Your 2017 EOFY Tax Minimisation Tips

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Another financial year is about to finish! As a business owner, there are many obligations that you need to consider and action just before and after 30 June. Some of these will help to minimise your tax. We have outlined these action points below to assist you.

 
Before 30 June 2017

·   Ensure your employee superannuation payments are received and allocated by your employees’ super fund prior to 30 June 2017 to ensure a tax deduction for this year. Any payments made between 1 July 2017 and 28 July 2017 will count towards your Superannuation Guarantee requirement but will not be tax deductible until the 2018 financial year.

·   If you operate through a trading company, review shareholder loan accounts and make minimum loan repayments (may need to declare dividends).

·   If you operate through a discretionary family trust, ensure that a Trust Distribution Resolution for each Trust is signed by 30 June 2017.

·   Review 2017 LAST MINUTE strategies below to reduce your tax prior to 30 June 2017.

·   Carry out a stocktake by 30 June 2017 (companies with turnover over $10 million)

1 July 2017

·   Superannuation guarantee rate is still 9.5%

·   2% Temporary Budget Repair Levy ceases.

14 July 2017 or before

·   Provide 2017 PAYG Payment Summaries to all employees

28 July 2017

·   Quarterly Superannuation contributions due for employees (for the period 1 April 2017 to 30 June 2017).  THIS IS A KEY DEADLINE!

(Note: If you fail to meet your requirements by 28 July 2017, you must complete a Superannuation Guarantee Charge Statement and forward it to the ATO together with underpaid superannuation plus administration fees and interest by 14 August 2017. Superannuation Guarantee Charge payments are NOT tax deductible.)

14 August 2017 or before

·   Lodge your 2017 Annual PAYG Payment Summary Statement (for employees) with the ATO. Penalties apply for late lodgement.

28 August 2017

·   Taxable Payments Annual Report due for lodgement with the ATO (building and construction industry)

 

Key changes from 1 July 2017

·     The temporary budget repair levy for high income earners is abolished. This reduces the highest marginal tax rate from 49% to 47%.

·     The maximum concessional contribution has been reduced to $25,000, independent of your age at the start of the financial year.

·     The maximum non-concessional contribution has been reduced to $100,000.

·     The maximum amount of non-concessional contributions allowed under the bring forward provisions has reduced to $300,000.

 

Confirmation of changes from 1 July 2016

The following were expected to be implemented from 1 July 2016, and we can confirm that the following measures have passed parliament and are now law:

 

SBE Company Tax Rate reduced to 27.5%

Effective 1 July 2016, the company tax rate for SBE (Small Business Entities) reduces by 1% from 28.5% to 27.5%.  To be considered an SBE, your group aggregated turnover must be less than $10 million.  This key concession for 2017 applies again in 2018.

 

$20,000 Immediate Deduction for SBE’s

Business groups with aggregated turnover of less than $10 million are now eligible to claim an immediate deduction for depreciating assets costing less than $20,000.

 

Similarly, depreciating assets costing $20,000 or more will be allocated to the SBE’s general small business pool and will depreciate at a rate of 15% in the income year in which the assets are first used or installed ready for use. The assets will then be depreciated as part of that pool at 30% in subsequent income years.

 

If the balance of the general small business pool is less than $20,000 at the end of the income year, this balance is also written off.

 

Your 2017 EOFY Reminders & Action Items

Trust Distributions - Timing of Resolutions

Trustees (or directors of a trustee company) need to consider and decide on the distributions they plan to make by 30 June 2017 at the latest (the trust deed may actually require this to be done earlier).  Decisions made by the trustees should be documented in writing by 30 June 2017.

 

If valid resolutions are not in place by 30 June 2017, the risk is that the taxable income of the trust will be assessed in the hands of a default beneficiary (if the trust deed provides for this) or the trustee (in which case the highest marginal rate of tax would normally apply).

 

 (Action Required) Please contact our office before 30 June 2017 so that we can properly prepare this document for you to sign.

 

You might not need to do a Stocktake

Small Business Entities (operational businesses with an aggregated turnover below $10 million) have access to a range of tax concessions.  One of these concessions is the simplified trading stock rules.  Under these rules, you can choose not to conduct a stocktake for tax purposes if there is a difference of less than $5,000 between the opening value of your trading stock and a reasonable estimate of the closing value of trading stock at the end of the income year.  You will need to record how you determined the value of trading stock on hand.

 

If you would like to take advantage of the simplified trading stock rules, call us today to make sure you are eligible to use the simplified rules and to discuss how to use them properly.

 

Deadline for 2017 PAYG Payment Summaries

You need to provide 2017 PAYG Payment Summaries to your employees and other workers by 14 July 2017.  These must then be submitted to the ATO by 14 August 2017 or penalties will apply.

