X

Secure your business and your
future by contacting us today.

Our team is ready to talk to you about your business accounting needs and your personal wealth management strategy. We look forward to providing you with a flexible, highly tailored and truly personalised experience.

    New financial year business budget basics

    Senior couple planning their investments with financial advisor in living roomNobody likes to think about the inevitable. Talking to family and friends about your own death is not high on your conversation list.

    Like everyone, your day-to-day life is filled with busy activities and it’s not unusual for the task of getting your affairs in order to sit at the very bottom of your to-do list.

    But estate planning is important. Taking the time to make clear arrangements and to keep them updated will provide both you and your loved ones valuable peace of mind.

    There is a lot more to estate planning than just writing your will and putting it in your files for someone to find in years to come. It is a complete strategy that outlines how your assets will be distributed to your beneficiaries after you die.

    This isn’t an easy task and is best done with the support and guidance of a professional accountant or financial advisor. They can help you determine exactly what you want and advise on the best way to achieve your wishes.

    Charming little girl and her beautiful young parents are talking and smiling while sitting on sofa at homeStart now

    While you might think that estate planning is something to do when you are nearing retirement, you should actually start thinking about it now.

    Your estate is made up of all your assets, and you begin accumulating wealth as soon as you start earning an income… so even if you are only in your 20s, it’s worthwhile considering how you want your assets distributed.

    If you are a newly employed young person, the first stage of estate planning may be writing a simple will and making sure your superannuation beneficiaries are set up correctly. Then as your circumstances change and your wealth grows, you can speak with an expert about complex estate planning processes and modify your plans accordingly.

    It’s vital that you understand your legal rights and responsibilities, so we recommend seeking professional advice. An advisor can also give you guidance on the most tax effective strategies when it comes to the transfer of your assets.

    Male hand signing business document, senior man putting signature on legal paperReview your will

    When was the last time that you checked your will? Making sure that you have a current, valid will is fundamental to your estate plan.

    It is a legally binding document that not only describes how you want your assets distributed, but it also helps to minimise the potential for disputes once you are gone.

    Your will also saves your family and other loved ones from the stress and worry that can accompany complex legal matters.

    Here in Australia, if someone dies without a will in place, their assets are distributed according to the inheritance laws of the state they live in. If this happens, it could have a significant tax implication for your beneficiaries.

    The last thing you want is someone you love being burdened with an additional tax bill while they are grieving your loss.

    Think about tax

    Estate planning does have complex tax considerations that you need to think about. Your individual circumstances will dictate the complexity of your strategy, which is another reason why you should seek professional guidance.

    You want to make sure that you set up an effective transfer of assets. For example, a testamentary trust is a simple, tax effective way to make sure your assets reach their intended beneficiaries. They tend to provide protection from legal action and attract better marginal tax rates when trust income is distributed to children or minors.

    Child and parent hands holding money jarSuperannuation

    It’s important to note that your superannuation is not included in your estate. It is distributed as a superannuation death benefit, not as part of your will. Your binding death nomination determines who will receive the distributed funds, so you want to make sure you have that information up to date at all times.

    Under super law, how the benefit is paid – either as a lump sum or an income – and who it is paid to depends on who you nominate as your beneficiary.

    You can only nominate the executor of your estate if they are classified as a dependant.

    These super regulations are difficult to navigate, and we recommend having an advisor review your nominations to make sure they are valid.

    Accountant showing paper with points of project to colleagueSeek professional advice

    You want to make sure that when you are gone, the structures you have in place will work effectively for your beneficiaries.

    This is especially important if you own a business, have been married more than once or have a blended family.

    These situations can demand a more complex estate plan to ensure your assets are properly distributed.

    We understand that estate planning can be challenging, so here at North Advisory our aim is to make those conversations as easy as possible. If you’d like to find out more about how we can help you, please contact us today.

