With the Australian Taxation Office (ATO) becoming stricter year after year, adhering to set standards is absolutely essential for a much smoother accounting and bookkeeping experience.

Whether you’re a small business owner or an executive of a large conglomerate, you likely already know that nothing reigns supreme except for the ATO’s rules when it comes to financial matters. Fines for tax and financing-related blunders are skyrocketing, and related penalties are growing more severe, which is why it’s critical to ensure that you stay in the good graces of authorities.

This means it’s crucial to be mindful of mistakes that the ATO can pick up during tax audits.

Common Business Mistakes You Need to Avoid

With thousands of businesses being penalised by the ATO annually for avoidable mistakes, you must avoid the same fate to protect your finances and status. Staying away from tax mistakes isn’t as difficult as you might expect it to be; in fact, it merely requires simple awareness.

If you want to ensure that your company won’t commit blunders that can land it in hot water during tax audits, here are the pitfalls that you need to avoid:

Mistake #1: Failing to Keep Stock Records

Here’s something you should know: an increase in the value of your stock even in just a single year is classified as assessable income. Alternatively, a decrease in stock value is classified as an allowable deduction.

Some businesses value their trading stock at cost to minimise their taxes and have the lowest possible inventory value. Unfortunately, there are severe penalties for undervaluing business stock, similar to those imposed on businesses for not keeping records at all.

To help ensure that you don’t end up making the mistakes mentioned above, it’s ideal that you keep records of your stock for five years. It’s also worth noting that the records you keep much be written in English or in a form that the ATO can understand.

Mistake #2: Spending Too Much on Christmas Parties and Not Paying Your Fringe Benefits Tax (FBT)

So, you threw a much larger Christmas party last year and invited even your smallest clients to cut costs on tax audits. Well, newsflash: this doesn’t mean that you can avoid your FBT.

Aside from the fact that you can’t file your staff Christmas party under a classification of “staff amenities” for your deductions, actually throwing a party outside does not remove your obligation to pay Fringe Benefits Tax. If you want to avoid FBT the right way, you can celebrate at an after-hours offsite venue and keep the cost per employee for the celebration to under $300 (inclusive of GST).

Mistake #3: Maintaining Inadequate Record-Keeping

Another far-too-common mistake that business owners make is that they fail to maintain a distinct level of discipline with their record keeping. Even the smallest of mistakes when handling accounting and bookkeeping tasks can lead to severe lapses in your records. Unfortunately, these same lapses can result in the ATO levying severe penalties on your company once it finds out that things don’t add up.

If you want to avoid slacking on your record keeping-related work, then consider investing in professional bookkeeping and accounting services for your business’s finances. Through the help of an expert like SMB Accounting, you can ensure that your business has everything it needs to avoid problems with its numbers come tax time and beyond!

Conclusion

When it comes to keeping your business in shape and ensuring that it thrives, nothing is more important than ensuring that you don’t make any mistakes that the ATO can penalise you for. By keeping an eye out for the three mistakes mentioned above, you won’t experience any problems during your next tax audit!

We’re a business accounting firm on the Sunshine Coast specialising in a number of financial services, including tax returns, audits, company set-ups, and ongoing bookkeeping and accounting services that will help your business stay on top of its finances. Get in touch with us today to see how we can keep you in good financial shape!

Have you ever considered dealing with a customer who hasn’t paid for the products or the services you provided them? When you do fail to collect the money they owe you, that’s considered bad debt. This is an amount of money that can already be considered lost and should be written off in the books.

In this post, SMB accounting. Your trusted business accountants in Sunshine Coast will break down the basics of bad debt, and what you can do so you can keep it from happening to your business:

Debt Management

Even businesses that are considered successful can still fail if they have trouble managing their cash flow. In truth, the Australian Securities and Investments Commission or ASIC reports that mismanagement of cash flow is among the significant causes of businesses going under.

To minimize the risk of overdue payments turning into bad debts, you need to be able to establish clear terms when it comes to payment. You should also set a tighter credit control as well as a process that will help you motivate your customers to pay immediately. When you have debt management policies and strategies in place, that can also be helpful for when a customer runs into payment problems.

