Employers may wish to provide staff with some form of assistance with the operating costs of a motor vehicle used for business/employment purposes, but not to the extent of providing the employee with a company car.

 A ready solution would be to simply pay a motor vehicle allowance; an administratively convenient payment simply added to the regular payment and noted separately on the PAYG summary at year end.

The employee receives the immediate cash benefit and at year end may still claim for motor vehicle expenses incurred in their taxation return.

Payment of allowances avoids any fringe benefits tax implications which may arise should a company motor vehicle be provided.

We have considerable experience in negotiating payment plans with the Australian Taxation Office to the mutual benefit of all concerned when liquidity is temporarily strained, as it may be in these difficult economic times.

It is important there be regular communication with the ATO and, as your tax agent, we are well placed to assist you and facilitate resolution of any income tax or integrated client account debt.  Our access through the tax agent hotline and/or the portal is likely to achieve a faster outcome.

The ATO expects that debt repayment under a negotiated plan will be completed within two years.  Of course, the plan is conditional on future obligations and liabilities, as far as lodgements and payments are concerned, being met as they arise over the life of the payment plan.

It is worth noting that any late lodgements or payments will automatically default the payment plan which then must be renegotiated, usually supported by statements of income, expenses, assets and liabilities etc.

In short, defaulting a payment plan should be avoided; this includes allowing for Bpay processing time of two or three days as even a day late will trigger a default.

Under superannuation guarantee for employees legislation, the amount payable for 2013/2014 for employees (and some contractors) increased to 9.25% of a worker’s ordinary time earnings.  The superannuation contributions are payable by employers on a quarterly basis, on or before the 28th of the month following each quarter end.

To be deductible in the financial year of payment the June 2014 superannuation payment needs to be made on or before 30 June, 2014; otherwise superannuation payments are due as follows:

QUARTERLY DUE DATES FOR SUPERANNUATION PAYMENTS

September  – 28 October

December  – 28 January

March – 28 April

June – 28 July

It is essential employer superannuation payments are made to (and in) the nominated superannuation fund on or before the due date to avoid the administrative burden required in the event payments are even one day late!  Employer superannuation contributions are under Australian Taxation Office scrutiny and timing is an issue.

You can use the Superannuation guarantee eligibility decision tool  to work out if you need to make super contributions for your workers.

 The superannuation guarantee scheme is administered on a self assessment basis; what that means is that in the event the employer is even one day late with employee (and some contractor) superannuation contribution payments, the contribution becomes non deductible for tax purposes and the employer is required to lodge a superannuation shortfall statement as well as make payment of the superannuation guarantee charge consisting of:

• Superannuation shortfall amount i.e. amount either late or not paid
• Interest
• Administration fee

The superannuation shortfall statement and payment is required within one month of the contribution payment cut off, hence, two months after quarter end.
If the employee superannuation contributions are paid after the due date the employer has two options for treatment of the late payment:

LATE PAYMENT OFFSET OPTION – Employer may elect the late payment be used to offset the SG charge liability (non deductible) however the superannuation guarantee charge shortfall statement is still required.

PREPAYMENT OPTION – Employer may elect the late payment to be an advance payment for the next quarter (deductible, but the still applicable superannuation guarantee charge (for the previous quarter) remains non deductible and a shortfall statement is required).

Consequences for late payment, even one day late, must be avoided!

Traditionally, 30 June each year brings forth a rash of tax planning 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 $33,516, phasing out at $48,516.

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 initial deduction of $5,000 (GST exclusive) for motor vehicles used for business 100%, between 1 July and 31 December 2013, plus 15% of the balance of the cost.

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 between 1 July and 31 December 2013, costing under $6,500 (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 2014/2015 salary packaging arrangements are in place before the commencement of the new tax year.

Bonuses and fees for the 2013/2014 year need to be approved at meetings and in place prior to 30 June 2014.

PRIVATE COMPANY LOANS

Any loans to shareholders or associates during 2012/2013 need to be repaid on or before 30 June 2014 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 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 the summary statement for employees are required by the Australian Taxation Office 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 2014.  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 or 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 2014:

• 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 2014, ensure that any services are provided within 12 months of the payment and before 1 July 2015.  Otherwise, the deductions must be claimed over the period of the pre-payment.  Any expense under $1,000 is exempt from pre-payment rules.