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4 Important Tax Deductions That You Have to Know About

While we often take it for granted, taxes are incredibly important. This is why you’ll want to invest an ample amount of time to make sure that you get everything right. Failing to be thorough when it comes to taxes will surely lead to you losing a significant chunk of money.

When it comes to doing taxes, one of the most important things that you’ll want to focus on is deductions. Through deductions, you’ll be able to minimize the amount that you have to pay in taxes. The tricky thing about this is that people tend to either forget or are completely unaware of the deductions that they are eligible for. This is why we thought it would be useful to put together a brief refresher on this subject. If this is something that you’re interested in knowing more about, read on for a list of four important tax deductions that you have to know about!

Tax Agent Fees

Many of you may not know this but the fees that you pay to a tax agent or a tax consultant are actually tax-deductible. This means that if you made use of their services while preparing and lodging your tax returns last year, then you are able to cite it as a deductible. And while this won’t completely offset the costs of the services, this is another incentive to make use of professional services when filing for your taxes.

Union Fees

If you’re part of a union, you’ll be glad to know that your union fees are tax-deductible as well. To add to this, members of groups that are related to your profession that charge a fee for membership are also granted a tax deduction on the fees that they have to pay.

Work-Related Car Expenses

For those of you who have to drive around in your personal vehicle in order to perform your duties at work, we’d like to remind you that all car-related expenses can be a tax deduction. This includes but is not limited to fuel, maintenance repair fees, and other costs attached to using and maintaining a car. Now, there are two methods for calculating this deduction. You can either keep a 12-week logbook or you can make use of the cents per kilometre method. The cents per kilometre method derives the deduction from the total kilometres travelled in your car while you are doing work that generates income.

Home Office Expenses

Lastly, it’s important to note that your home office expenses are also tax-deductible. And while this may not be relevant to some of you, people who spend a considerable amount of time working from home will surely benefit from this. You can claim the cost of using your personal computer for work as well as any equipment or tools that you need for your job. If you work to spend all of your work hours at home, you can also claim the occupancy cost of your home office space as a tax deduction.

Conclusion

We hope this article proves to be useful when it comes to helping you with your taxes. While this may seem like a lot to take in, be sure to keep all of this information in mind as it will surely make a difference when it comes to doing your taxes. Feel free to refer back to this article whenever you have any questions about tax deductions.

SMB Accounting has knowledgeable tax consultants who can help you get started with taking care of your tax refunds. We make sure that our clients use their tax refunds wisely, and we also offer other services such as accounting and business advice. Contact us today for a consultation!

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Audited Financial Reports: When Does Your Company Need It?

All business owners can agree that their company’s finances are one of the most important operations that help keep their business running. With that being said, dealing with finances can be incredibly challenging but still necessary to ensure you provide an accurate record of your financial health—that’s where an audited financial report comes in. 

An audit is used to obtain an independent opinion on the financial report of a company or organisation. This information will boost the credibility of the information provided and improve confidence for intended users of the financial reports. Besides that, an audit will have to be presented per accepted accounting principles, and because of this, working with an experienced accountant is a must. 

In addition to boosting your credibility and user confidence, audits also promote consistency and objectivity in financial reports, presenting your company as true and fair. To that end, when are audits required?

When are Audited Financial Reports Required?

When You Have a Charity or Non-Profit Organisation…

For charities and non-profit organisations with revenue under the review or audit thresholds don’t need to submit the Annual Information Statement. Note that you’re not required to provide financial statements to the ACNC. However, it is highly recommended that you consider your constitutional requirements, which may require reporting obligations to members. 

When You Have a Large Company…

When your company evolves to a large proprietorship, your business must be audited under the Corporations Act. To know if your company falls under a large proprietary company is if, at the end of the financial year, your company meets the following criteria:

  • You have a consolidated revenue of &50 million or more;
  • You have consolidated gross assets of $25 million or more;
  • You have 100 or more employees;

When You Have a Small Company…

Usually, small proprietary companies aren’t required to prepare a financial report. However, if the ASIC or shareholders require a report, then you must comply. But seeing as this is a case-by-case basis, you must work with a credibly accountant to ensure that your finances are on track and if you’ll be requiring a financial audit. 

Why Do You Need a Financial Audit?

  • Companies, organisations, or charities seeking to obtain a grant, investment, or external funding may have to undertake an audit. This is because this may be part of qualifying criteria that will satisfy the provisions of the grant;

  • Some lenders may ask companies to provide audited financial reports if your business would qualify for a loan or satisfy loan requirements.