If you fail to deal with frequent bad debt or debts that have reached high levels, you would feel a decline in your business. When this happens, you definitely need to employ credit control and management tactics.

Bad Debt Can Impact Your Business

There are a number of ways bad debts can affect your business, including:

Putting you at risk of not being able to pay your own creditors

Affecting your growth and expansion plans

Reducing your cash flow which you use for day-to-day operations

Putting your business at risk of insolvency

How You Can Avoid Bad Debts

While it is inevitable for any business to encounter bad debts once or twice, there are ways you can prevent them from happening to you all the time. Here are some things you can do:

Perform Credit Checks

Before you offer any credit to customers, especially new ones, you should first perform credit checks. You can also request bank references from your new customers. Even existing customers should be credit checked before being allowed to get credit, especially if in large values.

Set Realistic Limits

You can also set credit limits to reduce potential losses due to bad debts. You can increase those limits if the customer proves that they are reliable and responsible with the payments.

Have Customers Sign Clear Terms and Conditions

When you have terms and conditions documented, and they sign it, then the customers know it would be harder for them to neglect the payment, especially if they will incur hefty penalties or will face legal consequences. You should also have your terms and conditions for credit posted on your website.

Send Your Invoices Promptly

Don’t forget to send invoices as soon as the delivery of the products or services is done. Make sure to double-check the address, too. Don’t wait until the end of the month to invoice as this delay will take away the feeling of urgency and could even influence the customers to pay late because you sent the invoice late, too, or worse, not to pay at all.

Conclusion

Never underestimate the effects of bad debt on a company, especially if yours is a small business that’s still trying to get its footing. When word comes out that you are lenient when it comes to credit collection, customers might abuse you and you’ll end up in debt yourself in trying to keep your business afloat. You wouldn’t want all your hard work to go to waste, so do what you can and also hire a small business accounting expert to help you sort things like this.

SMB Accounting has some of the best business accountants in Sunshine Coast. Contact our team today, and we’ll tell you all about our services!

Tax season is one of the most stressful times of the year. No one will argue that tax returns have always been a difficult thing to manage. This is why hiring a tax consultant is pretty much a requirement if you don’t wanna miss out on receiving potential deductions. With that being said, you also shouldn’t be complacent just because you’ve hired an accountant to help you with your tax returns as there are still ways to increase your tax returns and make the most out of your refund.

There are small changes you can make that will help you get the most out of your tax returns and will make submitting your tax returns easier than it has ever been before. If you want to know more about this, read on for four tips to help you maximise your tax returns every year!

Prepare Your Taxes Early

A lot of the stress that comes with doing your taxes stems from the time constraint. Doing your taxes near the cutoff can put a lot of undue pressure on you. Aside from being stressful, rushing to beat the deadline makes mistakes more likely to occur. This can cause even more problems for you down the line. To avoid this, we suggest that you prepare your taxes as early as possible. Be sure to give your tax consultant all the information and documentation they need as soon as it becomes available to you.

Determine Your Tax Bracket

Aside from preparing early, working out your tax bracket accurately will also help you maximise your returns. The tax bracket that you are in will determine your tax obligations. Now, it’s important to note that tax brackets aren’t always the same year-to-year. This is a common mistake that people often make, as they falsely assume that they are in the same bracket they were in last year. To avoid this, be sure to review the individual and married income tax rates to truly know where you stand and what your obligations are when it comes to your tax bracket.

Review Your Deductions

While it may be obvious, it is something that has to be said: review your deductions. Failing to claim deductions is a missed opportunity as you could potentially be saving yourself a significant amount of money. We suggest checking with the Australia Taxation Office to see which deductions you qualify for.

Create and Use a Receipt System

Lastly, being more organized with your receipts is a great way to maximise your tax returns. While it may seem trivial, tracking and saving receipts is one of the best ways to save money during tax season. Instead of stuffing your receipts in random places, we suggest creating a system for them that allows you to organize and keep track of any and all relevant receipts. And while you can opt to physically organize them, we suggest making use of an app that allows you to digitise receipts as they tend to be more secure and easier to manage.

