What You Should Know About Accrual Accounting With Businesses

Accrual accounting, put simply, is about stating revenues and expenses as they happen instead of when cash is paid out or received. As a contract, cash accounting systems don’t report expenses or income until a full-on transaction with a cash exchange happens. For the most part, accrual accounting is what businesses make use of. On the other hand, an accountant working with individuals sees the cash method used more often.

Accrual Accounting

When expenses are matched with revenues, that is the very basis of accrual accounting. A lot of times, this happens simultaneously in business a lot. However, cash transactions aren’t always achieved in an instant. The accrual accounting method is practically a necessity for businesses that have an inventory involved. They’re a much better example of how it functions as a whole. 

Stocking inventory tends to lead businesses to incur expenses, but it’s possible for businesses to have total sales in the same time period that can match the expense. Should the business have sales made on credit, it’s possible for the payment not to come in within the same accounting period. 

Credit purchases are a key contributor to how complicated business operations can get. That’s largely why the accrual method has been more of the standard.

Cash Accounting

As any accountant will point out, cash accounting, in a nutshell, is the complete opposite of accrual accounting. Cash accounting is a matter of recording the payment date at the moment it’s received or made. It is rather straightforward and quite simple to explain as well as comprehend.

Importance of Accrual Accounting

Accrual accounting is a key financial tool. It’s able to give a clearer statement of the health of the company since both accounts payable and accounts receivable are included. There is a clear, real-time portrayal of funds and what future reports could contain.

The benefits of accrual accounting include:

  • Accuracy – As previously mentioned, an accurate view of the company’s financial activity is accessible through this. Both debt and income are outlined thoroughly, which lets the business manage its financial activity patterns better.
  • Funding – A lot of shareholders and potential investors alike will likely want reports through accrual accounting. When there are reports that display a good income flow over a specific period, possible investors will be enticed.
  • Future Plans – Since accrual accounting is accurate in real-time, a more detailed business finance overview is available to management. In that way, progress in the past can be assessed, alongside having new future plans with a precise budget.

Conclusion

Handling a business can be rather complex, especially when you look into the accounting and finance aspect. A good way for the financial activities of a company to be monitored in real-time is through accrued accounting. There are several benefits to this, including the aforementioned accuracy, an avenue that brings in funding through enticing possible investors, and the ability to make future plans with a precise budget for moving forward.

SMB Accounting is one of the leading accounting firms in Australia, offering outstanding small business accounting services to clients in Brisbane, Melbourne, Perth and the Sunshine Coast. Let our team of highly skilled SMB consultants in Melbourne help you in growing your business. Partner with us today! 

 

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Why Real Estate Agencies Should Outsource Their Accounting

Is your real estate agency struggling to keep up with all your accounting and bookkeeping obligations, especially on peak months where there are a lot of homebuyers looking to purchase a house? It may be time to hire a full-time accountant on staff to keep up with all your tax and accounting responsibilities. The question is, should you hire an in-house accountant or outsource it to a firm?

There are many accounting firms in the Sunshine Coast that do a great job in helping real estate agencies get their taxes and bookkeeping in order. If you’re unsure if you should outsource or not, here are four reasons why outsourcing can actually be more beneficial than hiring in-house accountants.

Reduced Staff and Recruitment Costs

Many companies are under the impression that outsourcing expert services are going to be prohibitively costly. The idea of paying a firm to pay someone also to do the job you require does sound like hiring with extra steps and added costs. In reality, however, outsourcing lets you save on costs and time. Don’t let perceived costs prevent you from seeing the bigger picture here. 

Consider the cost of recruitment, advertising for the role, vetting candidates, and recruitment agency costs, not to mention paying for worker’s compensation, sick leave and other benefits. Looking at all that will make you realise that you’re actually spending too much time and money than just paying a firm to do the job you actually need to be done. 

Offloading Some of the Risk

By outsourcing accounting duties, you shift any risks to a third-party provider and mitigate the risk of significant loss. Your provider will be in charge of the performance and quality of service of the accountants. All you have to do is give them the data they need, pay them to process it, and expect results. Of course, you need to find a provider equipped with public liability and professional indemnity insurance. They also need to have their own risk management policies in place for providing consistent services.

Gaining Access to Unrivalled Expertise

An outsourced real estate accountant is expected to be well-versed in every aspect of the profession, from bookkeeping and lodgement of income tax returns to keeping you updated on your company’s financial health. You don’t have to worry about training your own staff to ensure you are compliant with the latest tax laws and regulations. When you outsource, you have access to an entire accounting firm’s expertise that you may not always find if you hire your own accounting staff.

