Payroll risk & lessons learned from celebrity chefs

If you have watched the news over the last month you will no doubt have heard about the payroll compliance woes of George Calombaris and Adriano Zumbo (both of MasterChef fame). The media surrounding these issues gives rise to some key questions for businesses – especially ones which grow quickly, employ staff across multiple locations, and have staff on many different contracts or employment bands.

While payroll is never an easy task, it certainly can be managed so it’s accurate every time, on time and with minimal fuss for the employer and employee. The good news is that payroll complexity can be navigated and mistakes avoided by being aware of your responsibilities and acting appropriately.

In the case of Calombaris, the Fair Work Ombudsman identified major discrepancies in employee payments. What seems to have started as a simple administration oversight has resulted in back payments to employees amounting to approximately $2.6 million, with potentially massive penalties still to be determined.

As we head towards the end of another financial year, this is a timely wake-up call to all business owners who employ staff – payroll risk is a real and important consideration for your business.

The major areas of risk in your payroll are:

Compliance with awards and EBAs

It’s imperative that you are identifying and adhering to the relevant industry awards for your employees. A simple misinterpretation of the award or an unaddressed change can result in significant over/under payments.

Superannuation obligations

The ATO received over 10,000 employee complaints in the 2015-16 year related to incorrectly paid superannuation with many of these triggering audit or review actions. Regardless of the size of your business, you need to be compliant with superannuation. This involves not just paying the mandatory 9.5%, but making sure it is paid on-time, via the prescribed superstream method, dealing with superfund choice and salary sacrificing arrangements and reporting correctly in your annual PAYG payment summaries.

Payroll Tax

Payroll tax is a state specific tax, charged on the total wages of a business over a prescribed threshold. Like super obligations, payroll tax can attract penalties and fines if payments are made late (monthly, quarterly or annually). This is an area which is often overlooked, and should be reviewed annually to ensure ongoing compliance. Businesses which operate across multiple States and Territories will need to be mindful to account for the differences in their payroll processes and keep up to date on local changes.

Are you on top of your payroll?

It’s common practice for SME businesses to rely on their payroll staff or bookkeepers to administer and manage the payroll function. Taking this approach blindly can result in increased risk of under or overpayments, non-compliance, and the risk of ATO audit and penalties.

Prosperity Advisers has a dedicated payroll team that can help you to minimise risk and simplify the reporting burden. Key benefits of outsourcing your payroll include:

  • Focus on your core business – time spent on payroll administration doesn’t increase sales or customer reach.
  • Reduce your risk – access the knowledge bank of experts who will ensure you are ATO & industry award compliant.
  • Free up your staff and reduce administration overload.
  • Access the most up to date systems & processes.
  • Increased security – protect your staff and assets from payroll fraud.

We recommend that you review your procedures and systems ahead of 30 June and if you are at all concerned about your payroll obligations and want to ensure you are minimising your risks we suggest that you get in touch with your Prosperity Adviser to discuss your situation.

Help for your payroll

A large number of businesses are discovering that outsourcing payroll can eliminate a very time consuming and risky function.

Prosperity offers an outsourced payroll service that ensures your payroll is managed efficiently and employees’ salaries and wages are accurately calculated and paid on time.

A successful partnership is easy to get started:

  • We work with you to streamline your systems so your data reaches us easily and with minimal fuss.
  • You nominate a relationship manager who will partner with our team to ensure the best outcomes.
  • We constantly update our knowledge and notify you when a change in process or pay rate is required.
  • We provide annual summaries and compliance documentation to your staff.

Contact your Prosperity Adviser to find out more.

Part 2: tax tips for your small business

First published in Kochie’s Business Builders

It’s that time of year when small businesses can benefit by considering strategies to minimise tax burden. In this second article of our three-part series for year-end tax tips we look at accelerating deductions and how small businesses can reduce their tax for 2017.

With the individual tax rate set to reduce by 2% for those in the top bracket, a tax deduction is worth a little bit more in 2017 than 2018. The mere deferral of a tax liability for one year can provide some welcome cash flow relief when it comes time to paying your tax. Indeed you never know what the future will bring, so a tax deduction taken in a year when you know tax will arise is like a mid-year gift.

Incur necessary expenses including prepayments
A business deduction does not necessarily need to be paid in order to be claimed. You often just need to have been issued an invoice. So for all those expenses (excluding inventory) you know you will need to outlay for, it may be better to order it this financial year. Suppliers who offer generous terms of settlement are ideal but even paying the cash before year-end can also be a good idea. Repairs and maintenance is a good example. Simply ensuring all invoices received have been accounted for is also something that can sometimes be neglected.

