. Whether you’re trading crypto or NFTs as an individual or business, capital gains tax (CGT) applies to any gains you make regardless of whether the gain is in foreign currency or Australian dollars.

 

Most people are now familiar with cryptocurrency, which is a type of digital money created from code and usually takes the form of tokens or coins. The most well-known of which include Bitcoin, Ethereum, and Dogecoin. Non-fungible tokens are a comparatively more recent development which basically consists of a unit of data stored on a ledger to certify that a digital asset is unique. This has mostly been applied to artwork but can also include photos, videos and other types of digital files.

 

Based on its data holdings, the ATO will be writing to around 100,000 taxpayers with crypto assets explaining their tax obligations and urging them to review their previously lodged returns. It will also prompt another 300,000 taxpayers as they lodge their 2021 tax return to report their crypto capital gains or losses.

 

Individuals or businesses that dispose of crypto must work out if they made a capital gain or loss and report the resulting gain or loss in their tax return. Disposal of crypto can include exchange of one cryptocurrency for another cryptocurrency, trading, selling or gifting cryptocurrency, converting cryptocurrency to a government issued currency (ie Australian dollars).

 

Transfers of cryptocurrency from one wallet to another while maintaining ownership is not considered to be a disposal, however, if your crypto holding reduces during this transfer to cover a transaction fee, this fee is a disposal and has CGT consequences. In addition, if you acquire a small amount of crypto and use it within a short time to make personal purchases, the crypto may be considered to be a personal use asset and not subject to CGT.

 

In conjunction with contacting taxpayers, the ATO is also conducting a data-matching program which will consist of account identification and transaction data from cryptocurrency designated services providers from the 2021-2023 financial years. These details include the usual client identification information such as name, address, date or birth, phone number and email, but interestingly, now also includes social media account details. Transaction details will also be obtained which includes bank account details, wallet addresses, transaction dates/time/type, deposits, withdrawals, transaction quantities, and coin type.

 

It is estimated that records relating to approximately 400,000 to 600,000 individuals will be obtained each financial year under the program.

 

According to the ATO, while crypto appears to operate in an anonymous digital world, it closely tracks where crypto interacts with the real world through data from banks, financial institutions as well as online cryptocurrency exchanges to trace the money back to taxpayers. It will then match the data obtained from cryptocurrency designated service providers to either individual or business tax returns to ensure that the right amount of tax is being paid.

 

Need help to work out whether you need to pay CGT?

 

If you or your business has been dabbling in crypto and need help to work out whether those transactions are subject to CGT, we can help. The ATO is keeping a close eye on this relatively new financial area and it pays to get it right. Contact us today for expert help and advice.

 

Boosting Super: Low And Middle Income Earners

 

If you’re a low or middle-income earner, you can take advantage of the government super co-contribution scheme to boost your super. The scheme works like this, for eligible individuals, depending on the amount of personal contributions you make to your super account, the government will contribute a maximum of $500 to your super account.

 

For the 2021-22 income year, you are able to get the maximum $500 government co-contribution if you earn less than $41,112 for the financial year and make a personal contribution of $1,000 to your super account (provided you satisfy the other criteria). The $41,112 threshold includes your assessable income, reportable fringe benefits and total reportable super contributions for the year, less any allowable business deductions.

 

Remember, personal contributions do not include the compulsory super contributions that your employer makes on your behalf or contributions made through a salary sacrifice arrangements, and are typically made from your after-tax income.

 

Those individuals that have a total income of more than $41,112 but less than $56,112 for the 2021-22 income year are still able to get a co-contribution, although not at the maximum $500 amount. The entitlement to the co-contribution reduces progressively as income rises with a minimum contribution amount of $20 (if the co-contribution is worked out to be less than $20, the minimum amount of $20 will be paid).

 

In order to be eligible for the scheme, individuals must also satisfy the 10% test, which requires that 10% or more of your income be from either employment-related activities, carrying on a business, or a combination of both. The ATO notes that for this test, your total income is not reduced by allowable business deductions to ensure that self-employed individuals are not disadvantaged if they have low income/profit in any financial year.

