Category: Newsletters

Tax Planning and Restructuring to suit your Business

Tax planning is a legitimate discipline used in business to minimise, within legal limits, taxes paid by businesses. This is not a tax avoidance undertaking to deliberately exploit the tax system, so it is important to consider carefully which areas to explore. In 2019, consider the following areas:

As your business builds, it may be that it makes sense to restructure the business to suit your business’s needs. Four main business structures are: company (a legal entity separate from its shareholders), partnership (a group of people or entities but not a company), trust (a holding entity for income or property), sole trader (a single person legally responsible, with or without employees).

Restructuring means changes to your existing liabilities and taxes, so seeking professional financial advice is essential to understanding which structure can help your business optimise its future tax planning whilst ensuring the new structure makes sense operationally.

Earlier this year, the Australian Government determined to not only increase but also to extend the instant asset write-off until 30 June 2020. This is a consequential opportunity for small businesses wanting to decrease tax payments. To be eligible:

Have an annual turnover of up to $10 million and the business asset must have cost up to $25,000, be in use and have been purchased during this financial year up to 30 June 2019.

The $25,000 threshold is a 25% increase on last financial year’s threshold.

The ATO permits your business to deduct in this financial year certain prepaid expenses incurred for work or services to be performed in the next financial year. There are prepayment rules that apply and it is important to follow these rules including ‘eligible service period’, ‘excluded expenditure’ such as amounts less than $1000 and salary and wages, ’12-month rule’ and ‘pre-RBT obligation’.

Recording debtors and creditors in an accrual accounting system – that is recording income and expenses when work or services are completed, whether or not payment has yet been received or paid – will enable your business to determine actual income and expenses for the financial year to 30 June 2019.

Superannuation payments made to your employees by financial year end constitute a tax deduction for your business. It is essential that payments made to super funds are made timely and no later than 30 June 2019 to be eligible.

Have your trust distributions been calculated to meet ATO legislation? Do you need your trust minutes prepared and signed prior to 30 June 2019?

Arrange a tax planning meeting with us and we will discuss ways you might hone tax planning and evaluate restructuring your business to your advantage this year and every year hereafter.

How can YML help?

Talk to our Accountants today to see how YML Chartered Accountants can assist you with tax planning and restructuring your business. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.

Single Touch Payroll – NOW Mandatory for ALL Businesses

STP, Single Touch Payroll, is an initiative introduced by the ATO to streamline company reporting of salaries, wages, PAYG withholding taxes and superannuation contributions. STP was initially applicable only to businesses with 20 or more employees. As of this year, from 1 July 2019, all employers will be required by the ATO to have adopted STP regardless of the number of employees, so small businesses with 19 or fewer employees now also need to report via STP-enabled software.

With mandatory reporting via STP, small, medium and large employers need to ensure they are complying with the ATO’s new requirement. To do so, a business needs to consider its digital connectivity capacity and, where applicable, upgrade with STP-enabled software.

There are many options available – from purchasing in-house software packages to using a third party and subscribing to a STP software provider who works out and lodges the necessary reportable data to the ATO on your behalf.

Your business’s pay cycle does not need to change. As you pay your employees, whether it be weekly, fortnightly or monthly, you will simultaneously file with the ATO that payroll cycle’s data including employee payments, taxes withheld and super amounts. This will result in a smoother transition, allowing you to timely report to the ATO.

You will still need to prepare and submit a quarterly BAS, but payment summaries and end of financial year payment summaries will be automatically produced by the STP system.

YML Group helps many clients with STP and we can help your business set up its STP system. There are many low cost solutions such as Xero, MYOB, Reckon and others that YML Group can assist you with for ongoing compliance of the ATO’s STP regulations.

Lodging payroll with the ATO has never been easier. Let us help you set up STP today.

 How can YML help?

Talk to our YML Innovation Team today to see how YML Group can assist you with ensuring your company is STP-compliant. Contact us on (02) 8383 4400, or by visiting the Contact Us page on our website.

FBT 2019 – What’s new?

The FBT year in Australia is from 1 April and ending 31 March the following year, so now is the time to ensure that you are up-to-date with the latest FBT developments in the areas of focus for the ATO.

