Australian Taxation Agents require Clients to provide Photo ID

Identity breaches by nefarious people in our widening technological world is cause for the Tax Practitioners Board’s requirement for tax practitioners to verify their clients’ identities with a form of photo identification. This means greater protection for you of your personal and financial information and transactions.

To mitigate devastating financial consequences affecting Australians and the Australian economy, the Tax Practitioner Board asks tax agents to ensure that they adequately authenticate their individual clients’ identities. To achieve this, clients must provide evidence to their tax agent, including a form of identification that contains a photograph.

What you need to provide to your tax agent?

As an Individual seeking to engage a registered tax practitioner in your own right, you are required to provide your Full Name plus either your Residential Address or your Date of Birth. To do this, you will need to show original documentation as evidence:

An original or certified copy of a primary photographic identification document; or BOTH of the following:

An original or certified copy of a primary non-photographic identification document; and

An original or certified copy of a secondary identification document.

YML Group – Your registered Tax Agent

At YML Group we value our clients and, as directed by the Tax Practitioners Board, we wish to protect both your identity and our practice. You will soon receive an email from us requesting the necessary identification documentation to assist us with validating your identity with YML Group.

How can YML help?

Talk to our YML Chartered Accountants Team today to see how YML Group can assist you with your identification process. For more information, view Our website and contact us on (02) 8383 4400 or by using our Contact Us page on our website.

End-of-Year Festive Season – Claims and Tax Exemptions

Australia’s tradition of celebrating the festive season culminates with end-of-year parties at commercial businesses across the nation, especially in 2022 following a hiatus. Employers keen to reward their employees with the bonhomie of a party, as well as gift-giving, with the right approach, can avoid or reduce tax obligations on the costs of parties and gifts. The Australian Taxation Office (ATO) sets out a complex tax treatment for festive season claims, including Fringe Benefits Tax (FBT). Here is a general summary for employers.

Party Time – How to apply the Minor Benefits Exemption

The rules around tax-deductible expenses when it comes to throwing a work-related party can be confusing. A staff party is classified as entertainment by the ATO. Entertainment is subject to FBT – at 47 per cent (47%) unless the Minor Benefits Exemption is used.

A minor benefit to an employee, and any associate of an employee, is exempt from FBT where it is not a reward for service, it is less than $300 (GST-inclusive) and it would be unreasonable for it to be treated as a fringe benefit. The ATO determines if a minor benefit would be unreasonable to be treated as a fringe benefit by looking at a range of criteria, including the infrequency or irregularity of a minor benefit and the practical difficulty of establishing the notional value of a minor benefit.

A seasonal weekday party held on business premises to which only staff are in attendance and at a cost of no more than $300 (GST-inclusive) per head is an example of how to throw a party that is FBT-exempt. No tax deduction or GST input tax credit may be claimed.

For seasonal weekday parties held on-site with staff, associates and/or clients, so long as the cost per head for food and drinks does not exceed $300 (GST-inclusive) per head, then these parties are also FBT-exempt. Employers might note that there is no FBT on benefits provided to clients.

Off-site seasonal parties, held on a weekday and at a venue that is not used for business, may also be FBT-exempt, so long as the cost per head is up to $300 (GST-inclusive). No tax deduction or GST input tax credit may be claimed.

Once a party’s cost per head exceeds $300, FBT at 47% is payable for employees and any associates of employees. The cost now becomes an allowable tax deduction.

Gifts Galore – What is exempt and what may be claimed?

Giving gifts to staff and clients to incite goodwill and festive cheer can be fraught with questions about tax exemptions and tax obligations on gifts.

To avoid paying FBT, firstly, a gift must not be considered entertainment, such as restaurant meals, concerts, sporting events, movie tickets and holiday accommodation but rather must be a non-entertainment gift such as gift hampers, flowers, sealed bottles of alcohol, beauty products, gift cards and store vouchers.

Second, a gift must cost less than $300 (GST-inclusive) to avoid paying FBT. A gift that meets these criteria is not only exempt from FBT, but a business may claim a tax deduction and a GST input tax credit.

If a non-entertainment gift exceeds the $300 threshold, it will incur FBT, but a tax deduction and a GST input tax credit may both be claimed. To minimise the amount of tax paid, keeping a non-entertainment gift below the $300 threshold is advisable.