Maintaining Stability and Consistency

Continuity is essential in Real Estate, especially if you want to keep things running smoothly all the time. If you happen to be experiencing any internal conflicts between your accountant and other staff members, your clients won’t be interested in your internal staffing issues. Outsourcing eliminates this problem entirely. There are no staff walkouts, leaving you in the lurch, not knowing what is going on. All you need to worry about is sending all your real estate sales data and other pertinent information to the accounting firm and let them handle the rest.

Conclusion

Hiring an external provider is never a bad thing. Although it does have its advantages and disadvantages, you stand to gain more when you outsource some of the work in your company. Real estate is a fast-growing industry and can be overwhelming at times. Having an external provider as a partner can ease some of the burdens of running your business.

SMB Accounting is one of the leading accounting firms in Australia, offering outstanding service to clients and individuals. We provide small business accounting services to clients in Brisbane, Melbourne, Perth, and the Sunshine Coast. Let our team of highly skilled SMB accountants help you in growing your business. Partner with us today!

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2021 – Tax Planning – Client Newsletter

General Year End Tax Planning Strategies

Business Income and Expenses

Subject to cash flow requirements, consider deferring income until after 30 June, especially if you expect lower income for 2021/22 compared to 2020/21.

Most businesses are taxed on income when it is invoiced. Some small businesses may only be taxed when income is received. Income from construction contracts is generally taxed when progress payments are invoiced or received.

Ensure that you have complied with the requirements to claim deductions in 2020/21:

  • Bad debts must be written off in your accounts before 30 June.
  • Employer or self-employed superannuation contributions must be paid to, and received by, the super fund before 30 June and must be within the contributions cap ($25,000 for all individuals regardless of age).
  • Depreciation can be claimed for assets first used, or installed ready for use, before 30 June.
  • Small businesses (turnover less than $10m), can claim expenses prepaid up to 12 months in advance – for larger businesses, this is generally limited to expenses below $1,000.
  • Wages paid to your spouse or family members must be reasonable for the work performed.

“The Temporary Full Expensing of Assets allows immediate deductions of assets purchased after 6 October 20 and before 30 June 22 for eligible businesses with turnover up to $5 billion.”

Small businesses planning major purchases or replacement of capital equipment should contact us for advice. Careful timing of those transactions can result in substantial tax savings.

Scrap any obsolete item in the asset register before 30 June. Consider delaying the sale of assets that will realise a profit on sale and bring forward any sales that will result in a loss.

Review valuations of trading stock in the lead up to 30 June. The best practice is generally to value stock at the lower of cost or market selling value.

These best practices should be revised if you expect a tax loss for 2020/21 or substantially higher income in 2021/22 compared to 2020/21.

 

Personal Income, Deductions and Tax Offsets

Subject to cash flow requirements, set term deposits to mature after 1 July, rather than before 30 June.

Consider realising capital losses if you have already realised capital gains on other assets during 2020/21. Conversely, consider realising capital gains if you have unrecouped capital losses, or you expect substantially higher income in 2021/22 compared to 2020/21.

If you expect lower income in 2021/22 due to retirement or any other reason, consider deferring income until after 1 July, when you will be in a lower tax bracket. If you are a primary producer and you expect a permanent reduction in income, consider withdrawing from the income averaging system.

Arrange for deductible donations to be grouped in the higher income year, if you expect a substantially higher or lower income in 2021/22 compared to 2020/21. Make all donations in the name of the higher income earner.

Other Tax Planning Considerations

Contact us for advice if you have moved to or from Australia for an extended period. You may need to review your residency status for tax purposes. There are important tax consequences if you change tax residency.

Trustees of trusts should ensure that all necessary documentation is completed before 30 June, especially where you intend to stream capital gains or franked distributions to specific beneficiaries or have beneficiaries who aren’t the default beneficiaries.

Family discretionary trusts may need to make a family trust election if the trust has unrecouped losses or has beneficiaries whose total franking credits for the year may exceed $5,000.

Be sceptical of year-end tax shelter schemes. You should not enter a scheme without advice regarding both its tax consequences and commercial viability.

