2017 September 17 by Allworths
Keeping your business passion alive
With thanks to our guest contributor: Jo Hanlon of Mind Your Ps, our go-to HR experts
You may have inherited a business, started one, bought or fallen into one by chance. Regardless of whether you’re the CEO, or serving coffee to your regular customers, one thing is for sure, most of you will experience the loss of passion for your business or work from time to time.
So what gets in the way? A plethora of reasons I’ve heard include:
- DOING the work yourself & working IN not ON the business
- Not having enough time to do things well
- The uncertain and changing economy
- The Government red tape
- Ongoing staff/manager issues distracting progress
- Others or your own negativity
- Not having enough money
- Plain old fatigue from trying to be everything to everyone
- Personal changes
- Hating what you do… the list goes on!
So how can you uncover, clarify further, regain and rejuvenate your passion for your business or job? Here are my top 3 tips.
Tip #1: Know your PURPOSE, the WHAT for and WHY you do what you do in the first place. Your Purpose gives access to sustainable Passion, Inspiration and Energy. The strategies, day to day tactics & values driven behaviour are HOW you and the team upholds Purpose.
Take a moment to reflect on what your Purpose is. Is it to make a difference to your client’s life; send your kids to the best school; save the planet; make lives easier and more workable; provide jobs for others; fundraise to support medical research to change lives? Whatever it is, it must be REAL enough for you to remain Passionate about it against all odds. If you don’t know it, there are plenty of resources available to help you uncover what it is.
Tip #2: Ensure your PURPOSE is BIGGER than just you. Being involved in a game bigger than just our own personal gain really does feed our dreams and Passions by keeping them alive and relevant. When your Purpose is aligned to your innate human nature, involves your own values and is in the interests of your communities, it can only draw bigger and better performances from you and inspire and engage others.
Consider the passion and drive of national sportsmen and women who do their best for their country as well as achieve their own personal bests. Nic Marchesi and Lucas Patchett’s venture, ‘Orange Sky’ of providing mobile showers for the homeless is one fantastic example. Think also of the continuous efforts of scientists and fundraisers dedicated to years of research and fundraising to find new cures for various ailments. You can’t help but be inspired by these people who have a clear Purpose that benefits many.
Tip #3: SHARE it with others. When you Passionately articulate and communicate your Purpose, you engage the hearts and minds of others including your staff; giving you support in the doing and the dreaming.
Think Fred Hollows, Glen McGrath, Bill & Melinda Gates, Professor Alan Mackay Sim and Sister Anne Gardiner.
Sharing your Purpose also keeps you on track and accountable on a much wider scale than just living in your own head and that goes for SME business owners and leaders as well as large philanthropic organisations.
My belief is that many of the reported 75% of businesses that fail within their first 5 years, have missed being clear on their Purpose for existing in the first place. Providing a product or service just because you like it, may not be enough to push you past the first few barriers to success. Being clear on your business Purpose, having it be bigger than you and sharing it gets others engaged in the process and assists to build resilience; giving you the Power and synergies needed to push through barriers to find workable solutions.
So to your homework: I strongly recommend you take some time out and reflect, ask for help if needed, to rediscover your Purpose and revitalise your Passion. If you have tried to do your best but nothing is bringing it back, maybe it’s simply time to get real with yourself, make a change to follow your heart’s Purpose and kick that real Passion into gear now, after all, life is too short to have no Passion for your business!
2017 September 17 by Allworths
Mark Copsey – Partner
I’ve found one simple question causes relief and yet so much stress at the same time with clients: is your will up to date? Possibly the most overlooked issue in managing personal financial affairs is that of Estate Planning. Whilst clients are desperate to talk about it, it usually requires some prompting.
Why is Estate Planning important?
Having a valid will is important as it ensures your assets are inherited by the people you would want to see receive them, instead of the distribution of your assets being governed by a legislated formula based on your family relationships and assets.