Gifts to clients, irrespective of cost, do not incur FBT. No GST input tax credit or tax deduction may be claimed on an entertainment gift to a client. Therefore, to benefit from a GST input tax credit and a tax deduction, consider giving non-entertainment gifts to clients.

Are company partners and sole traders allowed to gift themselves a present?

No. Company partners and sole traders may not buy themselves a gift. These benefits are only for employees, any associates of employees and clients.

Festive Season Record-keeping – YML’s Bookkeeping is at your service

YML’s dedicated virtual bookkeepers understand Australian business, all financial processes and tax regulations, providing your business with financial information, processing, and management-level reporting at any given time of the day or night.

Make sure to keep all records related to entertainment, parties and gift benefits given to your employees and clients.

To assess your festive season costs and the tax implications of throwing your staff and clients a party and giving them gifts, contact YML’s bookkeeping service today.

How can YML help?

Talk to our YML Business Services Team today to see how YML Group can assist you with festive season tax assessments. For more information, view Our website and contact us on (02) 8383 4455 or by using our Contact Us page on our website.   

How to manage your rising monthly loan repayments

The Reserve Bank of Australia has increased the cash rate numerous times since May 2022. For anyone with a variable loan, this has meant rapid rises in interest owed. For many people, these rises stretch the household budget and cause stress as each repayment falls due to the lender.

YML’s reputable Finance Team can offer you a myriad of ways to ease the pressure of repaying your loan. With our insight in to the world of lending, you could soon be managing your monthly repayments despite rates continuing an upward trajectory for the foreseeable future in 2023.

Learn more about how we can help you by calling us on (02) 8383 4466 and requesting a callback or booking an appointment with our Finance Team.

How can YML help?

Talk to our YML Finance Team today to see how YML Group can assist you with managing your monthly loan repayments. For more information, view Our website and contact us on (02) 8383 4466 or by using our Contact Us page on our website.   

Tax Audit Insurance – Why is it important?

In 2023 ongoing developments in artificial intelligence (AI), data matching and social media combine to make a powerful tool for the Australian Taxation Office (ATO) to compare lodged tax return disclosures with other taxpayer and financial benchmarks. This information gives the ATO greater insight in to which businesses – including small to medium enterprises (SMEs) – and which individuals might warrant an official audit of their financial transactions and records.

Businesses and individuals, particularly those who own rental properties, who operate trusts or manage a SMSF are all targets of the ATO’s ability to cross-check financial data against annual tax returns.

An inquiry or investigation of your company and / or your personal finances leads to costs associated with both the audit process and defending your position. Tax audit insurance is a safeguard against the substantial costs that such an audit might entail for your company and for you.

Professional fees, accounting and taxation work done in relation to a tax audit are covered under a tax audit insurance policy. These costs can be much higher than the charges paid initially to lodge your tax return and therefore tax audit insurance is a prudent purchase for companies, SMEs, self-managed superannuation funds (SMSFs) and individuals to make.

Minimise the financial impact of an audit

Any minor issue exposed by data matching could flag the ATO’s attention and place your business entities and you under scrutiny.

It can be costly to be represented if you are selected for review or audit. Depending on the unique circumstances any inquiry or investigation can grow to cost a considerable amount.

Being audited can require hours of work and be a time-consuming and stressful process. Time, stress and expense can be alleviated with the help of professionals and offset by tax audit insurance.

Generally, policies cover costs up to a predetermined limit. Some policies might offer retrospective protection, meaning that a policy also covers previously lodged tax returns. Please check with the policy underwriter for full details, inclusions and exclusions.

YML Group – as your registered Tax Agent – can help you

At YML we recognise how frustrating an audit could be for you. And we know how tax audit insurance can lessen the financial impact of an audit. We can help find the best policy for you. With tax audit insurance, we can respond to your audit matters on your behalf without a substantial financial drain on your business or you. You will soon receive an email from us providing you with the opportunity to take up audit insurance.

How can YML help?

Talk to our YML Chartered Accountants Team today to see how YML Group can assist you with your tax audit insurance policy. For more information, view our website and contact us on (02) 8383 4400 or by using our Contact Us page on our website.     

SMEs’ Obligation under Australia’s Renewable Energy Target (RET) Scheme

What is the MRET scheme?

