Blog

May 31

Another financial year is about to finish

Posted by Peter Marmara-Stewart at Friday, May 31, 2019

As a business owner, there are many obligations that you need to consider and action over the next few weeks. Some of these will help to minimise your tax. We have outlined these action points below to assist you.

Key Changes from 1 July 2019

Please urgently check these key things:

1. Has your payroll software automatically updated for these changes? Or do you need to load these changes
into your payroll software? (Xero does this automatically.)
2. Check your first pay run from 1 July 2019 to ensure the changes are correct.
3. Review any salary packaging and calculations and make any adjustments to employee FBT contributions or other items where needed.
4. Single Touch Payroll becomes compulsory for all businesses employing people. You will have to ensure you have payroll software that is STP enabled before the 30th September.

Accelerated Depreciation

All businesses with an aggregated annual turnover of less than $10 million will get an immediate tax deduction for any individual assets costing less than $30,000. This $30,000 limit applies to each individual item. Businesses can apply this $30,000 rule to as many individual items as they wish. These arrangements have been extended until the end of June 2020.

Trust Distributions - Timing of Resolutions

Trustees (or directors of a Trustee Company) need to consider and decide on the distributions they plan to make by 30 June 2019 at the latest (the Trust Deed may actually require this to be done earlier). Decisions made by the Trustees should be documented in writing by 30 June 2019.

If valid resolutions are not in place by 30 June 2019, the risk is that the taxable income of the Trust will be assessed in the hands of a default beneficiary (if the Trust Deed provides for this) or the Trustee (in which case the highest marginal rate of tax would normally apply).

You might not need to do a Stocktake

Small Business Entities (operational businesses with an aggregated turnover below $2 million) have access to a range of tax concessions. One of these concessions is the simplified trading stock rules. Under these rules, you can choose not to conduct a stocktake for tax purposes, if there is a difference of less than $5,000 between the opening value of your trading stock and a reasonable estimate of the closing value of trading stock at the end of the income year. You will need to record how you determined the value of trading stock on hand.

If you would like to take advantage of the simplified trading stock rules, call us today to make sure you are eligible to use the simplified rules and to discuss how to use them properly.

Deadline for 2019 PAYG Payment Summaries
You need to provide your 2019 PAYG Payment Summaries to your employees and other workers by 14 July 2019.

Action Step: If you have any doubt about how to correctly complete your 2019 PAYG Payment Summaries, please contact us for assistance BEFORE you prepare them.

Taxable Payments Annual Reports – Building and Construction, Cleaning and Courier

Since the 1 July 2012, tax reporting rules apply for businesses in the building and construction industry. This financial year they have been expanded to the cleaning services and courier services business. Businesses have to lodge an annual report with the ATO, setting out details of payments made to contractors. This will assist the ATO to reduce the "cash economy" by ensuring tax is paid on all income including "cash" payments.

You will need to record the following details of all payments made to contractors for building and construction services:

• The ABN of the contractor
• The name and address of the contractor
• The gross amount paid for the financial year, including GST
• The total GST included in the gross amount paid

If you use computerised accounting software, your system should be able to track this information for you and prepare the required Taxable Payments Annual Report.

Action Step: Ensure that you lodge your Taxable Payments Annual Report with the ATO no later than 21 July 2019. Cleaning and Courier Services have until the 28th August 2019 to lodge their Report.

Payroll Tax

Payroll Tax applies to all entities that have an Australian payroll that exceeds state-based limits.

You should note that, in addition to normal salaries and wages, the following items are generally also included in payroll expenses, if Payroll Tax applies:

• fringe benefits based on the grossed-up taxable value of fringe benefits;
• all employer contributions to Superannuation on behalf of employees; and
• some contractor or sub-contractor fees.

For more detailed information about whether Payroll Tax applies to your business, please contact our office.

Action Step: The Annual Return/Reconciliation for Payroll Tax must be lodged by 21 July 2019 with your State Revenue Office.

WorkCover/WorkSafe

Your WorkCover/WorkSafe insurer sends an annual reconciliation to all registered employers at the end of the financial year.