Single Touch Payroll

The Single Touch Payroll reporting framework is expanding from 1 July 2021 to include closely held payees. A closely held payee is one who is directly related to the entity from which they receive payments, for example:

  1. Family members of a family business;
  2. Directors or shareholders of a company;
  3. Beneficiaries of a trust.

 

Income Tax Changes – Small Businesses

Tax Rate

For the 2020/21 year, the reduced corporate tax rate has been reduced to 26%, down from 27.5%, eligibility for the reduced corporate tax rate remains unchanged and applies to base rate entity companies with an aggregated turnover of less than $50m.

The lower company tax rate for base rate entities will reduce to 26% in 2020–21 and to 25% for the 2021–22 income year.

Small Business Income Tax Offset

The small business income tax offset has been increased to 13%, up from 8%. The tax offset is a 13% discount of the income tax payable on the business income received from a small business entity (other than a company) with an aggregated turnover of less than $5m, up to a maximum of $1,000 a year.

Expanded access to small business concessions

From 1 July 2020, businesses that are not small businesses because their turnover is $10 million or more but less than $50 million can also access an immediate deduction for certain start-up expenses and for prepaid expenditure.

From 1 July 2021, businesses that are not small businesses because their turnover is $10 million or more but less than $50 million can also access these small business concessions:

  1. Simplified trading stock rules; and
  2. PAYG instalments concession; and
  3. A two-year amendment period; and
  4. Excise concession.

 

Temporary Full Expensing of Assets

From 7.30 pm AEDT on 6 October 2020 until 30 June 2022 the temporary full expensing allows:

§  Eligible business entities with an aggregated turnover less than $5 billion or corporate tax entities that satisfy the alternative test can immediately expense the cost of eligible new depreciating assets.

§  Eligible businesses with an aggregated turnover under $50 million can immediately expense the business portion of the cost of eligible second-hand assets for

§  Businesses with an aggregated turnover under $10 million can immediately expense the balance of a small business pool at the end of each income year in the period.

Accelerated Depreciation Turnover less than $500m

An immediate deduction is available for entities with an aggregated turnover of less than $500m for assets first used or installed ready for use between 12 March 2020 until 30 June 2021, and purchased by 31 December 2020, cost less than $150,000 up from $30,000

The balance of the general small business pool is also immediately deducted if the balance is less than $150,000 on 30 June.

The threshold reverts to $1,000 from 1 July 2021.

Income Tax Changes – Individuals

Tax Rate

The key income tax bracket changes for the 2020/21 year, as a result of the federal budget, are:

  • the 19% rate ceiling lifted from $37,000 to $45,000; and
  • the 32.5% tax bracket ceiling lifted from $90,000 to $120,000.

Low Income Tax Offset

Australian tax resident individuals whose income does not exceed $66,667 are entitled to the low income tax offset. The maximum low income tax offset is $700 for the 2020–21 and later income years. This has been increased from $445 as a result of the 2020–21 federal budget.

Low and Middle Income Tax Offset

Australian resident individuals whose income does not exceed $126,00 are entitled to the low and middle income tax offset.  The low and middle income tax offset amount is between $255 and $1,080.

Limiting Deductions for Vacant Land

New legislation limiting deductions for the costs incurred in holding vacant land applies to costs incurred on or after 1 July 2019, even if the land was held before that date.

Amounts you do and do not need to include in your tax return

There have been a range of new assistance and support payments made available to individuals in response to the natural disasters and other circumstances that have impacted us during the 2019-20 & 2020-21 financial year. There are specific requirements around reporting Disaster Recovery Payments (DRP), payments in relation to 2019-20 bushfires and some COVID-19 grants, please contact us for advice regarding these payments.

General speaking, emergency assistance in the form of gifts from family and friends is not taxable.
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Special Purpose Financial Statements: Are They Still Needed?

Many business owners know that the special purpose financial statements (SPFS) are slowly being phased out. This financial report has long been used by “non-reporting entities” who need to present their data to a limited group of users for a specific purpose. 

Soon, Australia will move forward with an SPFS-free framework after an extensive study by the Australian Accounting Standards Board (AASB). This article will tell you what you need to know about the subject so you can better prepare for new regulations ahead.

Will SPFS Be Gone for Good?

The SPFS will not completely disappear. Instead, it will be separated. SPFS can apply to companies and businesses that do not need to comply with the Australian Accounting Standards (AAS). 