Small Businesses have the advantage of not having to spread out a deduction into a future year for prepayments where the service period is less than 12 months. Prepayments do not necessarily need to be “paid” however it is often necessary to trigger the deduction in the first place. Prepaying rent and interest are obvious big ticket items that can provide an early deduction.

Depreciable Assets
We raised the $20,000 Instant Asset Write-off in the last edition, which means depreciable assets are usually limited for small business for old and expensive assets. Even these assets can be added to a “pool” providing a 30% depreciation rate (15% in the first year). But for those who have not pooled, it can pay to have a look at your depreciable assets prior to year-end to determine if any assets are no longer being used. These can be written off and their remaining depreciable balance claimed as an immediate tax deduction if they have been “scrapped”.

Bad debts
To get a deduction for a bad debt in the current year it needs to be “written off” in the ledger, before year end. There also needs to have been reasonable attempts to recover the debt and an argument can be made that there is limited likelihood of the debt being recovered. It can pay to review your debtors list and identify defiant customers.

Pay super
While super for the final quarter is not payable until 28 July, it will not be deductible in the current year if not paid before year end. So you might as well pay it. Also be wary of paying after 28 July, you will not receive a deduction at all.

For both staff and owners, additional concessional contributions into super should be considered both to take advantage of the cap ($30k or $35k if 49 years of age or over in 2017 then reducing to $25k next year) and to reduce taxable income.

Bonuses
In order to claim a deduction for bonuses the amount needs to have been determined before year-end and documentation should exist to prove that the decision to pay it was made, usually by way of a minute or communication with the recipient.

Analyse inventory
The value of closing stock is usually added back to taxable income and therefore the lower the value the better. An exception is where the simplified trading stock regime is chosen which avoids the need to make an adjustment if the movement in value is reasonably estimated to be less than $5,000. Either way it can be beneficial to carry out a detailed stocktake. The value of trading stock is reduced where stock can be argued to be obsolete or damaged, so the nature of the stock and trading history for each item can be relevant in minimising taxable income.

Cyber Security and WannaCry

In the news recently there has been coverage of a large global computer attack, infecting computers with a ransomware program called WannaCry. This attack has raised questions for SME businesses on what can be done to protect against these types of attacks.

Ransomware attacks can cause unnecessary stress and affect productivity, in addition to hurting your wallet. It’s important your business responds quickly if affected, and you make sure your systems are protected from these types of attacks.

What is ransomware?

Ransomware blocks access to a computer system or files until a sum of money is paid. It works by encrypting your data and demanding payment for its release, threatening the deletion of the data if the payment is not made.

How is ransomware deployed?

Ransomware can be deployed via phishing emails, attachments to emails and by exploiting weak network defences. Once a machine has been infected, the ransomware will attempt to spread to other computers.

How do I protect against an attack?

While it depends on the strain of ransomware, you can help to protect your system by:

  • Keeping your systems up to date – this attack takes advantage of a critical hole in older versions of Windows. Microsoft released a patch to cover the vulnerability in March 2017, so businesses with up to date software will not be affected.
  • Backing up your files – ransomware encrypts your data and demands payment for its release. An attack will be less concerning to those businesses who frequently back up their data. SMEs backing up their own systems need to ensure those systems can’t also be compromised if an attack spread.
  • Educating yourself and your staff – small businesses lost over $2 million to scams in 2016, so it’s important to educate yourself and your staff on cyber security.

Do you have your cyber security under control?

Prosperity Advisers can assist you to develop and implement a cyber security plan, which covers:

  • Conducting regular scheduled system checks, including penetration testing and using your external auditor to assist.
  • Changing your security levels as required.
  • Identifying cyber security and forensic experts that you can call on when the need arises.
  • Implementing a breach plan, including a cyber security incident response plan which involves law enforcement agencies and regulators, and a press release statement.
  • Considering limiting the impact by putting in place cyber insurance cover which can provide both indemnity and liability cover.

For further reading on managing your cyber security risk, please refer to the Australian Cyber Security Centre (ACSC).

We recommend that you review your procedures and systems and if you are at all concerned about your cyber security, please get in touch with your Prosperity Adviser. To receive our Free Cyber Security Checklist and request one of our directors contact you to discuss your situation, please send an email by clicking here.

