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5 Ways to Cut Costs in Your Business Operations – Our Guide

Managing your cash flow is a crucial part of running your business, but it’s an aspect that tends to overwhelm entrepreneurs. As a business owner, you’re laser-focused on bringing in more profit and scaling your company, but doing so during uncertain economic conditions means that you need to account for every cent you make. Any increase or reduction in your costs can affect how much profit you make, further highlighting the importance of cash flow management. 

However, tracking your expenses and working with accounting firms in the Sunshine Coast will help you boost profits and find other opportunities to cut down on business costs. Here are five possible ways you can save more money by economising your operations:

  • Switch to Technology 

Automating tasks has never been easier than it is today, as there are many tools and software you can use to improve your workflow. You can take advantage of project management software, for example, which will automate tasks necessary for running your business, saving you valuable time.

You can also invest in accounting tools to keep a close eye on your cash flow and financial reporting, as small business accounting is crucial to your business’s success. It will also help you keep track of your expenses, ensuring you’re well aware of every business transaction you make.

  • Consider Operating Your Business From Home

2020 has demonstrated how the work-from-home setup has been beneficial for many businesses all over the world, so it’s something you may want to consider for your own enterprise as well. Doing so will help you cut back on your office space expenses, business taxes, utilities, and even insurance. 

However, some companies still require an office to work more efficiently. If operating your business from your home isn’t feasible, consider moving to a smaller or less expensive space instead. You’ll enjoy much bigger savings that way.

  • Reduce Energy Usage

Energy, although necessary, tends to eat up a portion of a business’s income. Fortunately, you can optimise your energy usage by switching to energy-efficient appliances such as light bulbs and your heating or air conditioning system. You can also ask your local energy provider to perform an audit, as they can recommend ways to cut down on your energy usage. You can even invest in a solar panel system, which will reduce your impact on the environment while reducing your energy bills. 

  • Invest in Your Employees

While investing in your employees may seem like a way to spend more money instead of cutting back on your expenses, it can actually save you a lot of money in the long run. By assessing the skills and experience of your employees and analysing their potential, you can train them to refine new, useful skills that will be beneficial to your business. In the process, you won’t have to hire more people to take on roles that your employees have shown proficiency in, thereby reducing turnover. It’s important, however, to make sure that your employees don’t feel overwhelmed or burned out with the tasks you give them. 

  • Reduce Your Debts 

Asking your accountant to run a financial audit on your business will help you find ways to save more money and take care of your debts, which will save you hundreds of dollars in interest. They can create a plan that will help you pay off your debt early or on time, improving your credit score and avoiding a deficit. It will also help you make more informed financial decisions, which is crucial to your business’s success.

Conclusion

Running a business is exciting and rewarding, but it involves a lot of analysing and tracking to make sure you’re well aware of everything going in and out of your company. If you’re not careful, you may be spending more than you’re earning, which can quickly land you in hot water. With these five tips, you’ll enjoy much more savings and reduced business expenses, helping you achieve your earning goals. 

SMB Accounting is an accounting firm in the Sunshine Coast offering individual tax returns, small business accounting, financial reporting, and other services. We complete many types of audits, such as investigative reviews, self-managed super fund audits, trust account audits, and more. Contact us today to find out how we can help you!

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3 Benefits an SMSF Can Provide for Your Small Business

One way that small business owners can strengthen and supplement their income is through self-managed super funds (SMSF). Though it might seem challenging, these obstacles are worth traversing, as SMSFs offer many benefits. Having an SMSF allows you to invest in commercial properties within your private super funds. This gives you the twofold benefit of increasing the value of your super fund and providing your organisation with valuable assets. 

What is an SMSF?

An SMSF is a superannuation trust structure that provides benefits to its members upon retirement. Its main difference from other super funds is that SMSF members are also the trustees of the fund, and they can amount to a maximum of four members. This allows a level of control when it comes to tailoring the funds to each trustee’s needs. 

SMSFs come with their our Tax File Number (TFN), Australian Business Number (ABN), and transactional bank account. This bank account will allow trustees to receive contributions and rollovers, make investments, and pay out lump sums and pensions. As mentioned before, the fund is controlled by trustees, which can take two forms:

  • The Corporate Trustee. A company can act as the trustee with each member as a director. This can allow simpler registration of assets, more efficient management, and flexibility in membership. 
  • The Individual Trustee. In this case, each member is appointed as a trustee with a  minimum of two trustees required. 

While setting up an SMSF requires compliance with the trustees of the fund, there are quite a few major advantages it can offer. Here are some of these advantages:

1. It can reduce the capital gains tax

A small business owner can transfer their commercial properties into the fund. The superannuation law might prevent individuals from transferring their residential properties to a fund, commercial properties are exempt. Business offices, buildings, and industrial locations can be held in your SMSF.

Including commercial properties in your SMSF reduces the capital gains tax amount on the sale of these properties, boosting the super fund as well. Consult your accountant about which funds you can and cannot write off in this manner.

2. It can give provide tax deductions for business expenses

Once a property has been transferred to the SMSF, you will have to enter a lease agreement with the fund to rent the property on commercial terms. This can be written off as a tax deduction for the business, as any rent paid toward using the property would now be a business expense. 

Repairs, maintenance, renovations, improvements, and other property management fees are also now claimed in the fund.