Here is a little background to help you understand what happened and what will happen soon:

  • International Financial Reporting Standards (IFRS) was the basis of the AAS, and it was reestablished as the AAS in 2005. This is where SPFSs began. 
  • Fast forward to a few years later: the IFRS then introduced the General Purpose Financial Statements (GPFS), which enables reduced disclosure of financial statements while still recognising the mandatories and requirements set by the AAS.
  • The Australian Accounting Standards Board (AASB) decided to create other frameworks—one based on the IFRS requirements, and the other as a simplified disclosure framework. As you can see, the SPFS is completely removed from the frameworks by this time. 
  • Both the for-profit and not-for-profit private sectors will be affected by the changes later on. 

The Effects of the New Direction

Here are the recent happenings and the news:

  • In March, the AASB decided to no longer require large for-profit companies—proprietary companies, unlisted public companies, and the like—to use SPFS starting 1 July 2021. 

 

  • CPA Australia, Chartered Accountants Australia, and New Zealand (CAANZ) created a joint submission, requesting the AASB to give them two years before fully transitioning to the new change. With this, other companies followed suit.

  • Because of this, the AASB decided to move the implementation date to one year to financial years after 1 July 2021. At the same time, they also announced perks for those who would adopt the changes the soonest.

  • The case is different for for-profit trusts or entities that prepare AAS-based financial statements. If their financial statements are a requirement of their constituting document, they will be unaffected. Take note that this exemption is only applicable to documents created or amended before 1 July 2021.  In their case, the SPFS would be removed first. The private sector NFP and the public sector will follow soon after.

What Happens to Those That Already Prepared Their SPFS

Companies that already prepared their SPFS for the year up before 30 June 2021 are required to make disclosures about their compliance. This is alongside their recognition and measurement requirements. The same disclosure and requirements are also required for NFP entities.

Conclusion

There are still many things to learn about this change, and it is still currently being observed. Make sure to determine whether any of these new regulations apply to your business. Better yet, talk to your accountants so they can explain the changes. Through their help, you can understand how these changes affect your company. 

Should you need accountants along the Sunshine Coast, QLD, SMB Accounting is here to assist you. SMB Accounting is a leading accounting firm in Australia providing outstanding service to our clients—both businesses and individuals alike. We offer a range of accounting services, from taxation to Quickbooks consulting. Contact us at 1 300 854 159.

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Knowing Your Accounting: 4 Business Taxes You Need to File

The advantage of owning your own business is that it ensures your progression to financial independence. Instead of relying on an employer to handle your benefits and retirement plans, you have more freedom in directing how your career will go. However, this level of liberty doesn’t come without a cost.

Owning your own business requires you to perform, among other things, rigorous tax regulations. It’s an entrepreneur’s responsibility to fulfil their own tax obligations. Otherwise, they can face hefty penalties that drastically reduce monthly profit margins.

Knowing Your Obligations to the Australian Taxation Office (ATO)

As an employee, you didn’t have to worry too much about income taxes and how they affected your financial stability. This is because your employer handles all the paperwork in line with their organisational structure. Now that you are your own boss, you should have a good grasp of these tax obligations to ensure hassle-free business operations. This keeps your business free from penalties because of missed or incorrect dues.

While balancing your finances, here are three business taxes you should remember to file:

Corporate Tax

The most basic tax form you need to master is filing for corporate tax. It’s essentially a percentage you pay to the ATO for your company’s profits. Businesses that earn less than $10 million yearly must pay a 28.5% corporate tax, while businesses going beyond this margin must pay 30% of their annual profit.

Payroll Tax

After overseeing your business’s yearly profit, you also need to account for your employee’s wages. The payroll tax you’re obligated to submit depends on the state government’s guidelines. This will depend on the territory that your employees are situated in. Since payroll tax thresholds will vary with every state, you may need to change your payment practices. You can do this by segmenting the payroll terms of your employees based on their location.

Remember that you also need to account for Pay as you go (PAYG) withholding that comes with collecting income tax payments from your employees. This means you must account for the cut percentages of these values while giving the appropriate salary value to your employees. Since these figures and categories may be confusing, it’s best to use a ledger for all the computations and percentages.

Goods and Services Tax (GST)

Australia’s GST is set at 10% of the price of your goods and services. It’s an obligation you have to pay to the ATO if you fall under specific qualifications. You’ll need to file a GST if your annual business income reaches beyond $75,000 or more per year, or if you include taxi travel for your operations, or you want to avail of fuel tax credits. You can pay for these dues monthly, quarterly or annually.

