2019 MATTERS ON THE GO

Single Touch Payroll (STP) for Employers with less than 20 employees has now passed into law.  This means that all employers are required to be STP compliant by 1 July 2019.

 Micro employers (those with less than 4 employees) are not yet required to purchase payroll software in order to comply with STP reporting.  Rather, the ATO has asked payroll providers to develop a low cost solution (around $10 per month) for these employers.

 The ATO have stated from a compliance point of view, that employers should not be concerned about penalties for the first 12 months as their primary aim is to help employers get the new system implemented.

The following tax proposals have been put forward for the upcoming Federal Election:

• Excess imputation credits – plans to deny refunds for excess imputation credits with effect from 1 July 2019.

• Negative gearing - plans to limit negative gearing to new housing. The current plan will      restrict negative gearing in relation to all investments not just property investments. 

• The CGT discount - plans to cut the CGT discount in half from 50% to 25%.

 Should you wish to discuss any of the above, please contact our office.

A NEW YEAR

Welcome back to a brand new year. We hope it has been a great start so far for you. It is hard to believe that we are in February already!

 CFD has been in operation for almost 4 years now.  During this time, we have seen many changes.  Even CFD have had to get on board the change train! 

 The ATO are being ruthless with their debt recovery processes which is causing stress for business owners.

 Businesses are needing to change the way they operate, primarily to mitigate cashflow issues caused by delays in payments or businesses closing down without warning.

 We know a reliable team is important to any business and when there is a change it brings about concerns from clients.  Please be assured (with Shaneel’s recent departure from CFD) that our team (no matter how big or small) will continue to provide the excellent service you have always received. We now have a new team of Accountants with over 25 years experience!

 We thank you for your support.

 “CFD has a small firm personality with big firm capabilities”

ATO AGGRESSIVELY PURSUING OUTSTANDING DEBTS

IF YOU HAVE AN EXISTING TAX DEBT, BE PROACTIVE AND DEAL WITH IT NOW.  DO NOT WAIT FOR THE DEBT COLLECTORS CALL!

In November we advised that the ATO were on a mission to reclaim unpaid tax debts.  We were not wrong! 

The ATO are aggressively pursuing collection of all outstanding debts, with less flexibility and assistance for businesses who are having trouble paying their tax debts.

The ATO recognises that businesses and individuals may experience cash flow issues and are generally agreeable to payment plans.  Though taxpayers that repeatedly default on agreed payment plans or deliberately avoid communication or payment to the ATO are being targeted.

This month we have received a record number of phone calls from the ATO and their Debt Collectors pursuing debts as small as $600 and wanting details of all related parties including our clients Self Managed Super Fund’s.

If you can’t pay your debt on time, please contact our office so we can liaise with the ATO on your behalf to get the payment plan you require.  You need to provision for tax within your cashflow requirements, the ATO are becoming less tolerant.

DO NOT IGNORE - the ATO has the power to garnishee your bank account or wind up your business for unpaid taxes.

MERRY CHRISTMAS FROM CFD

LOWER TAXES FOR SMALL AND MEDIUM BUSINESS

Good news for Small & Medium Businesses with lower tax rates coming soon!

A new Bill introduced to the House of Representatives on 16 October 2018 to accelerate tax cuts for small and medium businesses has received Royal Assent.

The Bill sought to implement the Government’s announcement that it would bring forward by five years the implementation of tax cuts for small and medium sized incorporated businesses with annual turnover of less than $50 million per annum. The changes would mean that small and medium businesses will face a corporate tax rate of 25 % from 1 July 2021 rather than 1 July 2026.

The new Bill also brings forward, from 1 July 2026 to 1 July 2021, the 16 % small business income tax offset for unincorporated small businesses (with annual turnover of less than $5 million).

Simply, the changes are:

Corporate tax rate to reduce from 27.5% to:

(Applicable where aggregated turnover threshold is no greater than $50 million): 

• 26% for the 2020 - 21 income year, then;

• 25% for the 2021 – 22 and later income years. 

