Proven strategies to get a better tax refund from the ATO

Here are five simple tips that you should use to ensure you maximise your chances of getting a better tax refund from the ATO.

1. Claim deductions for everything you are entitled to claim

The simplest way to increase your tax refund:  Claim a deduction for every expense you are legally entitled to claim.

If you are required to pay for anything that relates to your work, keep the receipt.  If you aren’t sure whether you can claim a certain item, keep your receipt anyway – your accountant can advise you if you’ve claimed everything correctly.

Don’t go overboard:  You can only claim legitimate items that you have receipts for.  ‘Made up claims’ or ‘generous guesses’ lead to ATO reassessments, audits and surprising tax bills.  There are honest ways to boost your refund and that’s what your accountant will help you with.

2. Keep good records

Each year during tax time, many of our clients tell us that they spent countless hours tracking down receipts from the past 12 months.  Those people wasted hours of their time – and they probably missed out on hundreds, even thousands, of dollars in their tax refund!

People who lose money at tax time...

• aren’t organised
• don’t keep track of receipts
• don’t fill in car logbooks regularly.

If that sounds like you… you might be missing out on vital deductions that can boost your tax refund.

The solution is simple:  Spend just 5 minutes a week organising your receipts and logbooks.  You’ll save hours of frustration AND you’ll ensure you receive the best possible tax refund.

3. Get advice from professional accountants

Over 70% of Australians use an accountant to lodge their tax returns, with good reason!

Using an accountant to help with your tax return will not only save you time and stress, it will also ensure that you get a better tax refund.  Apart from checking your return for errors and accuracy, an accountant can also find extra deductions or tax offsets that you weren’t even aware of.  And the best part – any fees your accountant charges for your tax return are fully deductible on your following year’s tax return.

4. Don’t forget the small stuff!

A $10 donation to charity or a $5 textbook might not seem like much at the time, but each of these small purchases across twelve months can add up to hundreds of dollars – all money that you can claim as deductions on your tax return.

Whenever you buy anything related to your work, no matter how small it is, keep the receipt.  Keeping track of the small stuff is a sure fire way to ensure you receive the best possible tax refund.

Speak to us today to help ensure you get the maximum tax refund you are entitled to.  CONTACT US NOW.

5 Fatal accounting mistakes business owners make

In a recent survey of over 500 small business owners, flexibility and feeling in control ranked as the top reasons they love being in business.  Meanwhile, almost 60% said bookkeeping was hands-down their most hated task.

Most business owners understand that effective financial management is key to their success.  But lack of knowledge, frustration and even avoidance can add up to accounting mistakes that derail future growth.

Protect your business and reduce your stress by avoiding these five costly accounting errors.

1. Mixing personal and professional finances

From day one, business owners should have a separate bank account in which to deposit their income and pay their business expenses.

It’s also crucial to designate a business-only credit card.  Come tax time, separate statements will make submitting claimable expenses quick and easy, while reducing the risk of a painful audit.

2. Letting accounts receivable slide

It’s frighteningly easy to lose track of which customers have paid you and which are late.  Implement a strict policy and schedule for tracking and pursuing unpaid invoices.

• ask customers to pay at the point of purchase or no more than 30 days later;
• contact clients to confirm they have received your invoice and to agree on a payment date;
• follow up immediately when payment dates are missed; and
• keep accurate, up-to-date records of each client’s payment history.

Investing in a cloud-based accounting solution can make AR a breeze by automating your monthly invoicing – and contacting late payers with a reminder email.

3. Not using tech to track your expenses

Tired of chasing down missing receipts and struggling to justify claims come tax time?  There’s an app for that!  Choose from numerous options such as Receipt Bank, Shoeboxed or Expensify.

Many of these apps generate expense reports that are easy to share or sync automatically with accounting software.

4. Neglecting to strategise for long-term growth

Effective accounting means managing day-to-day finances while making provisions for future growth.  Software and cloud-based solutions offer easy ways to track your financials, but they also generate reports and provide analytic tools small business owners can use for future forecasting.

Familiarize yourself with the reports your software can generate to track long-term trends, identify and mitigate risk and discover new ways to increase profitability.  Talk to your accountant about which reports and metrics are most important for your particular business and how to utilize them.

5. Don’t go it alone

Small business owners are rarely trained accountants.  Don’t try to manage your company’s finances all by yourself.