Conclusion

Keep in mind that you will need to confirm if these tax obligations apply to your business. You will have your hands full worrying about operations and these tax filing duties. Filling up these figures and forms can be overwhelming, especially if you’re also busy running your company. Thankfully, you can outsource your accounting needs to capable firms with the experience and versatility of handling different enterprises. Having a reliable accounting firm to work with will lessen your burden as a business owner and speed up your timeline for scaling your company!

If you want to partner with a reliable accounting firm on the Sunshine Coast, our team at SMB Accounting can help. Our professional accountants perform different forms of tax services to ensure accurate and balanced ledgers for your operation. Contact us today at 1300-854-159 to avail of our subscription packages.

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Tax-Write Offs: An Australian Business’s Basic Guide

For decades, the concept of tax write-offs is something that Australian businesses have had quite a bit of difficulty wrapping their heads around. From small mom-and-pop retailers to multinational corporations, the financial tool in question has maintained a sort of mystified aura because of all the different details involved. Unfortunately, this unfamiliarity has hindered companies from maximising tax write-offs to their advantage because a certain level of knowledge is required to utilise it as best as possible.

If you’re a business owner looking to alleviate your business’s costs, then the tool in question poses a valuable opportunity worth capitalising on. Fortunately, the experts at SMB Accounting have put this guide together on everything you need to know about tax write-offs so that you can get your optimisation efforts well underway:

What is a tax write-off?

Alternatively known as an instant asset write-off, tax write-offs allow eligible businesses to claim immediate deductions for the business-related portion of the costs of an asset. Generally, this particular privilege is made available in the year the investment is first used or installed ready for use.

When it comes to eligible usage, instant asset write-offs can be used for multiple assets as long as the cost of each individual purchase is less than the relevant threshold. Additionally, this same financial tool can be used for new and second-hand purchases. However, it is worth noting that tax write-offs cannot be used for assets that are excluded from the Australian Taxation Office’s simplified depreciation rules.

How do tax write-offs work?

While there are many simplified definitions for how the tool in question works, the best way to define a write-off is that it’s an expense that can be claimed as a tax deduction.

When you look at the functional aspects, the way tax write-offs work is that they’re deducted from a business’s total revenue to determine total taxable income. In full effect, this tool helps alleviate the incurred costs that businesses run into whenever they invest in specific items necessary for a business’s operations. However, it is important to note that once applied, these write-offs are meant for tax deduction purposes and not actual cost reimbursements!

Given the way they work, qualifying write-offs are now considered essential to running a business because of how instrumental they are in managing expenses and reducing overall costs. Although a write-off doesn’t need to be 100 per cent necessary, it’s vital that you consider it as a regular expense that helps run the business!

How do you qualify?

Among the different aspects of instant asset write-offs that businesses struggle with the most, the main facet that bears the most difficulty is the matter of qualification.

For starters, it is important to note that you will have to check your business’s eligibility and apply the correct threshold amount so that you can pinpoint the exact figures or cost components that you’ll write off. Additionally, using the tool in question also means that you’ll need to be mindful of when an asset was purchased, first used, or installed ready for use to certify its qualification or eligibility as a cost that can be written off.

Beyond qualifications, it is also important to understand that the instant write-off eligibility criteria and threshold have changed over time. In the context of the current COVID-19 situation, the Federal Government is expected to reinforce the availability of an instant asset write-off and increase its threshold from $30,000 to $150,000.

Conclusion

While the prospect of using an instant tax write-off or tax write-offs can be an intimidating idea at first, it’s important to know that the tool in question can be easy to work with once you consider the right points. By taking the above-mentioned pieces of knowledge into mind, you’ll be able to ensure that you provide your business with the means to stay ahead of the curve and reduce its tax expenses at all costs!

We’re a business accounting firm on the Sunshine Coast specialising in a number of financial services, including tax returns, audits, as company set-ups, and ongoing bookkeeping and accounting services that will help your business stay on top of its books. Get in touch with us today to see how we can keep you in financial shape!

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Everything You Need To Know About Cash Flow Forecast

If there’s one thing that can make or break your small business, that’s cash flow. When you have a solid cash flow plan, you can help reduce the stress for you and your creditors and have sufficient funds to help your business expand. This is why it’s important to have a cash flow forecast — but what does it really do?

A cash flow forecast tracks the money that comes in and out of your business within a minimum of six months. This way, you’ll be able to estimate business peaks and obstacles with regards to cash and ensure you can budget your money for upcoming payments. Besides that, it also triggers you to negotiate suppliers, manage demand and surplus, and purchase necessary assets. 