 

  1. In addition to the two income tests above, there are also other eligibility criteria including:
  2. being an Australian resident or permanent visa holder (with the exception of New Zealand citizens on a prescribed visa);
  3. being under 71 years of age at the end of the financial year;
  4. have a total super balance less than the general transfer balance cap at the end of 30 June of the previous financial year (($1.6m before 1 July 2021 and $1.7m on or after 1 July 2021);
  5. have not contributed more than the non-concessional contributions cap ($110,000 for 2021-22 income year); and
  6. have not claimed a tax deduction for the personal contribution you have made.

 

Where you meet the eligibility criteria, the government co-contribution is automatically determined by the ATO when you lodge your tax return. In most cases, the amount is paid directly to the super fund to which the personal contributions were made. There are exceptions however, including situations where you’re retired and no longer have a super account, in those instances, the co-contribution will be paid directly to you.

 

If you think you’re eligible for super co-contribution but have not received a payment, you can contact the ATO either via phone or in writing to request and explanation. Where you’re eligible to the co-contribution and it has not been paid within 60 days of receiving all the required information, the ATO will pay interest as a way of compensation.

 

Want to take advantage?

 

If you’re a low or middle income earner and would like to take advantage of the government co-contribution, we can help you work out the optimal amount of personal contribution to boost your super. We can also help if you think you’re eligible and have not received a co-contribution. Contact us today.

Rental Property Deductions: What Can I Claim?

 

 

Rental property deductions have many rules, and the ATO is on the lookout for incorrect claims. Some expenses can be deducted immediately, while others will need to be claimed over time. Stay on top of the rules and avoid ATO headaches this tax time.

Did you know that a random audit by the ATO last year revealed nine out of ten rental property owners made a mistake with their rental deductions? In this first of a two-part series, we share some tips on what you can and can’t claim.

 

This series assumes you own a 100% rental property (with no private use) that is rented out, or genuinely available to rent, at commercial rates. You’ll generally only be able to claim a portion of your expenses if:

-you have a dual-use holiday home;

-you sometimes rent out your home on Airbnb;

-your property is leased at “mates’ rates” to friends and family; or

-your property is sometimes not available for rent.

 

Purchase expenses

Buying an investment property carries a host of upfront expenses, but not all of these are deductible straight away.

 

Stamp duty is not deductible, and neither are conveyancing or legal fees for the purchase.

 

Instead, these expenses will be included in the asset’s “cost base” for capital gains tax (CGT) purposes when you later sell the property, which effectively reduces the size of your capital gain.

 

On the other hand, ongoing land tax (and other charges like council and water rates) are deductible. Legal fees you incur later may also be deductible if they relate to things like evicting a tenant or suing for loss of rental income.

 

Another trap that can arise is initial repairs. If you need to remedy damage that already existed when you bought the property, the repair costs are not immediately deductible in the year you incur them. Instead, these can be claimed gradually over time as capital works deductions (or sometimes as depreciating assets).

 

You also can’t deduct costs associated with selling the property, like advertising and conveyancing expenses (which instead form part of the asset’s CGT cost base). You can, however, claim advertising costs for finding tenants while you own the property.

 

Repairs or improvements?

While initial repairs aren’t immediately deductible, ongoing repairs and maintenance costs for damage and wear that arises while the property is leased (or available for lease) are deductible in the year you incur them. This includes costs not only to remedy direct damage or deterioration, but also for preventative maintenance to keep the property tenantable, such as oiling a deck. Gardening, lawn-mowing, cleaning and pest control are also deductible.

 

It’s vital to distinguish between a repair and an improvement. This is because unlike ongoing repairs, improvement costs are not immediately deductible. The ATO says that if the work doesn’t relate directly to wear and tear (or other damage) from leasing the property, it’s not a repair. Examples of work that isn’t a “repair” but more likely an improvement include:

 

  • Replacing an entire structure when only part of it is damaged.
  • Replacing a damaged item with something that’s better and changes its character (eg replacing a broken plaster wall with a brick feature wall).
  • Renovations or additions to make the property more desirable or valuable.