Collaborate with a trusted professional, invest in quality IT solutions and spend some time familiarizing yourself with relevant tools and trends.

You’ll feel empowered, which is step one to forging a more love-filled relationship with small business accounting!

4 Simple Steps for Better Business Finances

If you’re like most small business owners, you spend the majority of your time managing daily operations, keeping customers happy, and looking for new ways to grow.  Spreadsheets, cash flow analysis, and financial projections are probably not your first passion.

However, measuring profitability, creating realistic budgets, and planning ahead for the future are crucial to your professional success.

Follow these four tips to get a handle on the numbers, and take control of your business finances.

1. Move to the cloud

How much of your time do you spend hunting down financial documents, poring over spreadsheets, and tracking expenses?

Constantly searching for and trying to integrate scattered data makes it nearly impossible to close out the monthly books quickly and efficiently.  Plus, reliance on spreadsheets is a proven liability.  Research shows over 88% of all financial spreadsheets contain errors.

Manage your business finances faster and more accurately by moving them to the cloud.

Cloud-based financial management systems have several benefits, including:

• Integration with all your other operational systems for the quick retrieval of the most current data;
• Automation of daily financial processes so you can step away from spreadsheets;
• Efficient expense tracking that improves accuracy and reduces revenue leakage; and
• Easy collaboration with team members and stakeholders.

2. Conduct regular financial reviews

Experts agree that vigilance is the key to effective business financial management.  Each month, set aside time to review your balance sheet, profit and loss statement, and cash flow statement.

Regular monthly check-ups will give you actionable insights into your business performance and growth potential.  This information is crucial for:

• Projecting future revenue, cash flow, and expenses
• Validating major purchasing decisions
• Anticipating and mitigating risk

You’ll need this key data, too, if you ever want to apply for a loan to expand and grow your business.

3. Bring a professional on board

On the surface, hiring an experienced bookkeeper or accountant may seem pricey, but their expertise could mean considerable long-term gains for your business.

A technical financial expert can optimize the efficiency and accuracy of your financial management, giving you peace of mind and added time to pursue growth opportunities.

Plus, most small businesses don’t need full-time professional help.  Part-time services are typically enough to help you manage crucial processes, plus a few extras, including applying for a business loan or overdraft, articulating and adapting your business plan and managing sudden growth – for example, hiring new staff, acquiring office space, or determining when to introduce a new product or service.

4. Final tips

Consider enrolling in a basic bookkeeping or accounting course so you can better understand the fundamentals of business financial management.  The knowledge you gain will feel empowering, and can help clarify discussions with your accountant.

Self-education is also key when it comes to investing in financial IT.  Be sure to do your research and consult an expert before investing in any new accounting solutions for your business.

Your knowledge, combined with professional support, is the very best route to sustainable, effective business financial management.

Tax Planning for 30 June 2016

Traditionally, 30 June each year brings forth a rash of initiatives through which the level of taxation for the current financial year may be reduced.  Consult your tax advisor about the following:

TIMING OF INCOME

Where possible, defer receipt of income until after year end.

TIMING OF EXPENSES

Where possible, incur expenses prior to year end.

BAD DEBTS

Review debtors and, where debts are unrecoverable, physically write off before year end to claim a tax deduction.

TRADING STOCK ON HAND

Scrap any obsolete or damaged stock by year end.

SUPERANNUATION

Ensure payments for employees or by self-employed persons are physically made (and received) on or before year end.

PRE-PAYMENTS

Immediate deductions are available for:

• Pre-payment of salary;
• Expenses <$1,000;
• Individuals, for non business expenses incurred on or before 30 June for the next twelve months – e.g. interest on rental property.

SUPERANNUATION REBATES

Contributions made on behalf of a low or no income spouse of up to $3,000 can attract an 18% rebate – i.e. $540.

SUPERANNUATION CO-CONTRIBUTIONS

The Government will contribute up to a maximum $500 to add to eligible employees’ personal contributions to superannuation funds of up to $1,000, subject to an assessable income (reportable fringe benefits, reportable employer superannuation contributions and salary sacrifice superannuation contributions) limit of $35,454, phasing out at $50,454.

MOTOR VEHICLE EXPENSES

Where significant employment or business use of a personal motor vehicle is claimed, maintain a log book for twelve weeks to maximise the tax deduction and keep records of all expenses.  The log book must be renewed every five years.