For this reason, many business owners seek assistance from experienced accountant firms, like SMB Accounting. Here, we can help business owners strategise, manage bookkeeping, and take hold of all accounting-related tasks to ensure your business runs smoothly. 

Is a Cash Flow and Budget the Same?

Budgets were designed to predict how a business will perform during a specific timeframe. This often includes non-cash items, like outstanding creditors and depreciation, and can even help with tax planning. 

On the other hand, cash flow forecasts concentrate on the cash position during a period, but unlike the budget, these cash flows don’t feature non-cash items. 

In summary, budgets will give you an overview of your profit position. In contrast, cash flow will give you your business’s cash position. 

Cash Flow Forecast Tips You Should Know

1. Know Your Customer’s Payment Terms

Receiving payments can be tricky, especially when your customer refuses to pay or cannot pay the full amount. With that being said, it helps to provide other payment alternatives, such as “cash on delivery” or instalment payment, so you can gauge profit and avoid debt. 

2. Send Out Invoices Right Away

Whenever you’re making a sale, you must send out the invoice immediately. Not only will this help with bookkeeping and accounting, but it will also keep you on track with your cash flow forecast. 

Some businesses opt for the “end of the month” invoice process, but this can be quite tricky as it can cause some delays. When that happens, it’s either you may miss out on getting paid, which could ultimately disrupt your cash flow. 

3. Offer Discounts for Up-Front and Full Payments

As mentioned earlier, some customers can have a tough time paying for your products and service. To help them out, consider offering a discount when they pay in full and up-front. 

4. Have a Deposit System

If you’re dealing with large invoices, you can have a deposit system that will allow customers and clients to pay small up-front payments from time to time. This is particularly helpful since it helps fund wages for your staff and enables you to buy materials. 

5. Don’t Overdo Excess Stocking

Though it’s always better to be safe than sorry, carrying excess stock can come at a cost. When you have stock sitting around in your storage room, you don’t get any cash in return. This is why it’s vital to have a good relationship with your supplier so you can have stocks delivered in a specific timeframe to avoid any wastage. 

6. Work With an Accountant

One of the best moves you can do to ensure a solid cash flow forecast is to work with reputable accountants. This way, their experience can help you with your business’s financial needs, allowing you to create accurate forecasts that can help your business avoid financial challenges, such as skipping deadlines and going over budget. 

The Bottom Line: Having a Cash Flow Forecast Can Do Wonders for Your Business

Financial matters are an integral part of running your business. This means ensuring your cash flow forecast is in check, you’re on track with your budget, and you’re practicing adequate bookkeeping and accounting duties. Ideally, you want the help of accountings to ensure that your finances are taken care of by the right hands. 

How Can We Help You?

If you’re looking for an accountant in Caloundra to help you with your business’s finances, SMB Accounting is here to help.

We offer various accounting services, such as individual tax returns, small business accounting, SMSF audits, trust account audits, special financial statements, and more. Learn more about how our accountants can help your business today!

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2021/22 Federal Budget

Personal income tax changes

Retaining the Low and Middle Income Tax Offset (‘LMITO’) for the 2022 income year

The Government has announced that it will retain the LMITO for one more income year, so that it will still be available for the 2022 income year.

Under current legislation, the LMITO was due to be removed from 1 July 2021.The LMITO is a non-refundable tax offset that provides tax relief for low and middle income taxpayers and is available in addition to the Low Income Tax Offset (‘LITO’). The amount of the offset is $1080 and tax payers receive the full amount if their income is between $48,001 – $90,000

Below this threshold and above the threshold the amount is phased in or out. You will not receive any if your income is > $126,001

Personal Tax rates remain unchanged for 2021-22, Stage 3 tax rates start from 2024-25 unchanged

In the Budget, the Government did not announce any personal tax rate changes, having already brought forward the stage 2 tax rates to 1 July 2020 in the October budget. The stage 3 tax changes commence from 1 July 2024, as previously legislated.

 Reducing compliance costs for individuals claiming self-education expense deductions

The Government will remove the exclusion of the first $250 of deductions for prescribed courses of education. Currently, the first $250 of a prescribed course of education expense is not tax deductible. Removing this $250 exclusion is expected to reduce compliance costs for individuals claiming self-education expense deductions.