Under the Renewable Energy (Electricity) Act 2000 (the Act), the Mandatory Renewable Energy Target (MRET) was established as a means of incentivising Australian businesses to buy renewable-sourced electricity as a percentage of their annual electricity usage. This percentage is specified yearly for liable small- to medium businesses (SMEs).

Who is liable?

A liable entity is an individual householder or company who makes a relevant acquisition of electricity, a relevant acquisition being defined – for small-scale technology users, generally – as acquiring electricity from the Australian Energy Market Operator (AEMO) for own use on site (wholesale).

In other words, a company becomes liable upon making its first purchase of electricity from the grid or electricity sourced directly from the point of generation. A company is thereafter required to report its relevant acquisitions annually in an energy acquisition statement.

What is the SRES scheme?

The small-scale renewable energy scheme (SRES), for small-scale technology installations like rooftop solar, solar hot water systems, small-scale wind operations, requires liable entities to purchase renewable energy to meet a nominal percentage target of gigawatt hours (GWh) of electricity annually under the SRES. (Note that the target for liable entities – generally commercial in nature – under the large renewable energy target (LRET) is 33,000 GWh of electricity annually from renewable sources).

The reason, under the Act, for specifying a fixed amount of electricity being sourced is to provide certainty. It is expected that together these targets – SRES and LRET – will exceed the set target for renewable energy consumption in Australia.

Electricity fed in to the grid is indistinguishable as having been generated by conventional or renewable sources. Therefore, the scheme allows for the trading of renewable energy certificates – known as small-scale technology certificates (STCs) under the SRES – to be purchased by liable entities to demonstrate that renewable energy was generated by liable entities.

How to purchase STCs?

STCs are awarded for the generation of electricity from small-scale renewable energy systems. When a liable entity under the SRES purchases STCs, the number of certificates is predetermined, meaning a company is buying its STCs upfront to cover the expected generation of renewable electricity over the lifetime of the technology, up to 15 years.

There is a benefit to the pre-purchase. It is possible for individual householders or companies to assign their STCs to the installing company of their technology system and, in return, receive a lower installation cost.

The trading of STCs can be done through the STC Clearing House for $40 each, a price cap, or through an open market, usually at a lower negotiated price. Registration with the REC Registry is necessary to proceed with creating STCs.

What is the REC Registry?

The Renewable Energy Certificates (REC) Registry is an online portal where the details and history of each REC created is recorded.

STCs must be created by a REC Registry account holder before they can be bought, sold or traded.

An account must be held on the REC Registry before being allowed to create new certificates or to view existing certificates. To apply for an account, visit REC Registry - Start applying for an account (rec-registry.gov.au). Fees may apply.

Is GST paid on STCs?

The purpose of the SRES is to incentivise individual householders and businesses to install small-scale renewable energy systems. No GST is paid on fees for registering on the REC Registry nor when a STC is created.

Subsequent sales, purchases and transfers of STCs may incur GST.

Help is available from YML Group

Contact our Chartered Accountants to help you navigate your path to securing STCs under the SRES. We have the expertise to help your business benefit from this scheme.

How can YML help?

Talk to our YML Chartered Accountants Team today to see how YML Group can assist your STCs. For more information, view our website and contact us on (02) 8383 4400 or by using our Contact Us page on our website.                            

Watch Out! You may be liable for a maximum criminal penalty of $13,200 if you have not acquired your Director ID Number by now.

Introduced in 2021, the Australian federal government’s Director Identification Number (DIN) scheme is designed to reduce illegal and unfair corporate activities, such as the creation of ‘dummy’ directors and company ‘phoenixing’.

The DIN is a unique 15-digit numerical identifier that remains with a director for a lifetime, including when a director changes companies.

Currently, despite acquiring a DIN as a company director being a legal requirement, the ATO reports that of the estimated 2.5 million company directors in Australia, over 1 million have yet to apply for their DIN. Are you one of these people?

Mandatory registration of all Australian company directors requires company directors to apply online by first registering for myGovID. This identity validation process is essential and must be done directly and personally by each individual director. Thereafter, applying for the DIN can be done via myGov. It is a free application.