For the FBT year ended 31 March 2019, the FBT rate remains at 49% in line with last year’s FBT rate.

FBT applies to benefits, given to employees in lieu of or in addition to salary or wages, received and this tax is paid directly to the ATO by employers. Benefits received may include such items as vehicles, car parking, housing, private loans and even, these days, Bitcoin.

The ATO has identified two concerns - employers’ failure to identify and report FBT on items and employers’ incorrect application of exemption provisions when reporting taxable value on items – in areas of concern for the ATO. Let’s delve further…

Where an employer is required to lodge a FBT return, what do you need to know about:

FBT Rebate?

Some employers claim a FBT rebate despite being ineligible to do so. You need to check that you are a rebatable employer and if you are not, then you should ensure you are eligible to receive a FBT rebate before making a claim.

Employee Contributions?

To ensure that an employer reports employee contributions as income on their income tax return and does not overstate the employee contribution amount in order to reduce an FBT liability, the ATO focuses on finding accurate declarations on both the FBT return and the employer’s income tax return.

Motor Vehicles?

It is necessary for an employer to verify that a FBT exemption applies to the provision of a motor vehicle to an employee for private use. In addition to supplying this verification to the ATO, the ATO is looking for an employer to keep sufficient records to support an exemption.

An employer will need to look carefully at the complex rules of FBT car parking (slight increase in car parking threshold 2019) and will need to be aware of the Practical Compliance Guideline 2018/3, applicable to car and residual benefits claimed in 2019 and later FBT years. If an employer provides an employee with an eligible vehicle to perform work duties, then this guideline may be applicable. 

Living Away From Home Allowance (LAFHA)?

An employer pays a LAFHA to an employee to compensate an employee for additional expenses incurred and for the fact of being away from home whilst employment duties require an employee to live away from their usual residence.

It is important to only claim FBT for eligible employees and to obtain declarations from those eligible employees. Claiming for invalid circumstances or keeping insufficient records of the accommodation and meal components is also closely looked at by the ATO.

The ATO’s LAFHA reasonable total food and drink expenditure for one adult in Australia increases in 2019 by just under 7.5% from 2018. It would behove an employer to check the ATO’s LAFHA guidelines for 2019.

It pays to understand how FBT applies in these areas. To minimise your FBT liability, at YML Group we can prepare and lodge your FBT return and/or calculate any employee contribution.

Our fee for the preparation and lodgment of an FBT return is from $530 + GST and for the calculation of an employee contribution is $260 + GST per item.

How can YML help?

Talk to our YML Chartered Accountants Team today to see how YML Group can assist you with FBT. Contact us on (02) 8383 4400, or by visiting the Contact Us page on our website.

Employees : Time and Attendance Platforms

Managing a workforce as an owner and/or manager of any sized business has usually entailed an abundance of administrative tasks, an endless stream of minutiae to achieve the end result of timely and accurate payroll to your workforce. Well, not anymore.

In today’s era of Software-as-a-Service (SaaS), software options exist for managers of workforces, large and small, to manage their staff’s time and attendance on the job.

Companies specialising in time and attendance platforms are able to deliver on the promise of automation of manual administration, such as rostering, scheduling, deployment of employees; shift planning; tracking of time spent on a job and attendance in the workplace. All these automated administrative tasks may result in increased cost savings through this ability to reliably measure and manage human labour costs.

Live data and the capability for all employees to have access to a time and attendance platform means a manager can optimise staff on a day-to-day, weekly or monthly basis, making strategic, cost-saving decisions at the touch of a button.

A manager can adjust staffing levels and activity times readily. There is less time spent on contacting individual workers, less time lost chasing absentees and more time for managing the workforce on-the-job.

Employees generally want to work productively and with an automated time and attendance platform, they can be the right employee put in to the right shift and/or on to the right task corresponding to their natural aptitude. This may help to reduce costs as previously, less control was able to be exercised over staffing strategy due to the lack of real-time information.

Human Resources (HR) and Payroll can be linked to a platform, enabling the export of relevant data for those functions to operate smoothly, compliantly and with correct payment of wages and overtime. Meeting a company’s obligations to the ATO becomes far easier with automation of employees’ time and attendance.

