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The Tax-Free Payments to Employers

With the announcement from Federal Governments Economic Response to the COVIC-19 Coronavirus, the cash flow grant for employers measure is designed to support employing small and medium sized businesses and to improve business confidence. The measures also supports the activities of not-for-profits (including charities) at a time where they are facing increased demand for services.

On 12 March 2020, the Government announced the cash flow grant for employers measure and initially provided up to $25,000 with a minimum payment of $2,000 for eligible businesses. Small and medium sized business entities that employ workers with aggregated annual turnover less than $50 million are eligible.

The Government has then improved this measure as part of the second economic stimulus package. Not-for-profit entities (NFPs), including charities that employ workers, with aggregated annual turnover less than $50 million will now also be eligible. This will support employment activities at a time where NFPs are facing increasing demand for services.

Under the improved scheme, employers will receive a payment equal to 100 per cent of their salary and wages withheld (increase from 50 per cent), with the maximum payment being increased from $25,000 to $50,000. Furthermore, the minimum payment is being increased from $2,000 to $10,000.

An additional payment is also being introduced in the July to October 2020 period. Eligible entities will receive an additional payment equal to the total of all of the cash flow grant for employers payments they have received. This means that eligible entities will receive at least $20,000 up to a total of $100,000 under both payments. The cash flow grant for employers is tax-free payment with no new forms required and automatically calculated by the ATO

This additional payment continues to support businesses over a longer period to help them maintain staff, improve confidence, continue operating and at the same time stimulating the economy. It’s crucial for the government to help small businesses because they are the backbone of the economy.

Who is eligible and what is the timing?

SME business entities and NFPs that employ workers, with aggregated annual turnover less than $50 million will be eligible with the eligibility generally be based on prior year turnover.

  • The payment will be an automatic credit in the activity statement system from 28 April 2020 upon employers lodging eligible upcoming activity statements.
  • Eligible employers that withhold tax on their employees’ salary and wages will receive a payment equal to 100 per cent of the amount withheld, up to a maximum payment of $50,000.
  • Eligible employers that pay salary and wages will receive a minimum payment of $10,000, even if they are not required to withhold tax.
  • The payments will only be available to active eligible employers established prior to 12 March 2020 except charities which are registered with the Australian Charities and Not-for-profits Commission will be eligible regardless of when they were registered, subject to meeting other eligibility requirements.

The cash flow grant for employers payment will be applied to a limited number of activity statement lodgements. The ATO will send the payment as a credit to the entity upon lodgement of their activity statements. The ATO will send the refund within 14 days if the entity is entitled to a refund.

Type of lodger Eligible period Lodgement due date
Quarterly Quarter 3 (January, February and March 2020)
Quarter 4 (April, May and June 2020)
28 April 2020
28 July 2020
Monthly March 2020
April 2020
May 2020
June 2020
21 April 2020
21 May 2020
22 June 2020
21 July 2020

If you lodged quarterly, you will be eligible to receive the payment for the quarters ending March and June 2020.

If you lodged monthly, you will be eligible to receive the payment for the March, April, May and June 2020 lodgements. To provide a similar treatment to quarterly lodgers, the payment for monthly lodgers will be calculated at three times the rate (which is 300 per cent) in the March 2020 activity statement with the minimum payment will be applied to the entities’ first lodgement.

Additional payment eligibility and timing

Your entity must remain active in order to qualify for the additional payment from the Government.

If you lodged activity statements monthly, the additional payments will be delivered as an automatic credit in the activity statement system. This will be equal to a quarter of their total initial cash flow grant for employers payment following the lodgement of their June, July, August and September 2020 activity statements up to a total of $50,000.

If you lodged activity statements quarterly, the additional payments will be sent as an automatic credit in the activity statement system. This will be equal to half of their total initial cash flow grant for employers payment following the lodgement of their June and September 2020 activity statements up to a total of $50,000.

The additional payment will be applied to a limited number of activity statement lodgements. The ATO will send the payment as a credit to the entity upon lodgement of their activity statements. The ATO will send the refund within 14 days if the entity is entitled to a refund.

Type of lodger Eligible period Lodgement due date
Quarterly Quarter 4 (April, May and June 2020)
Quarter 1 (July, August and September 2020)
28 July 2020
28 October 2020
Monthly June 2020
July 2020
August 2020
September 2020
21 July 2020
21 August 2020
22 September 2020
21 October 2020

If you lodged quarterly, you will be eligible to receive the additional payment for the quarters ending June 2020 and September 2020. Each additional payment will be equal to half of their total initial cash flow grant for employers payment with up to a total of $50,000.

If you lodged monthly, you will be eligible to receive the additional payment for the June, July, August and September 2020 lodgements. Each additional payment will be equal to a quarter of their total initial cash flow grant for Employers payment with up to a total of $50,000.