It is important to remember that company directors must apply for a DIN themselves and not use a proxy. (See below for Steps to apply for a DIN)

Offences and penalties for late or non-acquisition of a DIN

ASIC enforces the legislative requirement of a DIN on directors. To avoid a substantial financial penalty for refusal or failure to obtain a DIN, you must reach out to the ABRS. Here are the four offences and their associated penalties that are upheld by ASIC under the Corporations Act 2001:

From 1 December 2022 the ATO will be taking a reasonable approach towards those directors who have intent to apply and with good reason have missed the deadline. “However,”, as stated by ABSR Deputy Registrar Karen Foat, "if we are reaching out to people and trying to support people to apply, and we find that people are deliberately not meeting those obligations, then that's when penalties can apply."

Steps to apply for a DIN

The ABRS directs you firstly to the myGovID app and then to apply through myGov. If you already have a myGovID, you can head straight to myGov. If you don’t have a myGovID, you can set one up. Use this link to learn how: How to apply for your Director ID (mcusercontent.com)

Another way to apply, if you live in Australia, is to call the ABRS and apply directly. You will be asked to verify your identity using your tax file number (TFN) and at least one identity document, as well as answer some questions. To call the ABRS, use this link: Contact us | Australian Business Registry Services (ABRS)

Am I a company director?

YML Group has the expertise to determine your company position status and to guide you through your DIN application.

There is no time to delay any further. If you are a company director, apply NOW for your DIN.

How can YML help?

Talk to our YML Chartered Accountants Team today to see how YML Group can assist you with acquiring a DIN. For more information, view our website and contact us on (02) 8383 4400 or by using our Contact Us page on our website.                            

Transferring asset ownership to a SMSF is an in specie contribution

In specie is from Latin and means ‘specified in its actual form’. Therefore, a business or a related party or individual transferring an ATO-approved asset – shares, property or managed funds – to a SMSF, without first selling the underlying investment, is, in fact, making an in specie contribution.

In general, contributions to superannuation funds may incur taxation liabilities, so what is the benefit of transferring an asset in specie?

What is the benefit of an in specie transfer?

The most likely benefit is reduced tax payable on the transfer of an asset. Where a cash transfer is not possible in to a SMSF, then an in specie transfer can reduce the amount of income tax and capital gains tax (CGT) which would be incurred on any prior sale of an asset.

For example, if a SMSF member transfers real estate property to their member account, the SMSF will need to take in to consideration the transfer cost consequences as the beneficial ownership of the asset will change upon transfer. No longer would the individual (outside of the context of SMSF membership) benefit from owning the property, rather it would be the SMSF as the entity owner of the property benefiting.

Once an in specie contribution has occurred – a SMSF member has transferred ownership of an asset they own to their member account – the increase in the capital value of the SMSF is considered a contribution by the SMSF member. As the SMSF member has thereby disposed of an asset, any financial gain realised by the SMSF member may be subject to CGT. However, there is a benefit to transferring commercial property used in an SMSF member’s own business where a concessional contribution may be relevant.

Non-concessional contribution (NCC) and concessional contribution (CC) caps will determine how the market value of an in specie transfer will be divided between members of a SMSF. For example, a married couple’s commercial property in specie transfer amount will be considered in relation to each party’s non-concessional cap (up to $300,000 each over three years), so as to avoid exceeding any caps which would result in tax payable.

What should be considered before transferring in specie?

Before transferring an asset, the specific circumstances of the transfer need to be considered, such as:

• what the trust deed says about allowing in specie transfers,
• whether the asset’s market value will exceed a SMSF member’s contributions limit,
• what CGT consequences exist for the individual disposing of an asset,
• what amount of commercial property stamp duty is payable, and
• whether the SMSF member wishes to retain an asset in a SMSF for a long period of time (as contributions transferred in to a SMSF are difficult to remove prior to retirement phase).

Guidance from YML’s Super Solutions can help you make these assessments of your in specie transfers, as well as help ensure that full compliance with both the ATO and the receiving SMSF is fulfilled by all involved parties.

What about moving assets out in specie?

Assets can be transferred out of SMSF member accounts upon retirement age being reached. A common practice is for an SMSF member to buy a property for future use in retirement. Whilst still working, an SMSF member transfers the retirement property in specie to their SMSF member account and upon retirement, the property is taken as a lump sum in specie transfer, rather than as an SMSF asset sale requiring the SMSF member to fund a purchase price.