Reflections on the 2017 Federal Budget and what it means for GPs

One week on from the 2017 Federal Budget, some of the dust has settled on the announcements and we are in a position to assess whether there really was much new in the way of increased support for the sector.

What we know

In the lead up to Budget night, the Federal Government worked closely with both the RACGP and AMA to trade off an end to the Medicare freeze in exchange for ongoing support of the MyHealth Record system, reviews of the MBS and tightening access to after-hours claims. Both organisations have defended their negotiations with the Government, claiming that they are a first step towards increased recognition of the value of general practice care.

The good news is that the Turnbull Government has pledged $10 billion to healthcare including the withdrawal of the Medicare indexation freeze and the establishment of a Medicare Guarantee Fund to ensure longevity of health care and access to medicines. Some of this funding is for new programs and some is confirming allocations previously announced. All of the initiatives are yet to be passed, so depending on where we end up some initiatives may not get the green light.

The funding for these announcements will come from a proposed increase in the Medicare Levy by 0.5 per cent from July 2019 in a move that will cost workers on average earnings $400 a year.

A slow melting of the Medicare Freeze

The government announced that it would resume indexation for:

  • GP bulk billing incentives from July 1, 2017,
  • Standard GP and specialist consultations from July 1, 2018
  • Specialist procedural and allied health from July 1 2019.

The budgeted cost of these changes in year one is just $9m, which is indicative of the slowness of the unfreezing measures. Indeed, even after July 2018, the rebate for a B level consult will increase by only around 55 cents. There is no evidence that the thawing will apply to services such as GP care plans.

With increasing bulk billing rates, there seems little pressure on the Government to allocate more funding towards the GP sector.  The Government’s statement that they are “recognising and rewarding General Practitioners” seems somewhat hard to swallow.

For dental support, families will receive an extra $300 to spend on their children’s dental care every two years. The amount families can spend on dental check-ups, fillings and other basic dental work every two years will rise from $700 to $1,000 as a result.

Medicines

Doctors prescribing medicines will also be encouraged to prescribe more generic brands to save taxpayers $1.8 billion. The new listings on the Pharmaceutical Benefits Scheme will include a $510 million new drug for patients with chronic heart failure. Large pharmaceutical companies will wear the pain for these cuts in return for certainty of funding a new five year agreement with the government.

Improved access to telehealth

People in remote areas with mental health problems have been promised access to city-based psychiatrists via a new $9m telehealth program. People suffering a mental illness who don’t qualify for care under the NDIS will continue to have access to psychosocial support programs under an $80m plan that will provide community support, matched by State funding if approved.

Healthcare homes start delayed

The Government’s flagship Health Care Homes (HCH) program, meant to revolutionise GP care by tying patients to a single GP practice, has been delayed. Of the shortlisted practices, 20 will launch the program in October with the bulk of practices participating in the trial – a further 180 – to start in December.

We continue to harbour concerns about how the implementation of the HCH model will impact the taxation arrangements of both practices and contracting GPs, with little apparent consideration being given to what we see will be a fundamental change in the tax status of practitioners at participating practices.

Pathology rents

One positive arising out of pre-budget negotiations and lobbying is that the Government appears to have dropped their plan to limit the rent payable by pathology centres to GP practices.  The budget does commit a further $18m towards audit and compliance programs designed to support existing rental regulations.

An industry under pressure

It is hard to see that any of the announcements will help address the fundamental issues facing General Practice. Recent studies have confirmed declines in job satisfaction, decreasing work life balance, ongoing pressure on GP net incomes and a shift in graduate numbers away from general practice into specialisations.

GP practices and individual contracting GPs have a long road ahead as they wait for any meaningful outcomes from the loosening of the Medicare freeze. In the interim, we continue to work with practitioners and practices to streamline processes, improve reporting and financial management and maximise the opportunities available to improve after-tax outcomes. Drawing on more than 25 years of industry practice we combine the skills, knowledge and know-how of chartered accountants, tax specialists, financial planners, business managers and cloud system experts to help practice owners and contractors to manage for prosperity.

Prosperity adds SME specialist practice

  • Supplements stellar growth in Brisbane practice
  • Holistic service offering key attraction
  • SME sector not well served

Roger Ng & Co – a specialist SME Brisbane-based Accounting & Tax practice has joined the Prosperity Advisers Group.