Some improvement costs are claimed over time as capital works deductions (where they are structural improvements) and in other cases as capital allowances (where they involve a depreciating asset such as carpets, timber flooring and curtains). Note that new rules from 2017 restrict deductions for depreciating assets already used in second-hand residential investment properties at the time of purchase. Your tax adviser can help you navigate these and other complex rules about capital deductions.

 

Get help from the experts

With the ATO promising to double the number of audits of rental property claims this year, it’s important to get good advice. Contact us for expert assistance to ensure you maximise your deductions while staying within the rules.

GST On Imports: Are You Optimising Your Cashflow?

Looking for opportunities to improve cashflow? If you import goods as part of your business, you don’t have to pay GST upfront if you’re registered for the ATO’s deferred GST scheme. Instead, you can defer and offset GST amounts in your next activity statement. However, there are some eligibility requirements – including a condition that your business lodge activity statements monthly (rather than quarterly). Find out how you can take advantage of the scheme.

 

If you import goods into Australia as part of your business, your cashflow position is probably top of mind. So, if you’re not already taking advantage of the ATO’s scheme to defer GST payments on imports, it’s time to talk to your adviser. The scheme can benefit not only wholesalers, distributors and retailers, but also any business that imports goods for use in carrying on its business.Usually, GST is payable on most imports into Australia and goods will not be released until the GST is paid to customs. This can have significant cashflow implications for importers. While you’re generally able to claim a credit later for the GST paid, you still need to have the funds to pay the GST at the time of importation.

 

The ATO’s deferred GST scheme allows participants to defer payment of the GST amount until their next business activity statement (BAS) is due.

 

This means you can start selling or using the imports in your business right away without having to come up with the GST amount when the goods arrive in the country.

 

Eligibility for the scheme

Businesses who wish to take advantage of this scheme must apply first and be approved by the ATO. To be eligible, you must have an ABN and be registered for GST. You must also lodge and pay your BAS online. This can be done yourself or through your registered tax or BAS agent.

 

Another key requirement is that you must also lodge your BAS monthly, which means that if you’re currently lodging quarterly you’ll need to elect to lodge monthly. (When you make this election, the change won’t take effect until the start of the next quarter, so you won’t be able to defer GST on imports until the start of that quarter.) If this applies to you, you’ll need to weigh up whether the deferred GST scheme is worth giving up quarterly BAS lodgement.

 

Once you’re approved for the deferred GST scheme, it’s important that you lodge and pay your monthly BAS on time. The ATO may remove you from the scheme if you fall behind, and in this case you’d need to reapply for the scheme.

 

Timing of the deferral and credits

Once you’re approved, your GST amounts on taxable imports will be deferred until the first BAS you lodge after the goods are imported (which for monthly lodgers is due 21 days after the end of the month). The deferred amount is reported electronically by customs to the ATO, who will use this data to pre-fill the “deferred GST” in your BAS.

 

The deferred GST liability is then effectively offset by a GST credit you can claim for the deferred amount. As with all GST amounts you pay on purchases you make for your business, you can claim a credit for the deferred GST liability on your imports to the extent that you use the goods in carrying on your business (and you can’t claim a credit for private use or to make input-taxed supplies). Therefore, the overall effect of participating in the deferred GST scheme is that your GST on imports is deferred and offset, and you aren’t required to have funds available to pay the GST when the goods are initially imported.

 

Could your cashflow be improved?

Contact our office to discuss how the deferred GST scheme could benefit your business or to explore other strategies for improving your cashflow position.

Easy Money: Is This The End For Cash-Only Business?

The prediction of Australia becoming a cashless society by 2020 looks closer to becoming a reality with two developments: the government’s crackdown on cash-only businesses and the imminent launch of instant bank transfers. Let’s take a look at what these mean for you.