Conclusion

We hope these tips prove to be useful when it comes to helping you maximise your tax returns. Remember, doing your taxes doesn’t have to be stressful. By taking the time to be more organised and prepared, you make things infinitely easier for yourself.  

If you’re looking for an accountant in Caloundra to help you with your business’s finances, SMB Accounting is here to help. We offer various accounting services, such as individual tax returns, small business accounting, SMSF audits, trust account audits, special financial statements, and more. Learn more about how our accountants can help your business today!

 

As business managers, it’s important to understand where their brand is positioned in terms of finances and operational performance. Having that knowledge of whether the company is in the red or not can often help you make better choices in the future and steer where the business should be focusing.

A flurry of data can say a lot, but it can be challenging for any regular person to decipher. Management reporting is a phrase that’s often thrown around when it comes to assessing where your business is at, but what does it actually mean? And who’s responsible for it?

Defining Management Report

A management report is a set of information that is given to a business owner and manager to showcase relevant metrics to their performance. The data being shown is often collected throughout different departments and teams in a small company, often taking sales into account.

Most management reporting is often presented via graphs and charts. The visual representation of the product can often make it much easier for managers to absorb and understand the insights it provides rather than construing the raw version. As implied above, management reports are used in order to understand how the business can be lead better.

Management reports are best assigned to an accounting firm that will be able to handle all your financial data. It can be taxing on time and energy to assign someone else within the company to handle this financial report, after all. Allowing a professional to focus on this responsibility will give you accurate data and let you allot resources to focus on business growth.

Interpreting a Management Report

The top three elements business managers will often observe in a management report is budget, cash flow and KPIs. Budget is one of the most important parts of a statement as it provides you with how much your business is working with. The amount of cash in a given period of time can help you manage your goals better.

Cash flow is also significant. Understanding how money is moving in the business in terms of investing, spending and earning will allow business managers to assess the activities going on. If it seems like a company’s cash flow is unbalanced, perhaps too much money is going out of the business with nothing in return. A manager should make a decision to rectify that.

Picking KPIs for a Management Report

KPIs or key performance indicators can differ from company to company, and even more so for the department creating a similar report. The KPIs in a management report is used to answer whether or not the actions of business managers are helping the company progress and meeting its objectives.

Businesses that are offering products are bound to have different signifiers in contrast with a service provider. Here are some examples of general KPIs that all companies use:

  • Productivity of different department staff
  • Employee satisfaction rating
  • Profitability of the business’ clients
  • Return on investment
  • Customer acquisition

Conclusion

Management reporting is something that businesses of any size should be able to utilise. It can be rather crucial in managing a business just right, so having that updated information provided in the report from month to month can be a lifesaver.

Looking for an accountant in Caloundra to handle your management report? SMB Accounting in Australia offers to do your reports, providing individual tax returns and audits to help your small business. Contact us today!

Now that we’re halfway through the year, it’s the best time to make changes in how you operate your business, particularly when it comes to finances. This is because reviewing your financial budget regularly can identify areas for improvement and spot opportunities for growth.

Budgeting is one of the easiest ways to manage your cash flow since it handles your operational expenditures, though experienced business owners know that the best way to improve their budget for their small business is through benchmarking. When budgeting for larger companies starts to get tricky, benchmarking is one of the proven options that streamline your budgeting process. 

If you’re looking to organise your business’s financial mess, you’re taking the proper steps for improvement by being here. In this article, we’ll share with you reasons you should start benchmarking for your small business. Let’s take a look!

What is Benchmarking?

Benchmarking is when you review your financial records, analyse, and measure your business’s inputs and outputs. With this comparison, you can understand your current situation and compare it to similar businesses in the sector. Having a birdseye view of your finances reveals inefficiencies, high costs, and wastage, allowing you to take necessary action immediately to improve operations and budgeting. 

