Achieving Financial Freedom!Download eBook

Monthly Archives: June 2017

Another financial year is about to finish

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.

Pay off your home loan sooner and maximise your tax deductions

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.

WATCH OUT FOR PHONE SCAMMERS!

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