    Read More Blogs

    The Treasurer, Josh Frydenberg, delivered the Federal Budget on Tuesday 29 March 2022. We have outlined information that is relevant to you, your superannuation and business and employers.

    Hand Man Refill and filling Oil Gas Fuel at station

    FOR YOU

    Temporary reduction in fuel excise

    As widely predicted, the Government will temporarily reduce the excise and excise-equivalent customs duty rate that applies to petrol and diesel by 50% for 6 months from Budget night.

    That is, the current 44.2 cents per litre excise rate will reduce to 22.1 cents per litre from Budget night. However, the measure is subject to the passage of the enabling legislation so don’t expect to see a change right away.

    The reduction extends to all other fuel and petroleum based products except  aviation fuels. At the conclusion of the 6 months on 28 September 2022, the excise and excise-equivalent customs duty rates revert to previous rates including any indexation that would have applied during the 6 month period.

    The Australian Competition and Consumer Commission (ACCC) will monitor the price behaviour of retailers to ensure that the lower excise rate is passed on to consumers.

    The measure comes at a cost of $5.6bn.

    Low and middle income cost of living tax offset increase

    The low and middle income tax offset (LMITO) currently provides a reduction in tax of up to $1,080 for individuals with a taxable income of up to $126,000.

    The tax offset is triggered when a taxpayer lodges their 2021-22 tax return.

    For the 2021-22, the LMITO will be increased by $420 which means that the proposed new rates for individuals are as follows:

     

    Taxable income  Offset
    $37,000 or less $675
    Between $37,001 and $48,000 $675 plus 7.5 cents for every dollar above $37,000, up to a maximum of $1,500
    Between $48,001 and $90,000 $1,500
    Between $90,001 and $126,000 $1,500 minus 3 cents for every dollar of the amount above $90,000

    $250 cost of living payment

    A one-off $250 ‘cost of living payment’ will be provided to Australian resident recipients of the following payments and concession card holders:

    • Age Pensionhands of a senior woman holding australian banknotes and a pen
    • Disability Support Pension
    • Parenting Payment
    • Carer Payment
    • Carer Allowance (if not in receipt of a primary income support payment)
    • Jobseeker Payment
    • Youth Allowance
    • Austudy and Abstudy Living Allowance
    • Double Orphan Pension
    • Special Benefit
    • Farm Household Allowance
    • Pensioner Concession Card (PCC) holders
    • Commonwealth Seniors Health Card holders
    • Eligible Veterans’ Affairs payment recipients and Veteran Gold card holders.

    The payments are exempt from taxation and will not count as income support for the purposes of any income support payment. An individual can only receive one payment.

    Medicare levy low-income threshold increased

    The Medicare levy low income thresholds for seniors and pensioners, families and singles will increase from 1 July 2021.

      2020-21 2021-22
    Singles  $23,226  $23,365
    Family threshold  $39,167  $39,402
    Single seniors and pensioners  $36,705  $36,925
    Family threshold for seniors and pensioners  $51,094  $51,401

    For each dependent child or student, the family income thresholds increase by a further $3,619 instead of the previous amount of $3,597.

    Home Guarantee Scheme extended

    The Home Guarantee Scheme guarantees part of an eligible buyer’s home loan, enabling people to buy a home with a smaller deposit and without the need for lenders mortgage insurance. The Government has extended two existing guarantees and introduced a new regional scheme.

    Just prior to the Budget, the Government announced:

    • First Home Guarantee – from 1 July 2022, an increase from 10,000 to 35,000 guarantees to support eligible first homebuyers purchase a new or existing home.
    • Single parent Family Home Guarantee – 5,000 guarantees each year from 1 July 2022 to 30 June 2025. The family home guarantee supports eligible single parents with children to buy their first home or to re-enter the housing market with a deposit of as little as 2%.
    • Introduction of a Regional Home Guarantee. This guarantee will support eligible citizens and permanent residents who have not owed a home for 5 years (including non-first home buyers) to purchase or construct a new home in regional areas with a minimum 5% deposit areas (subject to the passage of enabling legislation).