3. The fund earns money for tax deductions

Any earnings on investments held in an SMSF are taxed at 15%—including commercial properties. That means rent will be taxed at the standard rate. We’ve mentioned before that small business owners like you can claim a tax deduction for the business on rent paid to the SMSF, but the SMSF itself will only end up paying this reduced tax. This serves the purpose of allowing businesses to make significant tax deductions while making significant contributions to its retirement fund. 

Final thoughts

Not all businesses and business structures can fit with every business. For the right enterprises, however, it can help manage the commercial properties of a business while growing out its retirement fund. An SMSF can offer options and benefits you otherwise would not have had. 

If you are looking to set up an SMSF for your business along the Sunshine Coast, QLD, you will need the help of an accountant. Send us at SMB Accounting a message so we can help you through this process. 

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What You Need to Know About Hiring an SMSF Auditor

A self-managed super fund (SMSF) trustee is obliged to designate an SMSF auditor approved by the Australian Taxation Office (ATO) on or before forty days before filing their SMSF annual return. In a nutshell, an SMSF auditor is a financial expert who works to evaluate if your company’s finances comply with the superannuation law.

Besides that, they also monitor your fund’s financial statements. If you’re thinking of hiring an SMSF auditor, then you must get someone that requires only minimal supervision so that you can focus on reaping the benefits of your trust while they handle your financial records. Aside from that, a major rule about hiring SMSF auditors is that they aren’t allowed by law to audit a fund that they have a financial interest in, nor have an intimate or professional relationship with the SMSF members or trustees involved.

Keep reading below to find out more about hiring an SMSF auditor.

The Importance of Having an SMSF Auditor 

Before you seek the assistance of an SMSF auditor, the person you select must be registered with the Australian Securities & Investments Commission. They should also have an SMSF auditor number which you will have to provide each time you submit your company’s annual return.

An SMSF auditor is knowledgeable at advising those in need regarding current assets in your SMSF and if your fund adheres to the rules and regulations listed down in the Superannuation Industry (Supervision) Act of 1993. Before they establish an audit of your fund, an SMSF auditor will create a Terms of Engagement Letter and submit it to the trustee of the fund.

What is a Terms of Engagement Letter?

The letter involves the duties and obligations of all parties linked to the audit, including the range of the audit. As a result, your existing accountant serves as an SMSF auditor’s primary contact person and will be provided with a separate Terms of Engagement Letter.

With the letter stating each party’s capabilities, it will serve as protection for you, your accountant, and the auditor to prevent any miscommunication from occurring. The Terms of Engagement Letter also stands to secure audit evidence prepared by your auditor in case of unwanted tampering and mishandling. 

SMSF auditors who don’t follow legal standards can be sued and face charges given by the Court. Besides that, the letter can also be considered a contract so that both parties remain accountable in the event of compliance breaches, such as reaching out to other auditors for second opinions. As a result, trustees may be audited by the ATO once they violate the policies stated in the Terms of Engagement Letter.

When is an SMSF Auditor Held Liable?

An SMSF auditor is usually tasked to give an honest and reliable opinion regarding your assets, proving that your fund exists and is being assessed as part of the requirement by the SIS Act. If you also require the guidance of an accounting firm, they will work hand-in-hand so that the auditor can confirm that your superannuation funds are appropriately handled and comply with all given conditions.

In the event that the SMSF auditor you hire does not stick to the given standards and, instead, prefers to take the situation into their own hands, they end up putting themselves at risk to potential lawsuits. Aside from that, they are also causing trouble with your company and your small business accounting service.

Conclusion

If you’re worried about relying on an SMSF auditor, it’s important to remember that they are tied by the law to accomplish their auditing responsibilities as professionally and lawfully as expected. A Terms of Engagement Letter exists to impose the rules and regulations for all parties present. So the secret to having an SMSF auditor is to take a closer look at how the audit is done and that everyone involved should make an effort to achieve their duties accordingly!

Are you looking for auditing and accounting services in Australia to handle your SMSF trust? SMB Accounting offers individual tax returns, small business accounting, SMSF audits, and Xero accounting software to our clients in need. Get in touch with us today to book an appointment!

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3 Smart Tips for Reducing Your Tax Liability

 

Truth be told, paying taxes is not fun. It entails the stressful preparations you need to do to take into account all of your income. On top of that, it involves seeing a significant percentage of your earnings slip out of your hand. Nevertheless, paying taxes diligently and promptly is something that must be done.

The bright side is that there are actually smart strategies you can employ to legally reduce your tax liability. With these methods, you can lower your tax bracket and, consequently, shrink the portion of your income that can be taxed.

In the sections below, we will give you a run-through of three of the many ways you can minimise your tax:

 

  1. Use Discretionary Trusts for Your Investments

Discretionary trusts provide you with a flexible way to indirectly gift your assets, property and money to your beneficiaries. In this legal arrangement, you are giving your identified trustee ‘full discretion’ on when and what funds to give to your recipients.

One advantage of this is that it allows you to freely distribute your income and assets to other people. On that note, you can divide up your income among your beneficiaries in a way that lowers your tax bracket and reduces the overall tax you need to pay.

Take note, however, that the trustees are liable to tax on the income that they haven’t distributed yet.

 

  1. Sacrifice Some of Your Salary Into Your Super

Superannuation, or ‘super’, is one way you can save money for your retirement. In this arrangement, your employer is obliged by law to pay 9.5% of your salary into your super fund. This is essential because it helps you secure your financial stability when the time comes for you to retire from work.