Fortunately, working with experienced accountants can simplify benchmarking even further with their expert guidance and tools. For one, professionals will utilise efficient methods that will help you compare your business and provide a competitive analysis. With a more streamlined approach to your financial procedures, your business knows what to do next to spend less and gain more.

Although there are benchmarking tools available in the market today, working with an accountant is still highly recommended. This is because working with a professional will allow you to create accurate financial forecasts that will benefit your business. 

Why Should I Start Benchmarking My Business?

  • Gives You an Edge Over Your Competitors: One of the biggest reasons you should start benchmarking is because it helps your business maintain a competitive edge. Seeing as budgeting is an essential factor for a successful business, it’s only right that you create strategies that will help you lead the pack in a competitive marketplace.
  • It’s Cost-Efficient and Effective: The great thing about benchmarking is that it improves your business outlook, allowing you to streamline your expenses. With that being said, benchmarking enables you to reduce your costs while improving your margins and business growth. 
  • Improve Workplace Productivity: A common mistake businesses make is that they keep worrying about their budget. But with benchmarking, you’ll get to identify problems, increasing your team’s productivity efficiently. With this, you’ll notice an improvement in your team’s skills and the quality of their output, encouraging them to feel more motivated at work. 

The Bottom Line: Utilise Effective Tools to Help Develop Effective Strategies for Small Business Growth

Understanding the financial health of your small business is essential for growth, allowing you to create strategies that will streamline operations and give you a competitive edge in the marketplace. 

With the help of credible accountants, you’ll get to use benchmarking tools and strategies that will provide you advantages in the market and improve your team’s work ethic to help them garner their desired results. 

How Can SMB Accounting Help You?

Financial-related tasks can be pretty overwhelming for small business owners like you. Thankfully, SMB Accounting is here to help you.

Our accounting firm offers various financial services like individual tax returns, accounting for small businesses, self-managed super fund audits and more. 

If you’re looking for a reliable accountant in Caloundra to help you run your business, reach out to us today!

 

The end of the year approaches, and while people are getting ready for the festivities ahead, professionals are crunching numbers to prepare for the 2021 tax returns. However, the factors to consider for writing a tax return is trickier now in a post-coronavirus world. 

Speaking of the impact of the coronavirus outbreak, the ATO now set their sights on the boom in home-bound, work set-ups, and other areas that received the most impact from the months-long lockdowns. 

As Australians prepare for the impending tax season to meet the November 1 deadline, the ATO finally unveiled their primary targets, so professionals like you don’t make the mistake of reporting unsupported deductions. 

ATO’s Focus Areas: Key Points for Tax Returns 

ATO puts the spotlight on the effects of the pandemic; that’s why they will be targeting the following for 2021’s end of the financial year:

Work from Home Offices 

There’s no doubt that COVID-19 put a wrench in everybody’s plans, but the biggest impact it made on the economy is its sudden demand for work from home set-ups as home office expenses skyrocketed to a whopping 4.42 million. 

Even business leaders had to unlock their creativity to turn a relaxed environment into a perfect space for productivity, be it investing in ergonomic equipment or turning kitchen tables into a makeshift desk. Nonetheless, that doesn’t mean you can add a new bed as part of your deductibles. 

The ATO will crackdown on specific home office expenses, from basic essentials such as phone, internet, HVAC, lighting, and other business-related costs for an all-inclusive claim of 80¢ per hour. Meanwhile, the ATO also calculator a fixed rate of 52¢ an hour for dedicated workspaces, including computer consumables.

Investment and Rental Properties 

The real estate industry took one of the biggest hits as COVID-related restrictions disrupted their operations, particularly Australians with investment and rental properties. This means their means of income have fallen short due to the little-to-no willing renters when the time for social distancing was at its peak; that’s why the ATO encourages to declare income from all real estate resources and get deductibles for income-producing spaces only. 

Cryptocurrency 

One of the most revolutionary digital assets that paved the way for blockchain technology in transaction-related activities, the economy’s shift to digital solutions solidified the advent of cryptocurrency. 