In completing your annual reconciliation, you will need to include the following items in addition to normal salaries and wages:

• fringe benefits based on the taxable value of fringe benefits (do not gross-up);
• all employer contributions to Superannuation on behalf of employees; and
• some contractor or sub-contractor fees.

For more detailed information about what items to include in the reconciliation statement, please contact our office.

Once the reconciliation is received and processed by your WorkCover/WorkSafe insurer, you will be issued with a final assessment or a refund, depending on the instalments you have paid during the year.

Action Step: Complete and lodge the Annual Reconciliation with your WorkCover/WorkSafe insurer by the due date.

Goods and Services Tax (GST)

A reconciliation of GST should be performed as at 30 June 2019 to determine if there has been an under or over-payment of GST in the 2019 tax year. If a discrepancy has arisen, then it is possible to amend a subsequent Business Activity Statement (BAS) to rectify the error, however there are limits imposed on adjustments that can be made in this way.

Income declared on your BAS should be reconciled to income declared on your income tax returns.

Also, please note that you are required by law to substantiate all Input Tax Credit claims with a complying Tax Invoice, and you need to retain these documents for a minimum of 5 years.

Action Step: Complete the annual GST reconciliations, and check that you have all required tax invoices and other supporting documents.

ATO Audit Activity

Please note that the ATO and State Revenue Office are constantly increasing their audit activities. In particular, there has been an increase in audit activity for PAYG Withholding, Payroll Tax, WorkCover, GST, Division 7A loan accounts from companies, and Trust distributions from Discretionary Trusts.

We are able to offer a review of your records and record-keeping procedures, if you are concerned about your ability to satisfy an audit.

Action Step: Please contact our office if you would like to request this service.

Last Minute Tax Minimisation Tips

Here are a few final reminders about ways to reduce your tax for 2019:

1. Write-off Bad Debts.
2. Write-off any trading stock that is damaged or obsolete.
3. Review your Asset Register and scrap any obsolete Plant and Equipment.
4. Pay for repairs, consumables, office stationery, and donations before 30 June 2019.
5. Realise any capital losses you have before 30 June 2019 to offset against any capital gains you may have made.

Feel free to call our office any time on 03 5134 1778 or email us at admin@prestoncoering.com.au.

May 22

Some Key Items that mean $ in your pocket

Posted by Peter Marmara-Stewart at Wednesday, May 22, 2019

You can reduce your tax by hundreds of dollars (if not thousands), with some of the following strategies.

Here's how to do it:

The Strategy behind Tax Planning

The tax you pay depends on your taxable income, and the tax rates that apply to that income.

Therefore, your tax is reduced if you:

1. Reduce your income, or

2. Increase your tax deductions.

Seeing we all want to earn more, reducing your income isn't an option! But increasing your tax deductions definitely is. We have shared below links to two Tax Planning Flyers, which both list a number of items that can be claimed as tax deductions. You can use them as a guide, but you should contact us if you are not sure of anything.

To illustrate: If you need something in July that is classified as a tax deduction, it makes sense to bring this purchase forward and buy it in June. You then get the tax deduction this year, and not next year.

Warning: Don't fall into the trap of buying something simply to get the tax deduction from it. If your tax rate (including Medicare Levy) is for example 34.5%, you would only get 34.5% of the purchase price back as a tax refund (or reduced tax payable) from the tax deductible item. You DON'T get 100% of the amount that you spend back as a tax refund (or reduced tax payable).

If you do need an item for your business or work and it is tax deductible, we recommend buying it BEFORE 30 June so that you get the tax deduction this year.

Your Tax Planning Strategy Checklists

Business Owners: Click Here for our ‘Tax Planning Flyer for Business Owners’.

Individuals: Click Here for our ‘Tax Planning Flyer for Individuals’.

If you are a business owner, we will look at both for you.

If you want to minimise your tax burden, then help us to help you, and get in contact with us today!

By spending a little bit of time with us reviewing your situation, we may be able to help you save thousands!!

Now is the time to do it - please contact our office TODAY to get started.

May 15

Pay Super for Employees Earlier

Posted by Peter Marmara-Stewart at Wednesday, May 15, 2019

To claim a tax deduction for Super, it needs to be physically paid. By paying your June quarter, or month’s Super before the end of the financial year 30th June, you will get a tax deduction for the year.