 

 (Action Required) If you have any doubt about how to correctly complete your 2017 PAYG Payment Summaries, please contact us for assistance BEFORE you prepare them.

 

Building and Construction Industry Reporting

From 1 July 2012, new tax reporting rules apply for businesses in the building and construction industry. Businesses will have to lodge an annual report with the ATO setting out details of payments made to contractors. This will assist the ATO to reduce the “cash economy” by ensuring tax is paid on all income including “cash” payments.

 

You will need to record the following details of all payments made to contractors for building and construction services:

·       The ABN of the contractor

·       The name and address of the contractor

·       The gross amount paid for the financial year, including GST

·       The total GST included in the gross amount paid

 

If you use computerised accounting software, your system should be able to track this information for you and prepare the required Taxable Payments Annual Report.

 

 (Action Required) Ensure that you lodge your Taxable Payments Annual Report with the ATO no later than 28 August 2017.

 

Payroll Tax

Payroll tax applies to all entities that have an Australian payroll that exceeds state-based limits.

You should note that in addition to normal salaries and wages, the following items are generally also included in payroll expenses if payroll tax applies:

·       fringe benefits based on the grossed-up taxable value of fringe benefits;

·       all employer contributions to superannuation on behalf of employees; and

·       some contractor or sub-contractor fees.

 

For more detailed information about whether payroll tax applies to your business, please contact our office.

 

 (Action Required) The Annual Return/Reconciliation for payroll tax must be lodged by 21 July 2017 with your State Revenue Office.

 

WorkCover/WorkSafe

Your WorkCover/WorkSafe insurer sends an annual reconciliation to all registered employers at the end of the financial year.

 

In completing your annual reconciliation, you will need to include the following items in addition to normal salaries and wages:

·       fringe benefits based on the taxable value of fringe benefits (do not gross-up);

·       all employer contributions to superannuation on behalf of employees; and

·       some contractor or sub-contractor fees.

 

For more detailed information about what items to include in the reconciliation statement, please contact our office.

 

Once the reconciliation is received and processed by your WorkCover/WorkSafe insurer, you will be issued with a final assessment or a refund depending on the instalments you have paid during the year.

 

 (Action Required) Complete and lodge the Annual Reconciliation with your WorkCover/WorkSafe insurer by the due date.

 

Goods and Services Tax (GST)

A reconciliation of GST should be performed as at 30 June 2017 to determine if there has been an under or over-payment of GST in the 2017 tax year. If a discrepancy has arisen, then it is possible to adjust a subsequent Business Activity Statement (BAS) to rectify the error, however there are limits imposed on adjustments that can be made in this way.

 

Income declared on your BAS should be reconciled to income declared on your income tax returns.

 

Also, please note that you are required by law to substantiate all Input Tax Credit claims with a complying Tax Invoice, and you need to retain these documents for a minimum of 5 years.

 

 (Action Required) Complete the annual GST reconciliations, and check that you have all required tax invoices and other supporting documents.

 

ATO Audit Activity

Please note that the ATO and State Revenue Office are constantly increasing their audit activities. There has been an increase in audit activity for PAYG Withholding, Payroll Tax, WorkCover, GST, Division 7A loan accounts from companies, and Trust distributions from Discretionary Trusts.

 

We can offer a review of your records and record-keeping procedures if you are concerned about your ability to satisfy an audit.

 

 (Action Required) Please contact our office if you would like to request this service.

 

Last Minute Tax Minimisation Tips

Here’s a few final reminders about ways to reduce your tax for 2017:

1.      Write-off Bad Debts

2.      Write-off any trading stock that is damaged or obsolete

3.      Review your Asset Register and scrap any obsolete plant and equipment

4.      Pay for marketing materials, repairs, consumables, office stationery, and donations before 30 June 2017

5.      Ensure employee superannuation contributions are made (and received by your employees’ superannuation fund/s) by 30 June 2017 to allow a tax deduction this financial year

6.      Realise any capital losses you have before 30 June 2017 to offset against any capital gains you may have made

7.      Review the guidance provided in TR97/7 to confirm if you are eligible to claim deductions for your creditors as at 30 June 2017

 

Want to talk?

Feel free to contact our office anytime by phone or email – We can’t wait to provide you with better advice now for a beautiful future!

 

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Modern Award Increase

The Fair Work Act 2009 (the Act) requires the Fair Work Commission’s Expert Panel to conduct and complete a review of the national minimum wage and minimum wages in modern awards in each financial year.

On 6 June 2017 the Commission handed down its decision regarding an increase to modern awards and the minimum wage.

The commission determined that it is appropriate to increase the minimum wage and modern awards by 3.3 per cent.