Is an in specie transfer difficult to do?

The decision to transfer in specie to a SMSF is a complex decision and to avoid complications around the process, seeking guidance from expert financial advisers such as YML is encouraged prior to commencing an in specie transfer.

How can YML help?

Talk to our YML Super Solutions Team today to see how YML Group can assist you with your SMSF in specie transfers. For more information, view our website and contact us on (02) 8383 4444 or by using our Contact Us page on our website.                            

Check your Single Touch Payroll (STP) software system – Is it fully ‘Phase 2’ compliant?

Australia’s streamlining of the Single Touch Payroll (STP) system for digitally reporting payroll and its various payment types to the ATO expanded at the start of this year under Phase 2. Are you set up and currently compliant under Phase 2?

If you have not met the initial Phase 2 compliance deadline of 1 March 2022, then check which Digital Services Provider (DSP) your company uses.

If you’re with Xero, then Xero has received an extension until 31 March 2023 for all its new and existing customers, giving you more time to ensure your reporting meets its compliance obligation. By this date, Xero users must have started reporting the additional information required by the ATO for STP Phase 2.

If you’re with another DSP, then it might have applied to the ATO for a deferral because it needs longer to update its software to be Phase 2-enabled. If so, then your business receives a deferral also and may be granted up until 31 December 2022.

Major Adjustments for Employers

To date, the ATO has found lodgement and/or failure to lodge errors being made by employers. Here are some tips to avoid making an error in your ATO report:

• • In the first instance of data entry, all payments to employees must be accurately classified. Where previously one figure reported was satisfactory, under Phase 2, a breakdown of all specific payment types is necessary. Match a Pay Item Description with a STP Phase 2 reporting category.

• • Allowances is a reporting category and, just as remuneration payments must be categorised, so too must allowances, each with its correct allowance type.

• • All the pay codes and categories must have the appropriate ‘reportable’ or ‘not reportable’ option selected against them. Employees will have understated total income received against their names at both the ATO and Services Australia IF the option ‘not reportable’ is selected. The ‘not reportable’ option means the data will not be released digitally to the ATO. This might result in your employees experiencing tax, superannuation and social security implications.

We at YML urge you to remember that correcting your STP Phase 2 reporting now is vital to avoid ‘failure to lodge’ and other penalties applicable after the first year of reporting.

Re-Mapping Pay Codes and Categories in your Payroll Software can be complicated

For those companies who are struggling to bring their bookkeeping in to Phase 2 mode, it is essential that you reach out for help.

It is a complicated process to re-map your system’s pay codes and categories for each employee and it can hinder your company’s ability to comply with STP Phase 2, especially because re-mapping processes differ between DSPs.

To achieve this initial set up and keep you on track with your STP Phase 2 reporting, YML’s Bookkeeping Service could be the answer for your business. We’ll help you stay on track with your STP Phase 2 reporting. How do we do that?

YML’s specialist Australian-focused Bookkeeping Service is offered to you via Business Process Outsourcing (BPO). YML will provide you with a dedicated YML virtual bookkeeper – ready to chat with you anytime you want and as often as you need – to keep your business in line with the ATO’s requirements.

YML’s Bookkeeping Service is a leading virtual process manager of all aspects of bookkeeping. A high qualified, specially trained, Australian-focused bookkeeper is available to partner with you and your business to help you manage the requirement of additional data in your STP report under Phase 2. Our staff will manage your bookkeeping and stay connected with you via video chat or via phone as often as you choose.

How can YML help?

Talk to our YML Business Services Team today to see how YML Group can assist you with your STP Phase 2 set-up. For more information, view our website and contact us on (02) 8383 4455 or by using our Contact Us page on our website.                            

Your SMSF – How much may you contribute under the Bring Forward Rule?

What is the Bring Forward rule and what does it mean for you?

From 1 July 2021 non-concessional (from after-tax income) contributions – up to a cap of $110,000 per year over a three-year period – may be made in to your superannuation fund account. Prior to 1 July 2021, the yearly cap was $100,000 over a three-year period.

The Bring Forward rule allows for a member to bring forward the caps of the later year or years to make a larger contribution in one year, up to a total cap of $330,000 (after 1 July 2021) over three consecutive years.