On that note, you should know that you can ask your employer to pay some more of your salary into your super on top of the minimum percentage required. This enables you to not only reduce your taxable income but also build your super fund faster.

You should keep in mind, however, that you cannot withdraw this money easily. You can only take it out in certain circumstances, such as when you retire or turn 65 years old.

 

  1. Claim Deductions for Your Work-Related Car Expenses

This is a smart hack, especially if you use your own vehicle for business purposes.

There are basically two ways for you to claim deductions for your work-related expenses. You can either use the ‘cents per km’ method or claim the actual expenses through the logbook method.

In the former method, for the 20/21 year you can claim a flat 72 c/km for travels you’ve proved as business-related. However, there is a cap of 5,000 km; this gives you a maximum deduction of $3,600.

The latter method, on the other hand, lets you claim business-use percentage on itemised allowable expenses. This could be your petrol, oil, insurance, repairs, maintenance, registration and so on. Take note, however, that you must maintain a logbook of your actual expenses for 12 weeks to document and prove these expenses.

 

Conclusion

Computing your taxes and filing them are honestly not enjoyable activities, especially if you are about to let go of a large chunk of your income. Nevertheless, you should know that there are various legal ways for you to minimise your taxes. The three tips mentioned above are just some of the many methods you can employ to do this.

For the best results, however, it’s still best to work with taxation experts. They can help you identify more opportunities to reduce your tax liability and complete your tax returns on time.

We are the authority when it comes to taxation in Australia. We look at innovative ways to complete your income tax returns on time and with minimum stress. If this sounds a lot like something you need, don’t hesitate to get in touch with us today!

 stephen@smbaccounting.com.au

 P 1300 854 159

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Tax Time is NOW!

TAX TIME IS NOW!

 

June 30 is fast approaching , so you should start thinking about any work-related and/or income-generating expenses you paid since last July 1, but also if you are planning on some expenditure n the near future to bring it forward before June 30

To recognise expenses that may be suitable as tax deductions, you should consider:

  • Was the expense related to your work or income-generating activity?
  • You have spent the money, and your employer didn’t reimburse you
  • You have an official record of the expense – e.g. receipt or bank statement?

Note: If the cost was for work and personal use (e.g. home internet) combined, you need to decide the percentage of the expense related to your work or income-generating activity.

To assist, we have recognised 8 tax deductions you may be able to claim on your tax return:

  1. Dry-cleaning, clothing and laundry expenses

You may be able to claim these costs, if you purchased clothing specific for your employment/business, protective clothing or work uniforms directly related to your job. There is also a claim for related cleaning costs, as work-related expenses.

Though, you’re unlikely to be able to claim costs for conventional clothing or non-compulsory work uniforms.

To claim these costs as tax deductions, you need to have written evidence of these costs, such as diary entries and receipts.

  1. Home office expenses

With the crisis of the virus affecting us all most of us have had to result in working from home, there are several home office expenses you may be able to claim as tax deductions.

These include:

  • Phone and Internet expenses
  • Computer consumables (e.g. printer paper and ink) and stationery
  • Home office equipment (e.g. computers, phones, printers, furniture and furnishings) – you may be able to claim either:- The full cost of the items, if it’s less than $300; or
    – The decline in value (also known as depreciation) for items over $300.

Most people won’t be able to claim:

  • Home expenses, like mortgage interest, rent and rates
  • Costs of general household items, like coffee, tea and milk

Please review the criteria’s before you consider on claiming an amount for home office expenses in your tax return.

For example, you should consider whether you can claim the temporary ATO-approved ‘shortcut method’ (of 80 cents per hour for all additional running expenses) for the period 1 March 2020 until 30 June 2020.

You should consider which method is best for you and the criteria you need to meet to claim a deduction.

  1. Education

If your studies were work-related and you enrolled in an eligible course, you may be able to claim a tax deduction.

  1. Industry-related deductions

You may also claim tax deductions for work-related expenses specifically related to your occupation and industry.

You can check the list of occupations and industries on the ATO website to see what industry-related tax deductions you can claim.

  1. Vehicle and travel expenses

While you generally can’t claim expenses for getting to and from your regular workplace, there are some work-related vehicle and travel expenses you may be able to claim.

These include:

  • Where your work requires you to attend multiple workplaces or locations
  • Car expenses where you need your car to perform your work duties
  • Accommodation expenses when you’re required to travel for work

 

  1. Other work-related expenses

Other  work-related expenses you may be able to include as tax-deductible expenses, depending on your work and individual circumstances. Expenses to consider include:

  • Overtime meals
  • Books, periodicals and digital information subscriptions
  • Safety goggles and protective sunglasses
  • Union fees, subscriptions to associations and bargaining agents fees
  1. Gifts and donations

If you gave a gift or donation to an organisation (e.g. your favourite charity), you may be able to claim a tax deduction. However, there are specific rules that apply.

Generally, you can claim any donation you made above $2 if it was to a ‘deductible gift recipient’. For gifts, different rules apply depending on the type of gift.

  1. Investment income

You may be able to claim investment income tax deductions if you’ve received:

  • Interest payments on your savings
  • Dividends from your investments in shares
  • Rental payments from an investment property
  • Another type of investment income

If you’ve received any of these, you could be entitled to claim for costs related to this income, such as interest charged on money borrowed to buy stocks or rental properties.

You may also be able to claim money you paid for investment advice.