  • In some cases, businesses would like to change ownership or sell their company; because of this, a buyer may require a financial report to see the true value of your business.

  • Some companies and organisations may need an audit specified for the constitution, rules or other documents. Because of this, you’ll need to work with a credible accountant and auditor to create a financial report. 

The Bottom Line: Audited Financial Reports are a Crucial Part of Any Organisation or Company

Seeing as audited financial reports are a huge requirement for some organisations, to stay compliant, you must work with a trusted accountant and auditor to ensure that your financial reports stay accurate. Otherwise, you may be dealing with a plethora of financial-related issues that may impact your company. 

How Can We Help You?

There’s no denying that financial audits or reports can be incredibly overwhelming for some businesses. Thankfully, SMB Accounting has a team of highly skilled accountants who are equipped for this job.

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!

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Taxing Wisely: 5 Tips to Use Your Tax Refund

Paying taxes is an activity that any law-abiding citizen must do. By paying taxes, there are times when you get a tax refund. As the name suggests, a tax refund is an excess of taxes that are given back to the taxpayer.

Most people would agree that a tax refund is a lifesaver. This is because an annual tax refund gives you many options on what to do with it, such as paying back debts or simply saving them for future use. In other words, a tax refund has a significant effect on your finances.

How exactly do you use your tax refunds wisely? This article lists down some ways that you can do this. Read on below to learn more.

#1 – Super Contribution Top-up

According to the Australian Securities and Investments Commission (ASIC), the average single person who retires at 65 with a “modest” lifestyle will need approximately $300,000 today to retire. On the other hand, those who want a “comfortable” lifestyle in retirement will need roughly $544,000.

For most people, those are massive numbers. If you add to your super very early on, it gives your savings a lot of time to grow. Simply get in touch with a superannuation advisor, and they will tell you how to transfer your tax refund into your super fund. It may seem like a small thing now, but your future self will thank you once you retire.

#2 – Term Deposit for Your Children

If you have children, your tax refunds can be used for their benefit. Tax refunds are like a long-term investment that you can use for your children’s big-ticket expenses, such as their education or their first car.

While not everyone has term deposits on their plans, it pays to set aside some funds for your children—especially considering the rising living costs in the country.

#3 – Buy Work-Related Equipment

Buying work-related equipment such as computers is no easy task. If you don’t have enough money, chances are you’ll be stuck with a subpar piece of equipment that hinders your job performance.

Work-related items that cost more than $300 must be depreciated over the “life” of the item. If you buy them by the end of a financial year, then the benefits on your subsequent tax will be small.

On the other hand, your depreciation calculation will cover more time if you buy them between July to August. In other words, it’s a bigger deduction on your next tax return.

#4 – Pay Off Debts or Loans

If you have credit card debts or personal loans that you’re paying off for a long time, then it’s recommended that you use your tax refunds to pay for them.

It’s a good idea to do so because your interest repayments will go down as soon as you lower your outstanding balance. Aside from that, you can now use the money for yourself instead of it going to your lender.

#5 – Put It in a Mortgage Offset Account

If you have a mortgage, chances are your mortgage provider is offering a mortgage offset option. A mortgage offset account is like a savings account, but it works a little differently. Your offset balance is deducted from your outstanding mortgage loan balance to calculate the interest component of your mortgage payments.

Because of this, you end up paying less interest for your mortgage, which leaves you with more money. You can pay off your mortgage quicker while your offset account balance is ready to be used in case of an emergency.

Conclusion

Tax refunds are money that comes back to you, so you must use them wisely. You can use them to pay debts or save them for later if a financial emergency occurs, as well as keep them as deposits for your children. In the end, you’ll be glad you have done so, because you will be able to get out of a bad spot quicker.

SMB Accounting has knowledgeable tax consultants who can help you get started with taking care of your tax refunds. We make sure that our clients use their tax refunds wisely, and we also offer other services such as accounting and business advice. Contact us today for a consultation!

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Your Guide to Claiming Home Office Expenses in 2021

Even if the room is not set aside purely for work-related purposes, you may be able to claim a tax deduction for the costs of running your home office, provided you did some of your work from it in the previous financial year. These critical tax deductions typically cover the expenditures of working from home or running a home-based business.

The question is, how can you claim your home office expenses this year? This essay will serve as a roadmap for you.

What are the new arrangements?