Examples of Tax-Free Payment to Employers

Example 1 – John’s Removalist Business

John owns and runs a removalist business in Western Australia and employs 10 workers on average full-time weekly earnings, who each earn $90,750 per year. John reports withholding of $15,600 for his employees on each of his monthly Business Activity Statements (BAS).

Under the Government’s measure, John will be eligible to obtain the payment on lodgement of his BAS. John’s business receives:

  • A credit of $46,800 for the March period
  • A credit of $3,200 for the April period, before he reaches the $50,000 cap.
  • No payment for the May period, as he has now reached the $50,000 cap.
  • An additional payment of $12,500 for the June, July, August and September period, respectively

Under the Government’s enhanced cash flow grant for employers measure, John’s business will receive $100,000.

Example 2 – Tony’s Barber Shop

Tony owns a barber shop on the Surfers Paradise. He employs 10 employees, with average salary of $45,000 per year. Tony reports withholding of $8,601 for his employees in each of his monthly BAS. Under the measure, Tony will be eligible to receive the payments on lodgement of his relevant BAS.

Tony’s business will receive:

  • A credit of $25,803 for the March period
  • A credit of $8,601 for the April and May period, respectively
  • A credit of $6,995 for the June period, before he reaches the $50,000 cap. Tony will also receive an additional payment of $12,500 for the June, July, August and September period, respectively

Under the Government’s enhanced cash flow grant for employers measure, Tony’s business will receive $100,000.

Example 3 – Todd’s Courier Run

Todd owns and runs a small paper delivery business in South Australia and employs two casual employees who each earn $10,000 per year. In his quarterly BAS, Todd reports $0 withholding tax for his employees as they are under the tax-free threshold.

Under the Government’s measure, Todd will be eligible to receive the payment on lodgement of his BAS.

Todd’s business will receive:

  • A credit of $10,000 for the March quarter, as he pays salary and wages but is not required to withhold tax.
  • An additional payment of $5,000 for the June and September quarter, respectively

If Todd begins withholding tax for the June quarter, he would need to withhold more than $10,000 before he receives any additional payment.

Under the Government’s enhanced cash flow grant for employers measure, Todd’s business will receive $20,000.

If you know anyone in your circle who need any assistance during these times, please reach out to them because “We can’t help everyone, but everyone can help someone”and “Together We Can Make A Difference”

Pitt Martin Accountants & Tax Advisers is here to assist you and your business in time of crisis by contacting 02 9221 3345 or connect@pittmartin.com.au.

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COVID-19 Business Continuity Plan

The COVID-19 situation is bigger than any of us have ever faced. Our clients, professionals, mum’s and dad’s don’t understand how badly they need accountants and advisors’ help.  They are scared and don’t know what to do, and most probably haven’t really thought through what the consequences will be for them.

As a business owner, there’s one key thing you need to focus on now which is keeping your business alive during these tough times. Downturn can be scary usually because there is no plan in place for your business and the world around you appear to be panicking. There is no reason to be panicking. In times of difficulty lies an opportunity. If your cash flow is under control then so is your business.

You need to take actionable appropriate steps to create a Continuity Plan, then in reality a downturn is just a stop gap to the next upturn, where your business will be cash flow fit and ready to take full advantage.

To maintain your cash, you may need to consider options that you haven’t consider before. You need to work with your accountant to identify which key parts your business is eligible for Australian Government stimulus package and get the process started to obtain these cash flow bonuses. When you meet with your accountant, it’s important to update your business cash flow plan over the coming months.

As an employer, you need to openly discuss reduced working hours with your employees to save cash (if this does save cash) and working from home arrangements. Employees will be scared. They will need to be assured, so they need to be given an understanding of the plan to keep the business alive.

Constant communication and a payment plan with the ATO could be an option especially if you need to delay making payments of GST and PAYG Withholding Tax. However it’s vital that you keep lodging you Business Activity Statements (BAS) and Instalment Activity Statements (IAS) by their due dates. The Australian Taxation Office (ATO) is implementing a series of relief options to assist those impacted by the coronavirus. The relief will not be automatically applied. You can contact your accountant to contact the ATO to make any requests for assistance.

In addition, you can contact your Bank Manager as soon as possible and arrange for additional bank funding or lines of credit that can be approved now for use in an emergency. Making these arrangements early before things have gone bad is the key. Bank approvals may take up to one month or longer. Consider also using alternative funders to set up a short term line of credit now to pay for inventory and operating costs. You should consider doing this as a backup now to any other bank lending arrangements you may have.

If you have to self-quarantine or if you incapacitated in any way, you need to have an Enduring Power of Attorney (EPOA) in place so your business can continue to operate. Ensure your EPOA and Will are up to date now and ensure your family and your Accountant know where the original signed documents are.