Provided that your total superannuation fund account balance does not exceed $1.7 million on 30 June of a financial year in which you wish to make excess contributions, you may add to your account.

The first time that you decide to make a non-concessional contribution of over $110,000, the Bring Forward rule is triggered, and the yearly cap no longer applies for the remaining two years. For example, if you were to add the whole three years’ worth of non-concessional contributions ($330,000) in the first year, you would be bringing forward the next two years under the Bring Forward rule.

Note, your fund’s fees and your life insurance premiums count towards your annual contribution caps.

What happens if you contribute more than the three-year capped amount?

If you make more than $330,000 in non-concessional contributions within three years, you might be liable to pay excess non-concessional contributions tax to the Australian Taxation Authority (ATO). The ATO will advise you of any relevant penalty.

Who is eligible to use the Bring Forward rule?

Since 1 July 2022, people under the age of 75 years are eligible to use the Bring Forward rule, up from 67 years of age, without satisfying the Work Test.

For those members over 75, the maximum amount you may contribute is $110,000 per annum – the Bring Forward rule no longer applies to you, upon meeting the Work Test criteria.

The Work Test requires that a member over the age of 75 is ‘gainfully employed’ and working a minimum of 40 paid hours during a consecutive 30-day period each financial year.

YML Super Solutions makes contributing to your SMSF easier

If you are considering building your retirement savings for an improved lifestyle, we at YML Group can help you by checking your eligibility to make additional contributions to your SMSF. We will also help you to track any previous years’ contributions so you can use the Bring Forward rule appropriately and beneficially towards making your future all that you want it to be.

How can YML help?

Talk to our YML Super Solutions Team today to see how YML Group can assist you with using the Bring Forward rule. For more information, view our website and contact us on (02) 8383 4444 or by using our Contact Us page on our website.                            

NEW Superannuation Guarantee (SG) Rate – Employers’ Obligations

What major change was made to SG eligibility?

From 1 July 2022 employers are required to pay Superannuation Guarantee (SG) to all eligible employees over 18 years of age regardless of how much they earn. One of the changes made to the SG scheme was the removal of the $450 per month income threshold before SG becomes payable to an employee. You might need to revisit your company’s pay cycle around 1 July to ensure that not only was SG paid fully in that relevant pay cycle – but also at a new rate – to your entitled casual and part-time workers.

Unchanged is that your workers who are under 18 years of age must work a minimum of 30 hours a week to qualify for the SG contribution.

What is the new SG rate?

An employer’s SG contribution has been increased by 0.5% to 10.5% of an employee’s eligible earnings. This new percentage applies from 1 July 2022. To meet this obligation, you will need to ensure that your company’s finances provide for additional funds for your new, higher SG payments to employees.

How does an employer pay SG?

Single Touch Payroll (STP) is the mandatory method of paying SG to employees. This streamlined digital reporting to the ATO will assist you to accurately calculate SG contributions to be deposited in to your employees’ superannuation fund accounts.

When must an employer pay SG?

Employees are entitled to receive the SG in to their superannuation fund accounts within 28 days of the end of a quarter. For example, the deadline for this financial year’s second quarter – 1 October to 31 December – is 28 January 2023.

What happens if an employer neglects to pay SG?

Whether an employer omits paying or short pays an employee entitled to SG, there is a penalty. If you fail to meet your employer SG obligations, you will need to lodge with the ATO a Superannuation Guarantee Charge statement to rectify payments owed to your employee/s. For failure to comply, penalties may apply include paying an amount up to 75% of the shortfall or the issuance of a director penalty notice equal to the unpaid SG amount.

To avoid penalties, you can:

• • Update your STP and accounting systems to incorporate the recent changes to SG.

• • Scrutinise and review all payments to make sure that your payments are accurate, and the data is correctly entered in to your STP system.

• • Pay SG by the deadline each quarter to be time compliant.

Help is available to you

YML Group has the know-how to set up both SG and STP for your company, giving you assurance and the ability to efficiently fulfil your employees’ SG contributions.

How can YML help?

Talk to our YML Chartered Accountants Team today to see how YML Group can assist you with your SG obligations. For more information, view our website and contact us on (02) 8383 4400 or by using our Contact Us page on our website.