Due to COVID-19, the Australian Taxation Office (ATO) made specific provisions last year to make it easier for persons to claim deductions for working from home.

Rather than calculating expenditures for specific running expenses, the new ‘shortcut technique’ allows people to claim a rate of 80 cents per work hour for all their running costs.

This rate is available to multiple people living in the same residence. For instance, a couple living together might each claim the 80 cents per hour rate.

Which strategy should you use when claiming?

You have three options for calculating your home office expenses:

Shortcut Method

Claim a rate of 80 cents per work hour for all additional running expenditures.

Fixed-Rate Method

Calculate the work-related portion of your phone and internet expenses, computer consumables, stationery, and the decline in value of a computer, laptop, or similar device at a rate of 52 cents per work hour.

Actual Cost Method

Claim the portion of all your operating expenses directly relevant to your job, which you must calculate on a fair basis.

Whatever approach you use, please follow the following rules:

  • The money has to have been spent by the taxpayers and not repaid.
  • The claim must be directly tied to income generation.
  • There must be documentation to back up the claim.

What are the expenses you can deduct?

You can claim the following expenditures if you are claiming using the fixed-rate method or the actual cost approach.

Running Expenses

Home office operating expenditures, such as energy, gas, and office furniture depreciation, can be deducted (e.g., desk, tables, chairs, cabinets, shelves, professional library).

You should keep diary/logbook documentation for four weeks to prove a pattern of working from home and justify the number of hours you are claiming, exactly like with a motor vehicle claim.

When no additional costs are spent, such as when you work in a room where others are watching TV or when the income-producing use of the residence is incidental, no deduction is allowed.

You’ll need receipts for the following expenses:

  • Work-related equipment in the home office.
  • Repairs to the home office, as well as furniture and equipment utilised for business reasons.
  • Cleaning costs for the home office.
  • Any extra costs associated with maintaining a home office on a day-to-day basis.
  • Keep a journal entry for each of your minor expenses ($10 or less) that total no more than $200.

Telephone (and mobile phone) and Internet Expenses

If you can recognise work or business calls from an itemised phone bill, you can claim the deduction for the billed percentage related to work or business.

For the whole year, a representative four-week period will indicate a pattern of internet and telephone use.

If you are “on-call” or compelled to contact your company or client frequently, your phone rental expenditures may be partially deductible.

Equipment Depreciation Expenses

You can claim depreciation on home office equipment such as computers, printers, photocopiers, scanners, and modems, but it must be allocated to the equipment’s use for work or company purposes. You can claim depreciation on office equipment and furnishings if you use the actual cost approach.

Occupancy Expenses

Only if the residence is used as a place of business is a claim for occupation expenditures allowed. The claim must be filed as an apportionment of total expenses incurred on a floor area basis.

  • Rent
  • Interest on a mortgage
  • The cost of water
  • Repairs
  • Premiums for homeowners’ insurance.

If you sell your home in the future, being able to claim these expenses may influence your principal residence exemption for capital gains tax reasons.

When does a house become a business?

The following indicators, none of which are conclusive on their own, may help to determine if a designated area contains the characteristics of a business:

  • The area is marked as a business district.
  • The area is not readily adaptable or suited for private or domestic use in the home context in general.
  • The region is used solely or virtually exclusively to conduct business.
  • Client or customer visits are typical in this area.

You are not entitled to a deduction for occupation expenses if you use your house to carry out income-producing activities as a matter of convenience. It would be unusual for a worker to be able to claim travel expenses.

Working with a tax professional can help you avoid common mistakes while filing your tax return and maximising the amount of money you get back. Please contact your trusted accountant on the Sunshine Coast from SMB Accounting for assistance with your tax return!

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How To Survive a Tax Audit: A Checklist for Small Businesses

You’ve got mail! The Australian Taxation Office (ATO) is requesting a tax audit of your business. Since it is your first time undergoing this, you start to think of what you need to prepare for the auditing to ensure that you won’t miss any important detail. 

Surviving a tax audit is no easy feat, as even the most seasoned business owners will be tested. Instead of fidgeting, why don’t you take a good read of this blog and learn what you should do to prepare for a tax audit? Here are some steps you can take to make sure that you have a smooth auditing experience. 

Always Keep Your Records Accurate and Updated

Having inaccurate data will prompt the auditor to dig further for nonconformities. To ensure that the audit will run smoothly and be completed quickly, keep your records updated and error-free. 