Now is the time to contact your insurance agent to review your policy to understand precisely what you are and are not covered for in the event of an extended incident. Review your general insurance policies for any Business Interruption Insurance inclusions.

We need to stay calm and rely on reliable sources of information from State and Australian Government. In the meantime, below is the link directly to the Government Media release of the second Economic Stimulus Plan, https://www.pm.gov.au/media/supporting-australian-workers-and-business

If you have any questions or would like to seek assistance, please do not hesitate to contact Pitt Martin Accountants & Tax Advisers on 02 9221 3345 or connect@pittmartin.com.au

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澳洲疫情中推出救市刺激计划,中小生意如何从中受益

How small and medium business benefit from the Stimulus Package

Hit by the bushfire, Coronavirus (COVID-19) and global economy downturn, the Federal Government has announced a $17.6 billion Stimulus Package on 12 March 2020 to maintain Australians in jobs, keep businesses in business and support the severely-affected industries. The stimulus is temporary, targeted and extensible. So what benefit does small and medium business can receive from this Stimulus Package?  It falls into the four main parts:

  • Pay up to $25,000 to employers to help cash flow.
  • Deliver 50% of the wage assistance to small business for each apprentice and trainee they employ.
  • Increase instant assets write-off threshold to $150,000 (from $30,000 previously).
  • Accelerate investment depreciation of 50%.

Cash payment to employer

Eligible employers who paid PAYG Withholding tax to ATO are entitled to an assistance of 50% of the withhold amount with a maximum of $25,000. Businesses that pay salary and wages but are not required to withhold tax will also receive the minimum payment of $2,000. This will be a TAX-FREE payment.

WHO are eligible

Business with a turnover of less than $50 million that employ staff between 1 January 2020 to 30 June 2020.

WHEN can they receive

Business will automatically receive the payment of 50% through their Business Activity Statement (BAS) or Instalment Activity Statement (IAS) from 28 April with refund to then be paid within 14 days.

Apprentices and trainees wage subsidy

Eligible employers can apply for a wage subsidy of 50% of the apprentice’s or trainee’s wage for up to 9 months starting from 1 January 2020 to 30 September 2020. Business is entitled to up to $21000 wage subsidy for each eligible apprentice or trainee they employ.

WHO are eligible

Small business with less than 20 full-time employees who employ an apprentice or trainee.

WHEN can they receive

Eligible business can start registering for the subsidy from April 2020. Get in touch with Australian Apprenticeship Support Network (AASN) for further information including registration and eligibility. Please be aware the application must be submitted before 31 December 2020.

Increase instant asset write-off threshold

Instant asset write-off threshold has been increased from $30,000 to $150,000 which will become effective from 12 March 2020 to 30 June 2020. It applies to the newly acquired assets and second-hand assets including equipment, tools and motor vehicles etc.

WHO are eligible

Business with aggregated annual turnover of less than $500 million (from $50 million previously).

WHEN can they receive

You will get the instant asset write- off when you lodge your tax return. The proposal applied from 12 March 2020 to 30 June 2020 only for the assets mentioned above.

Accelerating Depreciation Deductions

From 12 March 2020 to 30 June 2021, businesses are able to deduct an additional 50% of the cost of an eligible asset in the year of purchase. It aims to support business investment and economic growth over the short term. No limit on the value of the asset.

WHO are eligible

It applies to the new assets under DIV 40 of the ITA Act 1997 acquired by the business whose aggregated annual turnover of less than $500 million.

Please be aware that the second – hand assets and assets under DIV 43 of the ITA Act 1997 are not included.

WHEN can they receive

The deduction becomes available when you lodge your tax return. Only assets acquired and installed from 12 March 2020 to 30 June 2021 are entitled to the support.

Other assistance

Besides, stimulus payments to households and targeted affected industries:

  • $4.8 billion to provide a one-off $750 tax free stimulus payment to pensioners, veteran, other income support recipients and eligible concession card holders.
  • $1 Billion is used to offer support to those sectors, regions and communities that have been heavily affected by the Coronavirus, including tourism, agriculture and education industry.  This will include the waiver of fees and charges for those who operates business in Commonwealth National Park. It will also include to assist business with identifying alternative export markets or supply chains.
  • Additional money will be put in place to promote domestic tourism development.

ATO relief

On 12 March 2020, ATO also announced a series of administrative relief to further assist business affected by the COVID-19 outbreak. This includes:

  • Defer the payment for debt via tax lodgement such as income tax, activity statement (BAS), instalments activity statement (IAS), FBT and exercise payments by up to four months.
  • Business on a quarterly reporting cycle are able to change their GST cycle to monthly cycle in order to get quicker access to GST refund if they are entitled to.
  • Affected business can adjust their PAYG instalment to ZERO for the April 2020 quarter. They are also entitled to claim a refund for any instalment made for the September 2019 and December 2019 quarters.
  • Where business is affected by COVID-19, ATO will consider remitting interest and penalties applied to tax liabilities incurred on or after 23 January 2020.
  • Affected business are allowed to enter into a low interest payment plan if they have existing and ongoing tax liabilities with ATO.

