Month: October 2020
Deed of Variation – NSW Surcharge Land Tax
In June 2016 the NSW government introduced two surcharges payable by a ‘foreign person’ purchasing and/or owning residential property in NSW:
- Surcharge Purchaser Duty – currently 8% of the market value of the residential property – payable once upon acquisition;
- Surcharge Land Tax – currently 2% of the unimproved value of the residential land – payable annually on such land owned as at 31 December each year.
Residential property and/or land held in trust wherein any person is deemed to be ‘foreign’ – an individual, a corporation, a trustee ‘not ordinarily resident in Australia’ and who holds a ‘substantial interest’ of 20% or more, including beneficiaries of a trust* – means the trust is liable to pay the surcharge/s. Where this is the case, a trust deed may be varied by drawing up a Deed of Variation to exclude any foreign person/s.
* For a full definition of ‘foreign person’, see https://www.revenue.nsw.gov.au/help-centre/resources-library/g009
Deed of Variation
By now, many discretionary trust deeds have been amended to exclude foreign person/s from benefiting from a trust. Did you amend your trust deed prior to 31 December 2019? Transitional provisions allowing amendments to be made to exclude foreign beneficiaries are now in place and must be made and executed by midnight 31 December 2020.
If you have not yet reviewed and considered your trust, it is time to consult YML Group for an assessment of the ‘foreign’ status of your trust. A Deed of Variation may be used – going forward – to reduce and/or exempt your trust’s surcharge liabilities.
How can YML help?
Talk to our Accountants today to see how YML Chartered Accountants can assist you with your Trust Deed of Variation. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.
Bookkeeper Service – Why does your business need it?
Stay focused on your business by using a bookkeeping service to manage the day-to-day financial data. YML Group’s Business Process Outsourcing (BPO) service offers Bookkeeping to help you turn your attention towards the growth aspects – such as strategy and marketing – of your business.
What does a bookkeeping service do for your business?
Bookkeepers, generally, are involved in the daily tasks of financial data entry, including taxes, payroll, managing debtors and creditors, as well as tracking expenses and adhering to a company’s financial reporting protocols. A bookkeeping service can play a crucial role by undertaking the routine monetary work required to run a business.
Whereas, an accountant will oversee your business’s finances and will take an analytical approach to your financial data with their expertise in financial forecasting, profit and loss analysis, filing taxes and managing financial statements, including preparing a myriad of financial reports.
How might your business benefit from a bookkeeping service?
Up-to-Date Financial Accuracy
Running a business requires many fast-paced actions, including decision-making. Where a business owner has to deliver informed decisions requiring up-to-date financial information, the benefit of a bookkeeping service that manages that information means a business owner can readily improve a business with the knowledge of whether it can, for example, hire a new employee, increase office space or issue a purchase order for a new asset.
Tax-Time Compliance
There is a swathe of regulations around company taxes, including GST, BAS and PAYG withholding tax. It is important that a business keep financial records that enable accurate and timely reporting to the Australian Taxation Office (ATO).
If a business tries to manage their books themselves without the necessary qualifications or experience, there is a risk that the financial data is incorrectly entered and ATO penalties could be incurred. Missed tax payments due to human error or lack of knowledge can be avoided by using a bookkeeping service to stay on top of a company’s regulatory financial obligations and thereby reduce unwelcome costs to a business.
Management of Bills and Receipts
Businesses grow and become more complex – more customers, more products, more third-party suppliers, requiring an increase in payments and receipts. To prevent falling behind on paying creditors and to improve collection of receivables, a bookkeeping service ensures that liabilities are paid and that reminders are sent to debtors. Keeping check is what a bookkeeper is good at, improving a company’s credit rating and borrowing profile.
Timely Reporting of Financial Data
‘Balancing the books’ is essential for a successful business and when financial records are kept accurately and up-to-date, so financial reporting is easily produced for a business owner and other business stakeholders.
Working closely with a company’s accountant, a bookkeeper can deliver up-to-the-minute financial data necessary for an accountant’s analysis, forecasting and reporting.
Confidence to Focus on Future Business-Building
Bookkeeping, such as YML’s BPO service, is an affordable necessity for a well-run company and its growth-centric business owner. Overseeing the front-of-house operational functions to build a business is paramount for a business owner. If a business owner can leave the back-of-house functions such as financial data entry to experts by using a bookkeeping service, it makes sense to do so.
Developing a viable business model with a customer focus requires confidence, so trusting in a service to manage the books can make a huge difference to a company’s success.