One of the ways to organise your records is by using accounting software to store your data. The best accounting program to use should be equipped with the updated tax regulations to comply with them easily. Working alongside your accountant or a tax professional will also keep you in check of the taxes your business should be paying.

Check Your Tax Return Entries Twice Before Submitting

Errors are inevitable. While you are confident that your accountant is competent enough to produce an error-free tax return form, it won’t cost you a penny to double-check the entries. The margin for error gets wider when you enter data manually. You can avoid having erratic entries when you use accounting software.

Organise Your Documents and Keep Files From the Last 5 Years

As a standard practice, auditors only check on the previous year’s tax return. However, they can also audit tax documents covering the last five years, especially if they find enough proof that you are understating your business’ taxable income. If you organise your files regularly, it will be easy for you to take out the necessary documents at any time to back up your claim. 

Correct Errors Immediately

When you spot errors in your tax return, being diligent in rectifying them pays off. The ATO has the discretion to reduce your penalties for the tax entry miscues.

Aside from these must-do tasks, you need to know what the ATO looks for, so you are prepared anytime you get a notification from the office that you will get audited. Below are some of the things about your business that the ATO will probe into:

  • An accurate declaration of all your income
  • Deduction entitlement, credits or tax offsets claimed
  • Accurate reporting and withholding of Pay As You Go (PAYG) figures
  • Accurate calculation and reporting of other tax-related obligations

As a tip, never think even for a second that the ATO will overlook some discrepancies with your tax documents as the institution uses a system that can reveal irregularities and unusual transactions. Not paying the right amount of tax your business owes is punishable by ATO’s laws, and they can subject you to hefty fines.

Conclusion

Follow the guide mentioned above will give you a worry-free auditing experience and pass it with flying colours. If you’re still not confident, you can also consult with an accounting professional. 

Are you facing a business audit anytime soon? SMB Accounting is here to help. Our firm completes income tax returns in a timely manner within our office, whether via personal interview, telephone or email. We also offer a range of accounting services, including business advice, taxation and XERO/MYOB/QuickBooks consulting. Get in touch with us. 

 

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4 Tips to Help You Maximise Your Tax Returns Every Year

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!

 

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2021 – Tax Planning – Client Newsletter

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.
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2021/22 Federal Budget

Personal income tax changes

Retaining the Low and Middle Income Tax Offset (‘LMITO’) for the 2022 income year

The Government has announced that it will retain the LMITO for one more income year, so that it will still be available for the 2022 income year.

Under current legislation, the LMITO was due to be removed from 1 July 2021.The LMITO is a non-refundable tax offset that provides tax relief for low and middle income taxpayers and is available in addition to the Low Income Tax Offset (‘LITO’). The amount of the offset is $1080 and tax payers receive the full amount if their income is between $48,001 – $90,000

Below this threshold and above the threshold the amount is phased in or out. You will not receive any if your income is > $126,001

Personal Tax rates remain unchanged for 2021-22, Stage 3 tax rates start from 2024-25 unchanged

In the Budget, the Government did not announce any personal tax rate changes, having already brought forward the stage 2 tax rates to 1 July 2020 in the October budget. The stage 3 tax changes commence from 1 July 2024, as previously legislated.

 Reducing compliance costs for individuals claiming self-education expense deductions

The Government will remove the exclusion of the first $250 of deductions for prescribed courses of education. Currently, the first $250 of a prescribed course of education expense is not tax deductible. Removing this $250 exclusion is expected to reduce compliance costs for individuals claiming self-education expense deductions.

Changes affecting business taxpayers

 Temporary full expensing extension

In the prior year (2020/21) Federal Budget, the Government announced amendments to allow businesses with an aggregated turnover of less than$5 billion to access a new temporary full expensing of eligible depreciating assets until 30 June 2022.

In the 2021/22 Federal Budget, the Government has announced that temporary full expensing will be extended by 12 months to allow eligible businesses to deduct the full cost of eligible depreciable assets of any value, acquired and first used or installed ready for use by 30 June 2023. All other elements of temporary full expensing will remain unchanged, including the alternative eligibility test based on total income, which will continue to be available to businesses.

Temporary loss carry-back extension

In the prior year (2020/21) Federal Budget, the Government announced amendments to introduce a temporary loss carry-back measure. In the 2021/22 Federal Budget, the Government has announced that the loss carry-back measure will be extended to allow eligible companies to also carry back (utilise) tax losses from the 2023 income year to offset previously taxed profits as far back as the 2019 income year when they lodge their tax return for the 2023 income year.