    YOUR SUPERANNUATION

    Reduction in minimum superannuation drawdown rates extended again

    The temporary 50% reduction in superannuation minimum drawdown requirements for account-based pensions and similar products has been extended to 30 June 2023.

    Minimum superannuation drawdown rates 2019-2023

    Age  Default minimum drawdown rates (%)  Reduced rates by 50% for the 2019-20 to 2022-23 income years (%) 
    Under 65 
    65-74  2.5 
    75-79 
    80-84  3.5 
    85-89  4.5 
    90-94  11  5.5 
    95 or more  14 

    australian dollar with graph, home budget laptop and calculatorBUSINESS AND EMPLOYERS

    $120 deduction for every $100 spent on technology

    The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud based services.

    The technology boost will be available to small business with an aggregated annual turnover of less than $50 million.

    An annual expenditure cap of $100,000 will apply to the boost.

    The boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year. The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2023 will be included in the income year in which the expenditure is incurred. That is, the additional deduction available under this measure is expected to be claimed in the 2023 tax return.

    Lowering tax instalments for small business

    Normally, GST and PAYG instalment amounts are adjusted using a GDP adjustment or uplift. For the 2022-23 income year, the Government is setting this uplift factor at 2% instead of the 10% that would have applied.

    The 2% uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods for instalments for the 2022-23 income year and are due after the amending legislation comes into effect:

    • Up to $10 million annual aggregated turnover for GST instalments and
    • $50 million annual aggregated turnover for PAYG instalments

    Two diverse coworker employees sharing laptop, discussing paper report at workplace

    Expanding access to employee share schemes

    In broad terms, an Employee Share Scheme (ESS) is a scheme under which shares in a company, or rights to acquire shares in a company, are issued to an employee or their associate in respect of their employment.

    At a commercial level, ESS arrangements are often used to better align the interests of employers and employees, as employees are provided with an opportunity to share in the profitability and growth of the business.

    The arrangements can also be useful in situations where a business is in start-up mode and does not have significant cash flow or reserves to attract top quality employees with high salaries.

    The Government has flagged changes to the ESS rules to expand access to schemes so that employees at all levels can directly share in the growth of the business.

    Where employers make larger offers in connection with employee share schemes in unlisted companies, participants can invest up to:

    • $30,000 per participant per year, accruable for unexercised options for up to 5 years, plus 70 per cent of dividends and cash bonuses; or
    • Any amount, if it would allow them to immediately take advantage of a planned sale or listing of the company to sell their purchased interests at a profit.

    The Government will also remove regulatory requirements for offers to independent contractors, where they do not have to pay for interests.

    While these changes might expand access to employee share schemes, it is important to consider the tax implications that can arise for employee when they receive shares or options at a discount to their market value. There are a number of different ways that employees can be taxed in this area and the treatment will often depend on how the ESS arrangement has been structured by the company.

    ‘Patent Box’ tax regime extended to agriculture and emissions

    The Patent Box tax regime was announced in the 2021-22 Budget for the medical and biotech industries and provides a concessional effective corporate tax rate of 17% on income derived from patents, to the extent that the taxpayer undertakes the R&D of that patent in Australia.

    The Government has announced an extension of the regime to:

    • Technology focused innovations to reduce emissions in line with the Government’s target to achieve net zero emissions by 2050, and
    • Practical, technology focused innovations in the Australian agricultural sector.

    Note that the legislation enabling the original 2021-22 Budget measure has not been enacted and is currently before Parliament – see Treasury Laws Amendment (Tax Concession for Australian Medical Innovations) Bill 2022.

    Streamlining fuel and alcohol excise compliance

     Young man working at warehouse in brewery

    From 1 July 2023, fuel and alcohol businesses with an annual turnover of less than $50 million will be able to lodge and pay excise and excise equivalent customs duty on a quarterly basis, rather than weekly or monthly. These businesses will lodge returns and pay excise by the 28th day of the month after the end of each quarter.