Estate planning includes: asset protection both for yourself and your beneficiaries, tax minimisation, consideration of beneficiaries, insurance policies and superannuation entitlements, and your requirements in relation to family and other relationships.
This article, the first in a 3-part series on estate planning, is an update from a 2009 article and will cover some, but not all, aspects of estate planning that we believe you should consider.
A testamentary trust is created by a will, and does not come into existence until the death of the will maker. The trust is established when a person(s) (the trustee(s)) holds assets for the benefit of another person or persons (the beneficiaries). Usually the will specifies a date on which the trust must be wound up (the ‘vesting day’).
Whenever children are left assets from an estate, a testamentary trust results. Where no specific age for transfer of the assets to the child is stated, they will receive the asset (i.e. trust must vest) at age 18. It is important to ensure that the will allows for the income to be applied for the minor’s benefit before age 18, or else no present entitlement will arise.
Advantages of a testamentary trust include flexibility, asset protection and scope for tax planning.
Assets are preserved for the benefit of beneficiaries in a protected environment, in that they cannot be attacked by external parties, such as creditors, family court and bankruptcy court. As the beneficiaries do not have a say over the management of the assets, the trustee has some control over the spending habits of young beneficiaries.
For a beneficiary, that may be a child who is intellectually impaired, suffering marital breakdown or financial difficulties, it may be preferable for them to inherit the assets through a testamentary trust rather than personally.
All estate beneficiaries and beneficiaries of trusts resulting from a Will, including minors under 18, are taxed at their ordinary marginal tax rates, provided the transfer to the testamentary trust occurred within three years of the date of death of the deceased. The concessions apply, even if no capital is ever paid to the beneficiary.
Examples of tax advantages
Assume $1 million assets of deceased estate (e.g. the proceeds of a life insurance policy). The deceased leaves behind spouse and two children. Say investment yields annual investment income of 6% on this investment: $60,000.
If the proceeds went to the deceased spouse, the income of $60,000 would be taxable at the spouse’s marginal tax rate, assuming they have other income, say in this case 38.5% (this could of course be as high as 49%) or tax payable of $23,100.
Had a testamentary trust been established, and the income split between the two children, the tax payable would be $7,200. This results in an annual tax saving of $15,900 which can be contributed to the children’s education, holidays and living expenses. Imagine the tax saved over the period before your child turns 18 or even commences employment, it could be hundreds of thousands of dollars.
- Flexibility of the testamentary trust
The trustee has absolute discretion to decide to which beneficiary income and capital distributions will be made in any year. This means that different beneficiaries may benefit from the testamentary trust in different years, considering the will maker’s original intentions, taxation implications and asset protection aspects relating to the particular beneficiary. There is no requirement that the beneficiaries of a testamentary trust acquire the trust property when the trust ends. The testamentary trust can make provisions for an extended family.
- Capital protected testamentary trust
The terms of the trust can include the right to income for one class of beneficiary and right to capital for another class (e.g. spouse has right to income, with capital protected for the benefit of the children). A capital protected trust can be ‘absolute’ (i.e. access to income only, and not capital), or it can have some ‘residual capital’ reserved (i.e. access to income, and access to part of the capital at the discretion of the trustee).
- Can a testamentary trust be established after the date of death?
Assume the deceased left all the assets under the will directly to his or her spouse. In this situation, the spouse could establish a trust (within three years from the date of death of the deceased) and transfer all or part of the estate into the trust. The children, as beneficiaries, would be able to take advantage of the “normal adult” tax rates.
The disadvantage of creating the trust after the date of death is that any remaining capital of the trust must actually pass to the children when they attain, age 18, whereas if the testamentary trust is established under the will of the deceased directly, then the capital does not need to pass to the children.
Capital Gains Tax: gifts under will
During their lifetime, individuals, whether resident or non-resident of Australia, are entitled to a deduction from assessable income for gifts or money or property of $2 or more to approved bodies, as specified by the Commissioner. However, if assets are gifted under a will to a tax-advantaged entity, a CGT event is triggered to give rise to a capital gain, being the market value of the asset at death, less its cost base.