Things to note

  • It’s important to remember that tax laws are complex, and you should ensure that you’ve confirmed you can claim an expense before including it in your tax return. Contact SMB Accounting for further clarification.
  • The Australian income year ends on 30 June. You have from 1 July to 31 October to lodge your tax return for the previous income year. If you use a registered tax agent to prepare and lodge your tax return, you may be able to lodge later than 31 October.
  • The information provided is of a general nature and doesn’t take into account your personal financial or business situation – we suggest contacting us at SMB Accounting if you need clarification.

 

Please feel free to share to any person you may think may benefit 😊

If you need any assistance, please get in contact with us at

 stephen@smbaccounting.com.au

 P 1300 854 159

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TAX SAVING STRATEGIES

 

TAX SAVING STRATEGIES

 

Even with the final day of the financial year to go, traditionally, year-end tax planning for small businesses is based around two simple concepts (i.e., Accelerating business deductions and deferring income).  Consideration will obviously also need to be given to the impact of the  COVID-19 pandemic on specific businesses as in itself has had the effect of reducing incomes and therefore tax payable.

Small Business Entities (‘SBEs’)  (i.e., Businesses with an aggregated turnover of less than $10 million) often have greater access to year-end tax planning due to particular concessions that only apply to them.  Taxpayers that qualify as an SBE can generally pick and choose which of the concessions they wish to use each year (although see below regarding the simplified depreciation rules).  The following are a number of areas that may be considered for all business taxpayers.

Maximising deductions for non-SBE taxpayers

Non-SBE business taxpayers should endeavour to maximise deductions by adopting one or more of the following strategies:

  • Prepayment strategies;
  • Accelerating expenditure; and
  • Accrued expenditure.

Prepayment strategies – non-SBE

Any part of an expense prepayment relating to the period up to 30 June is generally deductible.

In addition, non-SBE taxpayers may generally claim the following prepayments in full:

  • expenditure under $1,000;
  • expenditure made under a ‘contract of service’ (e.g., salary and wages); or
  • expenditure required to be incurred under law.

Note:  Prepayments can be a little confusing, so before you commit to making a payment please feel free to email SMB Accounting with any queries or assistance if required.

Accelerating expenditure – non-SBE

This is where a business taxpayer brings forward expenditure on regular, on-going deductible items.  Business taxpayers are generally entitled to deductions on an ‘incurred basis’.  Therefore, there is generally no requirement for the expense to be paid by 30 June 2020 (i.e., as long as the expense has genuinely been ‘incurred’).

Checklist

The following may act as a checklist of possible accelerated expenditure:

  • Depreciating assets – Non-SBEs that have an  aggregated annual turnover of less than $50 million can claim an immediate deduction for eligible assets costing less than $30,000 for any assets acquired and first used (or installed ready for use) from 7:30pm (AEDT) 2 April 2019 to before 12 March 2020.
    From 7:30pm (AEDT) on 2 April 2019 and first used (or installed ready for use) from 12 March 2020 to 30 June 2020 this has been increased to $150,000.
    Depreciating assets costing $100 or less can be written off in the year of purchase and depreciating assets costing less than $1,000 can be allocated to a low value pool and depreciated at 18.75% (which is half of the full rate of 37.5%) in their first year, regardless of the date of purchase.
    Finally, a 50% accelerated depreciation concession may apply for new eligible assets that start to be held and used (or installed ready for use) from 12 March 2020 to 30 June 2021.
  • Repairs.
  • Consumables/spare parts.
  • Advertising.
  • Superannuation – contributions to a complying superannuation fund, to the extent contributions are actually made (i.e., they cannot be accrued but must be paid by 30 June).

Accrued expenditure

Non-SBE taxpayers (and many SBE taxpayers – refer below) are entitled to a deduction for expenses incurred as at 30 June 2020, even if they have not yet been paid.

The following expenses may be accrued:

  • Salary or wages and bonuses – the accrued expense for the days that employees have worked but have not been paid as at 30 June 2020.
  • Interest – any accrued interest outstanding on a business loan that has not been paid.
  • Commissions – where employees or other external parties are owed commission payments.
  • Directors’ fees – where a company is definitively committed to the payment of a director’s fee as at 30 June 2020, it can be claimed as a tax deduction.

Maximising deductions for SBE taxpayers

Deductions can be maximised for SBE business taxpayers by accelerating expenditure and  prepaying deductible business expenses.

Accelerating expenditure – SBE 

In addition to accelerating other expenditure items, SBE taxpayers can choose to write-off depreciating assets costing less than $30,000 (or potentially  $150,000) in the year of purchase.*

Assets costing more than the relevant immediate asset write-off threshold are allocated to an SBE general pool and depreciated at 15% (or potentially at 57.5% for eligible new assets subject to the 50% accelerated depreciation concession) in their first year.  Therefore, where appropriate, SBE business taxpayers should consider purchasing/installing these items by 30 June 2020.

(*) The immediate asset write-off threshold was originally increased to ‘less than $30,000’, for eligible assets first used or installed ready for use between 7:30pm (AEDT) 2 April 2019 and 30 June 2020. 

The threshold was subsequently increased to $150,000 for eligible assets first used or installed ready for use from 12 March 2020 to 30 June 2020 as a result of the Government’s response to the COVID-19 pandemic.

Prepayment strategies – SBE

SBE taxpayers making prepayments before 1 July 2020 can choose to claim a full deduction in the year of payment where they cover a period of no more than 12 months (ending before 1 July 2020).