Please be noted, the ATO relief is not automatic; rather, it needs to be applied for. Pitt Martin Accountants & Tax Advisers are registered tax agent and able to assist you with the application. If you are not sure about the Stimulus Package and want to know more about it. Please get in touch with us on 02 92213345 or connect@pittmartin.com.au.

Disclaimer: This article is not providing a formal advice and may not suit to all scenarios. Please make an appointment with us to discuss.

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COVID-19 and your business

With the development of COVID-19 from epidemic to pandemic status, businesses across Australia are facing the possibility of harmful effect. We are all aware of the impact and potential expansion of Coronavirus on the world, but what are the potential impacts on the Australian economy over 2020 and how the impact can be managed and mitigated.

It is unknown if Covid-19 will be long forgotten in 12 months or something that we all have to accept as part of our lives. The truth is Australian businesses are likely to face many challenges including cash flow issues, loss of trades, supply shortages and changes to working arrangement for staffs which resulting in operational disruption.

As the situation develops there is more uncertainty than assurance that the issue will be resolves at this time. It is important to keep yourself constantly updated with Government advice releases.

What to do?

There is no need to be panic. Remember that tough times don’t last, tough people do. Businesses should consider taking an immediate action to develop strategic plan to mitigate the disruption and financial loss for immediate and future threats. It is vital for businesses to identify all significant risks and potential opportunities it may be exposed to during this time and develop an action plan to ensure business continuity throughout.

Businesses can assess and evaluate their trading performance, financial position and current cash flow position via review of the relevant aspects. This process will enable assessment of the business financially, the business challenges in the short to medium term and thoroughly test financial forecast assumptions.

Constant communication with clients, suppliers, employees, financiers and all other key stakeholders regarding the development of this situation is important.

Government

The Australian Government is acting decisively in the national interest to address the potentially significant economic consequences of the virus, without a permanent or structural impact on the budget balance.

The government has now announced an economic response totalling $17.6 billion across the forward estimates, representing 0.9 percent of annual GDP to strengthen the economy during this tough period.

The package is intended to support confidence, employment and business continuity. It is designed to support business investment, help small businesses manage short-term cash flow challenges, provide targeted support to individuals and assistance to the most severely affected communities and regions. It includes cash grant of up to $25,000 for small businesses, $750 one-off payments for potential consumers, and a significant temporary extension to the instant asset write-off scheme (from $30,000 to $150,000)

The Australian Taxation Office (ATO) is also providing administrative relief for some tax obligations for people affected by the Coronavirus outbreak, on a case-by-case basis including potential deferrals of lodgements.

For more details on the stimulus package, please visit the link below
https://www.pm.gov.au/media/economic-stimulus-package

If you have any questions or would like to seek assistance, please do not hesitate to contact Pitt Martin Accountants & Tax Advisers on 02 9221 3345 or connect@pittmartin.com.au

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澳洲山火税局和其他部门的援助总结

ATO and other authorities’ support for bushfire victims

In the past few months, more than 10 million hectares of land has been burned by the devastating Australian bushfire, thousands of homes have been destroyed and millions of animals were dead. The country is suffering billions of dollars’ loss during the bushfire season. Returning life to normal is a long way to go for most of us. Therefore, we summarize some assistance available offered by the ATO and other agencies to those impacted by the recent bushfire.

What we can help with

If you are affected by the bushfire and need assistance and support from the government. We are here to help you out FOR FREE. Of course, we can also reach out to ATO on your behalf to seek some tax relief.  

Tax relief

If you live in one of the identified impacted postcodes, around 3.5 million enterprises, individuals and SMSF have received the relief and support which are listed below:

  • Automatically deferred income tax, activity statement, SMSF, and FBT lodgement, and associated payments until 28 May 2020 
    • Defer does not apply to:
      1. Super Guarantee Contribution and Lodgements
      2. Large PAYG withholders (although they can apply for relief, it will be assessed by the ATO on a case by case basis)
  • Fast tracking of refund due
  • Tax payable can be deferred to 28th May 2020
    • Impacted taxpayers can apply for special consideration. The ATO announced that if the applicant is under the ongoing difficult condition, they might be released from income tax and fringe benefit tax debts.
    • Remit penalties or interest charged during the time you have been affected by the bushfire.
  • PAYG instalment can be adjusted to nil without any penalty

If you are not in one of the identified postcode but have been suffered from the bushfires, you might also be entitled to the relief. We can work with the ATO on your behalf.