Businesses that use cryptocurrency to obtain goods or services can get capital gains events, but the tricky part is that cryptocurrency exchange lacks clearly defined records. 

The Bottom Line: Unveiling the ATO’s Top Targets for 2021’s End of the Financial Year Tax Returns 

Tax season can often feel like a bane to all working individuals; that’s why getting a head start on your obligations to the Australian Taxation Office (ATO) can save you from dealing with costly consequences as the COVID-ridden financial year draws near. 

How Can We Help You?

If you’re looking for an accountant in Caloundra to help you with your business’s finances, SMB Accounting is here to help.

We offer various accounting services, such as individual tax returns, small business accounting, SMSF audits, trust account audits, special financial statements, and more. Learn more about how our accountants can help your business today!

Accrual accounting, put simply, is about stating revenues and expenses as they happen instead of when cash is paid out or received. As a contract, cash accounting systems don’t report expenses or income until a full-on transaction with a cash exchange happens. For the most part, accrual accounting is what businesses make use of. On the other hand, an accountant working with individuals sees the cash method used more often.

Accrual Accounting

When expenses are matched with revenues, that is the very basis of accrual accounting. A lot of times, this happens simultaneously in business a lot. However, cash transactions aren’t always achieved in an instant. The accrual accounting method is practically a necessity for businesses that have an inventory involved. They’re a much better example of how it functions as a whole. 

Stocking inventory tends to lead businesses to incur expenses, but it’s possible for businesses to have total sales in the same time period that can match the expense. Should the business have sales made on credit, it’s possible for the payment not to come in within the same accounting period. 

Credit purchases are a key contributor to how complicated business operations can get. That’s largely why the accrual method has been more of the standard.

Cash Accounting

As any accountant will point out, cash accounting, in a nutshell, is the complete opposite of accrual accounting. Cash accounting is a matter of recording the payment date at the moment it’s received or made. It is rather straightforward and quite simple to explain as well as comprehend.

Importance of Accrual Accounting

Accrual accounting is a key financial tool. It’s able to give a clearer statement of the health of the company since both accounts payable and accounts receivable are included. There is a clear, real-time portrayal of funds and what future reports could contain.

The benefits of accrual accounting include:

  • Accuracy – As previously mentioned, an accurate view of the company’s financial activity is accessible through this. Both debt and income are outlined thoroughly, which lets the business manage its financial activity patterns better.
  • Funding – A lot of shareholders and potential investors alike will likely want reports through accrual accounting. When there are reports that display a good income flow over a specific period, possible investors will be enticed.
  • Future Plans – Since accrual accounting is accurate in real-time, a more detailed business finance overview is available to management. In that way, progress in the past can be assessed, alongside having new future plans with a precise budget.

Conclusion

Handling a business can be rather complex, especially when you look into the accounting and finance aspect. A good way for the financial activities of a company to be monitored in real-time is through accrued accounting. There are several benefits to this, including the aforementioned accuracy, an avenue that brings in funding through enticing possible investors, and the ability to make future plans with a precise budget for moving forward.

SMB Accounting is one of the leading accounting firms in Australia, offering outstanding small business accounting services to clients in Brisbane, Melbourne, Perth and the Sunshine Coast. Let our team of highly skilled SMB consultants in Melbourne help you in growing your business. Partner with us today! 

 

Is your real estate agency struggling to keep up with all your accounting and bookkeeping obligations, especially on peak months where there are a lot of homebuyers looking to purchase a house? It may be time to hire a full-time accountant on staff to keep up with all your tax and accounting responsibilities. The question is, should you hire an in-house accountant or outsource it to a firm?

There are many accounting firms in the Sunshine Coast that do a great job in helping real estate agencies get their taxes and bookkeeping in order. If you’re unsure if you should outsource or not, here are four reasons why outsourcing can actually be more beneficial than hiring in-house accountants.