The national minimum wage will be $694.90 per week, or $18.29 per hour. This constitutes an increase of $22.20 per week to the weekly rate or 59 cents per hour to the hourly rate.

Weekly wages will be rounded to the nearest 10 cents.

Increases take effect from 1 July 2017.

What does this mean for CCIQ members?

The increase only applies to employees that calculate their pay rates from the national minimum wage, a modern award or in some cases a registered agreement.

CCIQ members whose businesses and employees are governed by a modern award (occupational or industry specific) will need to increase employee pay rates accordingly from 1 July 2017.

Where do I find updated awards?

Upon receiving formal notification of changes to all modern awards, CCIQ Employer Assistance will amend CCIQ award and wage templates to reflect the increase.

CCIQ members will be provided with copies of all modern awards and award pay guides relevant to their businesses via the CCIQ online member portal.

The commission is working on updating all pay tools and modern award. Once this is completed, CCIQ's Employer Assistance team will update member resources. It is anticipated this process will occur in June 2017.

Do I have to increase pay rates?

It is important that employers review the wage increases in accordance with their industrial instruments and contracts of employment, as some may have an obligation to pass on the increase even if they are paying above Award rates of pay.

After assessing the new rates of pay, there may be some circumstances where an employer is still paying above Award. If a contract does not provide an obligation to the employer to pass the increase on, the employee’s above Award wage will simply absorb the increase in their current rate of pay and no change will be required.

 

Tax Debt Disclosures

Do you have your tax debts under control?

From 1 July 2017, a new tax measure will come into play for small businesses, and we’re here to help prepare you for this tax change.

Businesses that haven't engaged with the Australian Taxation Office (ATO) to get their tax debts under control could have their tax debt information disclosed to credit reporting agencies by the ATO.

 

Initially, the ATO will be applying this new disclosure measure to businesses with a tax debt greater than $10,000 and is in default (at least 90 days overdue). If your tax debt is disclosed by the ATO, your credit rating will be adversely affected for the next 5 years.

 

What do you need to do?

 

If you have a tax debt that is 90 days or more overdue, you need to secure a payment arrangement with the ATO before 30 June 2017, regardless of how big or small the tax debt is.

 

We also encourage everyone who has outstanding tax payments not yet in default, to get these paid as soon as possible.

 

Tax debts, once disclosed to credit reporting agencies, will go on your credit rating file for 5 years which could greatly impact your chances of securing finance in the future or enter in to credit arrangements with your suppliers.

 

So, it is important to get your tax debts under control as soon as possible, and well before 1 July 2017.

 

How we can help you!

 

As your tax agent, we can help you negotiate an effective payment arrangement with the ATO without negatively affecting your cashflow.

 

Get in touch with us today to discuss your options and get control of your tax debts.

Tax Planning Starts Now

Tax Planning Starts Now

There are 5 key things all business owners must consider right now. Some of them are brilliant wealth creation ideas. Please read on… 

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30 June will be here before we know it. Let us help you get the most out of the upcoming months.  

Too often, we end up suffering because we have procrastinated and not made a positive decision to do something. If we all leave your tax planning until the end of May and early June, quite frankly there may not be enough time to do anything significant to legally reduce your tax.  

So, for 2017, our invitation to you is to start now with your tax planning.  

5 Key Tax Planning Strategies

Over the next five weeks, we will send you one email per week covering one of our five key tax planning strategies. These are:  

  1. The Secrets to Tax Planning
  2. Last Chance for big super contributions
  3. Why use a “bucket” company?
  4. Why use a SMSF?
  5. Trust Distribution Resolutions before 30 June  

So, keep an eye out for our emails over the next 5 weeks, and we’ll outline in detail for you how to save $ and at the same time grow your family’s wealth in a low-risk manner. 

How our tax planning service works

1 

First, we request from you details of your expected income and business profits for the 2017 tax year (1 July 2016 to 30 June 2017). This includes all: 

  • wages / employment income
  • interest, dividends and rental income received
  • business profits / losses; and
  • any capital gains / losses you expect to make.  

Based on this information, we estimate your taxable income and your tax payable before any tax planning strategies. For example, we may calculate (based on your information) that you have a taxable income of $100,000 for 2017. This would result in $26,632 tax and Medicare levy payable.  

2

Secondly, we discuss all your tax planning options. Some of these may be things to do in your business, and some of these may be investment / wealth creation options.  

3

Third, we provide you with a report that explains in plain English the tax planning strategies we recommend and exactly how much tax you will save.  

4

And finally, we provide you with an easy-to-follow action plan to ensure that both you and we can do everything that needs to be actioned before 30 June.   

Contact us today to get started! 

Don’t wait until June, now is the time to have a chat to us.