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13th Sep, 2024
With the latest statistics showing a significant rise in liquidations and with the ATO’s focused efforts on debt collection, small businesses face significant financial pressures. However, the answer isn’t to evade responsibilities or take shortcuts – business restructuring has to be done properly and in compliance with the relevant laws. The small business restructure roll-over (SBRR) provides a legitimate, structured path for businesses to reorganise their operations, allowing them to better meet these challenges without prejudicing creditors or engaging in unethical practices.
To qualify for the SBRR, each party to the transfer must meet the small business entity definition. A small business entity is defined as an entity with an aggregated turnover of less than $10 million. This includes businesses that operate as a sole trader, partnership, company or trust, provided they meet the turnover threshold. Entities connected with or affiliated with a small business entity also fall under this definition.
The assets being transferred must be active assets, which include CGT assets, trading stock, revenue assets or depreciating assets. Non-active assets, such as loans to shareholders, are not eligible.
The transfer must be part of a genuine restructure of an ongoing business, not an artificial or inappropriately tax-driven scheme, and there must be no change in ultimate economic ownership of the transferred assets.
Opting for the SBRR has several tax implications:
For CGT assets, the transferee must wait at least 12 months to claim the CGT discount on any subsequent sale, and pre-CGT assets retain their status. For trading stock, the roll-over cost is based on the transferor’s cost or value at the beginning of the income year. Depreciating assets allow the transferee to continue deducting the decline in value using the transferor’s method and effective life. Revenue assets are transferred without resulting in a profit or loss for the transferor.
13th Sep, 2024
The ATO has recently confirmed that collection of business debts – including debts relating to superannuation guarantee (SG), pay as you go (PAYG) withholding and GST – is among its key focus areas. This is a timely reminder for all businesses to ensure they’re meeting their obligations.
The most recent ATO statistics show that although 94% of employers are meeting their SG obligations without ATO intervention, the ATO still raised over $1 billion in SG charge liabilities in the 2022–2023 financial year.
To ensure your business doesn’t incur these extra liabilities, you must pay SG contributions for your employees and eligible contractors on time and to the correct funds. Some contracts and awards may require you to pay contributions more regularly than quarterly.
If you make contributions to a commercial “clearing house”, the contribution is considered to be paid when it’s received by the employee’s fund, not by the clearing house. However, if you use the ATO’s Small Business Superannuation Clearing House, the contribution is “paid” when received by that clearing house.
From 1 July 2026, employers will need to pay SG at the same time as salary and wages (commonly known as “payday super”).
If you miss a payment, taking action promptly is essential to accessing the ATO’s support services and minimising your exposure to penalties. You must lodge an SG charge statement with the ATO within one month of the missed quarterly due date. You can ask the ATO for an extension to the lodgement date, but you must do this before the due date.
You’ll also need to pay the SG charge. This charge is more than the amount of contributions you would have paid if you had paid them on time, and it’s not deductible. The charge is paid to the ATO, not your employee’s fund. General interest charge will accrue on any outstanding SG charge, and the ATO may also issue a director penalty notice if it remains unpaid.
13th Aug, 2024
Have you made charitable gifts or donations in the past financial year? The good news is these items are often deductible, giving many Australians a welcome boost to their tax refund. Make sure you know the rules this tax time.
When gathering your donation receipts, it’s important to understand what can and can’t be claimed as a deduction. The first general rule is that a donation of money of $2 or more may be deducted if the donation was made to a “deductible gift recipient” (DGR). A DGR is an entity that has registered with the ATO as being eligible to receive deductible gifts and donations.
Some charities may not have DGR status, so check if you’re unsure. Many online crowdfunding platforms are also not DGRs, which means you typically won’t be able to claim your donation towards fundraising for individual causes, such as someone’s funeral or medical costs.
The second general rule is that a donation is only deductible if you didn’t receive a benefit in return. This means you can’t make a claim if you received things like raffle tickets or items that have an advertised price, such as toys and food items. However, you may receive a “token” promotional item such as a sticker or lapel pin and still qualify for a deduction. Note that donations to a school’s building fund won’t be deductible if you received benefits such as reduced school fees or a certain placement on a waiting list in return for the donation.
Small cash donations totalling up to $10 don’t require a receipt. However, beyond that you must be able to provide evidence of your claim. You aren’t required to keep an original paper receipt, provided you keep an electronic copy that is a true and clear reproduction. If you don’t have a receipt, you may be able to substantiate the claim with other documentation such as a bank statement evidencing the donation.
If you make donations through a “workplace giving program” operated by your employer, you can simply claim the amount of donations shown in your income statement or payment summary. You can claim this deduction in your tax return regardless of whether your employer has reduced the tax withheld each pay period. In both cases, your gross salary or wages and deductible donations for the year will be the same, but any difference in the tax withheld during the year will factor into your eventual tax refund. Workplace giving programs aren’t the same as salary-sacrifice, as they don’t lower your gross salary or wages.
13th Aug, 2024
The new financial year has begun, and with it have come some important changes to superannuation from 1 July 2024. With these changes coming into effect, it’s a good time to give your super a check-up. Your super could be one of the biggest assets you ever have, so getting into the habit of checking in regularly can help you stay on top of it and make better choices for your future.
On 1 July 2024, the superannuation guarantee rate increased from 11% to 11.5%. Employer super contributions are calculated on a worker’s ordinary time earnings, for payments of salary and wages. For employers, the maximum super contribution base increased from $65,070 to $62,270 (the limit on what you can earn each quarter before your employer can stop making super guarantee contributions). The concessional super contributions cap also increased from $27,500 to $30,000 and the non-concessional contributions cap increased from $110,000 to $120,000.