Paying your employees’ Super a month earlier than you need to, can create a significant one-off tax benefit. If you have $20,000 to pay in Super for your employees prior to the 30th June, this can result in a tax saving of up to $9,400.

If this is something that you want to do, you will need to ensure that the payment you are making is processed before the 30th June. To ensure this is done in time, it is best to process the payment a week before the end of financial year.

Something to note is that, this creates a one-off tax benefit, as you are paying Super that you would usually pay in July earlier, to get the tax deduction.

May 08

Pay off your home loan sooner and maximise your tax deductions

Posted by Peter Marmara-Stewart at Wednesday, May 08, 2019

This is one of my personal favourites. Debt optimisation (sometimes referred to as "Debt Recycling"), is a financial strategy which creates wealth over time, and improves an individual's debt structure. This is achieved in the majority of cases by:

- Using all surplus income to reduce the home loan (non-tax deductible "bad debt");

- Creating or increasing investment debt (tax deductible "good debt"), by drawing against equity in the home; and

- Using the borrowed money to build an investment portfolio.

It is a great strategy that can be adapted to suit your goals and time horizons; though it is important to note that borrowing money to invest, and budgeting on the borrowed money, are key components.

Following is an example of how the assets and cash flow involved in a debt optimisation strategy can be used in a "split loan":

Where suitable, it is possible to extend on the strategy above by using the newly created investments as security for a margin loan, with the proceeds used to further invest. In this type of strategy, the interest costs are still generally met from the home loan, with investment income also used to reduce the home loan balance.

Using a strategy like this allows you to decrease your bad debt over time, and replace it with debt that can be used tax effectively, whilst building an investment portfolio that can be used to help fund your goals.

Apr 26

SMSF – Get your wealth working for you!

Posted by Peter Marmara-Stewart at Friday, April 26, 2019

Everyone is talking about SMSF's these days. Even with the changes made by the Government (such as the $1.6M cap), SMSF’s can be the way to go.

In simple terms, SMSF is a Super Fund that you fully control. You make all the investment choices - including shares, managed funds, property, and cash. SMSF's can borrow from a bank to purchase investments, but this opportunity might be limited.

Strategy

Choosing the right STRATEGY for your SMSF is the key.
One great strategy can be to purchase your business premises in your SMSF, or purchase an existing commercial property, that will be owned by your SMSF. Either strategy means that you can get your Super money working for you now and save significant dollars.

If you already own a commercial property outside of Super, it may be worthwhile looking at transferring the property to your Superannuation Fund. It may help to free up cash, and possibly even reduce your personal non tax deductible debt on your mortgage.

One of our clients owned a commercial property outside of their Superannuation Fund. The property was worth $275,000, with a small loan of approximately $50,000 left on the premise. They netted $205,000 (after Capital Gains Tax); that left them with only $50,000 on their personal mortgage. A great outcome for the client.

Furthermore, they now have net tax savings of $2,175 every year because the income from the property is taxed at 15%, not 34.5% and 39%.

It is important to review any stamp duty implications with the transfer of property, and best to seek advice as to whether you will have to pay stamp duty on the transaction.

Super Share Strategy

Another great strategy can be to lend your SMSF money to buy shares. The rate that your Fund has to pay you is determined by the ATO (and is a pretty good rate). By lending the money to your Super Fund, you will get a great return on your money, and potentially help with your contributions tax inside Super. It can also provide a little bit of leverage in your Super; making it work harder for you.

The benefits of this strategy can add up to tens of thousands of dollars for those with a decent balance ($300,000), and contributions ($20,000 p.a.).

Estate Planning

Another key reason for using a SMSF, is that it gives you exact Estate Planning options. For example, you can nominate a specific dependent (spouse or child under 18), to receive your Super benefit if you die. Unlike a Will, this cannot be contested.

Would you like NO TAX on your Investments?

Once you turn the age of 60, you can start to pay yourself a pension from your SMSF. There is NO tax on income from the SMSF, and NO tax on any capital gains; subject to the transfer balance cap (currently $1.6M).

This means you can gradually sell down assets (including property), held in your SMSF, and pay NO TAX regardless of any capital gain you make.