Small business income tax offset rate for unincorporated businesses from 8% to: 

(Applicable where aggregated turnover threshold is no greater than $5 million): 

• 13% for the 2020-21 income year, then;

• 16% for the 2021-22 and later income years. 

These changes are supportive for small and medium businesses.  Please contact our office to further discuss.

2018 HAS BEEN A DIFFICULT YEAR FOR SMALL BUSINESS. THE NEWS PREDICTS THERE IS MORE HARD WORK AHEAD

It’s all over Social Media, Newspapers and the News that next year will present a hard year…. 

• Interest rates are likely to rise

• Banks will seek principal repayments to take effect on loans

• Property valuations continue to decrease

• Business trading conditions are tight and margins are difficult to maintain 

We are fortunate to work in the SME environment and are exposed to industry trends, business trends and Family Business structures / dealings.

 With all this exposure, what do we learn? 

• Try and keep your business model simple!

• Cashflow needs to constantly turn – invoice / collect!

• Smaller / quicker processes / product or service for your customer base.

• Remember what was the path to success for your enterprise?  A particular product or service?  That is the basis of your brand over your history of being in business.

• Growth and expansion, a difficult strategy in today’s environment – cash requirements / investment. 

• Business is always based on your ROI - Return on Investment.  What is the best you can profit for requisite effort / capital investment?  This needs to be your focus and motivation. 

• Is each employee providing the requisite output for their role and salary package - Family or arm’s length employees?

• Business growth and profit targets take time – you need to work towards small but strong foundations year on year.  Strategy & thought process needs to be long term.

 If you’d like to chat more about this, please contact our office.

IMPORTANT DATES

21 December 2018          November 2018 Monthly BAS/IAS due for lodgement and payment

21 January 2019              December 2018 Monthly BAS/IAS due for lodgement and payment

28 January 2019             Make payment of Superannuation Contributions for December Quarter

21 February 2019            January 2019 Monthly BAS/IAS due for lodgement and payment

28 February 2019           December 2018 Quarterly BAS/IAS due for lodgement and payment

CFD Christmas Closure Dates:

Our office will close for the Christmas Break at 5pm on Friday 21st December 2018 and will reopen at 9am on Monday 7th January 2019.

We take this opportunity to wish you and your loved ones a Happy & Safe Christmas and New Year Break.

CHRISTMAS & FBT

As we approach the holiday season, some employers will be thinking about recognising their teams’ efforts by celebrating with meals, entertainment and gift giving (cash or non-cash) to the team and/or business associates. 

It is important to remember that any benefit that a business provides to staff can be classed as a “fringe benefit” and therefore may be taxable.

Minor Benefits

There is an FBT exemption for minor benefits valued at less than $300.  E.g.  If as an employer, you host a party and also give a gift to everyone, the party and the gift are considered separate for FBT.  If each is less than $300, they are both generally FBT free.

Christmas Party

If your Christmas Party is held at your workplace, during work hours and attendees are staff only, it will most likely be exempt from FBT.  If it is held away from the workplace and associates (i.e. partners of employees) attend, the party won’t be exempt from FBT.  We note that the minor benefit exemption may still apply.

Additionally, providing your staff with transport between home and the party (i.e. taxi or uber) may attract FBT.

Cash Gifts

Cash gifts to employees are treated the same as salary and wages.  PAYG Withholding and Super Guarantee obligations apply as the Tax Office treat the cash gift as ordinary time earnings.

Gift Deductibility

Keep in mind that if a benefit is exempt from FBT, you typically cannot claim it as a tax deduction, nor can you claim GST credits.

Non-entertainment gifts (such as a Christmas hamper) where the taxable value of the fringe benefit is less than $300 per benefit provided to employees and their associates may be tax deductible.  Whereas Entertainment gifts (such as movie/theatre/sporting tickets) are not tax deductible.

We recommend you contact us to ensure you are not inadvertently caught by the FBT rules leading up to Christmas.

Lastly, Enjoy your Celebrations! Be Safe!

