The ATO has introduced a new payroll reporting framework for employers called Single Touch Payroll which is set to commence from 1 July 2018 for large employers with 20 or more employees on 1 April 2018, while employers with 19 employees or less have until 1 July 2019 to comply with the new requirements, subject to legislation passing through parliament.

The number of employees in question is the number of employees you had on 1 April 2018 and simply needs to be documented for your records. Employees to be included in the headcount are full time, part time, casual and seasonal employees. Independent contractors, company directors, employees who ceased before 1 April and casual employees who did not work in March are to be excluded.

If you are using accounting software with a payroll solution, check if it is Single Touch Payroll ready. Employers with fewer than 20 employees and not using accounting software will need to adopt a payroll solution before 1 July 2019 to ensure compliance with the new requirements.

Under the Single Touch Payroll requirements, payment information of employees will be reported to the ATO on a regular basis depending on the business’s usual pay cycle (weekly/fortnightly/monthly). Payment information reported to the ATO will include employees’ salaries and wages, allowances, deductions, PAYG withholding and, importantly, superannuation information including super guarantee. Each time you pay your employees, tax and super details will be reported to the ATO. There will be no changes to the pay cycle or due dates for payment of PAYG tax or super contributions.

Another change under Single Touch Payroll is the removal of the need to prepare and lodge PAYG payment summaries to employees at the end of the financial year for most payments, as all the relevant information would have already been reported to the ATO. From the employee’s perspective, the pay information will be shown in their MyGov account, then transferred into the ATO “pre-fill” report.

CONTACT US TODAY at BSN & Co if you need help bringing you up to date with single touch payroll.

Many businesses and individuals fall into the trap of not paying their tax debts or putting it off thinking that it will go away if ignored.  The ATO has increased its compliance measures in recent years, which means it will follow up on outstanding tax debts either directly or by engaging debt collectors.

If you are unable to pay your tax debt in full, we can assist you with putting a payment arrangement in place so you can pay it off in instalments over a period of time.  However, you need to be aware that conditions apply on ATO payment plans.  You will be required to a) stick to the payment plan set up by paying the exact amount of the scheduled payments before the nominated date (any variation of the amount will default the plan!), and b) lodge and pay future obligations IN FULL, as and when due.

Non payment of future obligations in full will result in defaulting on an ATO payment plan and a new payment plan will need to be negotiated to remedy the problem.  Further, every time a payment plan is defaulted, the ATO increases your risk profile and after a certain number of defaults the ATO will require a ‘capacity to pay’ statement, which includes extensive details of your monthly income and expenses, before agreement to a further payment arrangement.

CONTACT US TODAY  at BSN & Co if you need help with paying off your tax debts.

Changes to Rental Property Deductions 2018

Recent budget announcements and legislation changes to rental property deductions in 2018 have significantly impacted the deductions previously available for property investors.

From 1 July 2017, owners of self-managed residential investment, rental properties will be unable to claim a tax deduction for travel expenses, nor can any such expense be included in the cost base of the property.

The other major change to investment properties is the limitation of depreciation deductions on existing plant and equipment of residential properties. From 1 July 2017, depreciation on existing or used plant and equipment acquired on or after 9 May 2017 (purchase contract date of property) will not be deductible. Any assets held prior to 9 May 2017, or properties purchased before that date, will still be depreciable as the old rules have been grandfathered.

The good news is that any new plant and equipment purchased can still be depreciated. Brand new residential rental properties are also allowed to claim depreciation on plant and equipment as the assets are not second-hand.

Depreciation of plant and equipment for commercial properties is unaffected by the new legislation.

To ensure you don’t miss out on rental property deductions, CONTACT US TODAY to discuss changes to rental property deductions 2018.

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:  $25,000

Condition:

Between 65 – 74 years must satisfy the work test and only contributions received before the 28^th day after the end of the month in which member turns 75 are deductible.

CONCESSIONAL / DEDUCTIBLE PERSONAL CONTRIBUTIONS BY INDIVIDUAL TAXPAYERS, INCLUDING INVESTORS

Maximum contribution by each individual up to 75 years of age without incurring excess concessional contributions tax:  $25,000

Conditions:

• 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).
• Over 65 years must satisfy work test.
• For individuals turning 75, only contributions received before the 28^th day after the end of the month in which member turns 75 are deductible.

HIGH INCOME EARNER CONTRIBUTIONS (DIVISION 293)

From 1 July 2017, an additional 15% “contributions tax” is applied to those with adjusted taxable incomes (broad definition) exceeding $250,000.

