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News & Updates

Net Medical Expenses Offset to be Phased Out

The Net Medical Expenses Tax Offset (NMETO) is to be phased out by 1st July 2019, with transitional arrangements for those currently claiming the offset.

Those who claimed the NMETO during the 2012/13 income year will continue to be eligible for the NMETO for 2013/14 income year if they have eligible out of pocket medical expenses above the relevant thresholds. Similarly, those who claim the NMETO in 2013/14 will continue to be eligible in 2014/15. The offset will apply to all medical expenses.

For all other taxpayers (i.e. those who did not claim the NMETO in 2012-13), the NMETO will be restricted to out-of-pocket medical expenses for disability aids, attendant care, or aged care expenses which exceed the relevant thresholds.

Carry Back Tax Losses

Historically companies could only carry forward losses, to offset against future years’ earnings. Under new legislation introduced by the Australian Federal Government, losses in 2012-13 can be carried back so you can claim a refund against tax paid in 2011-12. From 2013-14 onwards, tax losses can be offset against tax paid over the previous two years.

Who is eligible to claim?

To carry-back tax losses, you must:

  • be a company, or taxed like a company (e.g. corporate unit trust, corporate limited partnerships, public trading trusts) throughout the year you are claiming the offset and the year you are carrying losses back to
  • have a tax loss in either or both of
    • the current year
    • the income year just before the current year (the middle year)
  • have an income tax liability for either or both
    • the middle year
    • the income year just before the middle year (the earliest year)
  • have lodged all required income tax returns for the current year and each of the five income years before the current year
  • make a loss carry-back choice on your company tax return

How much can you claim?

The loss carry-back tax offset for the income year in which you carry back tax losses is the lowest of:

  • the sum of the loss carry-back tax offset components for the earliest year and the middle year
  • $1,000,000 x the corporate tax rate for the year you make a claim (i.e. a maximum of $300,000 in the 2012-13 income year)
  • your franking account balance at the end of the income year you make a claim (unless your company was a non-resident other than a New Zealand franking company)

If you need further advice, please speak to Michelle Mulligan on 1300 622 422.

 

Taxable Payment Reporting for the Building & Construction Industry

Businesses in the building and construction industry have been required since 1st July 2012 to record the total payments they make to each contractor for building and construction services, so that it can be reported on an annual basis. The first Taxable Payment Report is due on 21st July 2013 (if your company lodges BAS quarterly you will have an extra week in 2013, with an extended deadline of 28th July).

Who needs to report?

You are obliged to report if:

  • you are a business that operates primarily in the building and construction industry
  • you make payments to contractors for building and construction services
  • you have an ABN

How does the ATO determine whether you meet these criteria?

If 50% of more of your business income in the financial year OR prior financial year was derived from providing building and construction services, OR 50% or more of your ‘business activity’ in the financial year relates to building and construction services, then you are deemed to operate ‘primarily’ in the the building and construction industry.

What do you need to report?

You will need to report each relevant contractor’s:

  • Name
  • Address
  • ABN (if known)
  • Gross amount paid for the financial year (including GST)
  • The total GST that was included in that gross amount

Need more info?

The ATO web site clarifies a number of critical details that impact whether or not you are caught in the net of this reporting requirement, and defines occupations and work activities that qualify as building and construction services. You can read all the details here.

Need to make an asset purchase before 30th June?

With 30th June almost upon us, you’ve only got a few days to make up your mind on whether or not it’s worth making some last-minute purchases to grab a tax advantage with a handy write-off or write-down of assets in the 2013 financial year.

The Federal Government introduced some valuable amendments last year to the depreciation rules which give small businesses (annual turnover less than $2 million) some significant benefits, effective from this financial year (2012/13). Under these new rules, you can:

  • write off the full value of most depreciating assets costing less than $6,500 each (the limit used to be only $1,000 in prior financial years)
  • pool other depreciating assets in a ‘general small business pool’ and claim a 30% deduction for them
  • claim a deduction for most assets you have newly purchased or acquired, at 15% in the first year, regardless of when during that year you purchased or acquired them

Motor vehicles also get some handy concessional treatment (that includes cars, trucks, scooters, motorcycles, utes and vans, but not items such as tractors, harvesters, road rollers and graders, or trailers).