 

Ahead of the Black Economy Taskforce delivering its final recommendations, the Government continues to scrutinise businesses who deal largely in cash-only transactions.

 

The crackdown on cash is part of the Government’s campaign to create a fairer playing field for businesses in Australia – large and small – to protect workers by ensuring that employers pay superannuation and other benefits, and to recoup $5 billion lost in unpaid tax due to illegal business practices.

 

You can expect a visit from the ATO if your business meets any of the following criteria:

operate and advertise as a “cash only” business;
ATO data matching suggests you don’t take electronic payments;
are part of an industry where cash payments are common;
indicate unrealistic income relative to the assets and lifestyle of the business and owner;
fail to register for GST or failing to lodge activity statements or tax returns;
under-report transactions and income according to third-party data;
fail to meet super or employer obligations;
operate outside the normal small business benchmarks for your industry; and
you are reported to the ATO by the community for potential tax evasion.

Contact us if you would like to know more and to discuss how your business can transition out of a cash-only model.

 

Industries under the spotlight

The ATO has identified the building and construction, hair and beauty and restaurant industries as high risk, meaning they see that is easier for these businesses to hide cash-only transactions.

 

Examples

Here are some examples provided by the ATO based on their previous round of visits to businesses:

 

Failing to lodge and not reporting cash income
A licensed carpenter failed to lodge tax returns for a number of years. The ATO demanded lodgment and when the tax returns were lodged, it was clear that income from cash jobs was not included. An audit for the 2006 to 2013 financial years revealed that the taxpayer had over-claimed GST input tax credits in addition to not declaring cash income. The ATO said the taxpayer’s record keeping was very poor and they couldn’t explain how some materials and vehicles were funded. The audit resulted in the taxpayer owing additional tax and penalties of over $190,000.

 

Business owner’s lifestyle did not match their reported income
A nail salon business with a number of outlets was selected when data matching indicated anomalies. The ATO’s initial investigation confirmed that the owner kept incomplete records and declared income that did not support their lifestyle and assets. The ATO said it uncovered more than $2 million of undeclared income. After imposing penalties for reckless behaviour of over $241,000, the total amount of GST, income tax and penalties payable by the owner was more than $728,000.

 

Poor tracking of cash payments
During an ATO visit to a restaurant, the ATO said it became apparent that the owner needed to improve their record keeping practices as cash was kept in a cardboard shoe box. The ATO’s profiling work showed five merchant IDs, which the taxpayer said belonged to five different restaurants operating under the one entity. All had the same poor record keeping processes in place. The ATO’s analysis identified several bank accounts, and third-party information identified deposits in excess of $300,000 for 2014 and 2015. It identified $1.3 million of understated income for 2014 and $1.5 million for 2015. The ATO calculated cash not deposited by developing a “cash deposit timeline” for each restaurant. It turned out that no cash had been reported to the ATO, and only EFTPOS income had been included in tax returns and activity statements.

 

Benefits of a non-cash business model

We understand that changing a business model requires planning, but there are many benefits to changing to a non-cash model that can help your business to grow, such as:

-tax incentives you might have missed out on, by not accurately declaring your full income;
-happier customers – people expect to be able to pay by card;
-electronic payment and record keeping facilities give greater visibility over the health of your business;
-avoiding law suits and penalties for non-payment of employee entitlements, or allegations of underpayment.

 

You will undoubtedly be able to access more customers if you consider putting your business online.

 

How can I transform my business?

The best place to start the transition is with your record keeping methods. This means recording every sale and purchase accurately in your accounting software. By providing receipts when you make a sale and requesting an invoice every time you make a purchase, you will have a clear audit trail from which to declare all income and expenses. And if you need assistance – we are here to help you plan and provide advice on what you’ll need to do to ensure the best outcomes for your business.

 

One of the most attractive features of cash is its immediacy in terms of making transactions. But there are compelling changes ahead in the non-cash world.