ATO - LODGEMENT AND FBT COMPLIANCE

ARE YOUR LODGEMENTS UP TO DATE? IF NOT, PREPARE TO BE CONTACTED BY AN AGENCY ON BEHALF OF THE ATO!

The ATO are using external collection agencies to secure lodgement of outstanding Tax Returns and Activity Statements on their behalf.

This process has already been trialled.  From the end of November, the ATO will commence sending letters direct to Taxpayers requesting they get their obligations up to date.  If no action is taken by the Taxpayer, the matter will be referred to an external collection agency.

If you receive a letter or contact from a Collection Agency, please contact our office.

GOT A CAR REGISTERED UNDER A BUSINESS NAME?  MAKE SURE YOU HAVE LODGED AN FBT RETURN!

Anyone that has a car registered in a business name and has not lodged a Fringe Benefits Tax Return (FBT) will be contacted by the ATO.

When a business owns or leases a car and makes it available for employees’ private travel, a fringe benefit occurs.  Be aware that business Directors are also classed as employees for FBT.

Private use of a company car includes:

• Employees using the car for private travel, such as travel between work and home

• Garaging the car at or near an employees’ home and making it available for private use – even if the car is not used by the employee.

If you would like to discuss your FBT compliance, please contact our office.

PHOENIX COMPANY DIRECTORS TO BE NAMED & SHAMED!

Phoenix activity is where a new company is created to continue the business of a company that has been deliberately liquidated to avoid paying its debts.  This activity is estimated to cost the economy $5billion per year.

Under proposed changes, the ATO will have the power to name and shame individuals and entities engaged in illegal phoenix activity and apply to ASIC to have Directors disqualified.

The Government plan to introduce a Director Identification Number (DIN) that would require directors to provide more information about themselves to ASIC at the time of registering a company.  This will also include a 100-point identification check.  Under proposed measures, directors will be required to have a DIN.  This means a director’s officeholding across companies will be linked and traced by a search. 

Civil / criminal penalties will apply for directors who fail to apply for a DIN within the required time frame. 

The DIN will aid the Government in detecting phoenix activity and cease the ability for Directors to liquidate a company to avoid paying debts, including taxes and employee entitlements. 

Please contact our office if you wish to discuss this further.

EXTENSION OF TWO-YEAR PERIOD TO DISPOSE OF DWELLINGS ACQUIRED FROM A DECEASED ESTATE – DISREGARDING CGT

If you dispose of an interest in a dwelling that passed to you as an individual beneficiary or the trustee of the deceased's estate within two years of the deceased's death, any capital gain or loss you make on the disposal is disregarded. 

However, new draft Practical Compliance Guideline PCG 2018/D6 proposes that under certain conditions the ATO may extend this two-year period. The PCG therefore provides a safe-harbour to tax payers whereby they can safely rely on their tax position provided they met the conditions contained in the PCG.

The ATO will allow an extension of the two-year period if the dwelling could not be sold within two years of the deceased's death due to reasons beyond your control that existed for a significant portion of the first two years. 

To qualify for this safe-harbour, you must meet all the following conditions:

1. more than half of the first two years after the interest in the dwelling passed to you was spent addressing one or more of the “favourable” factors.  In addition, the dwelling was listed for sale as soon as practically possible after those circumstances were resolved (and the sale was actively managed to completion)

2. the sale completed (settled) within six months of the dwelling being listed for sale

3. the “unfavourable” factors were immaterial to the delay in disposing of your interest, and

4. the longer period for which you would otherwise need the discretion to be exercised is no more than 12 months.

Favourable factors that would work in favour of the extension include challenge of ownership of dwelling, life/equitable interest given in the will delays dwelling’s disposal or that the complexity of the deceased estate delays the administration completion.  Unfavourable factors include waiting for property market to pick up before selling or delays due to refurbishment to improve the sale price.

Once finalised the PCG will have retrospective application as well. No formal application is necessary as taxpayers will self-assess qualification for the extension. 

Please contact our office if you wish to discuss this further.

THE NEW LONG SERVICE LEAVE ACT – WHAT YOU SHOULD KNOW!

