Category: News

Interest Rates on Hold

Last week (05/03/19), the Reserve Bank of Australia decided not to change the official cash rate of 1.5%. Two days later the December quarter economic growth figures showed that the economy had slowed considerably – growing by just 0.2% from October to December, and 2.3% over the previous 12 months. This is considerably less than the forecast 3% in the Federal Budget. As a result, many economists are now expecting the Reserve Bank to reduce interest rates even further in the coming year; which would represent record lows. It’s an opportune time therefore to review whether you are making the most of this low rate environment. 

Have you considered the following? 

*         Fixed rate options. While rates are at an all-time low there may be opportunities to fix your loans for 3 or 5 years at under 5% per annum. Explore your options. Some borrowers may wish to fix just a portion of their loan. 

*         Review your position. Low interest rates offer an opportunity to refinance or revise your payment schedule to pay your loan off sooner. Talk to your broker to see if there’s a home or business loan that better suits your needs. 

*         Debt reduction. With lower rates, your monthly/fortnightly repayments will be less. Rather than pocketing the difference, if you put the difference into extra repayments, you can shave years off your loan and, in doing so, save thousands in interest. For example, a $500,000 home loan at an interest rate of 7% requires repayments of $3,078 per month over 30 years. At 4.5%, the repayments are $2,533, a difference of $545 a month. If you put that $545 into extra repayments, you can potentially take more than 9 years off the home loan term and save almost $140,000 in interest. 

*         Create an offset account. This is effectively a money source sitting beside your mortgage. Any savings inside this account are effectively offset against your loan, which in turn reduces the amount of interest you pay. 

Of course, low rates will not be around forever. As a borrower it’s important not to become complacent and to make sure that you still have the capacity to meet your repayment obligations in the event that rates increase. 

#News Flash# Single Touch Payroll Legislation Passes Parliament

Smaller employers (those with 19 or less employees) must commence reporting via Single Touch Payroll (STP) from 1 July 2019 after legislation passed Parliament this morning (12/02/2019).  

The STP regime revolutionises the way employers report payroll information to the ATO. In essence, STP is a new reporting mechanism whereby employers report employee payments (such as salary and wages, allowances etc.) and PAYG withholding to the ATO directly through their STP solution (e.g. upgraded Standard Business Reporting-enabled software) at the same time they pay their employees. To be clear, no additional reporting is required – just a new method of reporting.

Standard business reporting-enabled software (SBR-enabled software) is essential to reporting under STP. Employers must adopt an STP solution by the due date. Solutions will vary depending on an employer’s current payroll processes.

  •  Accountant or Bookkeeper – Employers who use an Accountant or Bookkeeper to process their pays will simply rely on them to provide an STP solution (SBR-enabled software) by the deadline. Even where an Accountant or Bookkeeper does not process employer payroll, employers may turn to them for advice around how they can become STP-compliant.
  • Software Upgrades – If an employer uses commercial payroll software, then they should contact their software provider as the deadline nears and ensure that they offer an updated Standard Business Reporting-enabled version of the software. Major software houses have this software available.
  • In-House Method – If an employer uses an in-house method of payroll or manual method (such as paying employees by EFT and manually providing them with pay-slips and Payment Summaries)…then they will likely need to adopt STP-compliant payroll software. Such employers may lean heavily on their Bookkeeper or Accountant when installing this software, and may need upfront training. Alternatively, they may choose to outsource their payroll to a payroll service provider such as a payroll bureau, or an Accountant or Bookkeeper.

The ATO is acknowledging that there are a significant number of smaller employers who do not use any type of payroll software when processing the pays each week/fortnight etc. Consequently, micro businesses (employers with 1 to 4 employees) will not be required to adopt/buy payroll software in order to comply with Single Touch Payroll (STP) reporting. Whilst for most employers their STP solution will be adopting STP-compliant software, micro-businesses will according to the ATO be provided with different STP compliance options. Speaking on a recent ATO webcast, ATO Assistant Commissioner, John Shepherd confirmed this:

“You won’t need to buy payroll software, that’s why we’re looking for those alternate solutions- some of which might be an app, something that’s fit for purpose to get the STP information in but is easy to use, doesn’t take much time and doesn’t cost that business money to do so ,” said Mr Shepherd.

“We’ve spoken to some different banks and the possibilities around as people pay staff through internet banking being able to submit the single touch pay run information at the same time and we expect that to be part of the list of options that come forward over the next 12 months.

“There are obviously lots of other benefits from using payroll software but we’re not saying for STP that you need to go out and buy a product to do STP.”

MYOB and Xero and other major software houses have already developed these low cost STP-solutions for micro-business. You should contact your Accountant or Bookkeeper for further guidance in this area.

 

 

Key Dates for January & February 2019

Many lodgement and payment deadlines are looming for business including those relating to Activity Statements, Superannuation, and more…..

