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News & Updates

EOFY-Car-Sales-2014

2 Weeks Left to Grab Some Tax Benefits

Has your bookkeeper or accountant give you a heads-up on how you’re travelling for this financial year?

If you know how your balance sheet is shaping up, now may be the right moment to do some last minute, end of financial year shopping.

Not only do you have the opportunity to balance your books (for example, purchasing office equipment, machinery, or motor vehicles and claiming some depreciation almost immediately, or withdrawing more funds to top up your superannuation with a personal contribution), but there’s also some great bargains to be had, particularly in the auto industry, where manufacturers like Holden, Toyota, Ford, and Mitsubishi, are vying to sell you their vehicle in a super-competitive market.

At the bottom end of the market, you could drive away with a city car such as the 2013-plated Fiat for $13,000, or a 3-door Hyundai i20 for only $14,990. Toyota are offering 1% finance on their Yaris, as is Nissan on the Pulsar. And that’s just scratching the surface. If you need a work horse ute, Mitsubishi will soon be introducing a new Triton, so you may want to investigate whether it’s worth snapping up a bargain on the current model (on the downside, it’s resale value will be pushed down by the release of the new model, and it’s not as sophisticated as many of the new breed of utes).

In the prestige segment, BMW is offering to reduce the price by an amount equal to the GST; Audi are throwing in sweeteners like 4 years’ free servicing and road side assistance; Lexus is doing 1.8% comparison rate finance on several models; Infiniti is doing 0% finance on the QX70 SUV if you’re prepared to chip in a 10% deposit; and the list goes on.

Superannuation contributions are another key consideration for business owners at this vital time of year, in terms of their legal obligation for their employees, their personal wealth creation, and the issue of tax deductibility. If you haven’t already sought advice from an accountant, do it now!

As a minimum, employers are REQUIRED to pay the legislated Superannuation Guarantee amount (9.25% for the financial year ending 30 June 2014) by 28th July at the absolute latest (it must arrive in the superannuation fund’s account by that date). However, if you wish to claim any superannuation contributions in FY2013-14, then the payments must hit the super fund by 30 June 2014. Likewise, if you want to draw more funds from your business and make a personal superannuation contribution at concessional tax rates, this must occur by 30th June. If you wait until the financial year is over and then consult your accountant, it’ll be too late – get in touch with them now!

Computer equipment is another key area where, if you’ve got a decent profit up your sleeve and some cash in the bank, you may want to go shopping right now. Most of the major vendors (Dell, Lenovo, HP, but of course never Apple) have some attractive deals to try and hook you at this time of year. Depending on how much you’ve already spent this year, and the value of your purchases, you may find that you can in effect write-off the entire purchase in the same period, or a good portion thereof.

This is general information – the choices you make will be shaped by your specific circumstances, but the potential impact is significant so make sure you get professional advice now, and take the correct steps before 30 June to lock in some substantial tax benefits.

 

Relationship

Does My Income Affect My New Partner’s Family Tax Benefit?

We received a valid and interesting question recently about Family Tax Benefit which we thought we’d share with you, as it is relevant to a lot of modern, blended families:

I don’t have any children myself and I don’t feel I should be responsible for the costs of looking after my partner’s kids from a past relationship. However, he’s told me that since we moved in together he has to report my income as well and he’s going to lose all the FTB Part B he used to receive. Is this correct?

The simple answer is yes – your income is taken into consideration, and the new assessment may result in FTB Part B no longer being paid.

Family Tax Benefit Parts A and B are payments available through Centrelink to assist families with the costs of caring for children. FTB Part A and Part B are both income tested, although the thresholds are different for each. The ‘family income’ is taken into consideration, regardless of whether both adults are parents of the children.

A family could have a single earner on a salary up to $150,000 and receive the maximum rate of Family Tax Benefit Part B, and yet if you’re both working Family Tax Benefit B reduces as soon as the secondary earner earns more than $5,183 per year, so a hypothetical  family with one partner earning $60,000 and the second partner earning $40,000 would receive no FTB Part B. This stems from the fact that Family Tax Benefit Part B is intended to assist families who choose to have a parent staying home to care for their children.

If you’d like further advice about the impact your changing relationship circumstances may have on your Government benefits and taxation, please call 1300 622 422 to speak with Michelle Mulligan, or contact us online.