Changes affecting business taxpayers

 Temporary full expensing extension

In the prior year (2020/21) Federal Budget, the Government announced amendments to allow businesses with an aggregated turnover of less than$5 billion to access a new temporary full expensing of eligible depreciating assets until 30 June 2022.

In the 2021/22 Federal Budget, the Government has announced that temporary full expensing will be extended by 12 months to allow eligible businesses to deduct the full cost of eligible depreciable assets of any value, acquired and first used or installed ready for use by 30 June 2023. All other elements of temporary full expensing will remain unchanged, including the alternative eligibility test based on total income, which will continue to be available to businesses.

Temporary loss carry-back extension

In the prior year (2020/21) Federal Budget, the Government announced amendments to introduce a temporary loss carry-back measure. In the 2021/22 Federal Budget, the Government has announced that the loss carry-back measure will be extended to allow eligible companies to also carry back (utilise) tax losses from the 2023 income year to offset previously taxed profits as far back as the 2019 income year when they lodge their tax return for the 2023 income year.

Debt recovery for small business

The Government has announced that it will allow small business entities (including individuals carrying on a business) with an aggregated turnover of less than $10 million per year to apply to the Small Business Taxation Division of the Administrative Appeals Tribunal (the ‘Tribunal’) to pause or modify ATO debt recovery actions, such as garnishee notices and the recovery of general interest charge or related penalties, where the debt is being disputed in the Tribunal.

Currently, small businesses are only able to pause or modify ATO debt recovery actions through the court system, which can be costly and time consuming. It is expected that applying to the Tribunal instead of the courts will save small businesses at least several thousands of dollars in court and legal fees and as much as 60 days of waiting for a decision

Superannuation related changes

Removing the work test for voluntary contributions

The Government has announced that it will allow individuals aged 67 to 74 years (inclusive) to make or receive non-concessional contributions (including under the bring-forward rule) and salary sacrifice contributions without meeting the work test, subject to existing contribution caps. Individuals aged 67 to 74 years (inclusive) will still have to meet the work test to make personal deductible contributions.

Removing the requirement to meet the work test when making non-concessional or salary sacrifice contributions will simplify the rules governing superannuation contributions and will increase flexibility for older Australians to save for their retirement through superannuation.

Reducing the age limit for downsizer contributions

The Government will reduce the age limit from which downsizer contributions can be made by eligible individuals, from65 to 60 years of age.

The downsizer contribution allows eligible individuals to make a one-off, after-tax contribution to their superannuation fund, of up to $300,000 per person, following the disposal of an eligible dwelling, where certain conditions are satisfied. Under the current requirements, an individual must be at least 65 years of age at the time of making the relevant contribution, for the contribution to qualify as a downsizer contribution.

Removing the $450 per month threshold for Superannuation Guarantee eligibility

The Government will remove the current $450 per month minimum income threshold, under which employees do not have to be paid SG contributions by their employer.

Changes to the First Home Super Saver (‘FHSS’) scheme

The Government has announced that it will make the following changes to the FHSS scheme.

  • Increasing the maximum releasable amount to $50,000

The Government will increase the maximum releasable amount of voluntary concessional and non-concessional contributions under the FHSS scheme from $30,000 to $50,000, to assist first home buyers in raising a deposit more quickly. Voluntary contributions made from 1 July 2017 up to the existing limit of $15,000 per year will count towards the total amount able to be released.

  • Changes to improve the operation of the FHSS scheme

The Government will make technical changes to the legislation underpinning the FHSS scheme to improve its operation as well as the experience of first home buyers using the scheme. These four changes will apply retrospectively from 1 July 2018, and will assist FHSS scheme applicants who make errors on their FHSS scheme release applications

Conclusion

This is a summary of the main areas which may affect you as an individual or as a business. However if you have any other questions regarding the budget send an email to stephen@smbaccounting.com.au

 

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Finding the Right Accountant for Your Needs? Here’s How

One of the most challenging things that every self-employed individual or business owner needs to face is getting taxes in order. Whether they like it or not, handling taxes with the correct paperwork should be done, especially when the end of the financial year is almost coming. Finding the right accountant will help you with that.

But, not accountants are the same. You must look for someone who’s reliable and well-equipped to handle the accounting details of your business. To give you some helpful insights to find the right accountant, consider the following tips:

Determine your needs

Before you interview and hire an accountant, make sure to evaluate first your needs. Do you need someone to handle your taxes? Or, do you need someone to organise your payroll and financial reports of your business? There should be a list of all the tasks that they need to do. Determine the services that you’ll need from an accountant. With today’s innovating trends in the finance and accounting industry, you might already be using accounting software. If that’s the case, you should find an accountant who knows how to use such tools and software.

