Posted in: business
With inflation surging, costs rising and interest rates increasing (after being stable for a decade), businesses may be feeling the heat about their profit margins. Your business may be struggling to absorb these rising costs amid labour shortages, while also requiring spare capital to expand and further digital transformation initiatives.
In a time where growth should be at the forefront of your mind, you may instead be struggling with the incoming additional financial pressure. Here are five measures that business owners can put into place to mitigate the impact of inflation.
Renegotiate Contracts To Reduce Costs
Many of your fixed-term agreements may have been made previously with pricing based on a certain set of assumptions. A project that commenced several years ago could now be operating at a loss, due to the cost of supplies today. In this instance, renegotiating the contract to reflect these changes is the best course of action. There is no sense in continuing a project if you would be put out of business by the overall cost to you after all.
Consider Alternative Pricing Strategies
To what degree might you be able to pass the inflationary price rises onto your customers without alienating them? Small scale increases to your products occurring over multiple times may be more palatable to your customers, such as with quarterly rises rather than annual rises. If things swing back, your business can maintain the increased pricing and profit from the gain instead.
How Do You Manage Wage Increases For Your Staff?
Consider how wage competitiveness for jobs could impact your staffing. If matching industry expectations for wages in a sector is not feasible, consider alternative options as incentives, such as flexibility, opportunities for career advancement and better work/life balance options (e.g. 4 and a ½ day weeks, WFH Mondays, etc). This might be a method to compete at a lower pay scale by focusing on other benefits.
What Are Your Key Products?
Identify the products that your customers come to you for (your ‘milk and bread’ as it were) and use them to stimulate the sales of more profitable products or services. Reduce your key product pricing and instead upsell or cross-sell additional products to increase your customer’s basket size and gain additional purchases.
Diversify Your Supply Chain
Identify opportunities to diversify your supply chain relationships and mitigate your risk of interruptions. It could be a critical point for your survival – the last few years have demonstrated that reliance on overseas production can be detrimental to a business. You could become a supplier yourself, investigate options closer to home for supply purposes or work out how government incentives could be used to benefit your business.
Rethinking your strategy for inflation now rather than later could be a key maneuver in ensuring how your business performs in the long term. You can speak with a trusted adviser today for logistical guidance for your business.
Posted in: super
The way in which a self-managed super fund is structured could change its legal compliance requirements. If you are in the process of setting up an SMSF, you will need to make a decision about how to structure it appropriately to suit.
An SMSF can be structured as a single-member fund or a multiple-member fund, with the trustees of those funds deemed as either to be individual trustees or a corporate trustee
Examining the circumstances of your members could help to narrow down the structure that will be best suited. You can also work out from the requirements of each structure whether or not a fund structure would be suitable for the needs of your members.
Individual trustees in a single-member fund will have two trustees within the fund. One trustee must be the fund member, but cannot be the other trustee’s employee (unless they are also relatives). An example of a single member trust fund structure could be a family super fund, where the members are trustees for the fund.
Individual trustees in a multiple-member fund structure generally have between two to six members. Each fund member must be a trustee and each trustee must be a fund member. Like the single-member fund, members of this fund structure cannot be the employee of another member (unless they are relatives).
SMSFs that use individual trustees or are looking to use individual trustees in their structure may benefit from the following:
- The fund can be cheaper to establish, as a separate company does not need to be set up to act as a trustee.
- Trustees must follow the rules in the fund’s trust deed, the super laws and the tax laws.
- There are fewer reporting obligations which means it can be easier to administer, however, changing trustees can mean more paperwork and administrative costs. .
- Another trustee must be appointed if your fund only has two trustees and one leaves or dies to continue operating as an SMSF, or it must change to a corporate trustee structure. If the trustees change, you need to notify the ATO within 28 days.
- Fund assets must be held in the name of the fund or the names of the individual trustees, “as trustees for” the fund. If the trustees change, the name in each asset’s ownership document must be changed as well, which can be time-consuming and costly.
SMSFs that are set up using corporate trustees, typically set up a business or company to act as a trustee. The members within these kinds of funds are known as directors and will need to apply for a director identification number as such.