Small businesses can allocate a vehicle purchase to the small business pool and then also immediately write-off up to $5,000 for vehicles costing $6,500 or more, for the first year they start to use the vehicle. Along with the instant $5,000 write-off businesses can depreciate the remaining value of the vehicle through the general small business pool at 15% for the first year (i.e. $5,000 + 15% of the remaining balance as a deduction in the 2012/13 year) and 30% for the following years.

If you have any questions about eligibility or the benefits for your business, speak to Michelle Mulligan on 1300 622 422.

Target retrenches 260 in Geelong Headquarters

In another round of job losses, Target has today called in staff at their Geelong headquarters and announced that almost a quarter of them no longer have a job, as the company restructures in an effort to boost performance.

So far this year, we’ve already seen Australian businesses and Governments announce substantial job losses:

  • Ford – will cease manufacturing in Australia from 2016, with 510 jobs to go in Geelong and 650 in Broadmeadows
  • Western Australian Newspapers – cutting up to 100 jobs, starting with voluntary redundancies and then potentially forced redundancies
  • Crown Casino – reducing head count by up to 50 in administration, marketing and back office
  • Pressure Dynamics – placed in administration on 7th June, with 40 jobs lost and another 50 at risk if a buyer can’t be found for the business
  • ANZ Bank – reducing call centre numbers by 70 in Melbourne, and moving them to New Zealand
  • GlaxoSmithKline – eliminating 120 jobs as a result of the closure of their Boronia tablet packaging section
  • Swan Services – almost 2500 jobs lost as one of the country’s largest cleaning companies collapsed
  • Sensis (Telstra) – slashing nearly 700 jobs, with more than half of those being sent overseas to the Philippines or India
  • Origin Energy – eliminating 850 jobs
  • Iluka – cutting numbers by 200
  • Jupiters & Treasury Casinos – almost 50 workers sacked
  • IBM Australia – embarking on a redundancy program which could see up to 200 workers lose their jobs
  • Holden – laying off 500 workers, including 400 production workers in South Australia and 100 vehicle development employees in Victoria, after already laying off 170 late last year
  • BlueScope Steel – eliminated 170 jobs from its Western Port Steel Mill in Hastings
  • QBE – looking to cut 700 jobs globally, although the number from Australia is not yet clear. Fairfax reports that QBE plans to set up a hub in Philippines
  • Victorian State Government – 3,500 jobs to go over two years, including 450 positions at the Dept. of Justice, 450 at VicRoads, 450 at Victoria Police, 400 from the Dept. of Education, 400 from the Dept. of Sustainability and Environment, and 500 from the Dept. of Human Services.
  • SA State Government – as many as 450 public service jobs to be eliminated as part of a 1% ‘efficiency dividend’

And yet, amidst the media headlines, there are also stories of success and strong growth. One only has to look at the BRW Fast 100 to see that strong performance is possible in any economic circumstances. The challenge as a business owner is knowing how to achieve it.

Across the board, the most significant losses have come from organisations which are conventional, lack agility, have little competitive advantage, and (in most cases) service only an Australian marketplace, and/or failed to manage their growth effectively.

In a competitive and dynamic global marketplace, the greatest opportunities for success exist for companies which are truly innovative, take measured risks, and can maintain a unique commercial proposition against global competitors.

 

 

Labor announces plan to tax Superannuation income streams

Superannuation Minister Bill Shorten and Treasurer Wayne Swan this morning announced Labor plans to tax Superannuation income streams above $100,000 at 15%, commencing on 1st July 2014.

Superannuation Minister Bill Shorten (Image: news.com.au)

“We all know that concessions can’t be open ended. Once you’ve achieved a comfortable level in retirement savings, you probably don’t need as much as those who haven’t gotten to that point.” Income streams up to $100,000 will remain tax free. In their media conference Shorten and Swan also announced a range of further reforms, including:

  • simplification of the design and administration of the higher concessional contribution caps
  • bringing forward to 1st July 2013 the commencement of the higher contributions concession cap for people aged 60 and over, who will be able to contribute up to $35,000 at concessional tax rates (those aged 50+ will  need to wait until 1st July 2014 for their $35,000 cap to kick in) – significantly, these higher caps will not be limited to individuals with superannuation balances below $500,000, as it was decided this would impose too high an administrative overhead
  • reforms to the excess contributions tax (ECT) to ensure that people who have contributed above the cap are not penalised with a level of tax above their normal marginal rate, and they have the opportunity to withdraw the excess contributions from their super fund if they so wish
  • extending the normal deeming rules to superannuation account-based income streams

If you have any questions about the impact this will have on you, and whether you need to make any changes to your current retirement planning, please contact Michelle Mulligan on (03) 9014 7125.