Otherwise, the prepayment rules are the same as for non-SBE taxpayers.

The kinds of expenses that may be prepaid include:

  • Rent on business premises or equipment.
  • Lease payments on business items such as cars and office equipment.
  • Interest – check with your financier to determine if it’s possible to prepay up to 12 months interest in advance.
  • Business trips.
  • Training courses that run on or after 1 July 2020.
  • Business subscriptions.
  • Cleaning.

 

Information Required

This is some of the information we will need to help us prepare your income tax return:

  • Stock-take details as at 30 June 2020.
  • Debtors listing (including a list of bad debts written off) as at 30 June 2020.
  • Note: In order to claim a deduction, the debt must be written off on or before 30 June.
  • Creditors listing as at 30 June 2020.

 

Please feel free to share to any person you may think may benefit 😊

If you need any assistance, please get in contact with us at

 stephen@smbaccounting.com.au

 P 1300 854 159

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Jobkeeper Payment Alternate test – Update 4

JobKeeper Alternative Turnover Tests

The ATO has now determined alternative tests for various businesses in relation to the fall in turnover where there is not an appropriate relevant comparison period.

If your business satisfies the basic test, you do not need to go to any of the alternative tests as outlined.

The alternative tests can apply in the following circumstances:

1. the entity commenced business after the relevant comparison period (the business did not exist in that period)

2. the entity acquired or disposed of part of the business after the relevant comparison period (the business is not the same business in that period as it is now)

3. the entity undertook a restructure after the relevant comparison period (the business is not the same business in that period as it is now)

4. the entity’s turnover substantially increased by:

      • 50% or more in the 12 months immediately before the applicable turnover test period; or
      • 25% or more in the 6 months immediately before the applicable turnover test period, or
      • 12.5% or more in the 3 months immediately before the applicable turnover test period.

5. the entity was affected by drought or other declared natural disaster during the relevant comparison period

6. the entity has a large irregular variance in their turnover for the quarters ending in the 12 months before the applicable turnover test period, or

7. the entity is a sole trader or small partnership where sickness, injury or leave have impacted an individual’s ability to work which has affected turnover.

The Commissioner cannot determine an alternative decline in turnover test in all circumstances. It is only where there is an event or circumstance that is outside the usual business setting for entities of that class which results in the relevant comparison period in 2019 not being appropriate for measuring decline in turnover.

The Commissioner can also only determine a test for a class of entities and cannot make discretionary decisions for individual entities.

If you fall into more than one of the classes of entities covered by the alternative test, you can choose which alternative decline in turnover test to apply. You only need to satisfy one of the tests (it does not matter if you do not satisfy one of the other tests that applies to you).

We are providing calculation and enrollment into the JobKeeper system as a free complimentary service to our clients in order that those businesses survive these uncertain times.

DOWNLOAD ARTICLE – Jobkeeper Payment Alternate test – Update 4

 

Please feel free to share to any person you may think may benefit 😊

If you need any assistance, please get in contact with us at

 stephen@smbaccounting.com.au

 P 1300 854 159

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JobKeeper Guidance – Update 3

JobKeeper Guidance and Payment

Further information has now been released by Treasury to clarify the comparison period is for either;

      1. any monthly period from March 2020 to the end of September 2020 OR
      2. any quarterly period from April to June or July to September, compared to the same monthly or quarterly period in 2019.

Importantly, once this self-assessed test is met for either;

(a) a monthly period OR

(b) any quarterly period,

there is no requirement to re-test in later months or quarters.

Eg, if a business assesses that its turnover will fall by 30% in April 2020 compared to April 2019, the business retains its eligibility until the JobKeeper payments stop for all businesses at the end of September 2020, rrespective of its turnover in the months subsequent to April 2020. It is not required to estimate or determine turnover for subsequent periods.

In addition, where an entity does not qualify in the month eg April 2020, or the April to June quarter, it can re-test in later months or quarters.

The information acknowledges that comparing monthly or quarterly periods from April 2020 and onwards, to April 2019 and onwards, may not always be possible or may lead to unfair outcomes.

The result is, where the ATO is satisfied that there is no such comparison period in 2019 or there is not an appropriate relevant comparison period, the ATO Commissioner may, by legislative instrument, determine an alternative decline in the turnover test.

The two examples that have been given in the information release relate to;

  • businesses that were not in existence for the whole of the comparison period in 2019. (In the explanatory materials, the business is permitted to average its actual turnover, from October 2019 when it came into existence, to March 2020, and then compare that average to its estimated turnover in April 2020).
  • businesses that were impacted by a natural disaster during the 2019 comparison period

On a positive note, the ATO Commissioner will retain flexibility to apply other alternative tests and take into account other unique circumstances (aside from natural disaster and start-up businesses) confronted by a business (should the 2019 comparison period not be reflective of typical turnover).

Treasury, in a separate fact sheet, Supporting Business to Retain Jobs, has stated that these alternative tests may include eligibility being established as soon as a business temporarily ceased trading or where a business significantly curtails its operations.

The JobKeeper payments package began on 30 March 2020, legislation was only passed last week, and the pay periods prescribed relate to fortnightly pay periods and the ATO’s guidance has come during the second fortnightly pay period running from 13 April to 26 April.

Hence, the ATO will assume that the minimum payment of $1,500 (before tax) has been paid for each of the first two fortnights, even if it has been paid late, provided it is paid to the employee by the end of April.