The Long Service Leave Act 2018 comes into effect on 1 November 2018. 

The changes include:

• Access to long service leave after seven years continuous employment (it used to be ten)

• Employees can take long service leave in smaller increments (e.g. for any period of one day or more)

• Most absences from work do not break continuous employment

• Unpaid leave, including parental leave, counts towards long service leave

• Increased penalties for employers who do not keep records or do not produce them when requested

If you would like to discuss this further, please contact our office.

FRANKING ACCOUNTS – IMPACT OF COMPANY TAX RATE CUTS

Under the Australian imputation system, when a company distributes its profit to its shareholders, the company can pass to the shareholders credits for income tax paid by the company on its profits.  Simply, Franked dividends are distributions to shareholders with franking credits.

On 19 May 2017, the Bill to reduce the corporate tax rate from 30% to 27.50% became Law.

The Legislation for reduction in the corporate tax rate for some small or medium sized businesses could be a pyrrhic victory as it will leave the shareholders with a reduced franking credit.

Essentially, the change in tax rate will represent a higher cost to shareholders who will see a reduction to the franking credits they can claim, which perhaps defeats the purpose of the company tax reduction.

If you would like to discuss this further, please contact our office.

COMPANY TAX RATE CUT

In the 2017 Financial Year, any company carrying on a business with a turnover of less than $10million was eligible for a tax rate cut from 30% to 27.50%. 

On 31 August 2018 the treasury laws amendment (Enterprise tax plan Base rate entities) Bill 2017 introduced by the Government was passed stating that for Financial Year 2018 lodgements, lower corporate tax rate applies for:

1. Corporate entities with a turnover of <=25m

2.  having no more than 80% of base rate entity passive income will be eligible for the lower corporate tax rate.

What is a Base rate entity (BRE) passive income comprise of?

• dividends other than non-portfolio dividends

• franking credits on such dividends

• non-share dividends

• interest income (some exceptions apply)

• royalties and rent

• gains on qualifying securities

• net capital gains

• income from trusts or partnerships, to the extent it is referable (either directly or indirectly) to an amount that is otherwise base rate entity passive income.

In a broader aspect it means a company can now have a lower tax rate if:

• it manages a portfolio of rental property but the rental income excluding reimbursement are not more than 80%!

• A bucket company who receives distribution which does not comprise of Base rate entity passive income which is rent, interest, dividend …

If you would like to discuss this further, please contact our office.

Our post next week will be about the impact these company tax rate cuts have on your franking accounts.

GST CHANGES IMPACT ALL RESIDENTIAL PROPERTY TRANSACTIONS, NOT JUST NEW PREMISES!

Further to our post of 25 May 2018 on “Changes to GST on Residential Property Transactions”, we advise the following:

Although the GST withholding obligation applies only to new residential premises (or new subdivisions of potential residential land by way of sale or long term lease), the notification requirement applies to all vendors of residential premises, i.e a vendor selling the family home.

Vendor’s are now required to provide a Purchaser with written notice advising whether the purchaser needs to withhold GST.  If a Purchaser is required to withhold the GST and remit it to the ATO, the written notice must include the Vendors Name and ABN.  

Some Contracts of Sale are being updated to include the written notification requirement.

Vendors must be vigilant and comply with the new requirement as the following penalty applies to the Vendor for noncompliance:

•  Vendor Penalty:  The requirement to notify the purchaser is a strict liability offence and a court may impose a maximum penalty of 100 penalty units for individuals ($21,000) or 500 penalty units ($105,000) for corporations.

If you would like to discuss this further, please contact our office.

IT’S 2018 AFL GRAND FINAL TIME – WHO WILL WIN?

The biggest day of Melbourne’s sporting calendar is this Saturday with Collingwood facing the West Coast Eagles in the AFL Grand Final.

 It’s also a long weekend for most of us and who wouldn’t be happy about that!

 Whatever you do this long weekend, stay safe and enjoy. 

 And….May the best team win on the day.

 (The author of this Post is a Collingwood Supporter…….Go Pies!)