Private Health Insurance

Means Testing of Private Health Insurance Rebate

The Private Health Insurance Rebate was introduced in 1999 to encourage Australians to take out their own private health insurance and reduce the reliance of an aging population on Government-funded health services. Effective from 1st July 2012, the Federal Government has now introduced a tiered rebate structure based on means-testing. The amount of rebate you receive is also affected by your age.

Singles earning under $84,000 and families earning under $168,000 are eligible for the maximum rebate, and at the other end of the spectrum, singles earning over $130,000 and families earning over $260,000 are not eligible for any rebate.

The Medicare Levy Surcharge was also modified according to the same tier structure.

Singles
Families
Up to $84,000
Up to $168,000
$84,001-$97,000
$168,001-$194,000
$97,001-$130,000
$194,001-$260,000
$130,001
$260,001
REBATE
< 65 y.o. 30% 20% 10% 0%
65-69 y.o. 35% 25% 15% 0%
70+ y.o. 40% 30% 20% 0%
MEDICARE LEVY SURCHARGE
All Ages 0% 1% 1.25% 1.5%

Official Interest Rate Remains Unchanged

If you were hoping that interest rates might be about to drop, don’t hold your breath – the Reserve Bank has today decided, again, to hold steady at the current 3% official cash rate. The first half of 2013 is looking decidedly subdued – the longest election campaign in Australian history is no doubt going to affect major private investments as businesses wait to confirm that Labor will in fact be voted out, and the Reserve Bank hasn’t shown any propensity to encourage business activity, obviously feeling that it’s safer to do nothing than make a change in these uncertain times.

Meanwhile, there’s only one major Victorian infrastructure project in progress at the moment, leading to mass layoffs at major civil construction companies, and the housing market is also pretty patchy.

Retail continues to plod along but perception is often almost as important as reality, and the current climate is not one of eager anticipation and positivity – if businesses don’t muster up a bit more enthusiasm and conviction, then we’re not likely to see any radical change over the next few months. Which is to say, there’ll continue to be a few businesses that struggle and ultimately go to the wall, a few that thrive irrespective of the economic climate, and a broad base that maintain the status quo.

The businesses most at risk in the current economic climate are ones that:

  • are carrying too much debt
  • do not proactively plan and manage their cashflow requirements
  • fail to respond to significant new trends in their industry
  • don’t have a strong value proposition with which to compete against new entrants (such as foreign multinationals) entering their market
  • have not optimised their operations and cost base

However, businesses that have a competitive product or service offering, efficient operations, well managed finances, and are responsive to changes in their marketplace shouldn’t have great cause for concern.

 

 

 

Tony Abbott Pledges to Double Small Business Growth Rate

With our current level of disillusionment in politicians, many Australians would argue that there’s no real difference between the major political parties.

However, the Labor and Liberal parties were founded on divergent philosophies and values, and Tony Abbott’s speech today at the Menzies Reseach Centre Small Business Roundtable in Melbourne suggests that small business entrepreneurs may in fact benefit from a change of Government at the Federal election next year.

In his speech, Tony Abbott undertook to “double the existing annual rate of small business growth” in Australia.

“We will restore the rate of growth of small business because we understand that small business is the engine room of our economy”, he said. Although details were sketchy, he did reiterate previous announcements that there would be a small business minister in Federal cabinet, business red tape costs would be cut by $1 billion a year, and administration loads would be lightened through initiatives such as engaging the ATO to handle superannuation administration on behalf of small businesses, who would simply need to send one cheque in to the Tax Office and the ATO would handle everything from there, and ensuring that small business wasn’t required to handle the paperwork associated with paid parental leave.

Whilst the promise of a politician is not known for its bankability, it does seem that entrepreneurs and small business owners may have some cause for cautious optimism if in fact the Liberal party is voted back into office.

If you’re a small business owner, have you considered the potential implications to your business of changes in the political landscape?

 

SMSF levies to rise from 2013-2014

The Federal Government recently announced that levies for self-managed superannuation funds will increase to $259 in 2013-14, an increase of more than one third from $191 this year.

The ATO will collect the levy during the year rather than waiting until tax returns are submitted.

The levy recently declined from $200, leading both the SPAA and Association of Superannuation Funds of Australia to query the size of the increase, arguing that greater transparency is needed around the ATO’s special levy relating to the introduction of a series of back office improvements.