NON-CONCESSIONAL / NON-DEDUCTIBLE CONTRIBUTIONS BY INDIVIDUAL TAXPAYERS

Maximum contribution by each individual up to 75 years of age without incurring excess non-concessional contributions tax:  $100,000 subject to individual’s total superannuation balance

Note:   Over 65 years the work test will need to be satisfied.

Note:   An individual taxpayer who is under 65 years of age in an income year can bring forward two years’ entitlements and make one contribution of $300,000 without exceeding the cap ─ i.e. no further contributions over the three years.

Note:   The annual maximum amount will be indexed and remain at six times the concessional amount.

Note:   If an individual’s total superannuation balance at 30 June 2017 was $1.6 million or higher, the non-concessional cap will be nil.

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

From 1 July 2013 excess concessional (only) 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 tax rate of 47% remains for excess non-concessional contributions.

GOVERNMENT CO-CONTRIBUTIONS

The co-contribution made by the Government of up to $500 is available to employees and the self-employed less than 71 years of age at the end of the income year who make non-concessional/undeducted personal superannuation contributions of up to $1,000 and whose total income (assessable, reportable employer superannuation contributions and reportable fringe benefit amounts) is less than $51,813; the lower threshold of $36,813 allows for the full co-contribution 50c/$1.

Conditions:

• 10% or more of the person’s total income is attributable to employment or carrying on of a business.
• Total superannuation balance at 30 June 2017 must be less than $1.6 million.

GOVERNMENT CONTRIBUTIONS FOR LOW INCOME EARNERS

From 1 July 2017, 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.

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 a spouse whose assessable income, reportable fringe benefit and reportable superannuation contribution amounts do not exceed $37,000.  The offset is phased out at $40,000.

Condition:

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

FUND ACCEPTANCE OF CONTRIBUTIONS – AGE AND WORK TEST

A regulated superannuation fund may accept contributions as follows:

• If the member is under age 65

–        all contributions made.

• If the member is 65 or more but under 70 years

–        mandated employer contributions

–        employer or member contributions provided the work test is satisfied.

• If the member is 70 or more but under 75 years

–        mandated employer contributions

–        employer or member contributions up to the 28th of the month in which the member turns 75 and satisfies the work test.

• If the member is 75 years 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.

SUPERANNUATION GUARANTEE CONTRIBUTION RATE

From 1 July 2014, the contribution rate has 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* superannuation over and above the compulsory superannuation guarantee charge of 9.5%, paid by employers for employees, will need to be recorded on employees’ year end PAYG summaries.

*where 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, the capacity to influence may be shown by:

1. The employer’s relationship with the employee. For example, 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; and
5. Any non-arm’s length dealings.

UNUSED CONCESSIONAL / DEDUCTIBLE CONTRIBUTIONS (BOTH FOR EMPLOYERS AND INDIVIDUAL TAXPAYERS, INCLUDING INVESTORS)

From 1 July 2018, where an individual’s superannuation fund balance is less than $500,000, unused concessional contributions (up to the maximum $25,000) may be aggregated and claimed on a rolling five year basis. The unused contributions can be accessed from 1 July 2019.

HOME PROCEEDS (KNOWN AS “DOWNSIZING”, ONE-OFF CONTRIBUTION, NOT SUBJECT TO USUAL CAP)

From 1 July 2018 proceeds from sale of home may be contributed, subject to:

Individuals aged 65 years or more

• Proceeds from sale of primary dwelling / main residence
• Lived therein for at least 10 years
• Provided house sells for at least $600,000, each joint owner may contribute up to $300,000
• Contribution must be made within 90 days of settlement
• Contract must be signed on or after 1 July 2018

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 tax planning for 30 June 2018, as follows:

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 $36,813, phasing out at $51,813, subject to age, income and total superannuation balance.

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 and can be kept in an electronic or paper format.

Record the financial year end odometer reading.

Small businesses (turnover <$10m) can claim an instant deduction for motor vehicles used for business 100% and costing up to $20,000 (this concession expires on 30 June 2018).

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 <$10m) 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 2018/2019 salary packaging arrangements are in place before the commencement of the new tax year.

Bonuses and fees for the 2017/2018 year need to be approved at meetings and in place prior to 30 June 2018.

PRIVATE COMPANY LOANS

Any loans to shareholders or associates during 2016/2017 need to be repaid on or before 15 May 2018, 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 2018.  Some purchases you may consider include:

• 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 2018:

• 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 2018, ensure that any services are provided within 12 months of the payment and before 1 July 2019.  Otherwise, the deductions must be claimed over the period of the pre-payment.  Any expense under $1,000 is exempt from pre-payment rules.

To ensure you don’t miss out on saving yourself $$$, CONTACT US TODAY about tax planning 30 June 2018.