Some exemptions apply: “a capital gain or capital loss made from a testamentary gift of property under the Cultural Bequests Program, or that would have been deductible if it had not been a testamentary gift, is disregarded.”
Generally, it may be better to gift cash and leave assets to other beneficiaries, or gift the asset during the lifetime of the deceased. Stamp duty should be considered when assets are transferred.
Pay for proper advice
One of my biggest issues in this area is a reluctance to pay for proper advice. Estate Planning is a very complex area and you should have your will prepared by appropriately qualified professionals. Over the years I have seen plenty of poorly drafted wills which simply do not achieve what was desired. Allworths work together with a number of great solicitors and lawyers who can provide the proper advice.
The advice in this newsletter is intended to be general in nature and does not take into account your personal circumstances. Before completing any of the strategies discussed we recommend you speak to your licenced financial advisor or solicitor.
Allworths Wealth Management Pty Limited (AFSL 457155) is the Wealth Management arm of Allworths Chartered Accountants. For further information please contact us on (02) 9264 6733 or email: email@example.com
2017 August 17 by Allworths
Eeny, meeny, miny, moe: getting that job done how and when you need it (part 2)
With thanks to our guest contributor: Jo Hanlon of Mind Your Ps, our go-to HR experts
Outsourced workers or labour hire resources – one off or repeat service provision
Outsourced workers are those who are generally employed by another employer and are subcontracted to work for your company to do a particular job or role on a short or longer term basis.
The legal relationship generally exists between the worker’s own employer which may be their own company or a labour hire company and the firm who is subcontracting the services of the worker or groups of workers.
Their direct employer manages the worker’s employment contract terms and conditions and pays them directly. This model is great for companies who need to cover seasonal or cyclical workload peaks and troughs as well as upscale or downscale work teams in a short time frame.
These workers may be subcontracted to work full time, part time or casually and their employer invoices you a pre-agreed hourly rate or set fee under an umbrella contract which covers the terms and conditions to which you agree for accessing their workforce. A buyout fee may apply if you want to take the worker on directly at some point.
A number of firms also outsource their work internationally, which can work well if the jobs are compliance-based and repetitive and can easily be done online using job specific platforms. Be clear on the processes you need to follow to manage any work quality and performance issues however, because if the workers work regularly for you and have been engaged specifically by their employer to do your outsourced work, they may have similar entitlements to locally based employees such as performance management processes, notice periods and even redundancy entitlements.
Online labour hire or worker engagement markets
A newer model of engaging workers that is fast gaining popularity is the model that allows you to locate and engage casual or freelance workers to do a one off task or job. This engagement is usually for a set or pre-negotiated fee and is done via an online platform or app such as Airtasker, Workfast, Uber, Guru or elance. These apps or portals allow you to enter the details of what type or work you need done or what type of worker you are looking for. The workers who are registered online via this portal may be prompted or alerted immediately and they apply or bid for the opportunity to complete your job. These platforms cover a wide variety of services, from one-off gardening, a move-in/move-out clean, shopping delivery, furniture assembly, ride-sharing and parcel delivery, to a complete website build, ghost writing, graphic design, completion of a marketing or business plan or a translation task.
The terms of engagement, insurance coverage, guarantee and payment transaction is generally managed online depending on the registration process you go through and agree to when engaging with the online marketplace and will differ depending on the platform’s relationship structure. Going through this process generally eliminates the need for any detailed or prolonged interaction between you and the person selling their time or services if not needed, and depending on the service provided are often pre-vetted for security and capability. Being able to rate the quality, timeliness and value of the services provided means the worker’s quality becomes self-managed and, as the ability to give feedback works both ways, so be sure to treat your freelancers well and pay up as agreed too.