Individual and families support

Australian social welfare agencies have mobile units to assist with families in the affected areas. People in the affected areas can also receive economic assistance and other forms of relief:

Disaster Recovery Payment

Disaster recovery payment is a tax free Federal Government payment for those who are seriously injured, have lost their immediate family member, have lost their home and had a significant asset loss during the bushfire period:

  • $1000 for each eligible adult and
  • $400 for children under age of 16
  • Additional $400 of educational expense for the eligible children. These payments are automatic if you are the primary carer of a child affected by the bushfire after 30 June 2019.

Loss of Income: Disaster recovery allowance

You are entitled to apply for the government allowance, if you are an Australian resident over 16 years old who works in a bushfire affected area and have lost your income but haven’t received the Government allowance. The allowance provides the income support for up to 13 weeks (equivalent to the maximum Newstart or Youth Allowance).

To be eligible for this allowance, you are required to prove your income is below the relevant income threshold. Although these payments are normally taxable, the government has announced to put it in law and make it tax-free.

Mental health support

Provide up to 10 free support session through primary health networks. In addition, Medicare rebate for 10 psychological therapy session will be granted if you are treated by the eligible GPs, psychologists, occupational therapists and social workers. (you are not required to have a GP referral for these services)

Phone, internet and energy

Many telecommunication providers offer support package including free call diversion, extended payment period, bill waivers under the extreme hardship, to bushfire victims. Please get in touch with your provider for more information.

Many of the energy providers are also offering support such as freezing accounts.

Support for business

Businesses who are directly or indirectly affected by the bushfire are entitled to :

  • Up to $50,000 recovery grant (tax free)
  • Offer a concessional loan of up to $50,000 to the eligible small businesses (including farmers, fishers and foresters) and non-for-profit organizations who suffered a significant asset and monetary loss during the bushfire period. The loan period can be extended to up to 10 years with the intension to repair and replace damaged assets and working capital.

Besides, a series of State Government Grants are also available.

Support for volunteer firefighters

Volunteer firefighters in NSW and QSL may be entitled to the allowance up to $300 per day with a cap of $6,000.  These kinds of allowance will not to be tested and they are tax-free. The payment is initiated by Federal Government and administered by the State Government (please refer to NSW Volunteer Firefighter Payment and QLD Volunteer Compensation Package for more information).

If you are in public sector, you are entitled to an extra 20 days paid emergency service leave to work on the front lines on the top of your normal annual leave.

Many telecommunication providers offer support to volunteer firefighter and SES (State Emergency Service) volunteers. Optus and Telstra, for instance, waive the payment for them from Dec 2019 to Jan 2020. 

If you are one of the bushfire victims and intending to apply and get assistance from the government, you are more than welcome to reach out to  Pitt Martin on 0292213345 or connect@pittmartin.com.au.

Disclaimer: This article is not providing a formal advice and may not suit to all scenarios. Please make an appointment with us to discuss.

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Superannuation Guarantee Amnesty

Superannuation Guarantee Amnesty

The Government has restored the Superannuation Guarantee (SG) amnesty aiming to provide employers who have fallen behind with their SG obligations the one-off opportunity to “self-correct”. However, this time those continually fail to take any action will be heavily penalised.

The announcement of the Amnesty is proposed to have immediate effect from May, commencing on 24 May 2018 and ending on 23 May 2019. The original amnesty failed to go through Parliament as many claims that the Amnesty is unnecessary to the recalcitrant employers. 

Since the original announcement, the ATO reports that over 7000 employers have come forward to voluntarily disclose historical unpaid super. The government has estimated that around $2.85 billion in SG payments is currently owed in late or went unpaid.

When is the Amnesty effective?

The legislation to give effect to the Amnesty was introduced into Parliament on 24 May 2018, and if enacted, will apply retrospectively and end six months from the date it receives royal assent. During this six-month time frame, employers are required to voluntarily disclose underpaid or unpaid SG payment.

The Amnesty applies to disclosures of previously undeclared SG shortfall amount up to until March 2018 quarter.

How do employers qualify under the Amnesty?

To be eligible for the Amnesty, an employer must voluntarily disclose SG shortfall amounts. Employers are obligated to pay all that is owing to their employees. Alternatively, employers can set up a payment plan with ATO if your company is not able to pay off the full shortfall SG amount. Defaulting on a payment plan will expose the employer no longer qualify under the SG Amnesty.

Should bear in mind that the Amnesty only applies to voluntarily disclosure. The ATO are, in the meantime, continuing its compliance activities against employers during the Amnesty period. Employers will face full amount penalties if they are subsequently caught by paying late or not paying any unpaid superannuation in full. The Amnesty does not apply to the amounts that have been identified by ATO as unpaid SG shortfall or where the employer is subject to an ATO audit.

What do employers pay under the amnesty?

Normally, if employers fail to meet their obligation on time, they are liable to pay the SG charge (SGC) imposed in relation to this SG gap and lodge a Superannuation Guarantee Statement. The SGC cannot be waived even if you pay the outstanding SG soon after the deadline.