The ATO suggests the following steps as a good place to start in giving your super a check-up:
Check your contact details: Make sure your contact details and tax file number (TFN) are up to date with the ATO and your super fund.
Check your super balance and employer contributions: Checking your super balance and keeping track of your employer contributions can be done at any time through ATO online services or your super fund. Your employer should be paying your super at least every three months.
Check for lost and unclaimed super: If you’ve changed your name, address or your job, you may have lost track of some of your super. Lost super is where your super fund hasn’t been able to contact you, or your account is inactive. Unclaimed super is where your fund has transferred lost super to the ATO.
Check if you have multiple super accounts and consider consolidating: If you’ve ever moved jobs, you might have more than one super account. Each account will charge fees and may include insurance, so combining your super accounts may reduce fees, help you pay only for the insurance you need and make your super easier to manage.
Check your nominated beneficiary: Make sure you have a valid death beneficiary nomination with your super fund, as this isn’t covered by your will. Check with your fund if there is an expiry on the nomination – some funds have options where the nominations don’t expire, while most nominations expire every three years. If you don’t have a beneficiary nominated, your fund will follow the law in determining where your super should go. You should also take a careful look at how your fund is performing and check that you aren’t paying too much in fees. You might also think about evaluating how your super is being invested – does it match your stage in life, how much risk you are willing to bear, or even your ethics and values? If you have insurance cover with your super fund, regularly check that it still meets your needs.
The Association of Superannuation Funds of Australia (ASFA) has developed a “retirement standard” which provides a broad approximation of how much super you need in retirement. As of March 2024, as combined amounts for couples retiring at age 67, ASFA suggests:
$690,000 for a comfortable retirement (providing an income of $72,663 per year); and $100,000 for a modest retirement (providing an income of $47,387 per year).
These figures assume that you will draw down all your super, receive a part Age Pension, own your home outright and are in good health. While useful as a baseline, your personal needs may differ significantly.
Many people assume that they will just fall back on the Age Pension if there is not enough in their super. This is definitely a safety net; however, you may not be comfortable on the restrictive budget required to get by on the Age Pension. As at 1 July 2024, Age Pension for a couple is $43,752 per year.
For the most accurate assessment of your superannuation needs, it’s best to seek professional advice. Your adviser can consider factors such as your health and life expectancy, inflation and investment returns, wages growth and taxation, and fees and regular contributions. Professional advisers have access to sophisticated tools and can provide customised forecasts based on your unique situation.
13th Jul, 2024
Despite preventative approaches by the ATO and the National Anti-Scam Centre (NASC) to take down fraudulent websites and block scam text messages, ATO impersonation scams are on the rise as tax time approaches. Using unsolicited contact via SMS, email or on social media, ATO impersonators frequently offer refunds or assistance in resolving tax issues or suggest suspicious activity on a taxpayer’s account. The ATO recommends not engaging with unsolicited contact and instead looking up the ATO’s contact numbers to verify the genuine nature of the communication.
The creation of NASC, funding for the Australian Securities and Investments Commission (ASIC) and the Australian Communications and Media Authority (ACMA) to take down fake investment websites, and establishing the SMS Sender ID register to stop scammers from spoofing trusted brand names have already had some success: over 5,000 website takedowns occurred and 100 million scam text messages were blocked in the final quarter of 2023. However, the lead-up to tax time still poses a risk – updated figures for May 2024 show a 31% increase in reports of ATO impersonation scams across SMS, email, phone contact and social media channels.
The ATO is working on preventative measures to help the community to recognise legitimate ATO SMS interactions, including removing hyperlinks from all its outbound unsolicited SMSs. Cybercriminals often use hyperlinks in SMS phishing scams, directing individuals to highly sophisticated websites – for example a fake myGov login page – in order to steal personal information or install malware.
The ATO has a dedicated team to monitor for scams and to assist taxpayers who have fallen prey to scammers, and provides detailed information about email and SMS scams, phone scams and social media scams on the ATO website. The ATO also offers a reporting service where people can report an ATO impersonation scam if they encounter one.
13th Jul, 2024
Claiming work-related expenses is an area where taxpayers frequently make mistakes, and the ATO has flagged it a primary area of focus for tax time 2024. More than eight million taxpayers claimed a work-related deduction in 2023, with around half of those claiming a deduction related to working from home costs, so it’s clear that understanding the methods for calculating working from home deductions is important to help taxpayers avoid incorrect claims and get their lodgment right the first time.
“Copying and pasting your working from home claim from last year may be tempting, but this will likely mean we will be contacting you for a ‘please explain’”, ATO Assistant Commissioner Rob Thomson has said. “Your deductions will be disallowed if you’re not eligible or you don’t keep the right records.”
There are two methods for calculating work from home expenses: the actual cost method and the fixed rate method. Both methods require keeping detailed records and following the ATO’s three golden rules: the money must have been spent by the taxpayer without reimbursement, the expense must be directly related to earning their income, and the taxpayer must have a record to prove the expense. The two methods can’t be used in combination – you need to pick one or the other each year – so it’s important to consider which method will best suit your individual circumstances.
To be eligible to claim working from home expenses by either method, when working from home you must be fulfilling employment duties (not just minimal tasks like taking calls or checking emails); incur additional running expenses as a result of working from home (eg increased electricity or gas costs for heating/cooling or lighting); and keep detailed records showing how these expenses were incurred.