Debt recovery for small business

The Government has announced that it will allow small business entities (including individuals carrying on a business) with an aggregated turnover of less than $10 million per year to apply to the Small Business Taxation Division of the Administrative Appeals Tribunal (the ‘Tribunal’) to pause or modify ATO debt recovery actions, such as garnishee notices and the recovery of general interest charge or related penalties, where the debt is being disputed in the Tribunal.

Currently, small businesses are only able to pause or modify ATO debt recovery actions through the court system, which can be costly and time consuming. It is expected that applying to the Tribunal instead of the courts will save small businesses at least several thousands of dollars in court and legal fees and as much as 60 days of waiting for a decision

Superannuation related changes

Removing the work test for voluntary contributions

The Government has announced that it will allow individuals aged 67 to 74 years (inclusive) to make or receive non-concessional contributions (including under the bring-forward rule) and salary sacrifice contributions without meeting the work test, subject to existing contribution caps. Individuals aged 67 to 74 years (inclusive) will still have to meet the work test to make personal deductible contributions.

Removing the requirement to meet the work test when making non-concessional or salary sacrifice contributions will simplify the rules governing superannuation contributions and will increase flexibility for older Australians to save for their retirement through superannuation.

Reducing the age limit for downsizer contributions

The Government will reduce the age limit from which downsizer contributions can be made by eligible individuals, from65 to 60 years of age.

The downsizer contribution allows eligible individuals to make a one-off, after-tax contribution to their superannuation fund, of up to $300,000 per person, following the disposal of an eligible dwelling, where certain conditions are satisfied. Under the current requirements, an individual must be at least 65 years of age at the time of making the relevant contribution, for the contribution to qualify as a downsizer contribution.

Removing the $450 per month threshold for Superannuation Guarantee eligibility

The Government will remove the current $450 per month minimum income threshold, under which employees do not have to be paid SG contributions by their employer.

Changes to the First Home Super Saver (‘FHSS’) scheme

The Government has announced that it will make the following changes to the FHSS scheme.

  • Increasing the maximum releasable amount to $50,000

The Government will increase the maximum releasable amount of voluntary concessional and non-concessional contributions under the FHSS scheme from $30,000 to $50,000, to assist first home buyers in raising a deposit more quickly. Voluntary contributions made from 1 July 2017 up to the existing limit of $15,000 per year will count towards the total amount able to be released.

  • Changes to improve the operation of the FHSS scheme

The Government will make technical changes to the legislation underpinning the FHSS scheme to improve its operation as well as the experience of first home buyers using the scheme. These four changes will apply retrospectively from 1 July 2018, and will assist FHSS scheme applicants who make errors on their FHSS scheme release applications

Conclusion

This is a summary of the main areas which may affect you as an individual or as a business. However if you have any other questions regarding the budget send an email to stephen@smbaccounting.com.au

 

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5 Ways to Cut Costs in Your Business Operations – Our Guide

Managing your cash flow is a crucial part of running your business, but it’s an aspect that tends to overwhelm entrepreneurs. As a business owner, you’re laser-focused on bringing in more profit and scaling your company, but doing so during uncertain economic conditions means that you need to account for every cent you make. Any increase or reduction in your costs can affect how much profit you make, further highlighting the importance of cash flow management. 

However, tracking your expenses and working with accounting firms in the Sunshine Coast will help you boost profits and find other opportunities to cut down on business costs. Here are five possible ways you can save more money by economising your operations:

  • Switch to Technology 

Automating tasks has never been easier than it is today, as there are many tools and software you can use to improve your workflow. You can take advantage of project management software, for example, which will automate tasks necessary for running your business, saving you valuable time.

You can also invest in accounting tools to keep a close eye on your cash flow and financial reporting, as small business accounting is crucial to your business’s success. It will also help you keep track of your expenses, ensuring you’re well aware of every business transaction you make.

  • Consider Operating Your Business From Home

2020 has demonstrated how the work-from-home setup has been beneficial for many businesses all over the world, so it’s something you may want to consider for your own enterprise as well. Doing so will help you cut back on your office space expenses, business taxes, utilities, and even insurance. 

However, some companies still require an office to work more efficiently. If operating your business from your home isn’t feasible, consider moving to a smaller or less expensive space instead. You’ll enjoy much bigger savings that way.