 

Cashless business model incentivesThanks to a billion-dollar infrastructure upgrade of Australia’s payments systems, from January 2018 customers of the “Big Four” banks and 50 smaller institutions will be able to benefit from the arrival of real-time funds transfers between accounts. This means that even when transfers occur between account holders from different institutions, or on weekends, public holidays, or anytime of the day or night, the funds should appear in real time. As a result suppliers and vendors can be paid swiftly and your own customers will be able to extend the same courtesy, meaning that delays to payment will be a thing of the past.

 

Plan your transition

Whatever your circumstances, we can help you plan, provide advice and assist your business to transition to a non-cash model.

Super “Opt Out” Choice For High Earners

If you’re a high income-earner with multiple employers, you may be aware of potential traps with compulsory super contributions that can lead to some hefty and unfair penalty taxes – and until now there’s been little anyone can do to avoid the problem. Fortunately, proposed new laws will give high income-earners the opportunity to take proactive steps to overcome any penalties.

 

Are you a medical professional or company director hired by multiple organisations who make compulsory super guarantee (SG) contributions on your behalf? Or perhaps you’re simply a high-income professional with an extra employment arrangement on the side, like a university teaching gig or consulting arrangement? If you have more than one “employer” for super purposes, you may benefit from changes to how the SG is administered for high income-earners.

 

What’s the issue?

A person’s concessional contributions (CCs) are capped at $25,000 per annum and include:

compulsory SG contributions
any additional salary-sacrifice amounts
any personal contributions made by the member for which they claim a deduction.

 

Unfortunately, a problem arises when an individual has multiple employers and inadvertently breaches their $25,000 CC cap because they receive compulsory contributions from each of these employers.

 

While an employer is only required to make compulsory contributions of 9.5% on the worker’s earnings up to $55,270 per quarter (or $221,080 per financial year), this applies on a per employerbasis. An employer must make contributions up to these thresholds regardless of how many other compulsory contributions the employee receives from other employers.

 

Example: Susan, a doctor, earns $215,000 p.a. from employer A, and $85,000 p.a. from employer B. Both employers must make contributions of 9.5% on all of Susan’s earnings because both salaries are below the $221,080 p.a. ceiling. This means Susan has total CCs of $28,500 ($20,425 + $8,075), and has breached her $25,000 CC cap.

 

If you contribute above the $25,000 cap, you will personally incur penalty tax on the excess amount at your marginal tax rate less a 15% offset, plus interest charges.

 

New opportunity to “opt out”

Fortunately, under proposed new laws before Parliament, affected employees will be able to “opt out” of receiving compulsory contributions from a particular employer by obtaining a certificate from the Commissioner of Taxation. The certificate will name a particular employer and a particular quarter of the financial year, and will exempt that employer from having to make SG contributions.

 

This is welcome news for high income-earners who may be at risk of breaching their CC cap. Here are some key requirements to know:

-You’ll need to apply for a certificate at least 60 days before the beginning of the relevant quarter.
-The Commissioner will only be able to issue you a certificate if you’re likely to have excess CCs if the certificate is not issued. To make this assessment, the Commissioner can rely on evidence such as past tax return data, employer payroll data and information provided in your application.
-You’ll be able to apply for certificates for multiple employers. However, you must always have at least one employer who’s required to make SG contributions for you.
-Once issued, a certificate cannot be varied or revoked.

 

If you choose to take advantage of this opt-out, you’ll be able to negotiate with the exempted employer to receive additional remuneration in lieu of super contributions (and you won’t need to show evidence of this to the Commissioner). The employer will still be allowed to make SG contributions (eg if negotiations for additional salary fail), but having the certificate in place means the employer will not be penalised if they don’t make contributions.

 

Start planning now

The legislation to enable the opt-out is likely to pass this year, creating some opportunities for 2020 planning. If you’re receiving SG contributions from multiple sources, contact us to begin your remuneration planning and to explore whether the opt-out may benefit you.

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