    In addition, businesses that import fuel and alcohol products for further manufacture or distribution, and want to defer payment of excise or excise-equivalent customs duty, will be able to transfer the fuel or alcohol straight into a warehouse administered by the ATO once the products have gone through Australian Border Force (ABF) customs clearance.
    The ABF will still collect tax on direct imports.

    Licensing requirements across the excise system will also be streamlined by:

    • removing all renewal requirements for excise and excise equivalent customs goods licences; removing licence fees; enabling the ATO and ABF to issue entity level licences in addition to site level licences; and providing blanket permission to move goods between sites controlled by licensed businesses
    • removing onshore producers of crude oil and condensate from the excise system until and unless they exceed the relevant production threshold to be liable for excise payments
    • extending the time limit to apply for a refund of excise overpayments from 12 months to 4 years after payment, to align with refunds of customs duty
    • creating a public register of excise and excise equivalent customs goods licences administered by the ATO.

    And, the excise and excise-equivalent customs duty regime for fuel will be amended by:

    • introducing a refund provision, similar to that in the excise law, for excise equivalent customs duty on petroleum based oils used in the further manufacture of petroleum lubricants, ending double taxation of these oils
    • removing the requirement to pay and then claim Fuel Tax Credits in respect of excise or excise equivalent customs duty on fuels used in domestic commercial shipping (‘bunker fuels’), aligning their treatment with the duty-free treatment of bunker fuels for international voyages
    • setting a single rate for businesses to calculate and claim Vapour Recovery Unit refunds.

    The excise law will be amended to provide a targeted exemption from excise licensing requirements, up to a threshold of 10,000 litres per year, for licensed hospitality venues to fill beer from kegs into sealed, non-pressurised containers of no more than 2 litres capacity and not designed for medium to long term storage (‘growlers’).

    Linking PAYG instalments to financial performance

    As announced prior to the Budget, companies will be able to choose to have their pay as you go (PAYG) instalments calculated using current financial performance, extracted from business accounting software, with some tax adjustments.

    The move is intended to ensure that instalment liabilities are aligned to the businesses cashflow. In addition, the digitisation of PAYG instalments will improve transparency and provide more accurate data on performance.

    Digitising taxable payments reporting system

    As announced prior to the Budget, businesses will be able to report Taxable Payments Reporting System data via their accounting software on the same lodgment cycle as their activity statements.

    The measure is expected to reduce the costs of complying with the system and increase transparency.

    Sharing of Single Touch Payroll data

    As announced prior to the Budget, the Government will commit $6.6 million for the development of IT infrastructure that will enable the ATO to share Single Touch Payroll (STP) data with State and Territory Revenue Offices on an ongoing basis.

    The funding will be deployed following further consideration of which states and territories are able and willing to make investments in their own systems and administrative processes to pre-fill payroll tax returns with STP data in order to reduce compliance costs for businesses.

    ABN integrity measure delayed

    Back in the 2019-20 Budget, the Government announced that Australian Business Number (ABN) holders would be stripped of their ABNs if they failed to lodge their income tax return. In addition, ABN holders would be required to annually confirm the accuracy of their details on the Australian Business Register.

    This measure has been deferred for 12 months, which means that the tax return lodgement obligation is due to commence from 1 July 2022 with the annual confirmation of ABN details to commence from 1 July 2023.

    Tax deductibility of COVID-19 test expensePositive SARS‑CoV‑2

    As previously announced, work‑related COVID‑19 test expenses incurred by individuals will be made tax deductible.

    Changes will also be made to ensure that FBT will not be payable by employers if they provide fringe benefits relating to COVID‑19 testing to their employees for work‑related purposes.

    The changes for deductions will be effective from 1 July 2021, with the FBT changes to apply from 1 April 2021.