This can have an absolutely fantastic outcome - and it is possibly far better than owning an investment property in your individual name or Family Trust.

Apr 19

DOUBLE TAX DEDUCTION for Life Insurance

Posted by Peter Marmara-Stewart at Friday, April 19, 2019

You can get a double tax deduction when you pay for Life Insurance through Superannuation.

How does it work?

Your business contributes your premiums to your Super Fund, and the business gets the tax deduction. On top of that, the Super Fund gets the tax deductions for the Life Insurance premiums it pays.

Option 1 – Pay $5,000 premium outside of Super
No tax deduction.

Option 2 – Pay $5,000 Life Insurance premium inside Super
Your business pays the Life Insurance to the Super Fund as a contribution. You receive a tax deduction; at 47% tax rate, that is a $2,350 tax saving.

Contribution is income in the Fund @ 15% = $750 tax payable.

Life Insurance premium is a deduction in the Fund @15% = $750 tax refund.

NET TAX SAVINGS $2,350

What do you need to make sure of in order to get this tax deduction:

- A business, or an employer that allows you to salary sacrifice to Super
- Super
- A chat with one of our team
- To take action before 30th June 2019

FAQ’s

Why are Life Insurance premiums not tax deductible outside of Super?

You are not allowed to claim the premiums outside of Super because you don’t pay tax on the money that you receive.

How much would I have to earn pre-tax outside of Super for that premium?

If you are on the highest marginal tax rate of 47%, you would have to earn $9,434.

Even if you are on the 34.5% tax bracket, you would have to earn $7,634.

Does this strategy apply to other insurances?

This strategy can apply to TPD (any Occupation) and Income Protection Insurance as well. Income Protection insurance is tax deductible outside of Superannuation also. Other insurances such as Home, Car & Pet insurances are not able to be paid through Superannuation.

Apr 17

Budget Summary 2019

Posted by Peter Marmara-Stewart at Wednesday, April 17, 2019

We are not going to give you a traditional Budget Summary due to the Federal Election, and the uncertainty with a lot that was proposed. We will just let you know what is likely to be, and what is likely not to be.

We can confirm that the instant asset write-off of $30,000 passed parliament, and is now law. This means, small and medium-sized businesses can instantly write off assets purchased under $30,000.

Both sides have committed to the Low and Middle Income Tax Offset, with Labor vowing to deepen the tax rebate and cut to lower income earners even more so. Labor hasn’t really changed its stance on its policies, still wanting to remove Franking Credit refunds for this financial year, and remove negative gearing effective 1st July 2020. Whether or not Labor can do this, even if they win the next election, remains unclear.

Anyone attempting to build wealth in this country will be worse off, if Labor wins the next election.

The coalition did announce a reduction and flattening of tax rates over the next several years in the budget, so that, there will be only 3 rates: 19%, 30% (up to $200,000) and 45%. Labor have said that they will not support this.

Of course, until it is passed into legislation, it isn’t so.

On a final note, we thought you may appreciate this great chart (courtesy of Cuff Links), showing the Federal Government’s deficit and debt position since 1901. The upper section shows revenues (green line) and expenses (red). The middle section shows the resultant annual surpluses (green bars – look hard!), or deficits (red bars). The purple bars in the lower section shows the level of Federal Government debt. All are expressed relative to total national output (GDP) each year (click on chart for larger image):


Apr 10

Trust Distributions – Who can you distribute to?

Posted by Peter Marmara-Stewart at Wednesday, April 10, 2019

If you are a small business who uses a Trust, there are a number of people that you can distribute to with a Discretionary Trust.

These include:

- Children
- Parents
- Parents-in-law
- Brothers & Sisters
- Grandparents
- Grandchildren

Children & Grandchildren

You can distribute only $416 to children who are minors. That might not seem like a lot, but if you have 3 children and you are in the 47% tax rate, that works to being $586.56 in tax savings.

If you have children who are over 18 and are studying at University, or are not really earning an income, you can distribute up to $21,600, and they will not pay any tax. At the 47% tax rate, that is $10,152 in tax savings. If we increase that to $37,000, they will have to pay $3,667 in tax, and your net tax savings will be $13,723.