Furthermore, growing a business by expansion, opening in another location, is a walk-in-the-park when the administration of doing so doesn’t take double or triple the time.

Managers can instead focus their time and energy on managing the business and their employees, paying more attention to relationships within an organisation for optimal yields.

So stop imagining a brighter future for your business and its employees and start investing in their future – a time and attendance platform, such as Deputy (www.deputy.com) and Tanda (www.tanda.co), is what you need now.

 

How can YML help?

Talk to our YML Innovation Team today to see how YML Group can assist you with your SaaS platforms. Contact us on (02) 8383 4400, or by visiting the Contact Us page on our website.

Small Business Instant Asset Write-Off : NOW up to $25,000

As a small business every opportunity to minimise tax is a significant one, so an increase of the instant asset write-off threshold is welcomed and may be taken up by small businesses to decrease tax payments.

Until recently, the instant asset write-off threshold was $20,000 and was due to revert to $1,000 as of 1 July 2019.

However, Prime Minister Scott Morrison made a speech on 29 January 2019 declaring that the Australian Government would extend the instant asset write-off for another 12 months until 30 June 2020 and he also stated that the threshold would increase (to $25,000) for tax returns lodged from financial year end 2019.

This legislation was introduced in to Parliament on 12 February 2019. It is not yet law.

Is your business eligible to claim this tax benefit?

Small businesses – with an annual turnover of up to $10 million – who have purchased and installed or put in to use an asset that cost up to $25,000 between 29 January 2019 and 30 June 2019 may claim an instant write-off of the business portion of that asset’s purchase cost.

The business portion write-off must be claimed in the business’s tax return for the relevant income year, so claiming an asset purchased for up to $25,000 may be done both this financial year end 2019 and next financial year end 2020.

What happens if the asset cost more than $25,000?

If an asset is purchased at a cost greater than $25,000, it may still be deducted but not immediately; rather, its depreciation cost may be deducted over time, over more than one tax return.

YML Group can help you determine eligibility and assist you with making your tax-deductible claims.

How can YML help?

Talk to our YML Chartered Accountants Team today to see how YML Group can assist you with your tax deductions. Contact us on (02) 8383 4400, or by visiting the Contact Us page on our website.

Working from home: What deductions can you claim?

Technology in the 21st century has broadened the work space for many people. Where an employee puts in additional working hours in their home or where a home office has been set up, the Australian Taxation Office (ATO) is of the view that not all expense claims made are legitimate deductions.

As an employee performing extra work at home like emailing in the evening, spending a day at home working on a presentation or a few hours at home making phone calls, you may not claim a deduction for occupancy of your home. Items such as rent, property rates and insurance are non-deductible, as are costs related to a mortgage.

However, if you run a home office as your primary place of business, then those occupancy costs may be claimed and you are encouraged to heed professional financial advice about which costs in your particular live/work situation are valid.

Any work conducted at home incurs running costs and running costs such as electricity, cleaning, stationary, office equipment and/or depreciation thereof, as well as phone/internet usage are all deductible expenses. Now, it is highly likely that not all the cost incurred may be claimed. Where there is personal and professional use of an item, only the work-related portion of the total cost is allowed to be claimed.

Expenses Home is principal workplace with dedicated work area Home not principal workplace but has dedicated work area You work at home but no dedicated work area
Running expenses Yes Yes No
Work-related phone & internet expenses Yes Yes Yes
Decline in value of a computer (work related portion) Yes Yes Yes
Decline in value of office equipment Yes Yes No
Occupancy expenses Yes No No
Source: Australian Taxation Office


Determining work-related expenses can be done using the ATO’s home office expenses calculator at https://www.ato.gov.au/calculators-and-tools/home-office-expenses-calculator/

Remember – Keep evidence of your work-from-home expenditure

Potential tax deductions are only claimable with the relevant and accurate proof of usage. Consider keeping such evidence as a detailed phone bill, purchase receipts and/or a diary of actual periods of an item’s usage within the home.

Being aware of what you may and may not claim as a deductible expense is especially prudent, given the ATO’s grasp on the 21st century worker’s flexible working life.

