If you are an employee, there are two ways in which you can optimise the tax-effectiveness of your additional super contributions:
- Opt for a salary sacrifice arrangement, whereby your employer makes additional superannuation contributions beyond the compulsory superannuation guarantee (SG) amount from your pre-tax earnings and reduces your salary accordingly; or
- Make a personal contribution and claim a tax deduction when you submit your tax return.
IS YOUR COMPANY COMPLIANT?
What we don’t often do at the end of a calendar year is legal compliance housekeeping, but perhaps we should. Legislation and regulations change throughout the year and these have an impact on your business. Perhaps your company took on more employees and has a higher turnover? These are excellent indicators of growth and success but also have the potential to attract new legal obligations.
Here is a list of 5 commonly overlooked legal issues you should review to ensure that your company is compliant this year…
Know the rules !
1. Corporate Governance
Corporate Governance Rules apply to every company regardless of their size, and the Australian Securities Investment Commission (ASIC) will issue fines for failure to keep your company records up to date.
Make sure all relevant documents have been lodged with ASIC, and the company register is complete. Consider whether your shareholder’s agreement and constitution still reflect the nature and structure of your company.
The end of the year is also a good time to follow up with your directors to make sure they have disclosed any new conflicts of interest and share trading activities in the course of the year.
2. Privacy Principles
If your company experienced growth and now has an annual turnover of more than $3 million it will now trigger the Privacy Act. There are also legislative triggers for smaller businesses who deal with personal information or sensitive health and financial information.
Review your company’s position and if in doubt seek some advice.
3. Finance Arrangements
There is no one size fits all finance solution and Companies often find that they ‘outgrow’ their finance arrangements, particularly during growth stages. When this happens facilities will need to be amended, updated and renegotiated.
It is also important to make sure you are complying with all of your obligations under your finance facilities, particularly in relation to any security you may have offered to secure loans.
REVIEWING YOUR SALARY PACKAGING ARRANGEMENTS
The new fringe benefits tax year starts on 1 April 2016. The following changes will take effect from this date.
Car expense fringe benefits
The rules for individuals claiming car expense deductions have changed.
As a result, if you reimburse expenses relating to an employee’s use of their own car, only two methods will be available to calculate the taxable value of this fringe benefit (when you apply the ‘otherwise deductible’ rule).
The two methods are:
- The log book method
- The cents per kilometre method (a single rate of 66 cents per kilometre now applies).
Meal entertainment benefits
All salary packaged meal entertainment benefits will be reportable. They will also be subject to a separate cap of $5,000. Benefits exceeding this cap will be counted towards an employee’s existing FBT exemption or rebate cap.
Are you SuperStream ready
With only two quarters left until SuperStream becomes mandatory, employers are being urged to cross SuperStream off their ‘to-do’ list ahead of the 30 June 2016 deadline.
It takes a little time to set up, but over a quarter of a million employers who have made the change are already enjoying (on average) a 70% reduction in the time they spend on super. That equates to approximately 1.5 hours each cycle! If you haven’t done so already your options to get ready include:
- upgrading your current payroll software
- using your super fund’s online system
- using a messaging portal
- using a clearing house (like the ATOs free Small business superannuation clearing house).
You can also ask your accountant or bookkeeper for help.
An important part of SuperStream preparation is collecting your employees’ TFNs and their funds’ unique super identifiers (USIs). You then enter it into your system ahead of the next quarterly due date on 28 January. This gives you time to check that things are running smoothly before the deadline.
February fuel tax credit rates change
Fuel tax credit rates change regularly. They also vary depending on when you acquire the fuel, what fuel you use and the activity you use it for.
Fuel tax credit rates are indexed twice a year, in February and August, in line with the consumer price index (CPI). The CPI is released towards the end of January and July, five days before the rates are changed. Fuel tax credit rates will be updated as soon as they become available.
Rates may also change for fuel used in a heavy vehicle for travelling on public roads. This is due to changes to the road user charge which is reviewed annually.
As of Monday 1 February 2016 fuel tax credit rates change due to indexation.
Fuel tax credit rates are indexed in August and February in line with the consumer price index.
You may need to use more than one rate in a BAS period.
Use the Fuel tax credit calculator to help you get your claim right.
For details of the fuel tax credit changes go to ato.gov.au/fueltaxcreditrates
CHANGES TO CAR ALLOWANCES
Claiming work-related car expenses is a common tax-time claim for many taxpayers. In fact, almost 4 million taxpayers claim the deduction each year. There are of course certain rules that must be adhered to in claiming these expenses and these days, the Australian Tax Office takes a close interest in such claims given the cost to the revenue.
The Treasurer announced in the 2015-16 federal budget that the methods used for calculating work-related car expense deductions would be simplified and modernised – in other words, changed.
Currently, taxpayers have an option to use one of four methods to determine their work-related car expense deductions:
- cents per kilometre
- logbook method
- the 12% of original value method, and
- one-third of actual expenses incurred.