    At this stage it is not entirely clear whether the deduction rules will cover expenses incurred where the employee is able to work from home. The initial media release indicates that the measure will cover situations where the individual has the option of working remotely, while the Budget only refers to costs of taking a COVID-19 test to attend a place of work but doesn’t specifically refer to employees who can work from home.

    If you have any questions about how any of these announcements affect you, please contact our team today. Read more Financial Industry articles.

    Read More Blogs

    Restaurant owner checking monthly reports on a tabletBusiness tax audit… three words that have the ability to strike fear into the hearts of business owners everywhere.

    Having the ATO go through your accounts is a daunting thought, and even if you have been operating your business for decades, it can still make you nervous.

    “What will they find?

    Will I be hit with additional bills?

    I hope I’ve done everything right!”

    We understand that the prospect of an audit can be overwhelming, but it doesn’t need to be. If you have robust systems in place and keep your accounting records up to date, it can actually be a smooth and easy process. By following some of our tips, we are sure that you can stress-less and be prepared for anything!

    Futuristic stock exchange with chart, numbers and BUY and SELL options What is ATO’s audit focus?

    To help alleviate some of the anxiety around a business tax audit, you can start by considering what the ATO will be looking for. Every year there can be slight changes to the ATO’s focus, depending on what is happening across the country. For example, in FY20/21 there was a lot of attention paid to how businesses rolled out JobKeeper payments, as this was a key financial stimulus from the government.

    This year, it is predicted that the ATO will be looking at employer obligations such as the Superannuation Guarantee (SG). Data they collect from Single Touch Payroll (STP) reporting provides them the information they need to determine who they might target.

    In addition to employer obligations, it’s likely that the ATO will also be focusing on cryptocurrency and share transactions. In 2021, they contacted ‘around 100,000 taxpayers who had traded in cryptocurrency and prompted 140,000 taxpayers at lodgment.’ So, it’s important that you understand the capital gains tax implications of crypto and trading.

    Businessman analyzing reports while working on paperwork in a restaurantAccurate records

    Knowing what the ATO is focusing on is helpful, but the best way to be prepared for a business tax audit is to make sure your accounting records are top notch.

    There’s nothing worse than being told you will be audited and realising you need to fix a year’s worth of accounting!

    Ideally, you want to use a cloud-based system, as it will make your day-to-day financial management much easier.

    Cloud accounting software, such as Xero, is always up to date with Australian tax regulations and will help you manage transactions and keep you on top of compliance.

    Implementing good accounting practices such as regular reconciliations, scheduled payroll, superannuation payments and other processes will make sure you are already in good shape should your business be selected for audit.

    Accountant calculating financesRemember to archive

    Most ATO audits focus on the most recent tax return, but an auditor might go back previous years if they think there’s a possibility of understated income. So, it’s essential that you remember to maintain your archive.

    Keep all relevant business finance documentation for at least five financial years so that you can support any claims. This is again where a cloud accounting system can be beneficial, because you will be able to keep digitised versions of the documents and reduce your office paper consumption.

    Australian annual corporate tax return conceptFix your mistakes

    Sometimes mathematical mistakes are made in business tax returns… especially if you are manually completing them. Applying the incorrect percentage, adding figures from different columns… it’s possible to end up with inaccurate calculations, so it’s wise to go over your numbers before you submit your documentation.

    But if you do identify an error, make sure you fix your mistake quickly. If you can highlight the issue at the beginning of your audit, it could help save you from being penalised.

    Specialised business accountant

    Here at North Advisory, we understand that a business tax audit might feel ominous, but our team of specialised accountants is here to help.

    We can support you by implementing processes that streamline your accounting and reduce your stress. If you’d like to find out more about our business accounting services, please contact us today.

    Read more Business Tax articles.

     

    Secure your business and your
    future by contacting us today.

    Our team is ready to talk to you about your business accounting needs and your personal wealth management strategy. We look forward to providing you with a flexible, highly tailored and truly personalised experience.