Corporate trustees within a single-member fund structure may have one or two directors, but one of those directors must be the fund member. If there are two directors, the member cannot be the other director’s employer (unless they are relatives).
Corporate trustees within a multiple-member fund structure generally number between two to six members, with each fund member also being a director. A member cannot be the employee of another member (unless they are relatives). An example of a corporate trustee SMSF could be a business acting as the trustee for a super fund, where the members are also directors of the fund.
SMSFs that use corporate trustees or are looking to use corporate trustees in their structure may benefit from the following:
- A company must be set up to act as the corporate trustee, for which ASIC will charge a fee to register them as a corporate trustee and an annual review fee.
- Directors must follow the rules in the fund’s trust deed, the super laws, the tax laws, the company’s constitution and the Corporations Act 2001.
- Company directors, including directors of an SMSF corporate trustee, will need to obtain a director identification number.
- There are some extra reporting obligations to ASIC but it can be easier to administer the ownership of fund assets and to keep fund assets separate from any personal or business assets.
- The corporate trustee does not change if a director leaves or dies, as it can operate with just one director. However, you will need to notify the ATO and ASIC within 28 days if the directors change.
- Fund assets must be held in the name of the fund or the names of the company, “as trustee for” the fund. If the directors change, the corporate trustee does not change so the titles of the fund assets are unchanged.
The setup of an SMSF can be a complicated process. You may benefit from speaking with a professional assisting you in its preparation and establishment. Choose someone who is qualified, registered and licensed, and right for you and your circumstances.
Posted in: super
With a significant number of Australians approaching retirement and looking at the best ways to maximise their retirement assets and income from their super for it, retirement planning makes sense.
Unfortunately, there are those who want to target people approaching and planning for their retirement with schemes designed to ‘help’ retirees and prospective retirees avoid paying tax by channelling their income through a self-managed super fund.
Retirement planning schemes are designed to help people avoid paying tax on the income earned through their assets (often in an illegal manner). Those schemes may seem like a simple get-rich-quick solution in maximising assets and income for retirement but can put people’s entire retirement savings at risk.
Anyone can fall prey to a retirement planning scheme. Anyone who is looking to put significant amounts of money into superannuation can be at risk of being ensnared, particularly those who are over 50, and who are:
- SMSF trustees
- Self-funded retirees
- Small business owners
- Professional service providers
- Individuals who are involved in property investment
Checking for standard features of retirement planning schemes can be an excellent way to avoid becoming tangled in one. Retirement planning schemes usually:
- Are artificially contrived and complex, with SMSF members often targeted and encouraged to use their SMSF as part of the scheme
- Involve a lot of paper shuffling
- Are designed to leave the taxpayer with a minimal or zero tax, or even a tax refund
- Aim to give a present-day tax benefit by adopting the arrangement
- Sound too good to be true – and in most cases, they are.
Currently, there are a number of schemes targeted toward those individuals who currently have an SMSF, as they have a high level of control and autonomy in the way that their retirement savings are invested (subject to applicable tax and super laws).
Some examples of retirement planning schemes include:
- Some arrangements involving SMSFs and related-party property development ventures.
- Refund of excess non-concessional contributions to reduce taxable components
- Granting legal life interest over a commercial property to SMSFs
- Dividend stripping
- Non-arm’s length limited recourse borrowing arrangements
- Personal services income
- Liquidating an SMSF
To avoid becoming a part of a retirement planning scheme, seek professional advice on super or SMSFs from a specialised accountant. You can also:
- Seek professional advice from a reputable source, such as a financial planner, adviser or accountant with proven professional qualifications and/or certifications.
Posted in: tax
The end of the financial year is coming up next month (30 June), and you may be looking for ways in which you could make tax savings in this year’s tax return. This could be through tax deductions, expenses that you could make now for your work purposes or even with tax offsets introduced by the government. Whatever your tax situation, we’re equipped and ready to help you navigate the tricks and traps of income tax returns.
Upon completing a tax return, individuals are entitled to claim deductions for expenses that are directly related to their income. These can come in a variety of forms, but must usually be work-related to be claimable.
There are three requirements individuals must meet to be able to claim a work-related deduction:
- the individual must have spent their money and not be reimbursed for it
- the expense must be related to their job and;
- there must be a record, like a receipt, to be able to prove it.