One of the limitations in accessing these services, if onsite assistance is needed, may be your location, but as with any economic model, demand will ultimately influence supply, and who knows, maybe it’ll prove to be a way to keep more people working sustainably in regional areas.
Other business resourcing models which are equally as valuable at different levels of the organisation are; consultants, coaches, mentors, advisory and/or governance boards, depending on what assistance or guidance is needed.
So, as you can see, there are many options for you to choose from in getting that job done when and how you need. It may be just a matter of thinking outside your familiar worker model, knowing what skills you need and looking for the best matching solution. Be sure to ask your accountant, IR specialist or other trusted advisor if help and input is needed… Eeny, meeny, miny, moe…
Refer back to part 1 of this article here.
Learn more about Jo at her website.
2017 August 17 by Allworths
Eeny, meeny, miny, moe: getting that job done how and when you need it (part 1)
With thanks to our guest contributor: Jo Hanlon of Mind Your Ps, our go-to HR experts
Many business owners or managers are put off from engaging people to do work for them because they still think they have to employ someone full-time; all they can see are the real or perceived issues and complications that can come with that type of engagement model.
Increasingly, there are a larger variety of models to use in engaging someone to assist you with getting a job, task or project done on a one off, short term, medium term or long(er) term basis which may be a better choice.
A number of options include:
- Full time employee – a person who is appointed (as an employee) to work 38 hours per week or an average of 152 hours per 4 weeks.
- Part time employee – a person who is appointed (as an employee) to work a pattern of regular hours amounting to less than 38 hours per week or an average of 152 hours per 4-week cycle.
- Casual employee – a person who is appointed to work only as and when they are needed, possibly in a regular pattern of work, or intermittently (e.g. 38 hours one week and 0 the next), depending on the needs of their employer, which may be in response to one off, cyclical or seasonal demands.
Be aware that under many modern awards, casual employees or even labour hire workers who work a regular pattern of hours over a 6 (or 12) month period may be required to be offered a permanent role by the employer. The casual worker does not have to accept the offer but, for compliance reasons, it may be required to be offered. In any case, if this is a requirement, it is advisable to document and file the offer and acceptance (or refusal) in writing. Also, most awards state a minimum shift length or payment amount in lieu of work for casual workers performing a shift of 2, 3 or 4 hours.
All Australian-based employees have a number of rights and entitlements, including: minimum pay rates by classification level and/or age, a set amount of paid or unpaid leave, various allowances, a superannuation payment guarantee, penalty rates and termination or redundancy notice period. These entitlements are set according to Fair Work, federal or state-based employment legislation and/or the appropriate industrial instrument or enterprise agreement if they are covered by one. Please refer to the appropriate legislation, award, agreement, Fair Work Information Statement or Fair Work Act 2009 for further details.
Increasingly, ignorance of an employee’s rights by their employer is proving to be no defence in a court of law. For those that read such media releases, if, when an audit is done by the ATO or other compliance agency and shortfalls in payments of rights and entitlements to staff are discovered, you will be aware that substantial back payments plus substantial fines may apply.
Contractors are not generally considered employees but are workers or specialists who are contracted by an entity to work for a period of time and/or to complete a specific project or piece of work.
There are a number of conditions which need to be met before a contractor can be considered a true contractor, as determined by the ATO, which include: use of their own equipment to undertake the job, being legally responsible for the commercial risk of their own work and footing the cost of rectifying any errors, freedom over how the job is completed subject to the terms of the contract, being able to sub-contract the work, basis of how the job is paid, and being independent of your business, i.e.: being able to take on other clients.
A number of employers have tried to use this type of worker engagement model as a way of avoiding fulfilling the legal obligations they normally have towards an employee, so be clear you are meeting the requirements of engaging a true contractor or you also may be up for additional fines and costs.
Different types of contractors include:
- Fixed term contractor – this type of worker is normally contracted to undertake work for a set period of time which may be a number of days, weeks or months.
