Blog

Jun 26

Another financial year is about to finish

Posted by Peter Marmara-Stewart at Monday, June 26, 2017

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 2017
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 2017 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.

Accelerated Depreciation

All small businesses with an aggregated annual turnover of less than $2 million will get an immediate tax deduction for any individual assets costing less than $20,000. This $20,000 limit applies to each individual item. Small businesses can apply this $20,000 rule to as many individual items as they wish. These arrangements have been extended until the end of June 2018.

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 2017 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 2017.

If valid resolutions are not in place by 30 June 2017, 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 2017 PAYG Payment Summaries
You need to provide your 2017 PAYG Payment Summaries to your employees and other workers by 14 July 2017.

Action Step: If you have any doubt about how to correctly complete your 2017 PAYG Payment Summaries, please contact us for assistance BEFORE you prepare them.

Building and Construction Industry Reporting

Since the 1 July 2012, tax reporting rules apply for businesses in the building and construction industry. 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 2017.

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 2017 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 2017 to determine if there has been an under or over-payment of GST in the 2017 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's a few final reminders about ways to reduce your tax for 2017:

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 2017.
5. Realise any capital losses you have before 30 June 2017 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.

Jun 02

Pay off your home loan sooner and maximise your tax deductions

Posted by Peter Marmara-Stewart at Friday, June 02, 2017

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. 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 this 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 are key components.
Here 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 with debt that can be used tax effectively, whilst building an investment portfolio that can be used to help fund your goals.

Jun 01

WATCH OUT FOR PHONE SCAMMERS!

Posted by Peter Marmara-Stewart at Thursday, June 01, 2017

This is a repost from our past blog containing an audio recording of a phone message supposedly from the ATO. Unfortunately, this incident has happened again to one of our colleagues, so we felt the need to warn you all again about these scammers.

In the last couple of days, we have heard of two people receiving a phone call from someone pretending to be calling from the ATO and claiming to be part of the fraud & tax evasion division.

One of the people that received the phone call was none other than Tash from our office.

Here is an audio recording of the phone message they have left: Click here to listen.

Please be aware that you may receive a phone call from these scammers, and if you are ever unsure, please contact us before doing anything!!

- The PCR Team

May 19

SMSF – Get your wealth working for you!

Posted by Peter Marmara-Stewart at Friday, May 19, 2017

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

Very simply, 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 purchasing an existing commercial property you own with 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 can be worthwhile looking at transferring that property to your Superannuation Fund also. It may help you free up cash and possibly even reduce your personal non tax deductible debt on your mortgage.

We had one client that we did this for. They owned a commercial property outside of their Superannuation Fund. The property was worth $275,000. They had a small loan of $50,000 approximately left on the premise. They netted after Capital Gains $205,000; 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% & 39%.

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 it is pretty good). 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 age 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's possibly far better than owning an investment property in your individual name or in a Family Trust.

May 18

Introducing Loanscope and Daniel Venpin

Posted by Peter Marmara-Stewart at Thursday, May 18, 2017

Here at Preston Coe & Ring, we are always looking to improve our service to you. For most of last year, we have been working with Emmanuel at Loanscope. Recently, they have had someone join the team - Daniel Venpin.

Loanscope and Daniel are highly dedicated to make sure that you are getting the best deals on your mortgage (whether that be for investment or your home), so don't hesitate to contact them.

For further information on Loanscope, they have prepared this introduction letter, and you can visit their website at www.loanscope.com.au.

May 12

Budget Summary 2017

Posted by Peter Marmara-Stewart at Friday, May 12, 2017



This is just a quick run-down of the Budget and the things that are most likely to impact our Clients. Please note that it is not a fully comprehensive review of everything in the Budget.

Under the Budget, there is a bank levy which the opposition says they do not oppose, but do not want the banks to pass on. The opposition has also opposed the removal of the 2% debt levy on high income earners. However, as this was a temporary measure with an end date in the legislation, a new law would have to be passed (we will be watching out for this closely).

If it all goes ahead as planned, the big winners are first home buyers, people downsizing their home and small businesses.