Reduced Staff and Recruitment Costs

Many companies are under the impression that outsourcing expert services are going to be prohibitively costly. The idea of paying a firm to pay someone also to do the job you require does sound like hiring with extra steps and added costs. In reality, however, outsourcing lets you save on costs and time. Don’t let perceived costs prevent you from seeing the bigger picture here. 

Consider the cost of recruitment, advertising for the role, vetting candidates, and recruitment agency costs, not to mention paying for worker’s compensation, sick leave and other benefits. Looking at all that will make you realise that you’re actually spending too much time and money than just paying a firm to do the job you actually need to be done. 

Offloading Some of the Risk

By outsourcing accounting duties, you shift any risks to a third-party provider and mitigate the risk of significant loss. Your provider will be in charge of the performance and quality of service of the accountants. All you have to do is give them the data they need, pay them to process it, and expect results. Of course, you need to find a provider equipped with public liability and professional indemnity insurance. They also need to have their own risk management policies in place for providing consistent services.

Gaining Access to Unrivalled Expertise

An outsourced real estate accountant is expected to be well-versed in every aspect of the profession, from bookkeeping and lodgement of income tax returns to keeping you updated on your company’s financial health. You don’t have to worry about training your own staff to ensure you are compliant with the latest tax laws and regulations. When you outsource, you have access to an entire accounting firm’s expertise that you may not always find if you hire your own accounting staff.

Maintaining Stability and Consistency

Continuity is essential in Real Estate, especially if you want to keep things running smoothly all the time. If you happen to be experiencing any internal conflicts between your accountant and other staff members, your clients won’t be interested in your internal staffing issues. Outsourcing eliminates this problem entirely. There are no staff walkouts, leaving you in the lurch, not knowing what is going on. All you need to worry about is sending all your real estate sales data and other pertinent information to the accounting firm and let them handle the rest.

Conclusion

Hiring an external provider is never a bad thing. Although it does have its advantages and disadvantages, you stand to gain more when you outsource some of the work in your company. Real estate is a fast-growing industry and can be overwhelming at times. Having an external provider as a partner can ease some of the burdens of running your business.

SMB Accounting is one of the leading accounting firms in Australia, offering outstanding service to clients and individuals. We provide small business accounting services to clients in Brisbane, Melbourne, Perth, and the Sunshine Coast. Let our team of highly skilled SMB accountants help you in growing your business. Partner with us today!

General Year End Tax Planning Strategies

Business Income and Expenses

Subject to cash flow requirements, consider deferring income until after 30 June, especially if you expect lower income for 2021/22 compared to 2020/21.

Most businesses are taxed on income when it is invoiced. Some small businesses may only be taxed when income is received. Income from construction contracts is generally taxed when progress payments are invoiced or received.

Ensure that you have complied with the requirements to claim deductions in 2020/21:

  • Bad debts must be written off in your accounts before 30 June.
  • Employer or self-employed superannuation contributions must be paid to, and received by, the super fund before 30 June and must be within the contributions cap ($25,000 for all individuals regardless of age).
  • Depreciation can be claimed for assets first used, or installed ready for use, before 30 June.
  • Small businesses (turnover less than $10m), can claim expenses prepaid up to 12 months in advance – for larger businesses, this is generally limited to expenses below $1,000.
  • Wages paid to your spouse or family members must be reasonable for the work performed.

“The Temporary Full Expensing of Assets allows immediate deductions of assets purchased after 6 October 20 and before 30 June 22 for eligible businesses with turnover up to $5 billion.”

Small businesses planning major purchases or replacement of capital equipment should contact us for advice. Careful timing of those transactions can result in substantial tax savings.

Scrap any obsolete item in the asset register before 30 June. Consider delaying the sale of assets that will realise a profit on sale and bring forward any sales that will result in a loss.

Review valuations of trading stock in the lead up to 30 June. The best practice is generally to value stock at the lower of cost or market selling value.

These best practices should be revised if you expect a tax loss for 2020/21 or substantially higher income in 2021/22 compared to 2020/21.

 

Personal Income, Deductions and Tax Offsets

Subject to cash flow requirements, set term deposits to mature after 1 July, rather than before 30 June.