If an expense was for work and private purposes, individuals can claim a deduction for the work-related portion.
Here are some common types of deductible expenses taxpayers like employees and rental property owners can claim this financial year:
Home Office Expenses
The past year may have seen you working more from home or remotely than ever before, and setting up a home office may have incurred a number of additional expenses. Some of the expenses that you may be able to claim as tax deductions include
- Phone and internet expenses
- Computer consumables (such as printer paper and ink) and stationery
- Home office equipment (such as computers, phones, printers, furniture, etc).
With home office equipment, you may be able to claim either:
- the full cost of the items (if less than $300 in value) or
- The decline in value (also known as depreciation) for items over $300.
Unless you meet very specific requirements, you probably will not be able to claim for home expenses, such as mortgage interest, rent and rates, or the cost of general household items.
If you plan to use the temporary ATO approved ‘shortcut method’ (80 cents per hour for all additional running expenses) to claim your deductions, you cannot claim any other expenses for working from home for that period. If you purchased a desk to use when working from home for example, you cannot claim a deduction for that separately as it is covered by the 80 cents per hour work rate. The deadline for this method of calculation is 30 June 2022 (unless it is extended).
Individuals can make a claim for work-related clothing expenses including compulsory, non-compulsory and registered uniforms, occupation-specific and protective clothing, and expenses associated with work-related clothing, such as dry cleaning, laundry and repair expenses.
Individuals can prepay self-education items before the end of the income year, including:
– course fees (not HECS-HELP fees), student union fees and tutorial fees
– stationery and textbook purchases
Other Work-related Expenses
Individuals can prepay the following expenses before 1 July 2022:
– union fees
– seminars and conferences
– subscriptions to trade, professional or business associations
– subscriptions to magazines and newspapers
If you are looking for assistance in working out potential expenses that you could incur prior to the end of the financial year, have queries about your claims or just want to prepare for 30 June 2022, start a conversation with us now. We are tax planning professionals ready and willing to help.
Posted in: tax
With more than a quarter of Australian employers currently having an apprentice or trainee on the books, it’s important that these young individuals understand what they may be able to claim work-wise on their tax returns this year (and that they should be preparing for it sooner rather than later).
You can claim a deduction for the cost of travel while performing your duties. This includes travel between different work locations, including for different employers. Normal trips between home and work are private in nature and can’t be claimed. This applies even if you:
- live a long way from your usual workplace, or
- have to work outside normal business hours (eg weekend shifts).
In limited circumstances you can claim the cost of trips between home and work, where:
- you had shifting places of employment (that is, you regularly worked at more than one site each day before returning home)
- you were required to carry bulky tools or equipment for work and all of the following conditions were met
- The tools or equipment were essential for you to perform your employment duties and you didn’t carry them merely as a matter of choice.
- The tools or equipment were bulky – meaning that because of their size and weight they were awkward to transport and could only be transported conveniently by the use of a motor vehicle.
- There was no secure storage for the items at the workplace.
If you claim car expenses, you must:
- keep a logbook of your work trips, or
- be able to show us your claim is reasonable if you use the cents per kilometre method (for claims up to 5,000 km only).
An important note to make is that your vehicle is not considered to be a car if it is a vehicle with a carrying capacity of:
- one tonne or more, such as a ute or panel van
- nine passengers or more, such as a minivan. In these circumstances (eg if you use a ute) you can claim the proportion of your vehicle expenses that relate to work – such as fuel, oil, insurance, repairs and servicing, car loan interest, registration and depreciation.
You also will need to keep receipts of your actual expenses.
You cannot use the cents per kilometre method for these vehicles. While it is not a requirement to keep a logbook, it is the easiest way to show how you have calculated your work-related use of the vehicle.
You can claim a deduction for self-education expenses if your course relates directly to your current job – for example, your apprenticeship course. You can also claim a deduction for the cost of travel from your home to your place of education and back, or your workplace to your place of education and back. You must keep records of your travel expenses to claim a deduction.