Record the financial year end odometer reading.

Small businesses (turnover <$2m) can claim an instant deduction for motor vehicles used for business 100% and costing up to $20,000.

PLANT AND EQUIPMENT

Review your asset schedule to scrap obsolete, worn out, lost or stolen items to maximise your depreciation claim.

Delay the disposal of any plant and equipment likely to be profitable in terms of written down value until 1 July.

Small businesses (turnover <$2m) can claim an immediate deduction for assets acquired, first used or installed ready for use, costing under $20,000 (GST exclusive).

HOME OFFICE EXPENSES

If carrying on a business from your home, pro rata tax deductions for interest or rent, insurance etc are available but impact on the main residence exemption from capital gains tax.

DIRECTORS / EMPLOYEES’ ENTITLEMENTS

Ensure any 2016/2017 salary packaging arrangements are in place before the commencement of the new tax year.

Bonuses and fees for the 2015/2016 year need to be approved at meetings and in place prior to 30 June 2016.

PRIVATE COMPANY LOANS

Any loans to shareholders or associates during 2014/2015 need to be repaid on or before 30 June 2016, unless a formal loan agreement is in place.

SALE OF INVESTMENTS

Delay the sale until after year end where a gain is anticipated to defer tax for a year.

Crystallise any capital losses in the tax year to offset against any gains made in the same year.

Timing of disposal under a contract for capital gains tax purposes is generally the date of making the contract, not settlement.

CAPITAL GAINS TAX CONCESSION

Assets need to be held for at least twelve months to access the 50% discount for individuals and trusts and the 33⅓% discount for superannuation funds.

CEASING BUSINESS / SALE OF BUSINESS ASSETS

Consider redundancy payments for employees.

Plan “golden handshake” payments for after the tax year end.

Small business capital gains tax relief measures may be available for:

• 15 year exemption
• 50% reduction
• Retirement exemption
• Replacement asset rollover

PAYG PAYMENT SUMMARIES

Summaries and summary statements for employees are required by the ATO by 14 August, otherwise substantial penalties apply.

SUPERANNUATION FUND EXPENSES

All expenses of a fund ought to be paid by the fund in order to claim a tax deduction.

DEPRECIABLE PLANT COSTING $300 OR LESS

Salary and wage earners and rental property owners will be entitled to an immediate deduction if plant for work related purposes costing $300 or less is purchased before 1 July 2016.  Some purchases you may consider include:

• Beepers and pagers;
• Books and trade journals;
• Briefcases/luggage or suitcases;
• Calculators, electronic organisers;
• Software;
• Stationery; and
• Tools of trade.

CLOTHING EXPENSES

Purchase and pay for work related clothing/expenses prior to the end of the income year, such as:

• Compulsory, non-compulsory (and registered) occupational specific and protective clothing;
• Other expenses associated with such work related clothing such as dry cleaning, laundry and repair expenses.

SELF-EDUCATION EXPENSES

Consider pre-paying the following self-education items before the end of the income year:

• Course fees (but not HELP fees), student union fees and tutorial fees;
• Interest on borrowings used to pay for any deductible self-education expenses.

Also bring forward purchases of stationery and text books (i.e. those which are not required to be depreciated).

OTHER WORK RELATED EXPENSES

Employees can pre-pay any of the following expenses prior to 1 July 2016:

• Union fees;
• Subscriptions to trade, professional or business associations;
• Magazine and newspaper subscriptions;
• Seminars and conferences;
• Income protection insurance (excluding death and total/permanent disability).

Note:  When pre-paying any of the above expenses before 1 July 2016, ensure that any services are provided within 12 months of the payment and before 1 July 2017.  Otherwise, the deductions must be claimed over the period of the pre-payment.  Any expense under $1,000 is exempt from pre-payment rules.

Super Contributions 2015 / 2016

CONCESSIONAL / DEDUCTIBLE CONTRIBUTIONS BY EMPLOYERS FOR EMPLOYEES

Maximum contributions for each employee up to 75 years of age, including “salary sacrifice” (needs to be proactive) and superannuation guarantee payments without incurring excess concessional contributions tax:   $30,000*

The 2015/2016 Budget proposed a $25,000 concessional contributions cap from 1 July 2017.  The Budget also proposed that, from 1 July 2017, individuals with a superannuation balance of less than $500,000 can make “catch up” concessional contributions where they haven’t reached their cap in previous years (unused concessional cap from 1 July 2017 may be carried forward on a rolling basis for a period of five consecutive years).