Check their qualifications

Make sure that you hire a qualified accountant. You can look for being a member of a professional association, based on your needs. The most important is to check whether they are university qualified with a Bachelor’s degree, even better a post graduate qualification such as a Master’s degree. You do not require any formal qualifications to call yourself “Accountant”. Some people accept services from accountants who are not certified, registered or chartered. However, this is not highly advisable in most cases. 

Find a specialist

You can hire an accountant who is specialised in an area, or you can choose a general accountant who is well-rounded on various tasks. 

For instance, tax accountants can help specifically with the preparation of tax returns and implement a system for your business to handle tax matters more efficiently. There are also management accountants who can help analyse business reports, budget, and forecasts to create better decisions for the business. 

Financial accountants can handle tasks related to the management of financial records. Auditing accountants handle the checking of financial reports as well as collecting evidence to prove the data on the reports.

Consider location

Some self-employed individuals may opt to choose accountants in their local area. However, with the various tools and software today, you can also hire qualified accountants from anywhere around the world—all thanks to the power of today’s technology!

In case you consider working with an accountant who will work for you remotely, ensure that you maintain open communication so that any urgent matter will be given prompt attention. 

However, if you still prefer to work with someone who can do face-to-face meetings, you should research to find a list of accountants in your area.

Conclusion

A qualified and reliable accountant will help you handle crucial tasks such as bookkeeping, tax preparation, budgeting, and others. However, despite the many accountants available out there, you definitely would want to work with someone who is qualified, reliable and values professionalism. It is important to analyse your needs so that you will know how to hire the best accountant to work with.

If you’re looking for accountants who can help you organise your income tax returns on time, work with SMB Accounting. We offer a wide array of top-notch accounting services, so you’ll not have to worry about the tedious process. Get in touch with us today!

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The Most Common Mistakes Businesses Make During Tax Audits

There are plenty of reasons why the Australian Taxation Office might want to run a tax audit on your business. It’s completely normal for businesses to go through this even though there are likely no problems on your end. If you’ve been filing correctly and you have the receipts for everything, then there’s nothing for you to worry about. 

But it is not uncommon for businesses to file claims that they can’t fully support beyond a reasonable doubt. To avoid any trouble with the ATO, try to steer clear of these mistakes businesses have tend to make when handling their finances and taxes. 

Work Expenses Without Having Receipts

Your receipts are essential to filing taxes as a small business owner. You can justify everything you buy for business purposes if you have the reason and the receipt behind it. If you don’t have a receipt on a business expense you claimed, you might as well have not filed it. 

The ATO can’t just take your word for it when you make business expenses without an official receipt. Aside from misplacing it, they can suspect you of either not making the purchase or buying the item under illegal circumstances. Neither of those will sound good for you as a business owner.

Home Office Expenses Where the House is not a Place of Business

Many small businesses start in a garage, on a kitchen table, or a small home office. But when your workplace is primarily residential, you can’t claim that the toilet paper you bought for the house is a business expense. In the same vein, you cannot claim a residential apartment’s rent is a business expense when it was not leased to you for business purposes.

Claiming 100% of GST on Purchase of Vehicles or Other Equipment 

It’s a common mistake for businesses to purchase vehicles or other equipment and claim all of it to be a business expense.

The only time you can claim full credit for the GST included in the price of the vehicle is when that statement is true. If it’s a delivery truck with your logo that you only drive to make orders, then the claim is valid. But if you’re driving around a car to use for personal errands as well, you can’t truly claim it to be 100% for business use. 

While you can use vehicles for business and private purposes, you cannot claim a full tax deduction for such vehicles. However, you are entitled to a reduced GST payment for the times that you do use these vehicles for business use. 

Conclusion

Tax audits conducted by the ATO may seem intimidating, but it is all for a good reason. Plenty of businesses have filed ridiculous claims, so be careful how you account for things. To avoid these mistakes throughout the year, the best advice is to hire a dedicated accounting service that knows exactly how to file business taxes for you.

To make sure you make fewer mistakes in your next tax audit, entrust your accounts to one of the top accounting firms along the Sunshine Coast. SMB Accounting offers trust account audits, audits of special purposes financial statements, special needs audits, and more. Contact us today!

 

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