Changes to car allowances mean if you are paying your employees a car allowance in excess of 66c per kilometre, you need to withhold tax on the amount you pay over 66c.
If you haven’t been doing this since July 2015, you should begin to withhold tax on the amount you pay over 66c and advise your employees.
What if your employees think that not withholding until now might result in them getting a tax bill?
Depending on the amount you’ve paid them, this shouldn’t have a significant impact on their tax for the year. But you can agree to increase the amount you withhold for the remainder of the financial year to cover the shortfall.
The team at Sciacca’s Accountants + Advisors wish you all a safe and happy Christmas and a prosperous new year.
We look forward to working with you in 2016.
We wish to advise that our offices will be closing for the Christmas/New Year period from Friday 18 December 2015 and will reopen at 8:30am Monday 4th January 2016.
As we come to the end of 2015, the words that come to mind are “thank you.” This has been an amazing year.
We thank you for your continued support and wish you and your loved ones a joyful and relaxing holiday season.
All the best in 2016 and beyond!
Best regards from the entire Sciacca Group team.
CASE STUDY: Good news story
A couple recently retired and their previous accountant told them they did not have to pay capital gains tax on the sale of their rental property.
He was wrong.
The clients got hit with interest of $5,900. They are on the age pension and John was able to get the interest written off.
Here’s what they had to say:
On behalf of my wife and myself I wish to pass on to you and your staff our late but very sincere thanks to all of you regarding our problem with the ATO over our failure to pay capital gains tax. If it was not for your company’s expertise and experience in this matter, the end result for us would have been horrendous. The added bonus of the ATO refund following the appeal process by your company was really appreciated. Once again, thank you to yourself and your staff.
As we rapidly approach the end of the financial year, NOW is the time to focus on the best strategies to reduce your tax where possible, to streamline your accounting and bookkeeping procedures, and to forward plan for the new financial year.
Of course the best way to do this is to come in and have a chat with us, so we can discuss your situation and give you personalised advice.
However, to get you thinking, we’ve put together a few tips:
Tax planning strategies
- Top up your super contributions
- Delay invoicing or receipting your income until 1 July
- Realise capital losses to offset against capital gains made during the year
- Small businesses with a turnover under $2 million can claim an immediate deduction for the cost of depreciable assets costing less than $1,000 and certain prepayments (e.g. lease and rent expenses)
- Get rid of slow-moving stock and write-off obsolete stock before 30 June
- Write off bad debts and claim back the GST credits where the debt has been outstanding for more than 12 months
- Review PAYG instalment obligations and consider varying the instalment for the June quarter where the estimate of business income tax payable for the year is less than the instalments raised by the ATO
Accounting & bookkeeping
- Ensure that BAS lodgements and super guarantee contributions are up-to-date
- Behind on tax and BAS payments? Ensure that payment arrangements have been entered into with the ATO and are complied with
- Report salary sacrifice contributions and certain fringe benefits on employee’s PAYG Payment Summaries
- Back up the data file prior to rollover and ensure your records are in good shape
- Review GST codes for profit & loss and balance sheet accounts for correctness
- Have cut-off procedures to ensure matching of income and expenses. For example, ensure suppliers provide the relevant invoices for all purchases and expenses for the period up to the end of June. Also identify work in progress or sales not yet invoiced and raise the relevant invoices for the period up to 30 June.
- Complete stocktakes of inventory. Any unders/overs of stock quantities and spoilage identified from the stocktake process should then be adjusted in the stock module by 30 June and thereby reflected in the financial statements.
- Complete stocktakes of fixed assets. Any adjustments required to the assets register identified in the assets stock take for issues including description, location, quantity and damage/obsolescence needs to be made in the assets module by 30 June and thereby reflected in the financial statements.
- Review the balance sheet and profit & loss statement to confirm:
- Bank accounts and loans are reconciled.
- Receivables and Payables subsidiary ledgers are reconciled to the general ledger.
- GST accounts and PAYG withholding are reconciled to the business activity statements.
- Wages in the profit & loss is reconciled to the PAYG Payment Summaries.
- Capital items such as plant & equipment purchases have not been expensed as repairs.
- Amounts in suspense have been allocated to the appropriate account.
- Fringe benefits tax has been paid on deductions claimed for employees private expenses.
- Material differences to the prior year can be explained.
Planning for the new financial year
There are a few things you can do to improve on the performance of your business this year:
- Prepare/update your business plan to provide solid focus and direction
- Update the budgets for the next 12 months and compare actual to budget.
- Review your current accounting software and upgrade to the latest version to take advantage of new features, or talk to us about other options
- Review credit terms with suppliers and customers and make changes if required
- Review insurances to ensure adequate level of coverage
- Reduce costs in areas identified as excessive in the current year
- Implement new internal control systems to address weaknesses identified
If you need any help at all with your planning, please get in touch. We are here to support you and give you the right advice, whatever stage you’re at.