IMPORTANT DATES FOR TAX

21 September 2018         August 2018 Monthly BAS/IAS due for lodgement and payment

21 October 2018               September 2018 Monthly BAS/IAS due for lodgement and payment

21 October 2018               Pay September Quarter PAYG Instalment/s

28 October 2018               Lodge and pay September Quarter BAS

28 October 2018               Make payment of Superannuation Contributions for September Quarter

28 October 2018               Lodgement due date for New Self Managed Super Funds (SMSF’s)

31 October 2018               Lodgement due date of Tax Returns for any entity that lodged late the prior year.  We will contact you if you fall into this category.

PROJECT MANAGING THE SALE OF OUR CLIENTS BUSINESS……WHAT DID WE LEARN??

We recently project managed the successful sale of a client’s business.

The process from initial discussions to settlement was over a period of approximately 9 months.

What did we learn during this process???

We learned that OPEN LINES OF COMMUNICATION IS EVERYTHING!

With such a transaction, the following technical ramifications/matters must be considered (at a minimum): 

• Financial

• Legal

• Accounting

• Tax

Additionally, the client’s emotions are involved as they are selling a business often they have spent their lifetime building.   And whilst the sale is proceeding, they are still running the business so still very much involved/attached.

Communication, commercial perspective, respect and hard work supports positive outcomes. 

We can assist with maximising business value in preparation of a business sale and offer our full support.

Contact our office on 03 8539 2600 if you wish to discuss an opportunity that has presented or if you are considering selling your business.

ATO SCAMS – BE AWARE!

Astoundingly, the ATO reports that during July and August it received more than 7000 scam reports to its dedicated phone line, with close to $190,000 being paid to scammers, and more than 1600 people handing over their personal or financial information.

The latest scams you need to be aware of with regards to ATO debt are:

Scammers sending fake ATO emails claiming they don’t have credit/debit card details stored.

The email instructs the recipients to login to a fake site called ‘ATO Office Portal’ or ‘ATO Gateway Portal’. The site asks for information including online banking credentials, credit card numbers and limits and personal address information.

Do not click on the link and do not disclose the information requested.  Delete the email immediately.

Scammers calling people claiming to be from the ATO and demanding payment of a ‘debt’.
 
In the example provided by the ATO, the person pretending to be from the ATO dialled the victim’s tax agent into a three-way teleconference; however, it wasn’t the victim’s tax agent, it was someone pretending to be from the agent’s practice. The person then instructed the victim to pay the ‘debt’ on that day.

Never give anyone your personal or financial information via phone. 

If you do receive contact from someone purporting to be from the ATO, refer the matter to our office immediately and we will check whether a “debt” is genuine.  Do not give personal or financial information to anyone you don’t know.

SUCCESSION PLANNING - SMALL BUSINESS

Small business owners in Australia are getting older.  It should be no surprise that the ‘baby boomer’ bubble that exists in the broader community is also evident in the SME community.

The area of succession planning is important as an increasing number of small business owners look to exit their business.  For many this exit will be brought on by retirement, however this is not the only time when business succession needs to be planned for. Family run businesses move through a life cycle and it becomes time to realise the capital value and move on.

Many business owners have limited superannuation.  Without realising the assumed capital value of their business, they will be forced to:

• Stay within the business for a much longer period than planned; or

• Accept a significant reduction in their standard of living

The focus of a sale of business will generally be on either price or value.  However, many small business operators are not in a position, nor have the skill set to maximise the value of their asset and this will leave many to negotiate on price alone. The likelihood is that most will achieve a sale by discounting.

Capital Gains Tax (CGT) can also prevent a sale from occurring.  Forward planning on a sale and discussions on the CGT implications is an important element to the overall strategy.

It is important to talk to us early about your forward plans and changes that are occurring in your business environment.  Preparation over a 3 year period for succession planning is not unreasonable.  Doing it too late may lead to issues being addressed too late and/or missed opportunities.

If you haven’t yet thought about succession planning, now is the time to call us to discuss.