You can’t claim a deduction if your:
- study is only related in a general way or is designed to help you get a new job. For example, if you’re an apprentice carpenter you can’t claim the cost of study to enable you to become a builder.
- Your employer pays your apprenticeship course fees outright or reimburses you upon completion of your course.
Tools & Equipment Expenses
You can claim a deduction for tools or equipment you are required to buy for your job. If you also use the tools or equipment for private purposes, you can’t claim a deduction for that use.
For example, if you have a toolset that you use for private purposes half the time, you can only deduct 50% of the cost. If the tools or equipment are supplied by your employer or another person, you can’t claim a deduction.
If a tool or item of work equipment you only used for work:
- cost more than $300 – you can claim a deduction for the cost over a number of years (depreciation)
- cost $300 or less – you can claim an immediate deduction for the whole cost.
You can claim a deduction for:
- the cost of buying, mending and cleaning uniforms that are unique and distinctive to your job – eg a uniform your employer requires you to wear.
- protective clothing your employer requires you to wear – eg hi-vis vests, steel-capped boots and safety glasses.
You can’t claim a deduction for plain clothing worn at work, even if your employer tells you to wear it or you only wear it for work (eg workwear or tradie wear that is not designed to provide you with sufficient protection from the risk of injury at your worksite)
You may be able to claim other work-related deductions:
- protective equipment such as sunscreen, sunhats and sunglasses
- union and professional association fees
- phone expenses if you have to make phone calls or send texts for work.
Remember that you can only claim part of the expense that is work-related in this instance.
If you have any concerns or questions about your upcoming tax return, you can come and consult with us – we’re equipped to assist you in all tax-related matters.
Posted in: business
As of 5 April 2022, new Directors will need to have applied for their Director Identification Number (DIN) prior to their appointment to the position.
Existing directors were required to obtain a DIN prior to the end of the transitional period (30 November 2022), whereas directors of Indigenous Corporation have until 30 November 2023. Failure to do so could result in penalties for non-compliance.
What Is A Director Identification Number?
Previously a company or business was registered through ASIC, where a Tax File Number and an Australian Business Number would be required. These are obtained through the Australian Taxation Office (ATO) and are a critical part of setting up a business or company.
Introduced in November 2021, there will be an additional step introduced in the registering of a company, involving a Director Identification Number (DIN). This director identification number is a unique identifier that a director will apply for once and keep forever.
They were brought in as a part of a broader regulatory strategy to address the issue of phoenixing – this is where controllers of a company deliberately avoid paying liabilities by shutting down indebted companies and transferring assets to another company.
DINs are recorded in a database to be administered and operated by the Australian Tax Office and are made available to the public.
The ATO has the power to provide, record, cancel and re-issue a person’s DIN. A DIN will be automatically cancelled if the individual does not become a Director within 12 months of receiving the DIN.
Who Does A DIN Apply To?
Director ID only applies to companies and corporate bodies registered under the Corporations Act and CATSI Act.
Director ID does not apply to sole traders, partnerships or trusts unless the trust has a corporate trustee.
Deadlines For Applying For A DIN
When the announcement of DINs was made in April 2021, there were set deadlines in place for those involved in profit and not-for-profit entities, as well as for Indigenous Directors. As of 5 April 2022, those deadlines have changed.
For profit entities, the deadline for applying for a DIN under the Corporations Act must be done before your appointment as a director.
For non-profit entities (including those entities registered under the ACNC Act as either private or public companies), you also need to have applied for your DIN before you are appointed as a director.
For new directors of Indigenous Corporations, the same requirements for applying are advised (prior to appointment).
How To Apply For A DIN
All directors must apply for their own DIN. This cannot be done by a third part, unless it can be proven to the Registrar that the director is unable to make the application on their own behalf (such as suffering some sort of incapacity, etc).
There are three ways to apply for a DIN:
- Online application via the myGovID app. This is different to myGov and is the quickest way to obtain a DIN.
- Phone application.
- Paper application (which is the slowest process).
These methods require proof of identity documentation, however, you may be able to use certified copies (witnessed by a Justice of the Peace) if you are using the paper application.
Posted in: business
The hard part in obtaining favourable judgements for your business or service is making sure clients and others perceive all you have done for them – in other words, getting credit for what you have done.