- Maximum term contractor –the contractor is contracted for a maximum term i.e. for up to a maximum of X months from the date of signing or commencing the contract.
The longer the term of any contract relationship is in play, and the more full time hours the contractor works for an entity, especially if the contract is extended for a further term or there is scope creep, the more likely it is that a court would have a view the contractor will be entitled to all the rights and entitlements of an employee in relation to conditions such as: unfair dismissal, paid leave, superannuation payments and parental leave entitlements, especially if the contractor does not stick to the conditions listed above. To avoid these pitfalls, it is highly recommended you check with your accountant, employment lawyer or an IR expert if you are not sure what type of worker you need…
Learn more about Jo at her website.
2017 August 16 by Allworths
New rules in force from 1 July 2017
- From 1 July 2017, there has been an effective reduction in the top marginal rate of tax for those with taxable incomes over $180,000, from 49% to 47%, with the removal of the 2% Temporary Budget Repair Levy.
- The 27.5% tax rate for companies carrying on small businesses is now available to companies within groups with an annual turnover of less than $25M. Eligible companies are those conducting an active trading business (i.e. not investment companies). This turnover threshold has been increased from the $10M limit applicable for the 2017 financial year. Note: access to the small business capital gains tax concessions is still limited to a $2M turnover threshold where applicable. The tax rate remains at 30% for other companies. The maximum franking credits that can be attached to dividends for companies carrying on small businesses is only 27.5%.
- Small businesses with a group turnover of less than $10M continue to have access to the concessional tax depreciation rules, including immediate deductions for eligible assets costing less than $20K up to 30 June 2018.
- Superannuation concessional contribution caps (maximum annual deductible amounts) have been reduced to $25,000 for all taxpayers regardless of age. This cap will be indexed periodically going forward.
- The 10% assessable income test has been abolished from 1 July 2017. This means that employees no longer need to have salary sacrifice arrangements in place to make additional deductible superannuation contributions in excess of their 9.5% compulsory employer super contributions. From 1 July, employees can make personal tax deductible super contributions at any time they like during the financial year. The $25,000 cap on deductible contributions still applies however, so the total of both personal and employer deductible contributions is limited to $25,000 for each financial year. The work test will continue to apply to require those over 65 to work at least 40 hours in a 3- day period during the financial year to be eligible to make personal super contributions. Finally, if you are aged 75 years or older, you cannot make personal super contributions.
Please contact us if you have any questions in relation to the above changes and how they may affect you.
Labor proposal to tax trusts as companies
Opposition leader Bill Shorten recently announced plans to tax distributions from family trusts at 30%.
As usual, the argument of ‘fairness’ has been put forward to justify the proposal to restrict the splitting of business and investment income to beneficiaries with a low tax rate. Leaving aside the question of fairness, there are many potential issues in relation to this proposal, which have not yet been addressed by Labor, including the following:
- The fact that income splitting of business and investment income is currently possible not only using trusts but also using companies with different classes of shares with distinct rights to dividends;
- Under the dividend imputation system, if a trust was to pay tax at 30%, then the franking credit would be expected to be passed on to the beneficiaries receiving the distribution. If their personal overall tax rate was less than 30%, under the imputation rules, they would be entitled to a refund of tax credits. As a result, their effective tax rate would be no different to that applicable if they had received a trust distribution under the current rules.
In summary, it is difficult to see how the proposal will achieve its desired objective of an increased tax burden on family trust beneficiaries without significant changes to the dividend imputation rules. Perhaps the devil will be in the detail if this proposal is ever passed into law.
2017 July 20 by Allworths
The new financial year is well and truly here. Bleary-eyed accountants everywhere have emerged from their cubicles to a sunny Sydney winter. It’s a great time to think about what the year ahead will bring. Although new year resolutions are usually made around January, and usually focus on kale consumption or yoga attendance, we’ve taken this opportunity to think about our own priorities over the coming 12 months…
Having given this some thought over the past couple of weeks, we’ve come up with a short list of resolutions that we are actively addressing this year:
After 17 years at 31 Market Street, we have been on the lookout for new office premises in Sydney. By the end of this year, we hope to be up and running in our new home. Watch this space.