No Amnesty Under Amnesty
The SG Charge is made up of The charge is made up of
SG shortfall amounts (this amount might be higher than if it paid on time) SG shortfall amounts
Interests on those amounts (currently 10%) Interest on those amounts (currently 10%)
An administration fee of $20 per employee, per quarter No administration fees
Penalties of up to 200 percent of the SGC payable (minimum 100% for quarters covered by the Amnesty) No penalties
General interest charged if the SGC or penalties are not paid by the due date General interest charged if the SGC or penalties are not paid by the due date
SGC amount is non tax deductible SGC amount is tax deductible

Under the quarterly superannuation guarantee, the interest charged is calculated on the employer’s quarterly shortfall amount from the first day of the relevant quarter to the date when the SGC would be payable (not from the date when the SG was overdue)

Under the Amnesty, employers who voluntarily disclose previously undeclared SG shortfalls are entitled to claim a tax deduction for these “catch-up” payments made in the Amnesty period.

If employers are late in making superannuation payments to their employees, special provisions in legislation applies to automatically protect employees from inadvertently breaching concessional contribution gap limits if the unpaid SG amount is paid to the Commissioner and then transferred to the employee’s superannuation fund. Where employers pay the superannuation directly to the affected employee’s superannuation fund(s), employees then would need to apply to the Commissioner requesting the exercise of discretion to either disregard the concessional contributions or carry them forward to the following year.

What happens if you don’t take advantage?

If an employer doesn’t take advantage of the Amnesty and are caught down the track, they are liable for the harshness fines, equal to double the amount of the SGC, i.e.200 percent of the SGC payable The Commissioner may remit all or part of the additional SGC payable by an employer. The legislation gives the power to the Amnesty to impose significantly higher penalties on employers who are not willing to voluntarily deal with SG gap by removing the ATO’s capacity to reduce the penalties below 100%. In fact, the Commissioner loses power for leniency even in cases where an employer has made a genuine mistake.

What to from here?

Even if you don’t think you have an outstanding obligation in relation to superannuation, it is wise to undertake an audit of your payroll in order to ensure your superannuation payable is calculated correctly and employees’ pay rates are in line with their entitlements under law and legislation.

If your business has engaged any contractors during the Amnesty period, reviews should be properly undertaken to ensure they are classified as employees under the SG provision even if two parties have reached the consensus that they should be treated as contractors. In other words, you cannot contract out of SG obligations.

If a problem is revealed, you can correct it without excessive penalties applying under the Amnesty. If you are uncertain about what Awards and pay rates apply to employees, there’s a pay calculator available on the FairWork Ombudsman’s website or you can contact them online or call them on 131394.

If you have not previously fulfilled your obligation in relation to superannuation and has the entitlement to the Amnesty, you should start working on this issue or get in touch with Pitt Martin on 0292213345 or connect@pittmartin.com.au.

Disclaimer: This article is not providing a formal advice and may not suit to all scenarios. Please make an appointment with us to discuss.

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Managing Cash Flow

Cash flow is one of the most important components of success for a SME business. Without cash, profits are meaningless. Organisations that don’t implement good cash management may not be able to make the investments needed to compete, or they may have to pay more to borrow money to operate.

Most business owners don’t really have a handle on their cash flow because they are too busy running their business. Inadequate cash flow management is causing more business failures today than ever before.

Cash flow is basically the movement of cash in and out of the business. You should be tracking this either weekly, monthly or quarterly. Positive cash flow occurs when the cash channelling into your business from sales is more than the amount of the cash leaving your businesses through expenses. On the other hand, negative cash flow occurs when your outflow of cash is greater than your inflow of cash. This generally brings concern for a business, but there are steps you can take to remedy the situation and generate more cash while maintaining expenses. You should review operating costs such as electricity, phone and internet frequently ensure you are getting the best deal.

You should have a clear debt collection process because late payments can put a significant strain on your cash flow. You could put your clients on direct debit with pre-authorisation checks so that the banks can draw against their accounts at scheduled intervals. You could also try offering discounts to clients if they pay invoices quickly.

As a small business owner, you might have areas that you are not so strong in. Perhaps you are great at sales but struggle with accounting, tax and bookkeeping. Hiring a professional or consultant who’s an expert in the areas that you need support with makes business sense. At the same time, you won’t have to pay a full-time additional salary ongoing. The consultant can work ‘in’ your business and you can focus ‘on’ your business.

Moving to a cloud accounting solution is a must because you can access your financials at anywhere and anytime. This means you can stay on top of your bookkeeping from overseas, home or on the road. Cloud accounting solution has made it easy for you to log in and add expense as you generate them, track overdue payments or review your profit and loss statement. You can securely share your financial information with your consultant, so they always have a live and up to date data to provide you with any advice as needed.