There are five principal dimensions to service quality:
Reliability is the ability to provide the promised service dependably and accurately. It includes timeliness and the person’s perception of your competence. People judge you on how dependable you are. Reliability means performing the service correctly the first time.
Assurance is the client’s feeling that her or his situation is in good hands. It involves the knowledge and courtesy of your personnel, and their ability to convey trust and confidence.
Assurance also involves credibility, which includes trustworthiness, believability, and honesty. It means having the client’s best interests at heart and demonstrating care and concern. Assurance is the reason for the old saying, ‘People don’t care how much you know until they know how much you care.’
Tangibles include the physical evidence of your service, your facilities and equipment, and the appearance of your personnel. Tangibles include correspondence, newsletters, brochures, and other tangible products that the client receives from you. They also include the neatness of reports and financial statements, and invoicing.
Responsiveness is your willingness to help people and provide prompt service. Responsiveness, like reliability, also involves the timeliness of service. Accessibility is also part of responsiveness, as are approachability and how easy you are to reach.
Empathy: means that you provide caring, individualised attention to clients. It goes beyond mere courtesy, although courtesy is as important a part of empathy as it is of assurance. It requires a commitment to the client and involves understanding the client and knowing his or her personal needs and specific requirements.
Courtesy involves politeness, respect, consideration for the client’s property, and consideration of the client’s time, as well as the friendliness of contact personnel (including receptionists and telephone operators).
To get a high rating on your scorecard, you need to think about how you can demonstrate your capabilities in these areas in ways that people can perceive clearly.
Posted in: super
One of the benefits of establishing or opting for an SMSF is due to the control they are given over where the money is invested. While this sounds enticing, the downside is that they involve a lot more time and effort as all investment is managed by the members/trustees. They are also often the targets of fraud and scams.
Firstly, SMSFs require a lot of ongoing investment of time:
- Aside from the initial set-up, members need to continually research potential investments.
- It is important to create and follow an investment strategy that will help manage the SMSF – but this will need to be updated regularly depending on the performance of the SMSF.
- The accounting, record keeping and arranging of audits throughout the year and every year also need to be conducted up to par.
- Data shows that SMSF trustees spend an average of 8 hours per month managing their SMSFs. This adds up to more than 100 hours per year and demonstrates that compared to other superannuation methods, is a lot more time occupying.
Secondly, there are set-up and maintenance costs of SMSFs such as tax advice, financial advice, legal advice and hiring an accredited auditor. These costs are difficult to avoid if you want the best out of your SMSF. A statistical review has shown that on average, the operating cost of an SMSF is $6,152. This data is inclusive of deductible and non-deductible expenses such as auditor fees, management and administration expenses etc., but not inclusive of costs such as investment and insurance expenses.
Thirdly, investing in an SMSF requires financial and legal knowledge and skill. Trustees should understand the investment market so that they can build and manage a diversified portfolio.
Further, when creating an investment strategy, it is important to assess the risk and plan ahead for retirement, which can be difficult if one is not equipped with the necessary knowledge. In terms of legal knowledge, complying with tax, super and other relevant regulations requires a basic level of understanding at the very least.
Finally, insurance for fund members also needs to be organised which can be difficult without additional knowledge.
Although SMSFs have the advantage of autonomy when it comes to investing, this comes at a price. Members/trustees need to invest time and money into managing the fund and on top of this, are required to have some financial and legal knowledge to successfully manage the fund.
SMSF Fraud Alert
The ATO is also warning of an increase in Self Managed Super Fund identity fraud and scams targeting the retirement savings of individuals. This is something to be aware of if looking to start an SMSF and maintain it.
These fraudulent perpetrators use stolen identity information or may harvest information from individuals by cold calling the victim and presenting themselves as superannuation experts.
They typically offer superannuation comparisons and/or high-return investment options through the establishment of a fraudulent SMSF. Remain vigilant, and remember that if you are dealing with an advisor for the benefit of your SMSF, you should check to see if the advisor is listed on ASIC’s Professional registers or Moneysmart’s list of unlicensed companies you should not deal with.
