Tag: Update

Update – Instant Asset Write-off Changes now Legislated

In the Budget on Tuesday, the Government announced that it would increase the instant asset write-off threshold to $30,000 and extend it to medium sized businesses (those with an aggregated annual turnover of less than $50 million).

This, and the earlier change announced in January (to extend the write-off threshold to $25,000) passed both Houses of Parliament yesterday and is now law (subject to the formality of Royal Assent).

The amendments mean there will be three tiers in the 2018/2019 financial year:

1.     $20,000 threshold for depreciable assets that are acquired and installed ready for use before 29 January 2019. Only available for businesses with an aggregated turnover less than $10 million.

2.     $25,000 threshold for assets first used or installed between 29 January 2019 and 2 April 2019. Only available for businesses with an aggregated turnover less than $10 million.

3.     $30,000 threshold for assets first used and installed after the 2 April budget announcement and before 1 July 2020. Available for businesses with a turnover of less than $50 million.

Going forward, all businesses with a turnover under $50 million are now eligible for a write-off of $30,000. This will be available under 30 June 2020.

To get the taxation benefit of this in the current financial year, you will need to have the asset installed ready for use on or before 30 June 2019.

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. 

Legislation Update 26/02/2019

The first sitting of Parliament for 2019 wrapped up last week. While legislation to extend the Single Touch Payroll reporting regime to all employers passed into law (just awaiting Royal Assent), there are a couple of other measures that remain unlegislated which could impact your business. With the full Parliament only expected to sit for three more days (April 2 – 4) until an Election is called, there are now serious doubts surrounding whether these measures will pass into law. In view of this, we put forward the following suggested approach in the meantime: 

  1. Superannuation Amnesty 

The legislation to enact this measure is still before the Senate. To recap, the Superannuation Guarantee Amnesty was to be available for the 12-month period from 24 May 2018 to 23 May 2019. To get the benefits of the Amnesty (set out below) employers must during this 12-month period voluntarily disclose any Superannuation Guarantee underpayments that exist in the past (going back to when Superannuation Guarantee commenced in 1992). 

For an employer, the tax benefits of the Amnesty are: 

* The administration component of the Superannuation Guarantee Charge (SGG) is not payable (this is a $20 per employee, per quarter, for whom there is an SG Shortfall) 

*  Part 7 penalties will not be applied. This can be up to 200% of the SG Charge that is payable (note that SG Charge includes the SG Shortfall that you owe to employees) 

* All catch-up payments that you make during the 12-month Amnesty period will be tax deductible. 

By contrast, under the current law, when superannuation has been underpaid or paid late Superannuation Guarantee Charge that must paid to the ATO is not deductible, and late contributions that an employer has made to an employee’s superannuation and has elected to offset against their SG Charge liability are also not deductible. 

If an employer is contemplating disclosing past superannuation shortfalls specifically to get the benefits of the Amnesty (including claiming a deduction for your late contributions) then it may be prudent to hold off until such time that the Amnesty actually becomes law (if at all). We will keep you apprised of the passage of the legislation through Parliament. However, with only a few sitting days remaining for this Parliament, and with the Opposition opposed to this measure, there are serious doubts about it becoming law. 

Irrespective of the Amnesty however, all employers should consider coming forward to disclose and pay past shortfalls to get their Superannuation Guarantee affairs in order. The Government is committing more resources to this area – including requiring Superannuation Funds to report more regularly to the ATO (at least once each month) – therefore non-complying employers may be more easily detected going forward. 

  1. Enhancing the Instant Asset Write-Off 

Legislation to expand and extend the Small Business Instant Asset Write-Off is still before the House of Representatives. This Bill seeks to extend the write-off by 12 months until 30 June 2020 (currently set to expire on 30 June 2019) and increase the threshold by $5,000 to $25,000; with the increase backdated to 29 January 2019. If passed into law, this would mean that there would be two thresholds for 2018/2019 as follows: 

* $20,000 (for assets installed ready for use between 1 July 2018 and 28 January 2019), and 

* $25,000 (for assets installed ready for use between 29 January 2019 and 30 June 2019. 

Irrespective of the whether the legislation passes into law, it is important to have perspective. You are only getting back the tax rate on the asset, not the full value of the asset. This is the same as the old law where the write-off threshold was $1,000  You don’t get any extra cash than you would otherwise have received under the old rules – you simply get it sooner. Consequently, you should not let tax distort or blur your commercial instincts – as you don’t get any extra cash than you would otherwise have under the old rules, you should continue to only buy assets that fit within your business plan. 

STP Rollout Now Law!

The Senate has now passed legislation to extend Single Touch Payroll (STP) to employers with 19 or less employees from 1 July 2019.

These businesses can also of course opt in early to STP.

The passage of legislation follows months of uncertainty for small business after STP was officially rolled out for employers with 20 or more employees from 1 July 2018.

The ATO still intends to allow micro-businesses (less than 5 employees) to adopt low-cost, alternative STP solutions.

 

 

INSTANT ASSET WRITE-OFF EXTENDED

The extension of the $20,000 instant asset Write-Off has now been passsed into law. 