 

 

5 Tips for any Business to Stay Competitive

Alcoa has just announced that it will be closing it’s Point Henry smelter and two rolling mills by the end of this year, with 980 jobs to go as a result.

Last week, Toyota announced the looming closure of their car manufacturing operations in Australia, in the wake of similar announcements by legendary Australian car manufacturers Holden and Ford. This spells the end of car manufacturing in Australia by the end of 2017, with huge flow-on effects to manufacturers/suppliers who supply components to the car makers.

Since the start of the Global Financial Crisis, Australia has lost about 150,000 manufacturing jobs or, as quoted by Sophie Mirabella on Q&A in 2013, “one manufacturing job every 19 minutes“. The Government has pumped hundred of millions of dollars into the automotive, clothing and textile industries, and yet manufacturing now accounts for 9% of GDP – in the 1960’s it peaked at 27% of GDP.

And of course these challenges don’t just apply to manufacturing. Australia has a high dollar, relatively small economy, low levels of capital investment, and restrictive tax legislation, all of which are factors that contribute to a challenging environment for most businesses.

So what do you need to do, as a business owner, to thrive and continue to be competitive in the reality of the 21st century global economy? Here are 5 tips that could make all the difference:

Innovation

  1. Differentiation – What competitive advantage can you establish based on your knowledge, innovation, and intellectual property that nobody else has or can easily imitate? If you’re doing what everybody else is doing, a company in Asia will inevitably do it cheaper than you. In fact, you’ll probably be tempted to outsource to them very soon (not just for manufacturing but also for customer service, virtual assistants, web development, IT support, or any of a number of functions you always assumed you had a monopoly on).

    Innovation is the greatest form of competitive advantage in the 21st century.

    You cannot afford to rest on your laurels and just keep doing what’s always worked for you. It is critical that you nurture a culture and a program of innovation.
    Keep learning, questioning, creating, innovating.

  2. Focus – As with competitive advantage and differentiation, the reality is that being a jack of all trades is unlikely to make you a master of any. To be an expert in your field (and you’ll need to be if you want a competitive advantage!) years of experience and practice are required. Very rarely can this be achieved if you’re too diversified and all over the shop. Steve Jobs turned Apple around by slashing the number of projects and products they were working on, believing “deciding what not to do is as important as deciding what to do.” This principle is also echoed in the fantastic book ‘Eat That Frog’ by Brian Tracy.
  3. Partnerships – At no point in human history have we been more connected than in the 21st century, and the old saying ‘No man is an island’ is more true now than it has ever been. While we’re quoting famous expressions, there is also ‘strength in numbers’. Working with other businesses can offer fantastic stimulation for idea creation, sharing of intellectual property, access to each other’s customer bases, and a whole range of other benefits. For example, if you’re maintaining your focus on your strengths (see Point 2 above!) maybe another company should be handling some of the peripheral tasks that are not part of your core strengths – IT, marketing, bookkeeping, accounting,…
  4. Surround yourself with GREAT people – if we truly believe our competitive advantage is the innovation, experience, and brilliance of our people, then surrounding yourself with a team of passionate, committed, loyal, experts should be one of our top priorities. If you can unleash the full capability of each team member, and they’re all bringing great skills and experience to the table, then you’ll have a huge competitive advantage.
    A few quick notes that directly tie into this:
    MOST teams are dysfunctional to a certain extent. Make it a priority to read ‘The 5 Dysfunctions of a Team’ by Patrick Lencioni (or listen to it on Audible) and get the most from your team.
    Staff are not commodities – you can’t simply ‘replace’ a great team member without a huge cost to the business. There are numerous ways to calculate the ‘cost’ of replacing staff, and estimates range from 20% of annual salary to 400% for some of your most highly experienced team members – but whatever the true figures, the reality is that creating a potent team of loyal, passionate ‘family’ who’d rather stay with you than go and work somewhere else for more money will definitely pay off for you.
  5. Measure. Measure. Measure – To be competitive, you need to know the facts. You need to change course when things are going off track. You need to challenge yourself to improve. And it’s not enough to rely exclusively on gut feel. Measure your marketing performance. Measure your financial performance. Measure your HR performance. Measure your efficiency and productivity. Use industry benchmarks to see how you’re going compared to others in the market. Use last years figures to see if you’re improving. Set targets and then track whether you’re achieving them. Understand your cash-flow so you can plan for the future and manage your growth effectively.