The SME sector is the engine room of the Australian economy and Queensland has a burgeoning small business sector. A key client group for both Prosperity Advisers and Roger Ng & Co, the SME sector features prominently in Prosperity’s growth plans. Joining forces means greater access for Roger Ng & Co clients to an expanded group of services and is a boost to Prosperity’s SME and private client network.

Combining the long history of both firms in delivering quality accounting, tax and advisory services in the Queensland market made a lot of sense for Prosperity Advisers’ Founder & CEO Allan McKeown, “We’ve experienced double digit growth at our Brisbane practice in each of the last four years including 12% year to date, so when the opportunity arose to merge with Roger Ng & Co we were excited by the prospect.”

Prosperity is a leading adviser to SMEs and HNW families with specialist teams in the Medico and Hospitality sectors and possessing a well-resourced Asia Desk. Expanding its client base in each of these areas is a key factor in its growth plans. “Our project to build the Advisory Firm of the Future involves embracing technology changes in order to advise clients using the latest thinking. Being a progressive firm was attractive to Roger Ng & Co and we welcome the more than 120 client groups and the team, from Roger Ng & Co that have joined Prosperity.” says McKeown.

“We are pleased that both Karen Ng and her father, Roger will continue with our firm. Their specialist SME knowledge will be invaluable in assisting Prosperity to cater for a market that is often not well served by its advisers; many of whom are trapped on the compliance treadmill.”

Following a searching selection process, choosing to join with Prosperity Advisers was a logical next step for Partner Karen Ng, “Prosperity offers a complete service for our clients from financial planning, accounting and business management using the latest technology, through to tax consulting and structuring, employee benefits and superannuation. It’s a one-stop-shop where our clients will benefit as they grow their businesses and family wealth. In addition Prosperity’s people really stood out for us as very approachable, client nurturing, highly knowledgeable and leaders in their respective fields. We are delighted to be on board.”

Bring in the new financial year with a clear plan for success

As another financial year comes hurtling to an end it’s a great time to pause and reflect on what you can do to ensure FY 2018 is all you want it to be. Here are my top 5 tips in preparation for a new year. Tackle one a week and you will be on track to start the year with confidence and a recipe for success.

  1. Set a budget for the year

Assessing financial performance is subjective. To know whether you have succeeded you need to be able to measure your results against an agreed plan (or budget). Having a budget also allows you to make financial decisions around setting revenue budgets and sales strategies, making decisions to invest in capital expenditure and team development. Importantly, it enables you to allocate personal remuneration and drawings without fear of unexpected bills or a cashflow crisis you didn’t see coming.

Most SME owners start with a good idea, an identified market niche and a tremendous amount of enthusiasm to drive their vision to succeed. But to what end? Having a clear financial goal in mind assists in shaping your broader business strategy for the year and also provides a sense of purpose to your company.

  1. Set your top 5 priorities 

Setting clear and concise goals gives you focus and direction. By identifying the 5 most important things to get done for you to be able to meet or exceed your financial budget you will ensure that your hard work pays rewards as your activity and efforts are directly linked to factors which contribute to your goals.

Of your 5 priorities it is also great practice to identify the number 1 priority – the one goal which is the most important thing for the business to achieve. You may also find that your top 5 priorities contain longer term projects, if so, identifying shorter term milestones or actions related to each one can keep it achievable and ensure you are making progress with steps in the right direction.

What you focus on gets done. 

  1. Use an advisory board

Being in business can be lonely, and being busy can mean time passes by without stopping to check on your progress. Implementing an Advisory Board provides owners a sounding board, guidance, and an outside perspective to hold you personally accountable. It is a great way to break the dynamic from working IN the business, to working ON the business.

I recommend at least a quarterly cycle of meetings, including a meeting agenda and financial reports (compared to your budget).

The Advisory Board team may be limited to one or two individuals (depending on the size and complexity of the business and the internal skills in the business) and meetings should be kept to 2 or 3 hours maximum. In my experience, businesses with an Advisory Board more often meet their financial targets and stay on track with their strategic priorities than those without one.

  1. Streamline a process 

Like decluttering your house during a spring clean, finding an inefficient process in your business and streamlining it can reap great rewards. For business efficiency as well as staff satisfaction.

We live in an age where technology can provide solutions for all sorts of problems and you might be surprised to find an “off the shelf” solution to your process inefficiency.