PASSED
In the May 2018 Federal Budget the Government announced an extension to the Small Business Instant Asset Write-Off that was originally introduced from 1 July 2015. Under the Budget announcement, the Write -Off was to be extended until 30 June 2019 (it was to expire 30 June 2018). On 12 September 2018, The Treasury Laws Amendment (Accelerated Depreciation for Small Business Entities) Bill 2018 was passed by the Parliament into law to give effect to this 12-month extension.


More info? In our exclusive Members Area, watch the Webinar on Instant Asset Write-off (under the useful links tab) and read the full article in your November/December 2018 Bi-Monthly Newsletter, page 15.

NOT a member? Join today for exclusive access to articles, webinars, videos & publications on Saving Tax!
Call today on 1800savetax (1800 728 3829) for a special offer for first time subscribers.
//mytaxsavers.com.au/what-do-i-get/

SUPER AMNESTY – TAKE ADVANTAGE!

Could you as an employer benefit from taking advantage of the Government’s new Superannuation Guarantee (SG) Amnesty? This article informs you of how you can wipe your SG slate clean, and enjoy some once-off taxation benefits in doing so.

Subject to the passage of legislation (which is currently before the Senate), the Amnesty will be available for the 12-month period from 24 May 2018 to 23 May 2019.

BACKGROUND
The latest data indicates that the “SG Gap” or SG Shortfall (the difference between the theoretical amount payable by employers to be fully compliant with their SG obligations and the amount they have actually paid) is $2.85 billion annually. This indicates that a concerning number of employers are not paying sufficient SG to their employees or are not paying it at all. In response to this and in order to recoup this key employee entitlement, the Government in late May 2018, announced a once-off, 12-month Superannuation Amnesty for employers.
BENEFITS
For an employer, the benefits of the Amnesty are:
  • The administration component of the Superannuation Guarantee Charge (SGC) is waived (this is currently a $20 per employee, per quarter charge for whom there is an SG Shortfall)
  • Part 7 penalties will not be applied. This can be up to 200% of the SG Charge that is payable (note that SG Charge includes the SG Shortfall amount that you owe to employees)
  • All catch-up payments that you make during the 12-month Amnesty period will be tax deductible. The amendments also allow contributions that an employer has elected to offset against SG Charge imposed on the SG Shortfall disclosed in accordance with the Amnesty to be deducted from an employer’s assessable income. This ensures commensurate benefits are provided for employers who contribute directly to their employees’ funds when disclosing under the Amnesty as opposed to the benefits for those who instead make payments in relation to SG Charge and leave it to the ATO to distribute the amounts to the relevant funds.
By contrast, under the current law, SG Charge paid to the ATO is not deductible, and late contributions that an employer has made to an employees’ superannuation fund and has elected to offset against their SG Charge liability are also not deductible.
DETAILS
With a Bill to enact the new Amnesty now having been introduced to Parliament, we can reveal the details are as follows:
  • The Amnesty applies to any SG Shortfall from the introduction of SG back on 1 July 1992 to the quarter ending 31 March 2018.
  • You must voluntarily disclose amounts of SG Shortfall relating to the above period. Therefore, if an employer has already lodged an SG Charge Statement (and in that Statment disclosed particular SG Shortfalls), then those particular Shortfalls are not eligible for the Amnesty even if the amount of the Shortfall has yet to be paid. Likewise, Shortfalls that the ATO uncovers during current, future, or past audits of the employer are not eligible for the Amnesty. The disclosure of a new Shortfall must come from the employer, and must occur during the 12-month Amnesty period. By way of background, SG Charge Statements and SG Shortfalls operate under a self-assessment model. The ATO are in most cases unaware that an SG Shorfall exists except in the case where an employee lodges a complaint against their employer themselves, or the Shortfall is uncovered in an ATO audit. This lack of awareness by the ATO of past employer Shortfalls is why eligibility for the Amnesty rests on the disclosure by the employer of new, undisclosed Shortfalls.
  • There is no requirement to actually make a payment to get the benefit of the Amnesty. Rather, you only need to disclose an SG Shortfall. However, where you fail to make a payment during the Amnesty period, you will not receive a deduction for the catch-up payments (which are only available during the Amnesty).
  • Any payments made outside the Amnesty period are not eligible for a deduction. For example, if an employer discloses a Shortfall during the Amnesty period, and then makes a payment arrangement with the ATO to pay the required amounts back in instalments, any amounts paid after 23 May 2019 cannot be claimed as a deduction.
ACCESS
To access the Amnesty, employers or thier Advisors must first calculate the amount payable (the SG Shortfall, plus nominal interest) and lodge one of the following forms:
  • SG Amnesty Fund payment form (where you wish to access the Amnesty and can pay the amount in full (including nominal interest) direct to an employee’s superannuation fund)
  • SG Amnesty ATO payment form (where you wish to access the Amnesty but cannot pay the amount owing in full). If an employer has already lodged an SGC Statment or received an SGC assessment for a quarter, they can only use this form.
Employers need to lodge these completed forms electonically through the Business Portal or their Accountant or Bookkeeper on their behalf via the BAS Agent or Tax Agent Portal respectively. There is now a radio button on all portals. Information that must be provided includes:
  1. Details of Employer
  2. Number of quarters covered
  3. Number of employees, (no employee details are required)
  4. Amount to be paid.
CONCLUSION
Legislation to enact this Amnesty was introduced into Parliment in late May and has been passed by the House of Representatives. It is currently before the Senate. Interestingly, the Opposition have criticised the legislation which it says shows leniency to non-complying employers. Therefore, it is no absolute certainty that the Amnesty will be passed into law over the coming months. For this reason, if you are contemplating disclosing past shortfalls specifically to get the benefits of the Amnesty (including claiming a deduction for their late contributions) then it may be prudent to hold off until such time the Amnesty actually becomes law. We will keep you apprised of the passage of the legislation through Parliament.