Superannuation


Contributions from downsizing the home
Date of effect: 1 July 2018

Individuals aged 65 or older, will be able to make non-concessional (after tax) super contributions of up to $300,000, using proceeds from the sale of the family home. This limit will:

•     apply on a per person basis
•     be in addition to the ordinary non-concessional contribution cap, and
•     be available where the home has been owned for at least 10 years.

Unlike other non-concessional contributions, it will not be necessary to meet a work test or have a ‘total super balance’ under $1.6 million. The amount contributed will not be exempt from the assets test used to assess eligibility for the Age Pension.

First home super saver scheme
Date of effect: From 1 July 2017 – opposition opposes this.

First home buyers will be able to save for a deposit, by making voluntary concessional and non-concessional super contributions. Contributions will be limited to $15,000 per year (up to a total of $30,000), and will count towards the relevant contribution cap.

Withdrawals can be made from 1 July 2018. Concessional contributions plus assumed earnings withdrawn will be taxed at the person’s marginal tax rate, less a 30% tax offset.

The Government has provided an online estimator to help individuals calculate the potential benefit of the scheme.

SMSF borrowings
Date of effect: When law is passed

Broadly, when new limited recourse borrowing arrangements are established, the loan balance will be included in an individual’s ‘total super balance’. The total super balance is used to determine a person’s ability to:

•     make non-concessional contributions
•     qualify for a Government co-contribution or a spouse contribution tax offset, and
•     make catch-up concessional contributions above the annual caps from 1 July 2018, where certain conditions are met.

Also, repayments made from the SMSFs accumulation balance will count towards the member’s transfer balance cap, if the borrowing supports a pension account. The transfer balance cap limits the total lifetime transfers a person can make to retirement phase pensions.

Taxation

Medicare levy increase
Date of effect: 1 July 2019


The Medicare levy will increase from 2% to 2.5% pa, to fully fund the National Disability Insurance Scheme. This increase will flow to a range of other taxes such as Fringe Benefits Tax.

Small business accelerated depreciation
Date of effect: 1 July 2017


The ability for small businesses with an annual turnover of $10 million or less, to claim an immediate deduction for eligible assets costing less than $20,000 each, will be extended for 12 months.

HELP thresholds and rates
Date of effect: 1 July 2018 – opposition seems to oppose this.


The annual income threshold at which Higher Education Loan Program (HELP) repayments commence will be reduced to $42,000 (currently $54,869). Also, the repayment rate will start at 1% and increase progressively to 10%.

Social Security

Pensioner Concession Card
Date of effect: From 1 July 2017


Individuals who lost entitlement to the Pensioner Concession Card as a result of the 1 January 2017 assets test changes, will be reissued with the card.

Energy Assistance Payment
Date of effect: 20 June 2017


Eligible pensioners will be entitled to a one-off Energy Assistance Payment of $75 for singles, and $125 per couple. Eligible recipients include Australian residents who qualify for the Age Pension, Disability Support Pension and Service Pension.

Residency requirements for pensioners
Date of effect: 1 July 2018


To be eligible for the Age Pension and Disability Support Pension (DSP), claimants will need to have 15 years of continuous Australian residence unless they have either:

•     10 years continuous Australian residence, with 5 years of this being during their working life, or
•     10 years continuous Australian residence, without having received an activity tested income support payment for a cumulative period of 5 years.

Existing exemptions will continue to apply for DSP applicants who acquire their disability in Australia.

Family Tax Benefit – Part A
Date of effect: 1 July 2018


A single taper rate of 30 cents in the dollar, will apply to income that exceeds the Higher Income Free Area ($94,316 in 2016/17). Currently, two tests are applied and the higher payment determines the entitlement.

Family Tax Benefit – Part A and B
Date of effect: 1 July 2017

The payment rates will not be indexed for two years. Indexation will resume on 1 July 2019.

Liquid Assets Waiting Period
Date of effect: 20 September 2018


The maximum Liquid Assets Waiting Period (LAWP), will increase from 13 to 26 weeks. The LAWP is a period an individual will be ineligible to receive Government income support. The new maximum period will apply to:

•     singles without dependents with liquid assets of more than $18,000, or
•     couples, or singles with dependents, with liquid assets of more than $36,000.