Are you spending too much time entering receipts and filing them? Try Receipt Bank to snap a photo of your receipts and bills and watch it load itself into your accounting system – and no more need to file the paper. Perhaps you are sick of entering and remembering too many passwords for the multiple applications you use each day? Try LastPass and save yourself time (and frustration) every day. 

Creating a culture of continuous improvement has immense benefits. Start now with one change and see where it leads. 

  1. What to stop doing!

Time is a limited commodity. To do new things and create new habits, you need to find some stop doing activities and bench old habits. To identify some things you can stop doing, consider the following questions:

  • Do you say ‘yes’ too often?
    • Next time, pause and consider “does it need to be done?”, “can someone else do it”, “if I need to do it, how urgent is it?”.
  • Do you do things that others could do?
    • Focus on delegation. Leverage the time of others to get tasks progressed and only get involved when they are advanced to a stage where they need your input.
  • Stop being a perfectionist.
    • Ensure the time spent is commensurate with the value of the task.
  • Cease & desist from doing repetitive tasks.
    • Take advantage of technology and start automating repetitive processes.

Help is close by. Your accountant should be a sounding board for your ideas or feel free to contact Prosperity Advisers if you want a fresh approach.

Federal Budget 2017: Making the right choices and securing better days ahead……perhaps for some?

OVERVIEW

According to the Federal Treasurer, Scott Morrison, the 2017-18 budget is intended to be a “practical” budget. Mr Morrison pointed out that the economic changes we’ve experienced over recent years have delivered overall benefit but still left many Australian’s “digging deep”, with not all sharing in the nation’s growth and prosperity. Many of our small businesses and SMEs have gone without just to keep their businesses open.

So what does this budget hold for families and businesses which makes it “practical” and delivers on Mr Morrison’s vision of “fairness” and “opportunity”? Well, depending on where you sit there are winners and losers. Overall however there are fewer significant changes when compared to budgets in prior years, indicating a cautious Government looking to win back much needed community support.

Super

This budget presents nothing like the changes put forward last year which affect super. However the Government is proposing adjustments to how property with debt is treated in SMSF, and there is good news for ‘downsizers’ who can benefit from a new non-concessional contribution incentive.

Business

There is some positive support for business in the form of extending the instant asset write-off and implementing the first phase of the 10-year Enterprise Tax Plan. Importantly, the Government is proposing significant initiatives across infrastructure and health which are designed to create “more and better paid jobs” across all markets.

The Government says that the global economic outlook is good and that we can expect 3% real growth rebound over the next two years.

Individuals & Families

Mr Morrison spoke of the pressures on families and that we are “moving to the end of a difficult period”. Initiatives for individuals and families are a key feature of this year’s budget. However, changes to the Medicare levy are earmarked to fund the National Disability Insurance Scheme and the new “Guarantee Medicare Bill” will come at a cost to taxpayers. Stimulating housing stock is designed to provide affordable housing as well as jobs growth, while higher education students will find their costs increase and pensioners will win back some benefits. 

INDIVIDUALS & FAMILIES

Changes to Personal Taxes

  • 2% Debt Levy wound back

Some good news for taxpayers with taxable incomes which exceed $180,000 – the debt levy of 2% that increased the tax rate for these income earners to 49% will come to an end on 30 June 2017 with no indication that this will be reintroduced.

  • Medicare Levy Up

Medicare is getting a boost but the counter is a measure predicted to make $8.2billion for the Government over four years.

Most workers will be hit hard when the Medicare levy increases from 2% to 2.5% of taxable income from 1 July 2019 to fund the National Disability Insurance Scheme.

Individuals will only be exempt if their income is below the threshold of $21,655 for singles, $36,541 for families and $34,244 for pensioners.

Other tax rates that are linked to the top personal tax rate, such as the fringe benefits tax rate, will also be increased.

  • Travel Expenses related to residential rental properties disallowed

From 1 July 2017 with the aim of gaining $540million in revenue, travel expenses related to inspecting or collecting rent for a residential rental property will be disallowed.

  • Depreciation deductions limited for residential rental properties

To address concerns that some plant and equipment items are being depreciated by successive investors in excess of their actual value, from 1 July 2017, investors can only claim depreciation on plant and equipment they actually acquire and not on items that are acquired from the previous owner of the property.

  • CGT Discount increased to 60% for “affordable housing” investments

From 1 January 2018, the CGT discount will increase from 50% to 60% for capital gains made by resident individuals from the sale of investments in “Affordable Housing”.