Most small business owners see growth as the solution to a cash flow issue. They often achieve their goal of growing the business only to find they have increased their cash flow issues in the process. Plan for growth and the related cash expenses in advance, so they don’t come as a surprise.

Cash flow shortages are often hard to predict, largely if they’re caused by a large unpredicted expense or unexpectedly slow payment from a major client. You should always have a plan in place to access additional capital if you need it.

One way to keep the situation under control is by tracking your cash flow results every week, month or quarterly to determine if your management is generating the type of cash flow your business needs. This also helps you get better at creating cash flow projections you can rely on as you make business decisions about expanding your business and taking care of your existing invoices.

Should you require any assistance regarding your accounting and bookkeeping, please do not hesitate to contact Pitt Martin Accountants & Tax Advisers on 02 9221 3345 or connect@pittmartin.com.au

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Deductions Denial of Vacant Land

Deduction Changes of Vacant Land Affecting Small Property Development

A new law has come into effect through the Parliament last month, denying the deductions for holding expenses associated with vacant land, which currently would be deductible in the ordinary course. The legislation is not only retrospective but also go beyond purely vacant land. Before, the old law allows those who hold vacant land with an intention to build a rental property on it to claim the tax deduction for costs of holding the land such as interest expenses, council rates and other ongoing cost.

When the new law enacted, deductions will be denied mostly for individuals, closely held trusts, and self-managed super funds (SMSFs). It applies retrospectively to costs or outgoings incurred on or after 1 July 2019, regardless of whether the land was held prior to this date. Without the grandfathering provision, the new law is likely to have a significant impact not only on those intending to develop vacant land but also those who have already acquired land for development purpose. This is the same target as previous tax changes that carve out travel claims to visit rental properties and depreciation claims on plant and equipment in some residential rental properties.

The new laws, however, go beyond purely vacant land for residential purpose. Deductions would be denied on land if there is no substantial structure on it. The only problem is that there is no clear definition of “substantial” given by the legislation. The Bill suggests that, for example, a silo or shearer is substantial, but a residential garage is not.

The non-deductible holding costs of vacant land under the measure will be added to the cost base of the asset if the expenses otherwise meet the cost base rules for CGT purposes, which will give relief against any capital gain or loss when the taxpayer ultimately sells the property. Please be aware that the cost of holding capital gains assets purchased before 21 August 1991 cannot be added to the cost base, which means it cannot be used to reduce capital gains or increase capital losses.

Is there any exception to the new law? The answer is YES. Some holding costs that relates to vacant land may continue to be eligible for deductions. For example, land leased to third parties under an arm’s-length arrangement who carries a business activity on the land or land used in a primary production business. However, deductions would be apportioned (at least to some extent) if there are residential premises on the land or being constructed on the land.

In addition, vacant land that is affected by natural disasters or out of control by the owner for a certain period are also exempt from the new law.

There is no denial of any deductions where the person or certain related parties use the land in carrying on a business or where the land is owned by companies, superannuation funds (other than SMSFs), managed investment trusts or certain public trusts.

If you have any tax queries about your ongoing and upcoming property development project, please get in touch with Pitt Martin Accountants & Tax Advisers. We are located at the Sydney CBD. Our contact number is 02 92213345 and email connect@pittmartin.com.au.

Disclaimer: This article is not providing a formal advice and may not suit to all scenarios. Please make an appointment with us to discuss.

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Guide to Low and Middle Income Tax Offset (LMITO)

Guide to Low and Middle Income Tax Offset (LMITO) of $1,080

We have received questions from our taxpayers wanting to know the recent tax relief of $1080. Although the immediate relief has been introduced in the 2019 Federal Budget, this article will explain in more detail aiming to provide you with a better understanding about this tax cuts. Firstly, tax offset of $1080 will not automatically come to you when you lodge your tax return. So what is the Low and Middle Income Tax Offset?

From 1st July 2018

The new LMITO was firstly introduced by the federal government as part of 2018-19 Federal Budget, which helps low and middle income earners (taxable income is at or below $125,333) lowers the amount of tax they need to pay. The new LMITO increases from a maximum amount of $530 to $1080 and the base amount increases from $200 to $255 per annum. The maximum threshold increased from $125,333 to $126,000 to ensure tax relief will be delivered to more taxpayers.

First thing to remember is that the LMITO is a tax offset. It can only be used to lower the amount of tax that you owe and not to generate a tax refund. ATO points out on their website:” it doesn’t mean you will automatically get an extra $1080 in your tax return.