Liquid assets are readily available assets such as bank accounts, terms deposits, shares and managed funds.

May 03

DOUBLE TAX DEDUCTION for Life Insurance

Posted by Peter Marmara-Stewart at Wednesday, May 03, 2017

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 49% tax rate, that is a $2,450 tax saving.

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

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

NET TAX SAVINGS: $2,450

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 2017.

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 49%, you would have to earn $9,803. But even if you are on the 34.5% tax bracket, you would have to earn $7,633.

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 19

Trust Distributions - Who can you distribute to?

Posted by Peter Marmara-Stewart at Wednesday, April 19, 2017

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 49% tax rate, that works to being $611.52 in tax savings.

If you have children who are over 18 and are studying at uni or are not really earning an income, you can distribute up to $20,542 and they will not pay any tax. At the 49% tax rate, that is $10,066 in tax savings. If we increase that to $37,000, they will have to pay $3,456 in tax and your net tax savings will be $14,674.

Brothers & Sisters

If you have brothers and sisters who are studying at uni or are not really earning an income, you can also distribute to them in a similar fashion as 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 who you are looking to distribute to, receives Centrelink, then this strategy is unlikely to work for you.

Apr 05

Tax Planning 2017 – It Starts NOW!

Posted by Peter Marmara-Stewart at Wednesday, April 05, 2017

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. Last year, we were able to help our clients save over $1M in tax. So, over the coming weeks, we will be listing a number of strategies to help you reduce your tax legally.

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 2017, start planning ahead to save tax.

How to do the planning 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 2017 tax year (1 July 2016 to 30 June 2017). 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 $100,000 for 2017.

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 before 30th June.

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

Feb 21

Blood Pressure Test

Posted by Peter Marmara-Stewart at Tuesday, February 21, 2017

A Blood Pressure Test for your Business

When was the last time you had your blood pressure tested?

Taking your blood pressure is one of the first things most doctors do before treating you for just about anything. How much pressure your blood is under as it courses through your veins is a reliable indicator of your overall health; and it can be an early indicator of everything from heart disease to bad circulation.

Does it tell the doctor everything they need to know about your health? Of course not, but one powerful little ratio can give the doctor a pretty good sense of your overall wellbeing.

Likewise, your Value Builder Score can be a handy indicator of your business wellbeing. Like your blood pressure reading, your company’s Sellability Score is an amalgam of a number of different factors and can help a professional quickly diagnose your business’s overall health.

Predicting Good Outcomes Too


When a doctor takes your blood pressure, they not only rule out possible nasty ailments; they can also use the pressure reading to forecast a healthy life ahead. Similarly, your Value Builder Score can predict good things for the future. For example, based on more than 10,000 business owners who have completed their Value Builder Score questionnaire, we know the average multiple of pre-tax profit they are offered for their business when it is time to sell is 3.7. By contrast, those companies that have achieved a Value Builder of 80+ are getting offers of 6.6 times pre-tax profit.

In other words, an average-performing business turning out $500,000 in pre-tax profit is likely worth around $1,850,000 ($500,000 x 3.7). If the same company improved its Sellability Score to 80+ while maintaining its profitability of $500,000, it would be worth closer to $3,300,000 ($500,000 x 6.6).

Are you guaranteed to fetch 6.6 times pre-tax profit if you improve your Value Builder Score to 80? Of course not. But just like blood pressure, one little number can tell you and your advisor a whole lot about how well you are doing; and your advisor can then prescribe an action plan to start maximizing your company’s health – and its value down the road.

Heart disease is called “The Silent Killer” because most people have no idea what their blood pressure is. People can walk around for years with dangerously high blood pressure because they haven’t bothered to get it tested. The first step on the road to health is to get tested. If you have a great score, you can sleep well at night knowing you have one less thing to worry about. If your score is not where it should be, then at least knowing your performance can get you started down the road to better health.

If you’re interested in getting your Value Builder Score, please visit our website for more details.
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