Condition:

Members over 65 must satisfy the work test.  For members over 70 the work test applies and only contributions received before the 28^th day after the end of the month in which a member turns 75 are deductible.

From 1 July 2017, the Budget proposes to remove the work test for those aged 65 to 74 in respect of super contributions.

CONCESSIONAL / DEDUCTIBLE PERSONAL CONTRIBUTIONS BY INDIVIDUAL TAXPAYERS INCLUDING INVESTORS

Maximum contribution by each individual up to age 75 without incurring excess concessional contributions tax:  $30,000*

Conditions:

• Less than 10% of assessable income including reportable employer super contributions and reportable fringe benefit amounts are attributable to employment.
• The individual must notify the fund of intention to claim a deduction (form NAT 71121) and the fund must acknowledge the notice.
• Contribution cannot create or increase a loss (deduction cannot exceed taxable income).
• Members over 65 must satisfy the work test (the Budget proposes removing the work test for those aged 65 to 74 from 1 July 2017).
• Only contributions received before the 28^th day after the end of the month in which a member turns 75 are deductible.

Effectively, with the removal from 1 July 2017 of the work test for 65 to 74 year olds, all members under 75 will be able to claim a tax deduction for super contributions whether self-employed or wage/salary earners.

*TRANSITIONAL CONCESSIONAL / DEDUCTIBLE EMPLOYER AND PERSONAL CONTRIBUTIONS

The concessional limit in 2015/2016 is $35,000 for persons aged 49 or over on 30/06/2015.  The Budget proposes a $25,000 concessional cap from 1 July 2017.

TRANSITION TO RETIREMENT PENSIONS

The Budget proposes, from 1 July 2017, that the tax exemption on earnings of assets supporting these pensions will be removed – ie not tax free earnings in the fund but taxed at the 15% rate as for accumulation phase assets.

HIGH INCOME EARNER CONTRIBUTIONS (DIVISION 293)

From 1 July 2012, an additional 15% “contributions tax” has applied to individuals with adjusted taxable incomes (broad definition) exceeding $300,000.  The Budget proposes a reduction to $250,000 from 1 July 2017.

NON-CONCESSIONAL / NON-DEDUCTIBLE CONTRIBUTIONS BY INDIVIDUAL TAXPAYERS

The Budget introduced a lifetime cap of $500,000 non-concessional contributions made on or after 1 July 2007, effective immediately from 3 May 2016. This replaces the $180,000 cap and bring forward rule.  Anyone exceeding the lifetime cap prior to 3 May 2016 is not required to remove the excess, however exceeding the lifetime cap after that date requires removing the excess, otherwise a penalty tax applies.

EXCESS CONCESSIONAL / DEDUCTIBLE AND NON-CONCESSIONAL / NON-DEDUCTIBLE CONTRIBUTIONS

An excess contributions tax of 31.5% and 46.5% was previously payable in respect of concessional and non-concessional contributions which exceeded the maximum amount allowed.  However, from 1 July 2013 only excess concessional contributions will be taxed at the member’s marginal tax rate and an interest charge applied.  The excess may be withdrawn from the fund.

The punitive taxes remain for excess non-concessional contributions and the rate increased from 1 July 2014 to 47%.

GOVERNMENT CO-CONTRIBUTION

The Government co-contribution of up to $500 is available to employees/the self-employed who are aged less than 71 at the end of the income year.  They must make non-concessional/undeducted personal super contributions of up to $1,000 and their total income (assessable, reportable employer super contributions and reportable fringe benefit amounts) must be less than $50,454.  The lower threshold of $35,454 allows for the full co-contribution of 50c/$1.

Conditions:

• 10% or more of the individual’s total income is attributable to employment or carrying on of a business.
• Salary sacrifice super contributions are included in assessable income from 1 July 2009.

GOVERNMENT CONTRIBUTIONS FOR LOW INCOME EARNERS

From 1 July 2012, concessional contributions made by or on behalf of individuals with adjusted taxable incomes of up to $37,000 will be matched by the Government, up to an annual maximum amount payable of $500.