“Affordable Housing” are properties that are:

  • managed through a registered community housing provider;
  • provided to low to moderate income tenants;
  • with rent charged at a discount below the private rental market rate.

In addition, you must also own the property for a least three years to access the extra discount.

  • Purchasers of new residential properties to remit GST

From 1 July 2018, if you acquire a newly constructed property or new subdivision and GST is included in the purchase price, you will be required to remit the GST directly to the ATO at the time of settlement.

Previously, the developer who sold the property would collect the GST and remit the amount to the ATO.

  • New HELP repayments and thresholds for higher education debt

From 1 July 2018 a new minimum threshold of $42,000 will be established with a 1% repayment rate.  Currently the minimum repayment threshold for the 2017/2018 year is $55,874 with a repayment rate of 4%.

Foreign Residents

Foreign investors in Australian residential property are facing tougher rules. This includes the removal of the main residence Capital Gains Tax exemption, tightened compliance and a cap of 50% sales to overseas investors in new developments. There will also be a levy on all foreign investors who fail to either occupy or lease their property for at least six months of the year.

  • Capital Gains Tax Changes

Individuals who are foreign or temporary residents will no longer have access to the CGT main residence exemption from 9 May 2017. Existing properties held before this date will continue to be exempt until 30 June 2019.

Currently, the foreign resident CGT Withholding rate applies to Australian real property or related interests valued at $2million or more. From 1 July 2017 not only will the threshold be reduced to $750,000 but the rate will be increased from 10% to 12.5%.

  • Annual Levy on vacant residential properties

As a measure to make more rental properties available, a charge of at least $5,000 will be levied annually on foreign owners of residential property where the property is not occupied or genuinely available on the rental market for at least six months.

The measure will apply to foreign investors who make a foreign investment application for residential property from 9 May 2017.

  • Foreign ownership in new developments restricted to 50%

With the aim of increasing housing stock to Australian purchasers, a 50% cap on foreign ownership in new developments will be introduced through a condition on new dwelling exemption certificates from 9 May 2017.

New dwelling certificates are granted to a property developer and act as a pre-approval allowing the sale of new dwellings in a specified development to foreign persons without each foreign purchase seeing their own foreign investment approval. The current certificates do not limit the sales that are made to foreign purchasers.

New & Existing Home Owners

  • Major Bank Levy

A new major bank levy is to be implemented affecting five of Australia’s biggest banks in an effort to level the playing field among big and small bank lenders. The Government proposes to monitor the potential impact on residential mortgage pricing with the aim to ensure that the levy is not passed on through mortgage pricing and fees to borrowers.

  • Access to Super for first home deposit

From 1 July 2017, individuals will be given the option of piggybacking on their superannuation to access a kind of super-charged savings account, which will allow savers to salary sacrifice up to $30,000 – with $15,000 in a single year – from their pre-tax income. It will receive the same favorable tax treatment as superannuation.

Then from 1 July 2018, individuals will be able to withdraw the contributions and the earnings for a first home deposit. The withdrawals will be taxed at an individual’s marginal rate, less a 30% tax offset.

Pensioners

The Government will provide $268.9 million over two years for a one-off winter energy payment in 2016-17 of $75 to singles and $125 per couple.

The pensioner concession card will be restored to those who lost it after the pension assets test change introduced earlier this year. Seniors will regain access to state and territory based concessions that were lost after the changes.

The Government will also provide $5.5 billion for home support services for the elderly as Australia’s population continues to age. However the residency requirements will be tougher, with recipients required to have 15 years of continuous Australian residence in order to access the support funding.

Anti-vaxxers “No Jab No Pay”

Parents who don’t vaccinate their children will be $14-a-week worse off, with $28 set to be wiped from their family tax benefits every fortnight.

The measure, which will start from July 2018, is expected to raise $15million over four years, while sending a tough message to those who fail or refuse to immunise their children.

Welfare recipients

A crackdown on unemployed Australians with drug and alcohol habits will include penalties for those who fail to turn up to appointments or work-for-the-dole placements due to intoxication, with payments to be reduced or cancelled.

A further initiative will target single parents who attempt to collect multiple welfare payments. Single-parent households will be subjected to closer scrutiny to verify any relationship status.

Smokers

Roll-your-own tobacco and cigars will soon be more expensive under a plan to bring their tax treatment in line with pre-made cigarettes. The change will be phased in over four years from 2017 to 2020, to coincide with the existing annual 12.5 per cent tobacco tax increases which occur on 1 September each year.