Important: If employers do not continue to pay their employees for each pay period, they will cease to qualify for the JobKeeper payment.

“This means that employees can make two fortnightly payments of at least $1,500 per fortnight before the end of April, or a combined payment of at least $3,000 before the end of April,” the ATO said.

While the ATO has set out guidance on determining the decline in turnover test for businesses, it has yet to reveal the alternative tests for businesses where turnover periods are not appropriately comparable.

This will be passed on ASAP as soon as we receive such information.

Guidance for sole traders and businesses that operate in the form of a company, trust or partnership will also soon be provided by the Tax Office.

It is also important to note, it has been confirmed that the payment will be limited to one entitlement for each director of an entity, even if there are multiple business owners or participants.

How To Enrol and Apply for JobKeeper

There are eight (8) steps that businesses or their advisors have to take to enrol for JobKeeper:

  1. Register your interest and subscribe for JobKeeper payment updates
  2. Check your employees meet the eligibility requirements.
  3. Continue to pay at least $1,500 to each eligible employee per JobKeeper fortnight (the first JobKeeper fortnight is the period from 30 March to 12 April).
  4. Notify eligible employees that you are intending to claim the JobKeeper payment on their behalf and check they aren’t claiming JobKeeper payment through another employer or have nominated through another business. If they are receiving JobSeeker they need to notify Centerlink to cancel.
  5. Send the JobKeeper employee nomination notice to your nominated employees to complete and return to you by the end of April if you plan to claim JobKeeper payment for April.
  6. From 20 April 2020, I can enrol clients or you can enrol yourself with the ATO for the JobKeeper payment. You must do this by the end of April to claim JobKeeper payments for April.
  7. In the online form, provide your bank details and indicate if you are claiming an entitlement based on business participation, for example if you are a sole trader.
  8. Specify the estimated number of employees who will be eligible for the first JobKeeper fortnight (30 March – 12 April) and the second JobKeeper fortnight (13 April – 26 April).

Download Article – Jobkeeper Guidance

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Claiming your Home Office Expenses

You may now be working from home more than ever and you will be incurring costs of working from home, outlined below are various details as to  what you can claim and how to claim those deductible expenses at tax time

In order to be able to claim, all of the following must apply:

      • You must have spent the money.
      • The expense must be directly related to earning your income.
      • You must have a record to prove it.

No deduction can be claimed for items that your employer has provided or where you have been reimbursed for the expense.

If you are not reimbursed by your employer, but instead receive an allowance from them to cover your expenses when you work from home, you:

      • must include this allowance as income in your tax return.
      • can claim a deduction as outlined.

Expenses you can claim

You will be able to claim a deduction for the additional running expenses you incur if you work from home,. These include:

      • electricity expenses associated with heating, cooling and lighting the area from which you are working and running items you are using for work
      • cleaning costs for a dedicated work area
      • phone and internet expenses
      • computer consumables (for example, printer paper and ink) and stationery
      • home office equipment, including computers, printers, phones, furniture and furnishings – you can claim either the:
        • full cost of items up to $300
        • decline in value for items over $300.

The  tracking of all of these expenses can be challenging so the ATO  will accept a temporary simplified method (or shortcut method) of calculating additional running expenses for the period starting 1 March 2020 until at least 30 June 2020. The ATO has also indicated they  may extend this method, depending on when work patterns start to return to normal (whatever that may be in the future).

Expenses you can’t claim

If you are working from home only due to COVID-19, you:

      • cannot claim occupancy expenses such as mortgage interest, rent and rates
      • cannot claim the cost of coffee, tea, milk and other general household items your employer may otherwise have provided you with at work.

Calculating running expenses

Additional Running Expenses can be claimed in 3 different methods:

      • shortcut method ─ claim a rate of 80 cents per work hour for all additional running expenses
      • fixed rate method ─ claim all of these:
        • a rate of 52 cents per work hour for heating, cooling, lighting, cleaning and the decline in value of office furniture,
        • the work-related portion of your actual costs of phone and internet expenses, computer consumables, stationery, and
        • the work-related portion of the decline in value of a computer, laptop or similar device.
      • actual cost method ─ claim the actual work-related portion of all your running expenses, which you need to calculate on a reasonable basis.

For more information on how to calculate and claim a deduction under the actual cost method or fixed rate method see Employees Working Working From Home

Shortcut method

You can claim a deduction of 80 cents for each hour you work from home due to COVID-19 as long as you are:

      • working from home to fulfil your employment duties and not just carrying out minimal tasks such as occasionally checking emails or taking calls,
      • incurring additional deductible running expenses as a result of working from home.

You do not have to have a separate or dedicated area of your home set aside for working, such as a private study.

The shortcut method rate covers all deductible running expenses, including:

      • electricity for lighting, cooling or heating and running electronic items used for work (for example your computer), and gas heating expenses
      • the decline in value and repair of capital items, such as home office furniture and furnishings
      • cleaning expenses
      • your phone costs, including the decline in value of the handset
      • your internet costs
      • computer consumables, such as printer ink
      • stationery
      • the decline in value of a computer, laptop or similar device.

You do not have to incur all of these expenses, but you must have incurred additional expenses in some of those categories as a result of working from home due to COVID-19.

If you use the shortcut method to claim a deduction for your additional running expenses, you cannot claim a further deduction for any of the expenses listed above.

You must keep a record of the number of hours you have worked from home as a result of COVID-19. Examples are timesheets, diary notes or rosters.

