The Australian and state governments have announced a number of concessions designed to boost cash flow for businesses that employ staff and purchase and depreciate business equipment. These concessions are available to businesses with turnover (gross income) up to $50 million.
Rather than repeat all the detail, we've summarised the salient points and provided a link to the government concessions.
The second fact sheet for economic reports to the coronavirus can be found at this link.
Boosting cash flow for employers
These are tax-free cash payments to your business bank account and are only available to businesses that actively employed staff as at 12 March 2020. The legislation has included integrity measures that prevent businesses from trying to manoeuvre into satisfying the eligibility criteria.
The only action required is to prepare and lodge your monthly or quarterly BAS, where gross wages and tax withheld are disclosed. In other words, no separate forms or submissions are required. The cash is then automatically refunded to your business bank account within two weeks.
Cash payments of up to $100,000 - $50,000 maximum spread between two designated time periods - for the periods between March and June 2020, and a second $50,000 for the periods June to September. You need to employ staff in both periods to be eligible for both payments.
Note, most employers won't receive the full $100,000, as the amount is calculated on PAYG withholding (disclosed as item W2 on your BAS form).
Even if you're not required to withhold tax, you're still eligible for $20,000 over the two time periods.
There are several examples in the government fact sheet explaining how the scheme would work for businesses lodging on a monthly and quarterly basis.
Payroll tax concession
Each state payroll tax authority has announced different concessions around deferring and reducing your payroll tax obligations.
Qld payroll tax information can be found at this link.
NSW payroll tax information can be found at this link.
Victoria payroll tax information can be found at this link.
Increased instant asset write-off and accelerated depreciation
These concessions relate to how asset purchases are deducted in your 2020 year-end tax return, and don't affect your immediate cash flow.
This relates to business equipment costing up to $150,000 (up from $30,000), purchased between 12 March and 30 June 2020. Unfortunately building work (such as an office or surgery fitout) does not qualify for this concession.
The tax office summary of this concession can be found at this link.
In respect to new assets purchased between 12 March 2020 and 30 June 2021, and not otherwise covered by the immediate write-off concession, an immediate deduction of 57.5% (rather than 15%) is available. To qualify, the asset must be new (not second hand) and be purchased and installed for use. Also, unfortunately, building work expenses do not qualify for this concession.
In relation to motor vehicles, you need to have a logbook to evidence business usage, and concessions are reduced for private usage and the luxury car limit.
The tax office summary of this concession can be found at this link.
If you think any of these concessions are available to you, and you have further questions, please don't hesitate to contact our office.
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It's always an interesting time during election campaigns, when the country waits with bated breath to see what changes are going to be made (or not made) by the successful candidates, and how this will affect their day to day lives. Right now its nice to have a reprieve from the relentless advertising.
In the lead up to our most recent polls, there were many people (including lots of accountants) sweating on changes to tax law that didn't eventuate. It's a good reminder that when it comes to your finances, the best protection you can give yourself is to invest in some solid professional planning, so that you're prepared for circumstances where you don't know the outcome, and over which you have little control.
Similar to investment decision making, effective tax planning means playing the long game - putting in place long-term strategies that are based on more than knee-jerk reactions to political movements or personal whims. Making sudden changes to your affairs will have immediate effects - some you expect and some longer-term effects you don't.
It's important to remember that while media hype around party policy and commentary on the possible impacts of these changes is unavoidable, it's important to absorb all the information with a healthy layer of reason.
Political ideologies aside, contentious topics such as changes to negative gearing and capital gains discounts, for example, are inevitable the rules in Australia are quite different to other countries - so it's important to ensure your tax strategies have you covered for fluctuations in these areas.
Similarly, self-managed super funds have always been a moving target, and will continue to be so. The popular strategy for doctors to buy their medical premises within an SMSF will continue, and the lack of appetite for the banks to lend is driven more by the general property cycle than by tax law considerations.
So to ensure you're on the front foot when it comes to your tax planning, make sure you're getting advice from a tax professional you trust and dealing with knowledgeable lenders who understand the medical industry and are equipped to assist doctors with their business planning.
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For a long time, the ATO has been using data-matching practices to ensure individuals and businesses correctly declare their income and claim offsets and other benefits in line with the law.
Recently, the ATO have expanded their reach into your information, so it's important to be across what is now being assessed, to ensure that you're compliant.Previously, data matching was largely focused on data from Centrelink, as well as interest and dividends, but these parameters are now being expanded to include other areas, such as property sales data, collected from land title offices.
For medical professionals, the ATO now receive summary reports from various providers, which include data related to research grants, WorkCover payments etc. This also includes rural and educational grants, and other untaxed payments received by doctors, that occasionally get forgotten about at tax time.