How can YML help?

Talk to our YML Chartered Accountants Team today to see how YML Group can assist you with your work-from-home expense claims. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.

BUY / SELL Insurance – What is it and how can it help your business?

It’s important to remember that protecting your business from the ups and downs in the market place isn’t the only protection you need to consider for the long-term health of your business. Your business needs a ‘will’ in place for the times when an owner of the business exits due to death, permanent injury or illness. In this case, a ‘will’ is Buy / Sell insurance, a policy that helps to cover the cost of transferring ownership if such an event occurs.

In the event of one of the owners of a multi-owner business dying or being permanently injured, a business would have lump sum funds available from a Buy / Sell insurance policy to ensure that the exiting owner’s shares might be bought by the remaining owner/s by compensating the family of the exiting owner.

Buy / Sell insurance proceeds could alleviate unpleasant disruptions to the business such as:

Ideally, coupled with Buy / Sell insurance would be a prior written agreement between business owners to determine a fair and equitable payment and that fair and equitable payment be made accessible for a buyout of a family’s shares. Such an agreement could mitigate any quarrelling among the parties and, simultaneously, could avoid any concerns about new ownership entering the business.

Therefore, in the likelihood of a sudden and unexpected departure of a business owner – through death, permanent injury or illness, it is advisable to consider transferring the financial risk associated with extraordinary circumstances to an insurer.

You will need to decide on the ownership structure of the policy, the payment of premiums and how to manage the tax payable on insurance proceeds should you make a claim. Where tax is applicable on premium payments and proceeds received, it is paramount that you seek advice from a professional financial advisor.

YML Group can readily and expertly assist you with preparing a bespoke Buy / Sell insurance package for your business.

How can YML help?

Talk to our YML Financial Advisory Team today to see how YML Group can assist you with Buy / Sell insurance. Contact us on (02) 8383 4400, or by visiting the Contact Us page on our website.

Applying For A Mortgage Is No ‘Walk in the Park’

The Banking Royal Commission commenced in 2017 and APRA’s crackdown on sub-standard lending practices have seen to new lending criteria being used since 1 July 2018, meaning applying for a home loan can feel like too much work for an applicant.

The new rules mean lenders now apply financial checks beyond what has been applied in the past. An applicant can feel scrutinised and even hounded for the depth of information being requested by banks and other lenders.

A lender is required to make sure that an applicant has the debt-servicing capacity to repay a loan at its interest rate within the specified loan term.

In order to have this assurance, applicants may be asked to provide extensive credit history data, including but not limited to: late bill payments, credit card balances, rental payment transaction lists, life and other insurance policy details, as well as disposable income capacity with detailed household budgets.

If a lender can satisfy itself that an applicant has the ability to service a principle + interest loan over the duration of the mortgage period, then a loan may be approved.

What can you do to improve your application?

Mind Your Credit History – As third-party verification of existing assets and liabilities is often required, keeping a record of your credit history is an important action you can take to improve your chances of receiving a loan.

Allow Time – Although many loans are approved relatively quickly and easily, expect to factor in more time for the application process. Allowing enough time to answer questions from a lender and enough time to supply supporting documentation will help to reduce any anxiety about a longer wait for an approval.

Plan Ahead – Realize you need to consider your financial transactions more carefully these days to best avoid impairing your future borrowing plans.

Seek Advice – It can be a long and intrusive process, requiring large amounts of financial information from you. We can help you weather the application process and can help you better understand what it is you need to do.

Everyone is treated equally

Whether you are buying your first home with a small deposit or buying yet another property for a portfolio with millions of dollars at hand, the process of determining a strong application is the same: evidence of financial capacity to repay a loan – taking in to account an applicant’s reasonable and true living expenditure and disposable income.

Stricter Lending, Safer Borrowing

Banks might be a lot stricter about providing a home loan, but ultimately it can lead to a safer path for many home owners. As the interest-only era of home loans phases out, being able to comfortably repay a home loan will be a ‘walk in the park’.

And that’s home sweet home.

How can YML help?

Talk to our YML Finance Team today to see how YML Group can assist you with your mortgage application. Contact us on (02) 8383 4400, or by visiting the Contact Us page on our website.