Consider realising capital losses if you have already realised capital gains on other assets during 2020/21. Conversely, consider realising capital gains if you have unrecouped capital losses, or you expect substantially higher income in 2021/22 compared to 2020/21.

If you expect lower income in 2021/22 due to retirement or any other reason, consider deferring income until after 1 July, when you will be in a lower tax bracket. If you are a primary producer and you expect a permanent reduction in income, consider withdrawing from the income averaging system.

Arrange for deductible donations to be grouped in the higher income year, if you expect a substantially higher or lower income in 2021/22 compared to 2020/21. Make all donations in the name of the higher income earner.

Other Tax Planning Considerations

Contact us for advice if you have moved to or from Australia for an extended period. You may need to review your residency status for tax purposes. There are important tax consequences if you change tax residency.

Trustees of trusts should ensure that all necessary documentation is completed before 30 June, especially where you intend to stream capital gains or franked distributions to specific beneficiaries or have beneficiaries who aren’t the default beneficiaries.

Family discretionary trusts may need to make a family trust election if the trust has unrecouped losses or has beneficiaries whose total franking credits for the year may exceed $5,000.

Be sceptical of year-end tax shelter schemes. You should not enter a scheme without advice regarding both its tax consequences and commercial viability.

Single Touch Payroll

The Single Touch Payroll reporting framework is expanding from 1 July 2021 to include closely held payees. A closely held payee is one who is directly related to the entity from which they receive payments, for example:

  1. Family members of a family business;
  2. Directors or shareholders of a company;
  3. Beneficiaries of a trust.

 

Income Tax Changes – Small Businesses

Tax Rate

For the 2020/21 year, the reduced corporate tax rate has been reduced to 26%, down from 27.5%, eligibility for the reduced corporate tax rate remains unchanged and applies to base rate entity companies with an aggregated turnover of less than $50m.

The lower company tax rate for base rate entities will reduce to 26% in 2020–21 and to 25% for the 2021–22 income year.

Small Business Income Tax Offset

The small business income tax offset has been increased to 13%, up from 8%. The tax offset is a 13% discount of the income tax payable on the business income received from a small business entity (other than a company) with an aggregated turnover of less than $5m, up to a maximum of $1,000 a year.

Expanded access to small business concessions

From 1 July 2020, businesses that are not small businesses because their turnover is $10 million or more but less than $50 million can also access an immediate deduction for certain start-up expenses and for prepaid expenditure.

From 1 July 2021, businesses that are not small businesses because their turnover is $10 million or more but less than $50 million can also access these small business concessions:

  1. Simplified trading stock rules; and
  2. PAYG instalments concession; and
  3. A two-year amendment period; and
  4. Excise concession.

 

Temporary Full Expensing of Assets

From 7.30 pm AEDT on 6 October 2020 until 30 June 2022 the temporary full expensing allows:

§  Eligible business entities with an aggregated turnover less than $5 billion or corporate tax entities that satisfy the alternative test can immediately expense the cost of eligible new depreciating assets.

§  Eligible businesses with an aggregated turnover under $50 million can immediately expense the business portion of the cost of eligible second-hand assets for

§  Businesses with an aggregated turnover under $10 million can immediately expense the balance of a small business pool at the end of each income year in the period.

Accelerated Depreciation Turnover less than $500m

An immediate deduction is available for entities with an aggregated turnover of less than $500m for assets first used or installed ready for use between 12 March 2020 until 30 June 2021, and purchased by 31 December 2020, cost less than $150,000 up from $30,000

The balance of the general small business pool is also immediately deducted if the balance is less than $150,000 on 30 June.

The threshold reverts to $1,000 from 1 July 2021.

Income Tax Changes – Individuals

Tax Rate

The key income tax bracket changes for the 2020/21 year, as a result of the federal budget, are:

  • the 19% rate ceiling lifted from $37,000 to $45,000; and
  • the 32.5% tax bracket ceiling lifted from $90,000 to $120,000.