The move is expected to claw an extra $360million in tax revenue.

A boost for those in regional areas

Those living in regional areas can look forward to some improved infrastructure. Firstly, the government will provide an extra $8.4billion in equity investment to the Australian Rail Track Corporation to deliver inland rail. It’s earmarked as a boost for regional Australia and a boon for jobs growth.

There will be $28.5million to establish the Regional Investment Corporation to streamline the delivery of $4 billion in concessional loans. This includes the $2 billion National Water Infrastructure Loan Facility and the $2 billion Farm Business Concessional Loan Scheme.

Superannuation

Most had thought taxation of super would be untouched given the significant changes which were announced in last year’s budget.

  • SMSFs with loans targeted for $1.6million cap

The Government proposes to introduce legislation confirming that from 1 July 2017, the use of Limited Recourse Borrowing Arrangements will be included in a member’s total superannuation balance and transfer balance cap.

This is a highly controversial proposal because, in addition to capturing a larger amount against the transfer balance cap by adding outstanding loans to member balances, the interplay with the total superannuation balance could threaten the ability of the member to make a contribution which in turn could affect the fund’s ability to service the loan.

  • Added bonus for ‘downsizers’

Older Australians will benefit from the incentive to ‘downsize’ their home property.

From 1 July 2018, an individual aged 65 or over can make a non-concessional contribution into superannuation of up to $300,000 from the proceeds of selling their home. The key requirement is that they must have owned the home for at least 10 years.

The contributions are in addition to existing rules and caps and exempt from the works test, the $1.6million total superannuation balance test and age test for making non-concessional contributions.

This is available to both members of a couple for the same home. 

SME BUSINESS

  • Instant asset write-off extended

The $20,000 instant asset write-off concession will be extended for another year. This now applies to businesses with a turnover of up to $10million since the recently legislated expansion of the definition of a small business which was announced in last year’s budget. It’s noted that this is potentially more valuable in the current year due to the 2% reduction in the top marginal personal income tax rates (discussed above).

  • More support for small business

The Government will provide $15million over two years to undertake a small business information campaign to educate the small business community about what programs and support are available to assist them.

  • CGT concessions to tighten

The Small Business CGT Concessions will be tightened to deny eligibility for assets which are unrelated to the small business. This effectively closes a loophole whereby ownership interests in larger businesses did not count towards the tests for determining eligibility for the concessions. The exact mechanism to achieve this result remains to be seen, however it’s expected that where access to the concessions is established through the $2million turnover test, the relevant asset that the concession may apply to must be used in that business (or another business you are connected to), rather than, for example, a shareholding in another active business or an unrelated active asset.

  • Accessing Crowd-Sourced funding

The Crowd-Sourced Equity Framework (CSEF) regime will be extended to proprietary companies through additional funding with the aim of facilitating crowd-sourced financial contributions.

  • Skilling Australia

Businesses employing foreign workers on skilled visas will be subject to a new regime including an upfront levy. The levy is designed to fund a new ‘Skilling Australia Fund’. For each employee on a Temporary Skill Shortage visa the levy will be an upfront payment of $1,200 for small business (<$10m turnover) or $1,800 for other businesses. For each employee being sponsored for a subclass 186 or 187 visa the payment required will be $3,000 for small business and $5,000 for other businesses.

  • Increased reporting for courier and cleaning businesses

The taxable payments reporting system (TPRS) currently in place in the building industry will be extended to contractors in the courier and cleaning industries. Business owners will be required from 1 July 2018 to report payments (individual and total for the year) that they make to contractors. The first annual report will be due in August 2019.

  • A boost for manufacturing, tourism and Indigenous businesses

Just over $100million will be allocated over five years to establish an Advanced Manufacturing Fund to promote research and capital development for high technology manufacturing businesses.

Indigenous businesses and entrepreneurs will receive increased business support, albeit from a new department, including training, loan products and capital support.

$5million will be provided for tourism operators in Queensland.

Business Administration

The Government will seek to incentivise the States and Territories to cut “red tape” for small business and SMEs with rewards when they do. It remains to be seen what red tape is to be targeted and how and what the rewards will include.   

HEALTH SECTOR CHANGES

  • Lifting the Medicare freeze

The Medicare Benefits Schedule (MBS) will be unfrozen at an expected cost of $1billion over four years. The bulk-billing incentives for General Practitioners will be indexed from 1 July 2017, standard consultations by General Practitioners and specialist attendances will be indexed from 1 July 2018, and from 1 July 2019 indexation will apply to specialist procedures and allied health services.