YML is a leader in the field of BPO and we have helped many clients – individuals and SME companies – to build better businesses with the practice of outsourcing their business processes. Empower your organisation with BPO through YML Group Outsource Manila and watch your business grow.
How can YML help?
Talk to our YML Business Services Team today to see how YML Group can assist you with your Bookkeeping requirements. For more information, view our website and contact us on (02) 8383 4400 or by using our Contact Us page on our website.
Using your Equity to Lower your Rate AND to Invest
Your home’s equity could open investment opportunities to improve your future wealth. By using equity in your home as collateral to borrow money, you could qualify for a Home Equity Loan.
How much equity?
First, it is important to calculate how much you still owe on your home loan. You can do this by ascertaining a current valuation of your home and comparing your home’s value with the amount you have yet to pay off your mortgage.
If your home is valued at $850,000 and you still owe $500,000 on your mortgage, then the difference of $350,000 = your gross equity.
How can equity be used?
Whether you want to renovate your home to further improve its value, you want to buy another ‘investment’ property or you want to invest in shares and managed funds, your equity can be used to borrow at a lower ‘residential’ interest rate than, say, 2.49% PA variable up to 60% LVR.
To borrow using your equity as collateral, a lender will assess your income, your living costs and your liabilities before usually lending up to 80% of the value of your home.
If your home is valued at $850,000 and a bank lends 80% of the value = $680,000, then you must deduct your existing mortgage amount-owing of $500,000. Your useable equity is therefore $180,000.
You may borrow more than 80% of the value of your home if you pay Lenders Mortgage Insurance. Note, this might lead to an increase in your loan repayments.
Home Equity Loan
To generate money for investment, although not a conservative approach, using your equity to take out a home loan can give you the opportunity to invest and grow your future wealth. Furthermore, borrowing against your home equity may be tax-effective as some investment expenses can be tax-deductible.
To help you decide whether releasing your home equity makes sense in your individual circumstances and to start exploring your investment opportunities, consult YML Group for expert financial advice.
How can YML help?
Talk to our YML Finance Team today to see how YML Group can assist you with your home equity. For more information, view our website and contact us on (02) 8383 4400 or by using our Contact Us page on our website.
2020-21 Federal Budget – Update
The Australian Government’s 2020-21 Federal Budget has been designed to increase employment and boost businesses during the ongoing COVID-19 pandemic. Key initiatives in the areas of personal taxation, job creation and infrastructure spearhead an array of economic measures intended to boost production in Australian industry.Australia’s Economy
In the June quarter this year, the Australian economy contracted by 7%.
Australia’s Treasurer has revealed an expected deficit of $213.7 billion in 2020-21. He announced a deficit fall to $66.9 billion by 2023-24.
Australia’s gross debt will increase to 45% of GDP ($872 billion) this year and then stabilise at around 55% of GDP in the medium term, whilst Australia’s net debt will increase to 36% of GDP ($703 billion) this year and then peak at 44% of GDP in June 2024, declining to less than 40% of GDP in the medium term.
Personal Income Tax Plan
Planned personal income tax cuts have been brought forward by two years and will now apply from 1 July 2020. What this means is…
From 1 July 2020 (subject to legislation being passed), $17.8 billion worth of tax cuts will improve the net income of workers as follows:
| Tax Thresholds | ||
| Tax Rate | Current | From 1 July 2020 |
| 0% | $0 - $18,200 | $0 - $18,200 |
| 19% | $18,201 - $37,000 | $18,201 - $45,000 |
| 32.5% | $37,001 - $90,000 | $45,001 - $120,000 |
| 37% | $90,001 - $180,000 | $120,001 - $180,000 |
| 45% | >$180,000 | >$180,000 |
| LITO | Up to $445 | Up to $700 |
An extension of the LMITO (Low and Middle Income Tax Offset) will mean a tax reduction of up to $1,080 for individuals with a taxable income of up to $126,000 during the 2020-21 financial year.
Economic Support Payments
Eligible recipients will receive two tax-exempt economic support payments of $250 each – one in November 2020 and the second in early 2021. People eligible are those currently receiving and/or holding (*conditions apply):
| Age Pension | Pensioner Concession Card* |
| Disability Support Pension | Commonwealth Seniors’ Health Card |
| Carer Payment | Veterans’ Affairs Payment* |
| Family Tax Benefit* | Veterans’ Affairs Concession Card* |
| Carer Allowance* |
Capital Gains Tax – Granny Flats
From 1 July 2021 (subject to legislation being passed), a new measure would provide for a targeted CGT exemption for granny flats where a formal written agreement – family/personal, NOT commercial – is created, varied or terminated for older Australians or Australians with disabilities.