A new space requires a new look. We’re working on a refreshed brand and website to better represent what we do and stand for. By the time we open the doors to our new office, we’ll have some brand-new letterheads and cards to hand out.
Of course, in 2017, it’s not so much about letterheads and cards anymore. We will be keeping up our new monthly digital newsletters and upping our social media game to better communicate with clients and followers. We even tried our hand at video production recently and might be gracing your screens with our awkward performances before too long.
Although we’ve held our own Australian Financial Services Licence (AFSL) for a while now, we’ve been upskilling in key areas of wealth advisory, including investment and retirement planning, to better assist our clients who have been making more money than plans! We’ve always enjoyed helping others create and protect wealth and this year plan on doing much more in this area.
We’re continuing to reduce our reliance on paper, not just for the environmental benefit, but also for the convenience of our clients. Our increased use of Xero and the electronic signature tool DocuSign (both of which offer our clients significant benefits) are two recent examples of our ongoing progress towards a paperless business.
In short, things are looking up. We’re actually very excited about some of the major changes we have on the cards over the next twelve months! Unlike many a weight-loss plan of years gone by, we are determined to see them through and build a stronger business for our team and clients.
Let us know if you have any FY2018 resolutions of your own, especially if we can assist you in their achievement!
2017 July 20 by Allworths
GST not being charged on all imports
In May, we published a blog post about proposed new GST rules affecting overseas businesses exporting goods and services to Australia. Under the proposals, from 1 July, they would be required to charge and remit GST on goods and services with a value of less than $1,000. This, we said, had made Gerry Harvey rather happy.
In a recent partial backflip, the government has deferred the imposition of the ‘Netflix tax’ in relation to tangible goods such as electronics or clothing. Importantly, it will still apply to Netflix and other digital content services. Specifically: “it will be imposed on intangible supplies such as supplies of digital content, games and software – but will also extend to consultancy and professional services performed offshore for customers in Australia.” You can read more about it here.
Wealthy families not receiving “windfall” tax cut
You may have read in The Australian recently, that the ATO had signalled a tax cut for the wealthy via a ruling allowing family investment companies to claim back hundreds of millions of dollars in company tax. They called this a “windfall” for the wealthy.
In fact, the ruling to which the article referred is a draft ruling on the tax residency of companies incorporated overseas. In a footnote to that ruling, a reference is made to some old cases that suggest a company may be considered as “carrying on a business” even if it only holds passive investments.
Under recent changes, companies with turnover of less than $10 million, carrying on a business, had their company tax rate reduced for FY 2017 from 30% to 27.5%. This is part of the government’s agenda to gradually reach 25%. The draft ruling, which is not binding, did not state that passive investment companies can benefit from the reduced company tax rate of 27.5%. We understand that the ATO have yet to form an opinion on this matter.
Even if the lower tax rate will apply to passive investment companies, when dividends are paid they will only be franked at the lower tax rate. Further, shareholders will potentially pay tax on their dividends at the highest marginal rate in any case. These factors mean the tax benefits are likely to be minimal.
Far from a “windfall” for wealthy families everywhere.
Crowdfunding for proprietary companies
Draft legislation, as part of the FY 2018 budget papers, indicate that equity crowdfunding will be extended to proprietary companies. This essentially means that incorporated SMEs will be able to raise equity finance from private investors without having onerous offer documentation requirements e.g. prospectuses.
Several web platforms have been established in Australia enabling transactions like these to be easily promoted and facilitated entirely online. They are eagerly following legislative changes in this area, as are would-be early-stage venture investors.
A previous proposal had suggested that companies hoping to raise capital in this manner would need to be public (unlisted), which is highly unusual for the sorts of ventures that would be looking for this type of funding.