Diagnostic imaging items on the MBS will be indexed from 1 July 2020. There will also be some minor amendments to MBS items with a focus on cancer screening.

Improvements to MBS compliance arrangements and debt recovery practices are anticipated to result in combined savings of $104million over four years. It will target unusual business billing and “improve the consistency of administrative arrangements”.

The MBS Review Taskforce will continue the review of the MBS with the aim of improving patient outcomes and $67million will be spent in 2017-18 in modernising the health and aged care payments system.

  • Hospital & health funding increases

The Government has indicated a total of $10.2billion for vital health funding. This includes additional funding of $2.8billion to be provided to a range of hospitals and $1.4billion to health research.

Up to $12.5million over six years will be allocated to the Central Coast Health & Medical Campus establishment in order to stimulate jobs and training access and participation.

There will be $115million for mental health initiatives, with $80million for severe mental illness support.

  • Changes to the PBS

The PBS will increase statutory price reduction arrangements with medicine manufacturers resulting in Government savings of $1.8billion over five years and reducing the cost of medicines for the public. A much needed win for individuals and families.

  • My Health Record System

Funding will be provided for the My Health Record system and the previously mooted national opt-out arrangements will be implemented.

  • NDIS

The National Disability Insurance Scheme is to be fully-funded by the 0.5% increase to the Medicare Levy from 2020 with legislation also to be passed to guarantee Medicare and the PBS. 

OTHER ENTERPRISES

Extension to the ‘Google Tax’ rules

Multinational anti-avoidance rules (such as the Diverted Profits Tax) will be extended to include partnerships and trusts. This will apply retrospectively from 1 January 2016.

 

Find out more

We are available to discuss your specific circumstances with you and to assist with any decisions you might be considering. Don’t hesitate to get in touch with your Prosperity Adviser today or give us a call on 1800 855 844.

Essential 2017 year end tax tips

First published in Kochie’s Business Builders

It’s that time of year when businesses can benefit by considering strategies to minimise their tax burden.

This is the first of a three part series on tax we are doing to help prepare you for tax time. Here, we look at some actions small businesses can consider in order to reduce their tax for 2017.

When evaluating these strategies you should always keep in mind that spending money for the pure purpose of gaining a tax deduction can be counter-productive if the expenditure is not necessary for the business or expected to create a net improvement in profitability. With all transactions, the business decision should be made first with taxation considerations a secondary influencing factor.

The specific circumstances of each business can also impact on tax planning. For example, if a business is not currently making taxable profits it is of no use bringing forward tax deductions into the current year.

A welcome change for 2017 is the increase in the small business turnover threshold from $2m to $10m. This significantly extends access to a range of concessions, however unfortunately the Small Business CGT Concessions remain limited to $2m.

Ready to get more bang for your buck at tax time?

$20,000 Instant Asset Write-off
This has been a big attraction for a few years now but as it currently stands this is the last year it will be available. An immediate deduction is available for business acquisitions less than $20,000 and depreciation pools that fall below $20,000 can also be written off. The threshold is a GST-exclusive amount if registered for GST (therefore $21,999 maximum total spend on any one asset). The asset needs to be installed ready for use prior to 30 June. Excluded assets are those leased out to another party, capital works and certain in-house software.

Avoid a Credit Reference from the ATO
This is not really a tax tip as such, but could avoid enormous headaches. From 1 July 2017 the ATO will commence reporting outstanding tax debts of businesses to credit reporting agencies. This will only occur where the debt is in excess of $10,000, unpaid for over 90 days, not in dispute and no payment plan has been established (or an existing one has been defaulted).

We are informed that the ATO will notify businesses prior to referring a debt to credit bureaus however it’s strongly advised to contact the ATO promptly if any tax debt arises and arrange a payment plan. If a plan is defaulted, contact them again. It would also be prudent to review the ATO business portal, to ensure no overdue tax debts exist.

Consider restructuring
Restructuring can achieve various goals including asset protection, estate planning, income splitting and commercial objectives. It is often critical to complete these transactions while a business remains eligible for benefits such as the Small Business CGT Concessions and Restructure Rollover. It is also usually ideal to complete the transaction at the end of the financial year to simplify the accounting processes required.

To ensure sufficient time to analyse cost/benefits of restructuring and plan for implementation now is the time to be speaking with your accountant if anything is to occur this year.