 

 

Novated Lease Car

Confused about Tax Legislation? Joe Hockey agrees!

Treasurer Joe Hockey yesterday told media that the Federal Government plans to drop a number of tax changes that were announced by the Labor Party while they were still in power, but will retain several more. Importantly, Mr. Hockey also highlighted that a number of pieces of tax legislation that have been announced to the public over more than 12 years had never yet been legislated.

96 tax announcements dating back to the Labor Government, and even before that to 2001 when Peter Costello was Treasurer, have somehow become waylaid in the Federal Government pending tray and never been legally enacted as legislation.

“You cannot go forward with a complicated and unresolved taxation system if you want to give business and consumers the best hope that what they work hard to achieve will be achieved,” Mr. Hockey told reporters in Sydney.

Some of the tax changes to be axed include:

  • The self-education expenses cap – Labor planned to limit self-education expense claims to $2000, but the Liberal Government has reversed that decision and claims will remain uncapped.
  • Fringe Benefits Tax crackdown on salary sacrificed cars – back in July, Kevin Rudd announced that the ‘Statutory Formula’ method of accounting for personal use of a motor vehicle would be scrapped, which would leave many people in a worse financial situation than they had been. The car industry predicted a significant slump in motor vehicle sales, and within days salary packaging companies like NLC had laid off as many as half their staff. The Liberal Party promised during the election campaign that they would reverse that decision, and Mr. Hockey yesterday confirmed that decision. As this was one piece of legislation that had not yet been passed through Parliament, there is in fact no further legislative action required. The traditional options of ‘Statutory Formula’ or ‘Operating Cost Method’ continue to be available. (And NLC has already restored 23 of the 72 jobs that it axed.)
  • 15% tax on Super Pensions above $100,000 per annum – all Australians get a tax break on their super contributions, and then expect to withdraw their savings as a tax-free pension when the time comes. The Labor Government proposed to tax the money coming out of those funds if it was greater than $100,000 per annum, but the Liberal Government has knocked that on the head as well. For now, your superannuation pensions will continue to be paid out tax free.

However, there are several Labor initiatives that the Liberal Government has pragmatically decided it will retain. The one which will get least argument in this regard is a series of increases to the cigarette tax. But they’re also phasing out the tax break for people with high medical expenses.  And, as per the Labor initiative, they’re cutting tax breaks on R&D for companies with income of $20 billion or more.

As we anticipated before the election, a number of Labor announcements have never made it into legislation. And the current Commonwealth Government certainly appears to be committed to improving consistency and transparency surrounding tax issues. A number of initiatives which were announced over the past decade may now make it formally into legislation, whilst others may be rescinded (expect more announcements to come over the next six months), but at the very least we expect that there will be greater clarity and less ambiguity.

Aroma Lily wins Whitehorse Business Group ‘Excellence in Business’ Award 2013

Hoc Heang Eng - Aroma LilyTop Class Accounting is delighted to congratulate our client, Aroma Lily Catering, on their win in the Whitehorse Business Group 2013 ‘Excellence in Business’ Awards.

Hoc Heang Eng and his wife Peou Eng, with their team, have created a unique and distinctive business comprising catering, cakes, and a café located in Mt. Pleasant Road, Nunawading. Their attitude, passion for the art of food, excellent service, and savvy business sense have fused to create a winning formula, which has now been acknowledged through their win in the ‘Startup/Micro/Home Based Business Award’ category of the 2013 Excellence in Business Awards.

Aroma Lily caters for corporate meetings and lunches, with simple morning tea combos and lunch platters, warm or cold savouries, sandwiches/rolls, and delicious sweets. In fact, their cakes and slices are in such high demand that Hoc and his team wholesale a wide variety of slices, brownies, cheesecake, tarts, and more for cafés and restaurants all around Melbourne. And, of course, you can arrange for Aroma Lily to cater for your private function as well.

Alongside their wholesale and catering facilities, Aroma Lily also operate their own café, Café Blanc, in Mt. Pleasant Rd, Nunawading, which is open from Tuesday to Saturday for breakfast and lunch.