The latest proposals would extend equity crowdfunding to private companies and allow an unlimited number of shareholders. However, the companies will have certain new obligations, including: a minimum of 2 directors, financial reporting in accordance with accounting standards, audit requirements, restrictions on related party transactions and minimum shareholder rights to participate in exits. With our audit capability through Allworths Assurance and Advisory, we expect to support a number of early-stage ventures through this increasingly complicated process in the coming years.
Though we can’t all be on Shark Tank, it seems most of Australia’s 2 million plus small businesses will have a new source of potential finance in the near future.
Feel free to contact our team if you have any questions about the above issues.
2017 June 5 by Allworths
With 30 June closing in quickly, here are some practical things to consider about the upcoming changes to superannuation. Before taking any action, we recommend speaking with your accountant or financial adviser.
Significant changes to super (not just SMSF) come into effect on 1 July, so be ready. Again, you should speak to your financial adviser about the following as the rules have become quite complex. Here are some pointers:
- If you intend on making concessional contributions (for which you claim a tax deduction), ensure these are received by the superannuation fund by 30 June. The limits are $30,000 for those under 50 and $35,000 for those over 50.
- Before making the contributions, consider any other contributions that may have been made on your behalf.
- Non-concessional contributions: generally, $180,000 with the ability to use the ‘bring-forward rule’ to contribute up to $540,000 for those under 65. Those aged 65 to 75 and working can contribute up to $180,000. You need to discuss these with your adviser to ensure you have not triggered the bring-forward rules in the previous three years.
- Note: this is your last opportunity to get a large chunk of money into superannuation and absolutely your last chance if you have a super balance of $1.6 million or more. If you have between $1.4 million and $1.6 million, there are more rules to consider.
- Unlisted assets and property: if a pension is in place and these assets were held by your super fund at 9 November 2016, look to get these valued at 30 June 2017 to take advantage of the transitional CGT relief rules.
- Ensure you have withdrawn your minimum pensions for the year if your fund is in pension mode.
Superannuation 1 July 2017
- Please note: the concessional limits for everyone reduce to $25,000 on 1 July. If you are on a salary-sacrificing arrangement, you need to advise your payroll department to reduce your sacrificed amounts.
- The maximum you will be allowed to hold in pension mode will be $1.6 million per person. The earnings on this amount will continue to be tax-free.
- You can still hold more than the $1.6 million threshold in superannuation, but the excess must be commuted back to accumulation phase where the income is taxed at 15%.
- Some thought should be given by those who have no income in their personal names as opportunities may exist to hold investments in your own name and take advantage of your tax-free thresholds. For example, $340,000 invested at 6% gives a $20,400 return on which no tax is payable. Held in your super fund in accumulation phase, the fund would pay $3,060 tax on this income.
The key message is to start acting now as post 30 June 2017 it may be too late.
If you need any advice on the above please drop us a line at firstname.lastname@example.org or call 02 9264 6733.
2017 June 5 by Allworths
With 30 June closing in quickly, here are some practical things for SME business owners and investors to consider. Before taking any action, we recommend speaking with your accountant or financial adviser.
- It may sound obvious, but look at bringing forward essential expenses such as repairs or pre-paying expenses such as rent, interest or subscriptions.
- Consider paying employee superannuation for the June quarter before 30 June to claim the deduction.
- If you operate through a trust, ensure your Trust Distribution Minutes are completed before 30 June. Have any of your children turned 18 during the year, who could be considered? Make sure your accountant reads the Trust Deed before resolutions are prepared.
- Review inventory and write off obsolete items.
- Review debtors/receivables and write off actual bad debts (if you operate on an accruals basis).
- If practical, look to defer revenue until the next financial year. Bear in mind cash is king.
- For farmers: review your sales records for livestock sold due to extreme conditions, drought, fire, flood, etc.
- Look to pay or declare staff bonuses before 30 June.