First Home Loan Deposit Scheme
For first home buyers purchasing a new home or a newly-built home, an additional 10,000 places will be available under the First Home Loan Deposit Scheme – from 6 October 2020 until 30 June 2021. This means more people purchasing homes for a minimal 5% deposit without mortgage insurance.
Superannuation
A reform to superannuation will see individuals able to use their current superannuation fund whenever they change employment, thus impeding any duplication of funds. Under this reform, a super fund would be ‘stapled’ to an individual.
From 1 July 2021, if an employee does not nominate a super fund account when they start a new job, an employer will pay the super contributions in to the new employee’s existing super fund – by obtaining information about the new employee’s existing super fund from the ATO. How? An employer will log on to ATO online services and enter the new employee’s details to determine the employee’s existing super fund account.
If an employee does not have an existing super fund account and does not decide upon a super fund, then an employer will pay the super contributions in to the default (company-nominated) super fund.
NEW JobMaker Hiring Credit
A new scheme to help increase employees in businesses has been developed. Called JobMaker Hiring Credit, it is available to eligible employers over 12 months from 7 October 2020 for each new position created.
Eligible employers can receive:
- $200 per week if they hire an eligible employee aged 16 to 29 years
- $100 per week if they hire an eligible employee aged 30 to 35 years
Employees must:
- Increase overall employee headcount and payroll;
- Work a minimum of 20 hours per week, averaged over a quarter; and
- Have received JobSeeker Payment, Parenting Payment or Youth Allowance for at least one month out of the three months prior to commencing the job.
To help businesses with less than $5 billion in turnover to invest in their future, this new measure enables them to fully expense new depreciable assets and the cost of improvements to existing eligible assets in the first year of use – acquisition of eligible capital assets from 7:30pm AEDT on 6 October 2020 and first used or installed by 30 June 2021.
Whereas the existing Instant Asset Write-Off is for asset purchases up to $150,000 (for businesses with less than $500 million in turnover and not applicable on purchases after 31 December 2020), this new measure does not cap an asset’s cost.
Carry-back Company Losses
The full expensing of capital asset investment will generate tax losses for some companies. Therefore, the new measure of enabling a company to carry-back losses will generate cash refunds for eligible companies. How does it work?
For eligible companies with less than $5 billion in turnover, losses may be applied against taxed profits in a previous year, thereby generating a refundable tax offset in the year in which a loss is made.
Losses from income years 2019-20, 2020-21 and 2021-22 may be carried-back to offset previously taxed profits in income years 2018-19, 2019-20 and 2020-21.
Eligible companies can receive their tax refunds after lodging tax returns for 2020-21 and 2021-22.
R&D Tax Incentive
As at the release of the Federal Budget, numerous and varied proposed amendments to the R&D Tax Incentive are before Parliament.
Currently, the R&D Tax Incentive provides (for the first $100 million of eligible expenditure):
- 43.5% refundable offset amount for eligible companies with less than $20 million turnover
- 38.5% non-refundable tax offset for all other eligible companies
Government incentive to help businesses sees a range of tax concessions now available to businesses with an aggregated turnover of up to $50 million (previously only available to small and medium businesses).
There are three phases of expanded tax concessions:
| Phase I | |
| From 1 July 2020 |
|
| Phase II | |
| From 1 April 2021 |
|
| Phase III | |
| From 1 July 2021 |
|
Retraining / Reskilling Workers FBT Exemption
From 2 October 2020, employer-provided retraining and reskilling of employees who are redeployed to a different role within a business* will be FBT exempt (*conditions apply).
Corporate Residency Test
The Corporate Residency Test will be changed to clarify the treatment of a company which is incorporated offshore. The change means that a company, incorporated offshore, will be treated as an Australian tax resident if it has a ‘significant economic connection to Australia’, satisfied by both:
- a company’s core commercial activities are undertaken in Australia; and
- a company’s central management and control are in Australia.
In the first FBT year (1 April) after the date on which legislation is passed, employers will be enabled to rely on existing corporate records – as opposed to employee declarations – for FBT purposes.
100,000 New Apprenticeships
From 5 October 2020, a 50% wage subsidy will be available to eligible businesses that take on a new or recommencing Australian apprentice or trainee up until 30 September 2021.
The 50% wage subsidy is capped at a maximum of $7,000 per quarter.
How can YML help?
We hope that this guide helps you to navigate the 2020-21 Federal Budget. Please talk to our Accountants today if you would like to engage YML Chartered Accountants to manage your ‘road to recovery’. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.