Taxable Payments – New Compliance for Couriers and Cleaners

The Australian Government has reviewed areas of the ‘Black Economy’ – the market of people working outside of the tax regulation system – and found that payments made to certain workers, namely contractual couriers and cleaners, must now be included in a company’s Taxable Payments Annual Report (TPAR).

So if you’re running an Australian company with an ABN whose core or auxiliary service offering includes couriers and/or cleaning, then you will need to fulfil your tax payment reporting obligation to the ATO for these payments.

Contractors can be sole traders (individuals), companies or other entities invoicing your company for their services. You only need to report payments you make to contractors for courier and/or cleaning services.

Reporting Contractor Payments

Here are two examples:

Lodging your TPAR 2018-2019

A company using contract courier and/or cleaning services will be required to collect the relevant information from 1 July 2018 and to report it in their 2018-2019 TPAR by 28 August 2019. You need to know that if an invoice from a contractor includes labour and materials, the total amount of the invoice must be reported as the payment. However, an invoice from a contractor for ‘materials only’ will not be included in the report.

The reportable information from an invoice you receive includes but is not limited to:

  • ✔ ABN
  • ✔ Name of Contractor
  • ✔ Contractor’s Address
  • ✔ Gross Amount Paid to Contractor (within FY 2018-2019)
  • ✔ Total GST included in Gross Amount Paid to Contractor

You do not need to report:

  • ▪ Payments for ‘materials only’
  • ▪ Invoices unpaid as at FYE 30 June
  • ▪ PAYG withholding amounts

Seek Advice

Throughout this current financial year, you will need to be garnering data from your courier/cleaner contractor invoices. YML Group can guide you in the process and assist you with your TPAR lodgement.

How can YML help?

Talk to our YML Chartered Accountants Team today to see how YML Group can assist you with your TPAR. Contact us on (02) 8383 4400 or by visiting the . Contact us on (02) 8383 4400 or by visiting the Contact Us page page on our website.

Government announces Changes to the Working Holiday Maker Programme

The Australian Government undertook a review of its Working Holiday Maker (WHM) programme and made changes to the criteria for overseas travellers wishing to work in Australia. These changes are now law and will hugely benefit Australian farmers and regional Australia’s workforce.

The WHM programme has two visa types: Visa Subclass 417 – known as Working Holiday Visa and Visa Subclass 462 known as Work and Holiday Visa. Which visa is issued to a travelling worker will depend on their country of residence.

Likewise, the Australian Government’s changes to the WHM programme are dependent upon the nationality of the travelling worker and, therefore, as an employer you will need to assess the visa rights of an individual working for you.

Generally, the changes for travelling workers include:

  • WHM Age Limit – May be aged 18 to 35 (no longer 18 to 30)
  • WHM Extension Period – May work with the same agricultural employer for up to 12 months (no longer up to 6 months)
  • WHM Third Year – From 1 July 2019, may opt for a third year visa after completing 6 months of regional work on their second year visa
  • WHM Work Period – May work altogether within Australia for up to 9 months a year (no longer up to 6 months for some countries)
  • Subclass 462 – May undertake regional plant and animal cultivation work in new regions within Australia for eligibility for a second visa
  • Subclass 462 – Annual caps lifted and an increase in available work places for some countries

Employers must now:

  • Validate Seasonal Labour Market Testing for 6 months (up from 3 months) prior to employing a travelling worker on an WHM visa
  • Repay their travelling seasonal workers for their out-of-pocket expenses up to $300 (no longer up to $500)

Overall, these changes are targeting genuine regional and rural workforce shortages by not only increasing the number of WHM visa holders but by giving WHM visa holders the option to extend their time in Australia. To achieve this goal, the Australian Government is allowing travelling workers to undertake longer periods of work in a broader scope of Australia’s agricultural sector.

Furthermore, the Australian Government is negotiating with yet more countries to enable an even greater number of participants in the WHM programme.

How can YML help?

Talk to our YML Migration Team today to see how YML Group can assist you with your WHM visa nominees. Contact us on (02) 8383 4400 or by visiting the Contact Us page page on our website.