- The small business asset write-off has continued, allowing immediate deductions for capital items up to $20,000.
- Also note the definition of ‘small business’: the turnover threshold for the 2017 financial year has increased to $10 million from $2 million.
- Have you taken money out of your company as a loan? Can you repay or have you considered Division 7A which could potentially deem loans as dividends if appropriate action is not taken?
- If you have acquired a property in the year, look to have a proper depreciation schedule prepared. It costs around $770 and the deductions in year 1 generally recoup this cost. We use BMT Quantity Surveyors but there are others around. Note that deductions will be restricted if the 2017-18 Federal Budget proposals go through.
- If you have made capital gains in the year, look at your investment portfolio and consider selling shares with unrealised losses. Only do this after speaking with your adviser.
- From 1 July, it is proposed that the government will disallow deductions for travel expenses relating to inspecting, maintaining, or collecting rent for a residential rental property. If you are planning a trip, take it before 30 June.
- Consider prepaying interest on investment loans, especially where you expect your overall tax rate to decrease next year, or where a discounted interest rate is available.
We hope these pointers are of use but remember to seek professional advice before taking any action. If you need any advice on the above please drop us a line at email@example.com or 02 9264 6733.
2017 June 5 by Allworths
The 2017-18 budget represents the federal government’s attempt to gain favour with voters amidst rising economic populist sentiment in the electorate. The government has decided to increase taxes and embark upon major new spending programs. There were no major tax changes announced, however, plans to increase the tax burden on property investors and foreigners were introduced, with some additional concessions for small business.
Relevant taxation measures include:
Increase in the Medicare Levy
The Medicare Levy will increase from 2% to 2.5% from 1 July 2019.
Extension of immediate $20,000 asset deduction for small business
The $20,000 instant asset write-off for small business entities (turnover less than $10M for the 2017 year) will be extended by 12 months to 30 June 2018.
Reduction in company tax rate
The company tax rate for small business entities for the 2017 financial year has been reduced to 27.5%.
Limit on investment property depreciation deductions
From 1 July, the government will limit plant and equipment depreciation deductions to outlays actually incurred by real estate property investors, rather than allowing claims to be based on quantity surveyor reports.
No deduction for travel expenses for residential property
From 1 July, travel expense deductions will be disallowed for inspections of residential rental property.
Tighter small business CGT concessions
From 1 July, the small business CGT concessions will be amended to ensure that the concessions can only be accessed in relation to assets used in a small business or ownership interests in a small business.
Taxable payments reporting system extended
The government will extend the taxable payments reporting system from the construction industry to contractors in the courier and cleaning industries per the recommendation of the Black Economy Taskforce.
GST on digital currencies
From 1 July, purchases of digital currency will no longer be subject to GST. The measure will align the GST treatment of digital currency with that of money.
Property purchasers to pay GST direct to ATO
From 1 July 2018, purchasers of newly constructed residential properties or new subdivisions will be required to remit the GST directly to the ATO as part of settlement.
Affordable housing incentive
From 1 January 2018, there will be an additional 10% CGT discount for resident individuals who invest in qualifying affordable housing, i.e. a total of 60% CGT discount.
Withholding from payments to foreign residents
There will be changes to the foreign resident capital gains withholding (FRCGW) rate and threshold. The changes will apply to:
- Real property disposals from 1 July where the contract price is $750,000 and above (currently $2 million)
- All contracts settled from 1 July that the FRCGW applies to will be subject to a withholding tax rate of 12.5% (currently 10%)
New tax on bank customers
The government will introduce a new bank levy for Authorised Deposit-Taking Institutions with licensed entity liabilities of at least $100 billion (i.e. the ‘Big 4’ banks plus Macquarie Bank) from 1 July. The levy will be calculated as 0.06% of liabilities. This new tax will likely be passed on to bank customers via higher interest rates and fees.
Please contact us if you have any questions regarding how the 2017-18 budget proposals may affect you.