As if that isn’t enough to keep them busy, Hoc Heang and Peou have also catered at festivals and markets such as the Suzuki Night Market, The Age Harvest Picnic (Hanging Rock), the Food and Wine Festival (Werribee Zoo), L’Oreal Fashion Week (Exhibition Buildings), and at the Australia Day Parade (National Gallery of Victoria).

Congratulations Hoc, Peou, and the entire team at Aroma Lily on your award, and we look forward to seeing many further successes as you continue to grow and develop your business!

 

Credit Cards

Are There Issues Using Personal Credit Cards for Business?

Many small business owners find themselves, for a variety of reasons, using their personal credit card to cover business expenses. But is that the right call? Whilst it may be easier and more cost effective to use a personal credit card for business expenses when you’re setting up, the accounting difficulties in the long term will probably make a small business credit card desirable.

Personal Credit Card Business Credit Card
Lower fees than business credit cards Simple to track and account for business expenses with monthly and online statements
Often have lower interest rates than corporate credit cards Avoid the danger of damaging your personal credit rating (if payments are missed or limits exceeded)
Can carry a single card Easy to provide proof of business expenses to the ATO
Enables you to maximise your reward points

Paying Tax by Credit Card

Many business owners are not aware that, since 2011, the Australian Taxation Office introduced a facility for businesses (and individuals) to pay their outstanding BAS and Income Tax debts using their credit card.

The ATO will accept payments of between $10 and $50,000. A card payment fee of 0.42% (VISA/Mastercard) or 1.45% (American Express) applies to transactions made using this service. (The fee is not subject to GST, and is equal to the fee the ATO incurs from its bank.)

Reward Points

Tax FBT Issues

A lot of business and personal credit cards offer reward points and other types of consumer loyalty programs (such as frequent flyers).

The courts have held and the ATO accepts that in most circumstances the rewards received under a consumer loyalty program are not taxable.

However, the ATO is mindful of businesses who try to integrate a loyalty progam into any of their employees’ remuneration packages.

Rewards may create a tax liability where:

  • the reward is received as part of an income earning activity, there is a business relationship between you/your business and the reward provider, and a business is being carried on or the benefit is convertible directly or indirectly to a monetary value; or

“Pamela is a sole trader operating a painting and wallpapering business, and she buys her paint from a paint wholesaler. The wholesaler has a loyalty program that entitles her to points which can be redeemed for shopping vouchers. There is a business relationship between Pamela and the paint wholesaler and it is this relationship that makes Pamela eligible to receive possible benefits.Pamela redeems her points for vouchers worth $2,500. Pamela uses the vouchers to acquire clothing for herself and her children.The redemption of points in return for the vouchers valued at $2,500 was as a result of business purchases of paint. The value of vouchers, $2,500, is assessable under section 21A of the ITAA 1936 as the benefit flows from the business relationship Pamela has with the paint supplier. The vouchers are assessable income at the time of receipt. Pamela is required to return $2,500 in her assessable income.

  • an employee receives a reward that is provided in such a way that their is a sufficient and material connection between the reward and his or her employment

John is an employee of XYZ Company. John uses his personal credit card for private expenditure. Under an arrangement (which can be explicit or tacit) between John’s employer and John, John is able to place all of the business expenditure of the company on his personal credit card. The company reimburses him for the expenditure he has paid on its behalf. Under the arrangement John’s points entitlement from the business expenditure is significant and exceeds 250,000 points per annum.

FBT may apply in this case. Any reward that arises from the redemption of the points has accrued in respect of significant business expenditure. The reward may have been provided under an arrangement, and may be in respect of employment.

GST and Reward Points

Are there any GST implications when you receive and/or redeem points under a credit card reward scheme for a reward?

The short answer is No, any goods or services purchased through redeeming of reward points are not considered a taxable supply.

 

Cairns

Rudd Proposes Tax Cuts for a Northern Economic Zone

Prime Minister Kevin Rudd has promised to stimulate growth in Darwin and Northern Queensland (Cairns, Townsville and Mackay) by creating a special economic zone which would benefit from reduced corporate tax rates for companies based in the zone – if his Government is re-elected in just over three weeks time.

Meanwhile, Tony Abbott was announcing his intention to give Tasmania a shot in the arm as well. When asked if he would match Rudd’s corporate tax cut for the North, he responded that he would take a close look at it, but that the proposal appeared to be totally uncosted.