  • Reduce Energy Usage

Energy, although necessary, tends to eat up a portion of a business’s income. Fortunately, you can optimise your energy usage by switching to energy-efficient appliances such as light bulbs and your heating or air conditioning system. You can also ask your local energy provider to perform an audit, as they can recommend ways to cut down on your energy usage. You can even invest in a solar panel system, which will reduce your impact on the environment while reducing your energy bills. 

  • Invest in Your Employees

While investing in your employees may seem like a way to spend more money instead of cutting back on your expenses, it can actually save you a lot of money in the long run. By assessing the skills and experience of your employees and analysing their potential, you can train them to refine new, useful skills that will be beneficial to your business. In the process, you won’t have to hire more people to take on roles that your employees have shown proficiency in, thereby reducing turnover. It’s important, however, to make sure that your employees don’t feel overwhelmed or burned out with the tasks you give them. 

  • Reduce Your Debts 

Asking your accountant to run a financial audit on your business will help you find ways to save more money and take care of your debts, which will save you hundreds of dollars in interest. They can create a plan that will help you pay off your debt early or on time, improving your credit score and avoiding a deficit. It will also help you make more informed financial decisions, which is crucial to your business’s success.

Conclusion

Running a business is exciting and rewarding, but it involves a lot of analysing and tracking to make sure you’re well aware of everything going in and out of your company. If you’re not careful, you may be spending more than you’re earning, which can quickly land you in hot water. With these five tips, you’ll enjoy much more savings and reduced business expenses, helping you achieve your earning goals. 

SMB Accounting is an accounting firm in the Sunshine Coast offering individual tax returns, small business accounting, financial reporting, and other services. We complete many types of audits, such as investigative reviews, self-managed super fund audits, trust account audits, and more. Contact us today to find out how we can help you!

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3 Benefits an SMSF Can Provide for Your Small Business

One way that small business owners can strengthen and supplement their income is through self-managed super funds (SMSF). Though it might seem challenging, these obstacles are worth traversing, as SMSFs offer many benefits. Having an SMSF allows you to invest in commercial properties within your private super funds. This gives you the twofold benefit of increasing the value of your super fund and providing your organisation with valuable assets. 

What is an SMSF?

An SMSF is a superannuation trust structure that provides benefits to its members upon retirement. Its main difference from other super funds is that SMSF members are also the trustees of the fund, and they can amount to a maximum of four members. This allows a level of control when it comes to tailoring the funds to each trustee’s needs. 

SMSFs come with their our Tax File Number (TFN), Australian Business Number (ABN), and transactional bank account. This bank account will allow trustees to receive contributions and rollovers, make investments, and pay out lump sums and pensions. As mentioned before, the fund is controlled by trustees, which can take two forms:

  • The Corporate Trustee. A company can act as the trustee with each member as a director. This can allow simpler registration of assets, more efficient management, and flexibility in membership. 
  • The Individual Trustee. In this case, each member is appointed as a trustee with a  minimum of two trustees required. 

While setting up an SMSF requires compliance with the trustees of the fund, there are quite a few major advantages it can offer. Here are some of these advantages:

1. It can reduce the capital gains tax

A small business owner can transfer their commercial properties into the fund. The superannuation law might prevent individuals from transferring their residential properties to a fund, commercial properties are exempt. Business offices, buildings, and industrial locations can be held in your SMSF.

Including commercial properties in your SMSF reduces the capital gains tax amount on the sale of these properties, boosting the super fund as well. Consult your accountant about which funds you can and cannot write off in this manner.

2. It can give provide tax deductions for business expenses

Once a property has been transferred to the SMSF, you will have to enter a lease agreement with the fund to rent the property on commercial terms. This can be written off as a tax deduction for the business, as any rent paid toward using the property would now be a business expense. 

Repairs, maintenance, renovations, improvements, and other property management fees are also now claimed in the fund.

3. The fund earns money for tax deductions

Any earnings on investments held in an SMSF are taxed at 15%—including commercial properties. That means rent will be taxed at the standard rate. We’ve mentioned before that small business owners like you can claim a tax deduction for the business on rent paid to the SMSF, but the SMSF itself will only end up paying this reduced tax. This serves the purpose of allowing businesses to make significant tax deductions while making significant contributions to its retirement fund. 

Final thoughts

Not all businesses and business structures can fit with every business. For the right enterprises, however, it can help manage the commercial properties of a business while growing out its retirement fund. An SMSF can offer options and benefits you otherwise would not have had. 

If you are looking to set up an SMSF for your business along the Sunshine Coast, QLD, you will need the help of an accountant. Send us at SMB Accounting a message so we can help you through this process. 

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