The Budget proposes that, from 1 July 2017, this will be replaced by a Low Income Superannuation Tax Offset (LISTO) for funds – a non-refundable offset based on the tax paid on concessional contributions made on behalf of low income earners, up to a cap of $500, and applied to members with adjusted taxable income of up to $37,000.

CONTRIBUTIONS FOR SPOUSE – TAX OFFSET

A taxpayer making a personal non-concessional/non-deductible contribution for his/her non working or low income spouse is eligible for a tax offset of up to $540 where a contribution of up to $3,000 is made for that spouse.  However, the spouse’s assessable income, reportable fringe benefit and reportable super contribution amounts must not exceed $10,800.  The offset is phased out at $13,800.

Condition:

No work test applies if the spouse is under age 65, but between ages 65 and 70 the spouse must satisfy the work test.   No offset applies if over 70 years of age.

The Budget proposes that, from 1 July 2017, the income threshold for spouses will increase to $37,000 and phase out at $40,000.  Plus, the work test will be removed for those aged 65 to 74 in respect of super contributions.

FUND ACCEPTANCE OF CONTRIBUTIONS – AGE AND WORK TEST

A regulated superannuation fund may accept contributions as follows:

• If the member is under 65 – all contributions made.

• If the member is 65 or more but under 70  – mandated employer contributions and/or employer or member contributions provided the work test is satisfied.

• If the member is 70 or more but under 75 – mandated employer contributions and/or employer or member contributions up to the 28th of the month in which the member turns 75 and the member satisfies the work test.

• If the member is 75 or more – mandated employer contributions.

A person satisfies the work test if gainfully employed at least 40 hours in a period of not more than 30 consecutive days in that financial year.  Again, from 1 July 2017 the work test will be removed for those aged 65 to 74 in respect of super contributions.

SUPER GUARANTEE CONTRIBUTION RATE

From 1 July 2014, the rate was increased from 9.25% to 9.5% and will remain so until 1 July 2021 when it will increase by 0.5% each year until the rate is 12%.

REPORTABLE EMPLOYER SUPER CONTRIBUTIONS (RESC)

From 1 July 2014, the payment of salary sacrifice superannuation and other additional* super over and above the compulsory super guarantee charge of 9.5%, paid by employers for employees, will need to be recorded on employees’ year end PAYG summaries.

*where an employee influences the rate or amount of employer contributions.

An employee is considered to have the capacity to influence if he or she can directly negotiate the rate or amount of employer contributions.  As a guideline, this may be shown by:

1. The employer’s relationship with the employee – e.g. the employee is the spouse of the employer.
2. The employee’s involvement in negotiations/preparation concerning the terms of any industrial agreement governing super contributions.
3. The amount contributed for the employee relative to the compulsory contributions the employer is required to make.
4. The employer’s super contribution arrangements for other employees.
5. Any non-arm’s length dealings.

SUPERSTREAM STANDARD FOR CONTRIBUTIONS – AN EMPLOYER’S PERSPECTIVE

This standard is aimed at improving the efficiency of the superannuation system by requiring employers to submit data and make payments for super contributions on behalf of employees electronically.  This will ensure employer contributions are paid into a member’s account in a consistent, timely and efficient manner.

Although implemented on 1 July 2015, the ATO allowed a 12 month period of grace for employers to “get it right” with respect to the new payment and reporting standard.  After this, the ATO will be undertaking compliance checks and may issue penalty notices or fines to employers who have failed to take reasonable steps or genuine attempts to meet their SuperStream obligations.

As every business is different, there is no ‘one size fits all’ approach to adopting SuperStream.  The following options are available to assist employers to meet their requirements:

• Upgrade payroll software
• Outsource payroll function or use other service provider
• Use a commercial clearing house or the free Small Business Superannuation Clearing House (for employers with 19 or fewer employees)

To support contributions being made using the SuperStream standard employers will need to collect the following information from their employees (if not already on hand):

• Unique superannuation identifier (USI) for APRA-regulated funds
• ABN for SMSF funds
• Bank account details
• Electronic service address

Most employers do not need to understand the technical detail of SuperStream as the data requirements will be sourced from a complying payroll system.  However, your payroll officer will need to become familiar with the data and processing requirements of SuperStream.

Please contact your advisor for more information.