It is encouraging to see the two Prime Ministerial contenders exploring opportunities to stimulate growth in areas of Australia which are lagging behind economically. If something is to come of these proposals after the election, we can look forward to improved utilisation of Australia’s vast potential. A special economic zone with reduced taxation may indeed be an effective stimulant for commercial investment, although many investors may understandably be wary of trying to establish a business based on policy which can change as quickly as the leadership of a political party, particularly if that political party has a poor track record on consistency and stability.

The notion of giving a region of Australia which has significant economic hurdles a hand up, and enabling them to contribute more substantially to the productivity and success of the nation, is unlikely to find much argument from the majority of people. But the practical measures necessary to achieve the stated goal are highly debatable, and need to be thoroughly researched, planned, and implemented.

Further Reading:

Tax Cuts, Economic Zone part of Kevin Rudd’s plan to develop northern Australia

Labor pledges lower company tax in new Northern Territory economic zone

Prime Minister Kevin Rudd unveils his plan for Northern Australia at latest stop on the election campaign trail

Family

There’s an app for Family Tax Benefit

If you receive Family Tax Benefit, Child Care Benefit or Child Care Rebate, you can now update Centrelink with important changes via the ‘Express Plus Families’ app for iPhone or Android.

You need to be register for Centrelink Online Services and then you’ll be able to

  • view and update your family income estimate
  • view your childcare attendance details
  • view your statements and online letters

You can download Express Plus Families from the App Store or Google Play.

Download on App Store

Android App on Google Play

 

Rudd’s Novated Lease Upset to Fund Carbon Tax Changes

Company vehicleKevin Rudd’s resurrection as Prime Minister comes at a critical time for the Labor Party, and the on-again, off-again, on-again Prime Minister wasted no time in trying to stem the bleeding by addressing the biggest political nightmares the public were caning them for.

However, most solutions come at a cost. And bringing forward changes to the Carbon Tax had to be funded somehow. So Rudd decided to cut out the ‘statutory formula’ method for valuing fringe benefits in the form of employer-provided cars.

It’s not that you can no longer receive an employer-provided car, or that you will now incur FBT on the entire value of the car. Until 16th July 2013 you were able to use either the ‘cost method’ or the ‘statutory formula’ method and in future you will still be able to use the cost method. What Rudd’s change means is that you will be levied FBT on the ‘actual’ value for personal use rather than a deemed amount. It could be argued that this is the fairest method. However, it carries with it an increased compliance burden in terms of record keeping, and because FBT is levied at the top marginal tax rate (currently 46.5%) an employee who is not in the top marginal bracket would be better off paying the cost of their personal use out of their own pocket, because the tax on their personal income is at a lower rate than the FBT on an employer-provided vehicle.

Aside from the fairness of these arrangements, many Australians have reacted negatively to Rudd’s announcement because the statutory method has been a long-standing option which we have come to expect and have indeed planned for.

However, in the media frenzy that followed Rudd’s announcement a few important details have failed to receive much airplay.

Firstly, the changes were presented as though they take effect ‘immediately’. In fact, they only apply to new contracts entered into after 16 July 2013. So anybody who has a current novated lease on a vehicle can continue to have their FBT treated under the old regime.

Furthermore, all new contracts established after 16 July 2013 can still be calculated under the statutory method up until the end of this FBT year (31st March 2014). It’s only from 1st April 2014 onwards that contracts entered into after 16 July 2013 must be assessed by the cost method.

Of course, if the Rudd Labor Government loses the upcoming Federal Election, we can expect the new Liberal Government to honour their pledge to abolish Rudd’s reform, so things may all go back to the way they were in a few months’ time.

 

ASIC Fees Increased from 1st July 2013

ASIC fees are reviewed each year. Most of them are linked to the Consumer Price Index in the March quarter. Examples of fees which have increased include:

Fee from 1st July 2013 Was
Annual review fee for proprietary company $ 236 $ 230
Late payment fee – one month $  72 $  70
Late payment fee – > one month $ 299 $ 292
Application for registration as an Australian company (Form 201) $ 444 $ 433
Change of company name (Form 205) $ 366 $ 357
Business Name Registration (1 year) $  33 $  30
Business Name Registration (3 years) $  76 $  70