January 2019
15 January – Due date for lodgement of income tax returns for companies and trust that were taxable medium to large businesses in the prior year and are not required to lodge earlier. If you fail to lodge by the due date, your 2018/2019 income tax return will be due on 31 October 2019
21 January – Due date for lodgement and payment of December 2018 monthly Activity Statements
28 January – Due date for October-December 2018 Superannuation Guarantee contributions to be made to a complying fund on behalf of your employees
31 January – Final date for lodgement of October-December 2018 TFN report for closely held trust for TFNs quoted to a trustee by beneficiaries

February 2019
21 February – Due date for lodgement and payment of January monthly Activity Statements
28 February – Due date for lodgement and payment of October-December 2018 quarterly Activity Statements, including electronic lodgments
28 February – Due date for lodgement and payment of Annual GST returns or Annual GST information reports – if you do not have an income tax return lodgment obligation
28 February – Due date for lodgement and payment of income tax return for selp-preparing entities that were not due at an earlier date. If you fail to lodge by this date, your 2018/2019 return will be due by 31 October 2019
28 February – Due date for lodgement and payment of income tax returns for medium to large businesses (taxable and non-taxable that are new registrants)
28 February – Due date for lodgement and payment Superannuation Guarantee Charge Statement if you failed to pay Superannuation Guarantee charge on time for the October-December 2018 quarter. Superannuation Guarantee Charge is not deductible.

Where one of these dates falls on a weekend or a public holiday, the due date is extended to the next business day except in the case of Superannuation Guarantee contributions.

SINGLE TOUCH PAYROLL

STP if fnally here! 
From 1 July 2018, all employers with 20 or more employees (as at 1 April 2018), must report their payroll information to the ATO via Single Touch Payroll. STP is a reporting change for employers. Essentially, STP requires that each time an employer pays their employees, they will have to instantly report to the ATO information such as the salaries and wages, pay as you go (PAYG) withholding and superannuation. The information will need to be reported from software, which is STP-enables. Eventually this will mean:

  • Employers will not need to provide Payment Summaries to their employees for the payments reporter through STP.
  • Employees will be able to view their payment information in ATO online services, which they will access through their myGov account.
  • Some labels on Activity Statements will be pre-filled with the information already reported.

NB employers with less than 20 employees (as at 1 April 2018) your STP start date will be 1 July 2019.

To finish reading this article – log into the Members Area and see your July/Aug Newsletter edition page 11

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AFTER TAX SUPPERANNUATION CONTRIBUTIONS

2017/2018 is the first year that individuals can reduce their tax liability for the year by making a pre-1 July personal superannuation contribution.  

To recap, new laws were introduced effective 1 July 2017 allowing all individuals up to age 75 to claim an income tax deduction for personal, after-tax superannuation contributions (pre-tax contributions, also known as salary sacrifice contributions, are deductible to your employer not you). Before this date, you could only claim a deduction for your personal contributions where less than 10% of (a) your assessable income (b) your reportable fringe benefits and (c) your reportable emaployer superannuation contributions (e.g. salary sacrifice contibutions) for the year were from being an employee – this was known as the “10% Rule”. This rule prevented most employees from claiming a tax deduction for their personal after-tax superannuation contributions.

To claim a deduction, the standard requirements that existed under the old rules must also be satisfied as follows: 
  • Age – All individuals under the age of 65 are eligible. Those aged 65 to 74 must meet the superannuation ‘work test’ (work for at least 40 hours in a period of not more that 30 consecutive days in the financial year in which you plan to make the contribution). For those aged 75, the contribution must be made no later than 28 days after the end of the month in which you turn 75 . Older tax payers are ineligible.
  • Minors – If the individual is under 18 at the end of the income year in which the contribution is made, they must derive income in that year from being an employee or carrying on a business.
  • Compying Fund – The contribution must be made to a complying superannuation fund.
  • Notice Requirements – To claim the deduction you must provide your superannuation fund with a Notice of intention to claim a deduction form before you lodge your tax return in respect of that financial year.
Note that the maximum deduction that you can claim is $25,000. This is the amount of the concessional contributions cap. As well as your after-tax contributions, included in the $25,000 cap are:
  • Employer contributions (including the compulsory 9.5% Superannuation Guarantee (SG) and salary sacrifice), and
  • Certain amounts transferred from a foreign superannuation fund to an Australian superannuation fund (this won’t affect most taxpayers).
Fo example, if you earned $50,000 for the year from your job, and your employer contributed $4,750, then in effect the maximum amount you could contribute and claim as a deduction would be $20,250 ($25,000 cap, minus $4,750).

https://www.ato.gov.au/forms/notice-of-intent-to-claim-or-vary-a-deduction-for-personal-super-contributions/