Brothers & Sisters

If you have brothers and sisters who are studying at University, or are not really earning an income, you can also distribute to them in a similar fashion as demonstrated above. Just make sure no one else is doing the same thing!!

Parents, Parents-in-law & Grandparents

If you have parents, parents-in-law and/or grandparents who are self-funded, you might be able to distribute to them in a tax effective manner.

How do you take advantage of this?

You need to have a Discretionary Trust with income, and you need to be a small business.

FAQ’s

Do I need to pay the distribution?

Yes, you will need to pay the distribution.

What if they receive Centrelink?

If the people you are looking to distribute to receive Centrelink, then this strategy is unlikely to work for you.

Apr 08

Tax Planning 2019 - It Starts Now!

Posted by Peter Marmara-Stewart at Monday, April 08, 2019

What would you do with an extra $10,000?

On average, we save more than this for our small business clients every year in tax. The reason we are able to do this is because, we help them plan ahead before the 30th June. We have saved millions in tax for our clients through good planning. So, over the coming weeks, we will be listing a number of strategies to help you reduce your tax legally.

This year will be a little different to others though, as there are some significant changes that could occur for this financial year and they have not. This is due to the policy positions of both the major parties creating different tax outcomes. As a result, we will be going on what we know is; and providing commentary on what might be.

Why?

If you leave your tax planning until the end of June, quite frankly, there may not be enough time to do anything significant to legally reduce your tax.
So, for 2019, start planning ahead to save tax.

How to plan to save tax with PCR’s help?

Our process works as follows:
First of all, we request details of your expected income and business profits for the 2019 tax year (1 July 2018 to 30 June 2019). This includes all wages / employment income, interest and dividends and rental income received, business profits / losses, and any capital gains / losses you expect to make.

Based on this information, we estimate your taxable income and your tax payable BEFORE any tax planning strategies. For example, we may calculate (based on your information) that you may have a taxable income of $150,000 for 2019.

Secondly, we discuss all of your tax planning options. Some of these may be things to do in your business, and some of these may be investment / wealth creation options.

Thirdly, we provide you with a report that explains (in plain English) the tax planning strategies we recommend, and exactly how much tax you will save.

Finally, we provide you with an easy-to-follow Action Plan, to ensure that both you and us can do everything that needs to be actioned prior to 30th June.

So, over the next few weeks, keep an eye out for our tax planning strategies. They can help you save more for your family’s wealth creation.

Mar 22

Cash Flow Budgeting Summary

Posted by Peter Marmara-Stewart at Friday, March 22, 2019

We are now at the last leg of the Cashflow Series. By now, we are hoping you have found a budgeting technique that best suits you.

To get a brief preview, we have summarised the key points for Cashflow Budgeting:

We hope that over the last weeks, we have provided you with some insight as to the importance and value that good cashflow budgeting can provide you. Now, we are going to recap the key points that we have covered, so that you can have everything you need to get going to start your journey.

Over the last several weeks, we have covered a number of aspects to Cashflow Budgeting and Management, starting with the fact that most of us are aware that we should do it, but we don’t.

We discussed the power and control that you can gain for your financial future, by preparing and taking control of your budget whilst making some substantial and beneficial changes to your life; so you can have success and achieve financial freedom.

The importance of goals was something that we went over, and more importantly, how you go about achieving those goals and about the substantial improvements that having accountability partners can make in achieving your goals. Remember, by having a specific accountability appointment with a person you have committed to, you go all the way from as low as 10% to 95% chance of achieving your goals. Having the goal is not enough. You need to make it happen - plan it, execute it, and have some accountability in place.

Subsequently, we went on to show you why personal budgeting is brilliant, how it will help you see your financial direction, keep you on track, and even improve your attitude when you see your growing wealth! Do not let it pass you by and take control!

Finally, we showed you my favourite budgeting technique: The Zero-Sum Budget. It is an absolutely great strategy for formulating a budget and making sure you allocate all your money, and do not give yourself excuses for not achieving your goals. It helps you prioritise and focus on the most important things for your money.

Your next step is to call us on 03 5134 1778, or email us at admin@prestoncoering.com.au to make time to meet. If you have some business and financial goals you want to achieve, and you need help, please do not hesitate to contact us. We have some great programs for both your business and personal goals.
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