Posted in: super
Paying super is compulsory for all employers, regardless of whether their staff are employed part-time, full-time or contracted. It’s important to remember that paying super for your workers isn’t a ‘tax’ or form of government revenue; it’s an entitlement to serve your workers in retirement.
With regular changes being introduced in regards to super contributions, it can become overwhelming trying to remain compliant. Employers are required by law to pay all employees super, provided their employees meet certain conditions. To ensure you are remaining compliant and to avoid hefty ATO fines, consider the following tips for paying super.
Paying The Right People
Investigate who of your employees are eligible to earn super. Most employees and many contractors will be eligible, so hiring individuals under certain employment terms to avoid paying super can see you end up facing severe fines. You must pay super to contractors if you have a verbal or written contract that is wholly or principally for their labour and if they are carrying out the work themselves. You will also need to pay casual employees super and the rules have just changed whereby you need to pay even if they earn less than $450 per calendar month.
Paying On Time
Super payments need to be made, at the very least, quarterly. Quarters are broken up as follows:
– Quarter one: 1 July – 30 September, due by 28 October
– Quarter two: 1 October – 31 December, due by 28 January
– Quarter three: 1 January – 31 March, due by 28 April
– Quarter four: 1 April – 30 June, due by 28 July
Paying In The Right Manner
To follow laws and regulations, employers must pay super contributions using SuperStream. The Government created SuperStream as a measure to improve efficiency. It requires employers to send employees’ information regarding their super entitlements electronically through one channel. It is designed to make the task of paying super easier and more time-resourceful.
Paying To The Right Place
Most employers allow employees to choose the superfund in which contributions will be paid to. Since the Government introduced the SuperStream reform, it should not make any difference to employers what funds their employees elect to be paid into. The only stipulation is that the fund must be a complying super fund or retirement savings account.
Paying The Correct Amount
All employers are legally required to pay all eligible employees 10 per cent of their total wage, regardless of how much they earn or their type of employment. Failure to do so will leave an employer susceptible to auditing and heavy fines from the ATO.
Posted in: tax
It’s getting closer to the time that FBT returns need to be lodged, so it’s important to understand that there may be a change to the FBT liability of your business when it comes to one employee benefit.
Car parking as an FBT benefit is provided on a particular day when, between 7.00am and 7.00pm:
- a car is parked at a work car park for the minimum parking period;
- an employee uses the car in connection with travel between their place of residence and primary place of employment at least once on that day;
- the work car park is located at or in the vicinity of the primary place of employment, on that day;
- a commercial parking station is located within a one-kilometre radius of the work car park used by the employee;
- the lowest representative fee charged by any commercial parking station for all-day parking within a one-kilometre radius of the work car park exceeds the car parking threshold;
- the parking is provided to the employee in respect of their employment, and
- the parking is not excluded by the regulations.
However, a car parking benefit provided in respect of an employee is exempt where:
- the car is not parked at a commercial parking station;
- the employer is not a public company or a subsidiary of a public company;
- the employer is not a government body; and
- for the income year ending before the start of the FBT year, the employer’s assessable income is less than $10 million or alternatively, it is a ‘small business entity’ (SBE)
Redefining a ‘commercial parking station’ to revisit a prior concept associated with the application of fringe benefits tax may make the perks of coming into the office a little more appealing to employees.
FBT applies to parking provided by employers to their employees where there is alternative parking available commercially available.
Prior to the recent ruling, there was a previous understanding that car parks that effectively charge penalty rates for all-day parking (to encourage shorter stays) would not represent genuine alternative parking arrangements for commuters, and should not trigger FBT liabilities as a result. However, the recent ruling has overturned this, which means that any alternative paid parking would trigger the liability.
This ruling came into effect on 1 April 2022.
This recent ruling on how car parking is treated as an FBT liability should assist in reducing the potential FBT burden on some employers (which should assist them in turn in incentivising employees back into the workplace with benefits).
Other FBT benefits that employers may be able to claim back on in their FBT return could include COVID-19 related benefits (such as office equipment, technology, etc), company cars, meals, entertainment, living away from home allowances, and more. As a result of the impact
If you need assistance with preparing your FBT return for lodgement, consult with a professional as soon as possible so that we can assist you with preparing your return.