Low Income Tax Offset

Australian tax resident individuals whose income does not exceed $66,667 are entitled to the low income tax offset. The maximum low income tax offset is $700 for the 2020–21 and later income years. This has been increased from $445 as a result of the 2020–21 federal budget.

Low and Middle Income Tax Offset

Australian resident individuals whose income does not exceed $126,00 are entitled to the low and middle income tax offset.  The low and middle income tax offset amount is between $255 and $1,080.

Limiting Deductions for Vacant Land

New legislation limiting deductions for the costs incurred in holding vacant land applies to costs incurred on or after 1 July 2019, even if the land was held before that date.

Amounts you do and do not need to include in your tax return

There have been a range of new assistance and support payments made available to individuals in response to the natural disasters and other circumstances that have impacted us during the 2019-20 & 2020-21 financial year. There are specific requirements around reporting Disaster Recovery Payments (DRP), payments in relation to 2019-20 bushfires and some COVID-19 grants, please contact us for advice regarding these payments.

General speaking, emergency assistance in the form of gifts from family and friends is not taxable.

Many business owners know that the special purpose financial statements (SPFS) are slowly being phased out. This financial report has long been used by “non-reporting entities” who need to present their data to a limited group of users for a specific purpose. 

Soon, Australia will move forward with an SPFS-free framework after an extensive study by the Australian Accounting Standards Board (AASB). This article will tell you what you need to know about the subject so you can better prepare for new regulations ahead.

Will SPFS Be Gone for Good?

The SPFS will not completely disappear. Instead, it will be separated. SPFS can apply to companies and businesses that do not need to comply with the Australian Accounting Standards (AAS). 

Here is a little background to help you understand what happened and what will happen soon:

  • International Financial Reporting Standards (IFRS) was the basis of the AAS, and it was reestablished as the AAS in 2005. This is where SPFSs began. 
  • Fast forward to a few years later: the IFRS then introduced the General Purpose Financial Statements (GPFS), which enables reduced disclosure of financial statements while still recognising the mandatories and requirements set by the AAS.
  • The Australian Accounting Standards Board (AASB) decided to create other frameworks—one based on the IFRS requirements, and the other as a simplified disclosure framework. As you can see, the SPFS is completely removed from the frameworks by this time. 
  • Both the for-profit and not-for-profit private sectors will be affected by the changes later on. 

The Effects of the New Direction

Here are the recent happenings and the news:

  • In March, the AASB decided to no longer require large for-profit companies—proprietary companies, unlisted public companies, and the like—to use SPFS starting 1 July 2021. 

 

  • CPA Australia, Chartered Accountants Australia, and New Zealand (CAANZ) created a joint submission, requesting the AASB to give them two years before fully transitioning to the new change. With this, other companies followed suit.

  • Because of this, the AASB decided to move the implementation date to one year to financial years after 1 July 2021. At the same time, they also announced perks for those who would adopt the changes the soonest.

  • The case is different for for-profit trusts or entities that prepare AAS-based financial statements. If their financial statements are a requirement of their constituting document, they will be unaffected. Take note that this exemption is only applicable to documents created or amended before 1 July 2021.  In their case, the SPFS would be removed first. The private sector NFP and the public sector will follow soon after.

What Happens to Those That Already Prepared Their SPFS

Companies that already prepared their SPFS for the year up before 30 June 2021 are required to make disclosures about their compliance. This is alongside their recognition and measurement requirements. The same disclosure and requirements are also required for NFP entities.

Conclusion

There are still many things to learn about this change, and it is still currently being observed. Make sure to determine whether any of these new regulations apply to your business. Better yet, talk to your accountants so they can explain the changes. Through their help, you can understand how these changes affect your company. 

Should you need accountants along the Sunshine Coast, QLD, SMB Accounting is here to assist you. SMB Accounting is a leading accounting firm in Australia providing outstanding service to our clients—both businesses and individuals alike. We offer a range of accounting services, from taxation to Quickbooks consulting. Contact us at 1 300 854 159.