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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.



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:


  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.



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.


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


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.


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.