If you use the shortcut method to claim a deduction and you lodge your 2019-20 tax return through myGov or a tax agent, you must include the note ‘COVID-hourly rate’ in your tax return.

Records you must keep

If you use the shortcut method, you only need to keep a record of the hours you worked at home, for example timesheets or diary notes.

If you use the other methods, you must also keep a record of the number of hours you worked from home along with records of your expenses. For more information on what those records are see Employees Working Working From Home.

 

 

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JobKeeper Payments Update 2

JobKeeper

In the third and largest economic stimulus package up to 6 million workers are set to be eligible for the $130 billion wage subsidy, known as the JobKeeper payment.

The flat $1,500 payment, which will be delivered by the ATO, will be paid to businesses, and will include businesses which have been structured through companies, partnerships, trusts and sole traders.

The full $1,500 a fortnight, before tax, to eligible employees will be required to pass on by employers.

Eligibility – businesses with a turnover of < $1 billion will need to self-assess a reduction in revenue of 30 per cent or more, relative to a comparable period a year ago.

Qualified employees will include those employed by the employer as at 1 March 2020, including those who have been stood down and retrenched workers can be re-employed to qualify for the JobKeeper payment.

How to apply and Participation in JobKeeper

  • Eligible businesses, will need to register an intention to apply on the ATO’s website. and additional information will come from the ATO about how and when claims for JobKeeper can be made.
  • A payment period is a rolling 14 day period commencing Monday 30 March 2020 and ending on Sunday 27 September 2020 (6 Months)
  • Information on the number of eligible employees engaged as at 1 March 2020 and those currently employed by the business, including those stood down or rehired, will need to be provided to the ATO, although the Tax Office will look to use Single Touch Payroll data to pre-populate the employee details for the business.
  • The ATO will make payments to the employers monthly in arrears, but the first payment will be sent in the first week of May and will be backdated to 30 March 2020 to allow employers to start paying their workers now.
  • Employers will be required to report the number of eligible employees employed by the business to the ATO on a monthly basis.
  • A normal payroll is run for employees and reported via Singe Touch Payroll (STP). The claims process will then be linked to STP to support the JobKeeper payment to the employer. If you do not use STP (eg Sole Trader, Trust Beneficiary, Director Fee, Dividend in Lieu of Labour etc) A manual claim process will apply.
  • The payment is treated as ordinary income for an employee and is subject to PAYG withholding tax.
  • An employer will be required to advise an employee if they have been nominated as an eligible employee for which an employer will be reimbursed a JobKeeper payment.

 

Contrived schemes and consequences

The legislation also makes clear that anyone who enters into or carries out a scheme for the sole or dominant purpose of obtaining a corona virus economic response payment will face a wide range of administrative and criminal sanctions, including up to 10 years’ imprisonment.

However, the legislation empowers the commissioner to call out any change in the financial position of any entity as part of a scheme designed to improperly pocket JobKeeper cash, and the ATO has extensive payback powers.

The legislation has clawback rules empowering the ATO to recover overpaid amounts and target those who weren’t entitled to payments received, plus interest.

 

Eligibility for employers

Definition of turnover:

For existing business:-

  • works on your BAS – if you are cash or accrual preparer. If you prepare your BAS as cash then you look at your Profit and Loss under a cash basis. If you are accrual then you check your PL as accrual. looking at the same period eg. Jan – March compared 2019 to 2020.

For the Start up business that has not been trading for over a year:

  • the ATO is working out how to report.

 

If your business turnover has not declined by 30% or 50% but is expected to at some point?

  • YES – Still go in and register.

I am self-employed Sole Trader, do I qualify?

  • YES – meeting some criteria – your 2019 income tax has been lodged prior to 12th of March 2020, Your BAS have been lodged

If I operate as a partnership, can each partner receive JobKeeper?

  • NO – only one (1)  partner can receive the JobKeeper payment

If I operate my business through a trust, can I receive the JobKeeper payment?

  • YES – but still only one (1) person can receive the JobKeeper

I operate as a company and usually pay myself a director fee. Can I receive JobKeeper payments?

  • YES –  One (1) shareholder or director can claim

As one of these types of businesses, how do I apply for the JobKeeper program?

  • it will be an online application

 

 Employees will be eligible if:

They are currently employed by an eligible employer or who were in that employment on 1 March 2020 and continue to be employed (even if currently stood down)

  • Is full-time, part-time or a casual who is employed on a regular and systematic basis or longer than 12 months as at 1 March 2020
  • Aged 16 years or older at 1 March 2020
  • An Australian citizen, a permanent visa holder or a special category holder ) eg 444 subclass) as at 1 March 2020.
  • Is a resident for Australian Income Tax purposes
  • Not in receipt of a JobKeeper payment from another employer.

I started with my employer after 1 March 2020 am I eligible for JobKeeper?

  • NO – only if you have been stood down

As a casual employee, how does JobKeeper affect me?

  • You need to be with the same employee for over 12 months.

If I am an employee on a fixed-term contract, how does JobKeeper affect me?

  • You are eligible if the contract started before the 1 March 2020

If my employer has put me on paid or unpaid leave can I still receive JobKeeper?

  • YES

If I am receiving Workers Compensation, can I receive Job Keeper payments?

  • YES – if you are doing light duties while still receiving Work Cover and some wages
  • NO – if you are only receiving work cover payments

What if I am on Parental Leave?