Irrespective of the Amnesty however, all employers should strongly consider coming forward to disclose and pay past shortfalls to get their Superannuation Guarantee affairs in order. The Government is committing more resources to this area – including requiring Superannuation Funds to report more regularly to the ATO (at least once each month) – meaning non-complying employers may be easily detected going forward.

For more on this subject: Members – login to the members area, Useful Links tab – watch the Tackling Tax video ‘Superannuation Amnesty’ presented by our CEO Kelvin Deer. //mytaxsavers.com.au/

Company Tax Rate Clarification

The Government has just announced that it will introduce legislation into Parliament to clarify confusion around the applicable tax rate for companies.

By way of background, in recent times the Government has passed legislation to progressively reduce the company tax rate for companies with a turnover of up to $50 million as follows:

 

Income year

 

Turnover threshold

Company tax rate for entities under the threshold

Company tax rate for entities over the threshold

 

2015–2016

$2m

28.5%

30.0%

2016–2017

$10m

27.5%

30.0%

2017–2018

$25m

27.5%

30.0%

2018–2019
to
2023–2024

$50m

27.5%

30.0%

2024–2025

$50m

27.0%

30.0%

2025–2026

$50m

26.0%

30.0%

2026–2027

$50m

25.0%

30.0%

 

It appears that the Government’s intention in making these reductions was to encourage small to medium businesses to reinvest the tax savings in their business, and in turn promote employment and investment growth.  

However, this intent became clouded recently when the ATO issued a draft Taxation Ruling in which it stated that, in its opinion, companies that were engaged in passive investments in shares and property could be seen to be carrying on a business, and thus eligible for the reduced company tax rate.

In response to this, the Government has stated that it will soon move to introduce legislation clarifying that only active trading companies qualify for the lower tax rate (and therefore not bucket companies or passive
investment companies).

Accordingly, if your company because of its turnover currently qualifies for the 27.5% tax rate and you are varying or otherwise calculating its PAYG Instalments, these should be calculated based on the reduced 27.5% tax rate only where the company is actively trading.

Bucket companies and companies that are solely engaged in passive investments in shares and property should operate (and calculate their PAYG Instalments) on the basis of the 30% rate applying; irrespective of the level of turnover.  

//www.ato.gov.au/Business/Small-business-entity-concessions/Concessions/Income-tax-concessions/Small-business-company-tax-rate/


SMALL BUSINESS REDIFINED

On 31 March, the Government secured Senate support for the passage through Parliament of legislation to assist small to medium businesses. While company tax cuts were the headline measure, included in the changes was an increase to the Small Business Entity (SBE) turnover threshold. Backdated to 1 July 2016, the SBE turnover threshold has been increased from $2 million to $10 million. Treasury estimates that this will allow an additional 90 000 to 100 000 businesses to qualify for a range of SBE tax concessions including:

 

  • Immediate deductibility for small business start-up expenses
  • Simpler depreciation rules
  • Simplified trading stock rules
  • Roll-over relief for restructures of small businesses
  • Deductions for certain prepaid business expenses immediately
  • Accounting for GST on a cash basis
  • Annual apportionment of input tax credits for acquisitions and importations that are partly creditable
  • Paying GST by quarterly instalments worked out by the ATO
  • Fringe benefits tax (FBT) car‑parking exemption and
  • Pay‑As‑You‑Go (PAYG) instalments based on gross domestic product (GDP)‑adjusted notional tax.

 

With the legislation and therefore increased SBE eligibilty backdated to 1 July 2016, this presents a tax planning opportunity for business. Among the depreciation concessions is the $20 000 instant asset write-off – giving SBEs the ability to claim as a deduction the full cost of the asset in the year of purchase and installation (rather than having the item depreciated over a number of years). The real benefit of the write-off is an improvement to your cash-flow – bringing forward deductions rather than having them spread out over more than one year. To claim a deduction in 2016/2017, the asset must have been acquired on or after 1 July 2016 and first used or installed ready for use in your business on or before 30 June 2017. So if you are contemplating purchasing a depreciating asset for your business (such as furniture, machinery, tools, equipment, small motor vehicle etc.) you may wish to bring forward that purchase to before 1 July 2017 and enjoy the cash-flow benefit.

 

Over the coming months we will be detailing the other various concessions listed above.