The new LMITO threshold is available for the 2018/2019, 2019/2020, 2020/2021 income years. If you are entitled to LMITO, it will automatically apply on your 2018/19 tax return. Before you lodge your tax return, check if LIMTO is visible on your tax return lodgement. See the diagram below to check your entitlement:

Taxable income* Minimum Tax Offset Maximum Tax Offset
<$37,000 $255 $255
>$37,000 – <$48,000** $255 $1,080
>$48,000 – <$90,000 $1,080 $1,080
>$90,000 – <$126,000*** $0 $1,080
$126,000+ $0 $0

* Your taxable income is your assessable income minus your allowable deductions

**LMITO is $255 plus 7.5% of the portion of your taxable income that exceeds $37,000

***LMITO is $1080 less 3% of the portion of your taxable income that exceeds $90,000, up to Nil

For example, if you earned taxable income in 2018-19 of:

  • Less than $21,885, while you have an entitlement to LMITO of $255. Your taxable income is under the tax-free threshold, you don’t have any tax to pay. Therefore, you cannot utilise the offset.
  • $45,000, you will receive a the LMITO of $855, ($255 plus 7.5% of the portion of your taxable income that exceeds $37,000, in this case $8,000). You may also be eligible for the LITO, see below.
  • $85,000, you are entitled to the full $1080 LIMITO.

The LMITO applies in addition to the existing Low Income Tax Offset (LITO). Taxpayer whose taxable income is at or below $66,667 will receive this benefit. The maximum LITO $445 applies to those with taxable income at or below $37,000. For taxpayers whose taxable income exceeds $37,000 but is not more than $66,667, the entitlement is reduced by 1.5 cents for each dollar over $37,000. Similarly, LITO can only be used to lower your tax paid and not a cash bonus given by ATO if you do not owe money to ATO.

From 1 July 2022

New changes come into effect from 1 July 2022

  • Income tax rate thresholds change —— the upper income threshold of the 19 per cent tax bracket increases from $37,000 to $45,000 with effect from 1 July 2022, intending to benefit all taxpayers with a taxable income over $18,200. The change will apply to resident taxpayers and working holiday makers.
  •  
  • The LITO increases —— for taxpayer with a taxable income at or below $66,667, the maximum LITO will be increased to $700 from current $445. However, the LITO reduces quicker than it currently applies. The increased LITO will be withdrawn at a rate of 5% every dollar between taxable incomes of $37,500 and $45,000. LITO will then be reduced at a rate of 1.5% every dollar between taxable incomes of $45,000 and $66,667.

These changes assume that Government does not withdraw the income tax changes in their future budget.

From 1 July 2024

From 1 July 2024, the 32.5% marginal tax rate will be reduced to 30%, The number of taxpayers benefit from such tax rate cut will be increased by the top threshold of the middle tax bracket jumped from $12,000 to $200,000. Tax relief applies to resident taxpayers and working holiday makers. Once again, this assumes that no more changes will be delivered to the future federal budget.

If you have any query about the above contents, please do not hesitate to contact Pitt Martin. We are located at the Sydney CBD. Our contact number is 02 92213345 and email connect@pittmartin.com.au.

Disclaimer: This article is not providing a formal advice and may not suit to all scenarios. Please make an appointment with us to discuss.

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PAYG Withholding Tax Deduction Denial

Government has passed a legislation right before Christmas 2018 which will prevent a deduction from being claimed for salary and wages (and certain other payments) by a business that fails to meet its PAYG withholding obligations. This change will apply to payments made from 1 July 2019 onwards. The existing penalties for failing to comply with PAYG withholding obligations are already significant, this adds another financial incentive for businesses to ensure that they are compliant with PAYG withholding obligations.

 What is Pay As You Go (PAYG) withholding?

When you make payments to employees and some contractors, you need to withhold an amount and send it to the Australian Taxation Office (ATO) at regular intervals. This amount will be sitting as refundable credit amount to offset your actual tax when you lodge your tax return.

What the new legislation says?

If taxpayers do not meet their PAYG withholding tax obligations, from 1 July 2019 they will not be able to claim a tax deduction for payments:

 •             of salary, wages, commissions, bonuses or allowances to an employee;

•             of directors’ fees;

•             to a religious practitioner;

•             under a labour hire arrangement; or

•             made for services where the supplier does not provide their ABN.

 

The main exception is where you realised there is a mistake and voluntarily corrected it. For example, if you made payments to a contractor but then later realised that they should have been paid as an employee and no PAYG was withheld. In these circumstances, a deduction may still be available if you voluntarily correct the problem but penalties may still apply for the failure to withhold the correct amount of tax.

Salary and contract fees are a big portion of tax deduction for almost every business. Losing such tax deduction, business can be ending to pay massive tax therefore business owner should make sure the PAYG withholding obligation is complied all the time.

Pitt Martin Accountants and Tax Advisers can look after your PAYG withholding obligation. If you have any query about the change of new legislation and your PAYG withholding obligation, please feel free to call us on +61292213345 or email connect@pittmartin.com.au.

Disclaimer: This article is not providing a formal advice and may not suit to all scenarios. Please make an appointment with us to discuss.

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