  • NO – You are not eligible to receive the JobKeeper

Where I have a salary sacrifice arrangement in place, how does the Job Keeper payment impact such an arrangement?

  • It does not any effect to your arrangement

 

Payments:

I have paid my employees, when does my business get reimbursed the JobKeeper payment?

  • The first week of May 2020

How often will the ATO make payments to my business?

  • Monthly in ARREARS

What is if pay my employees monthly not fortnightly?

  • the ATO will average it to fortnightly amounts, to make sure it has been passed on to the employee

If I have stood employees down after 1 March 2020 what do I do for these employees?

  • register and start paying the min $1500 per fortnight to the employees that are eligible

If my business is still operating and my employees are working do I still get a JobKeeper reimbursement?

  • Yes – please register

If I currently pay an employee less the $1500 per fortnight how am I impacted by the JobKeeper arrangement?

  • You must top up there pay to match the JobKeeper payment

If I currently pay an employee more than $1500 per fortnight how am I impacted by the JobKeeper arrangement?

  • the difference of their pay is out of the business
  • You must top up there pay to match the JobKeeper payment

If I currently pay an employee more than $1500 per fortnight how am I impacted by the JobKeeper arrangement?

  • the difference of their pay is out of the business

If I let my employees go after 1 March 2020, re-hire them and then immediately stand them down, what is the JobKeeper impact?

  • YES – they are eligible for JobKeeper when you bring them back, the employee must de-register from JobSeeker payments.

I don’t have enough funds to pay eligible employees until I receive the reimbursement, what should I do?

  • The JobKeeper must be paid in Arrears, there are many loans that you can apply for

If an employee resigns after I receive a JobKeeper payment, what must I do?

  • When you submit that months report to the ATO you take them off the list, if you employ a new person to replace them that employee is not eligible

How does PAYG withholding and Superannuation apply to a JobKeeper payment that I make to an employee?

  • PAYG is to be deducted from the employee and paid to the ATO via your BAS as per normal pay run.
  • Super is payable if the employee is still working.
  • Super is NOT payable if you are paying the JobKeeper to the employee as a stand-down (not working)
  • Super does not need to be paid on the difference of the employees pay if you are topping them up with the JobKeeper payment, eg. employee normally gets $1000 FT now gets $1500 super is only on the $1000 as per normal. It is up to the employer if you pay super on the extra $500.

If an employee I had to let go or was stood down is receiving a JobSeeker payment, how does JobKeeper impact both me and my employee?

  • Once you have advised the employee that they are on JobKeeper payments, the employee needs to tell Centerlink to cancel the JobSeeker payments. There will be data matching, note, the employee cannot claim both and they will need to pay back any amount they received unlawfully.

 Timing

The JobKeeper program is effective from 30 March 2020 and runs for 6 months until 27 September 2020. They will be made to eligible employers monthly in Arrears, with the first payment being made in the first week of May 2020.

Compliance and other issues

The JobKeeper program will be subject to ATO audit activity and there will be obligations on employers to establish their eligibility as well as that of their employees.

The ATO will cross-check payments with Services Australia data as well as other agencies to identify any multiple payments made.

There is further guidance coming from the ATO to assist businesses to assess eligibility, in particular, the ATO focus will be on ‘manipulation’ of turnover for a business that seeks to qualify. Businesses that are identified as ‘manipulation’ will face penalties.

Examples:

  1. Employer with employees on different wages

Greg owns a travel business with two employees. The business is still operating at this stage, but Greg expects that turnover will decline by more than 30 per cent in the coming months. The employees are:

  • Brooke, who is a permanent full-time employee on a salary of $2,000 per fortnight before tax and who continues working for the business; and
  • Zac, who is a permanent part-time employee on a salary of $800 per fortnight before tax and who continues working for the business.

Greg is eligible to receive the JobKeeper payment for each employee, which would have the following benefits for the business and its employees:

  1. The business continues to pay Brooke her full-time salary of $2,000 per fortnight before tax, and the business will receive $1,500 per fortnight from the JobKeeper payment to subsidise the cost of Brooke’s salary and will continue paying the superannuation guarantee on Anne’s income;
  2. The business continues to pay Zac his $800 per fortnight before tax salary and an additional $700 per fortnight before tax, totalling $1,500 per fortnight before tax. The business receives $1,500 per fortnight before tax from the JobKeeper payment which will subsidise the cost of Zac’s salary. The business must continue to pay the superannuation guarantee on the $800 per fortnight of wages that Zac is earning. The business has the option of choosing to pay superannuation on the additional $700 (before tax) paid to Nick under the JobKeeper payment.

Greg can register his initial interest in the scheme from 30 March 2020, followed subsequently by an application to the ATO with details about his eligible employees.

In addition, Greg is required to advise his employees that he has nominated them as eligible employees to receive the payment. Greg will provide information to the ATO on a monthly basis and receive the payment monthly in arrears.

2. Self-employed

Sienna is a sole trader running a florist. She does not have employees. Sienna’s business has been in operation for several years. The economic downturn due to the coronavirus has adversely affected Sienna’s business, and she expects that her business turnover will fall by more than 30 per cent compared to a typical month in 2019.

Sienna will be able to apply for the JobKeeper payment and would receive $1,500 per fortnight before tax, paid on a monthly basis.

 

Please feel free to share to any person you may think may benefit 😊

If you need any assistance, please get in contact with us at

 stephen@smbaccounting.com.au

 P 1300 854 159

 

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