These changes mean that it's more important than ever before to ensure that your record keeping is up to date and that you're declaring all income earned. We recommend having a designated bank account that all practice income, including grants, is banked in, so that there's no confusion about what you need to report. Also be aware that you may need to request additional information on some payments, to ensure accuracy.
If you're unsure about what needs to be included, or you suspect you've missed something, you should check with your accountant. It's much better to be proactive and make sure that everything's as it should be, than have the question asked by the ATO. Your accountant can check what income information the ATO have collected on you in previous years, as well as advise on your current income streams to ensure you're covered across the board.
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The banking royal commission has all but been and gone, but it's left us wondering what would happen if there was a royal commission into accountants?
Great accountants operate 100% in their clients' best interests, through a pure fee-for-service model, meaning they only charge and get paid for services that their clients actually need.
As with any industry, however, not all accountants are created equal, so If there was to be a an accounting royal commission, one of the major issues I believe would be in the spotlight is unnecessary complexity.
Where accountants would potentially come unstuck in a royal commission is for advising and servicing complex and unnecessary business and investment structures. Generally speaking, the more complexity involved, the more money that can be charged to manage it, so it makes sense that this is an area that's open to manipulation.
If you're dealing with an accountant that's not on the up and up, and are out to increase their bottom line at any cost, you could be the victim of being sold over-complicated and unnecessarily involved setups that you don't need.
The starting point for any accountant should be to act in their clients' best interests at all times, however, further to this, it should ultimately be a focus to steer clients towards the simplest option available to them.
This isn't always easy.
The psychology of complexity is interesting - some people are sceptical of solutions that are too simple, often demanding the solution with all the bells and whistles, even when a simpler (and cheaper) solution will achieve the same result.
It's critical that you can rely on your accountant to give you honest, impartial advice when it comes to your finances, and not put you into arrangements that are costly to administer and provide no added value.
Bottom line is, if your accountant is telling you you don't need to spend more money on a more complicated solution, you should listen!
Before you get yourself locked in to a large, complex accounting structure, it's important to make sure you're working with an accountant that understands the value of simplicity and is most interested in offering you the least complicated proposal there is, with the best return.
Take the time to make sure you're comfortable with any proposed course of action before you get started. It can take a number of years and cost significant sums in tax to undo overly complex arrangements, and, often, structures that hold a large asset or business can cost more to unravel than it would cost to simply keep going until you're ready to exit, accountants fees and all.
So, if you find yourself in a complex setup and you're not sure of the benefits, ask your accountant why they've advised the strategy detailed in their proposal.
Better to take your time to scope out your requirements before you set up than race into a new structure that might hurt you in the long run.
Get in touch to learn more and find out how we can help you with your accounting needs.
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Once upon a time, the rules governing superannuation didn't change all that often. Year after year they would stay more or less the same, with maybe a little tinkering at the edges. It made sense. After all, superannuation is the longest held investment most of us will ever have. It's hard to plan for forty years down the track when you're not sure what the rules will be forty weeks from now.
Sadly successive governments have become addicted to pulling and prodding at the superannuation rules and the 2017/18 financial year is no different.
A flat and lower concessional cap
Under the previous structure people over the age of 50 had a concessional contributions cap of $35,000 and those under 50 had a cap of $30,000. Now the cap for everyone is $25,000 regardless of age.
That doesn't mean that it might not still be a smart financial strategy to put more than $25,000 extra into super, but you need to be aware of the extra tax you'll be exposed to.
Div 293 is a tax applied to the concessional contributions of people on high incomes. In simple terms, it levies an additional 15% on concessional contributions up to the cap (which is now $25,000 for everyone).
This threshold used to be triggered once an individual earned $300,000 in any financial year, but now kicks in at $250,000. Again, this isn't to say that making those extra contributions isn't worthwhile, but the additional tax liability needs to be factored in.
The other thing to consider is that it's not just income that contributes to the threshold - investment losses like a negatively geared rental, and salary packaged fringe benefits and super are also included.
The reason it's so important to know how these changes will affect you, is that any contributions in excess of the cap will attract 46.5% tax - the highest marginal rate.
Of course, if you're earning over $250,000 that's already the tax rate for a fair percentage of your income, but if you've been planning with the expectation of a different tax environment, it could significantly impact on the end result.
The other thing to watch out for is salary packaging. Many Queensland Health employees can salary package up to 2% additional super, with the government matching that contribution. If you're already close to your cap that might push you over the edge.
As with any change in financial circumstances whether they're personal or regulatory it's important to sit down with your advisor and find out how they will specifically affect you.
The good news is that these changes will affect the returns that will be lodged next year, so it's the perfect time to seek advice.
And if you happen to find yourself sitting next to the Federal Treasurer at dinner, you might want to politely ask if he can please leave super alone in next year's budget.
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