• Xero

    Xero

    Giving you access
    anywhere, anytime!

    more

  • Xero

    Xero

    The world's easiest accounting system

    more

  • Xero

    Xero

    Connecting your business to your accountant in real time

    more

  • Xero

    Xero

    Simplify your bookkeeping today

    more

Another financial year is about to finish!

As a business owner, there are many obligations that you need to consider and action over the next few weeks. Some of these will help to minimise your tax. We have outlined these action points below to assist you.

Date

Action Required

BEFORE
30 June 2014

· Ensure your employee superannuation payments are received and allocated by your employees' super fund prior to 30 June 2014 to ensure a tax deduction for this year. Keep in mind that 30 June is a Sunday so allow plenty of time for this to happen. Any payments made between 1July 2014 and 28 July 2014 will count towards your Superannuation Guarantee requirement but will not be tax deductible until the 2015 financial year.

· If you operate through a trading company review shareholder loan accounts and make minimum loan repayments.

· If you operate through a discretionary family trust ensure that a Trust Distribution Resolution for each Trust is signed by 30 June 2014.

· Carry out a stocktake by 30 June 2014.

1 July 2014

· Superannuation guarantee rate increases from 9.25% to 9.5%

· 2% Temporary Budget Repair Levy commences

· Medicare levy increases from 1.5% to 2%

 

Date

Action Required

14 July 2014 or before

· Provide 2014 PAYG Payment Summaries to all employees

21 July 2014

· Taxable Payments Annual Report due for lodgement with the ATO (building and construction industry)

28 July 2014

· Quarterly Superannuation contributions due for employees (for the period 1 April 2014 to 30 June 2014). THIS IS A KEY DEADLINE!

(Note: If you fail to meet your requirements by 28 July 2014, you must complete a Superannuation Guarantee Charge Statement and forward it to the ATO together with underpaid superannuation plus administration fees and interest by 14 August 2014. Superannuation Guarantee Charge payments are NOT tax deductible.)

14 August 2014 or before

· Lodge your 2014 Annual PAYG Payment Summary Statement (for employees) with the ATO. Penalties apply for late lodgement.

1 April 2015

· FBT rate increases by 2% to 49%

 

Key Changes from 1 July 2014

Employers need to take note of a number of key tax changes that apply from 1 July 2014. These include:

·         2% Debt Tax for high income earners

·         Medicare Levy increase

·         Superannuation guarantee increase

·         Fringe Benefits Tax (FBT) increase

Please urgently check these key things:

1.       Has your payroll software automatically updated for these changes? Or do you need to load these changes into your payroll software?

2.       Check your first pay run from 1 July 2014 to ensure the changes are correct.

3.       Review any salary packaging and calculations and make any adjustments to employee FBT contributions or other items where needed.

2% Debt Tax for High Income Earners

From 1 July 2014 until 30 June 2017, a 2% Temporary Budget Repair Levy, or debt tax, will apply to individuals on their taxable income in excess of $180,000 per annum.  This means that the tax rate will increase by 2% for every dollar of taxable income you earn above $180,000 in a financial year.

Be aware that if you have a one-off spike in income after 1 July 2014, for example from the proceeds of a sale of business or a capital gain from the sale of an investment property, the debt tax is likely to impact on this increase in personal income.

If you have employees or directors affected by the debt tax, talk to us about strategies to lessen the impact.

While the legislation dealing with the debt tax has not yet passed through Parliament, this is likely to occur soon.

Medicare Levy Increase

In May 2013, the former Government announced an increase in the Medicare Levy by half a percentage point effective from 1 July 2014. This increase will take the Medicare Levy from 1.5% of taxable income to 2%.  Employers will need to factor this change in for PAYG withholding purposes. 

The increase in the Medicare levy rate has also impacted on the FBT rate from 1 April 2014.  This will be particularly important for businesses that have FBT liabilities each year as the cost of providing non-cash benefits and living away from home allowances to employees will rise.

2% Fringe Benefits Tax Rate Increase

The Fringe Benefits Tax (FBT) rate will increase by 2% from 47% to 49% from 1 April 2015 until 31 March 2017.  The increase is to prevent individuals attempting to use the FBT system to avoid the 2% Temporary Budget Repair Levy.  

The cash value of benefits received by employees of public benevolent institutions and health promotion charities, public and not-for-profit hospitals, public ambulance services and certain other tax-exempt entities will not change as the annual FBT caps are also increasing.  For public benevolent institutions and health promotion charities, the exemption threshold from FBT will increase to a grossed-up annual cap of $31,177 per employee (currently $30,000).  For public and not-for-profit hospitals and public ambulance services the exemption threshold will increase to a grossed-up annual cap of $17,667 per employee (currently $17,000).

In addition, the fringe benefits rebate rate will be aligned with the FBT rate from 1 April 2015.

Superannuation Guarantee Increase

From 1 July 2014, employers need to increase the minimum rate for superannuation guarantee (SG) contributions from 9.25% to 9.5%.  Please double check your payroll processes to ensure that the change in SG is applied properly from 1 July 2014.

Note: If you use the XERO online accounting and payroll system, you do not need to update the superannuation rates, since XERO will automatically do this for you on 1 July 2014. Another great reason for using XERO!

As announced in the 2014/2015 Federal Budget, the intention is for the SG rate to remain at 9.5% until 30 June 2018 and then increase by 0.5% each year until it reaches 12%.

Trust Distributions - Timing of Resolutions

Trustees (or directors of a trustee company) need to consider and decide on the distributions they plan to make by 30 June 2014 at the latest (the trust deed may actually require this to be done earlier).  Decisions made by the trustees should be documented in writing by 30 June 2014.

If valid resolutions are not in place by 30 June 2014, the risk is that the taxable income of the trust will be assessed in the hands of a default beneficiary (if the trust deed provides for this) or the trustee (in which case the highest marginal rate of tax would normally apply).

You might not need to do a Stocktake

Small Business Entities (operational businesses with an aggregated turnover below $2 million) have access to a range of tax concessions.  One of these concessions is the simplified trading stock rules.  Under these rules, you can choose not to conduct a stocktake for tax purposes if there is a difference of less than $5,000 between the opening value of your trading stock and a reasonable estimate of the closing value of trading stock at the end of the income year.  You will need to record how you determined the value of trading stock on hand.

If you would like to take advantage of the simplified trading stock rules, call us today to make sure you are eligible to use the simplified rules and to discuss how to use them properly.

Fuel Excise Increase

The cost of fuel will increase with the reintroduction of bi-annual indexing. As announced in the 2014/2015 Federal Budget, the Government intends to resume bi-annual indexation by the CPI of excise and excise-equivalent customs duty from 1 August 2014.  Aviation fuels are excluded from indexing.

The reintroduction of fuel excise indexing is not yet law.

Cut Backs to R&D Incentives

From 1 July 2014, the refundable and non-refundable offsets for the Research & Development Tax Incentive will be reduced by 1.5%.  This means the refundable offset will be reduced to 43.5% while the non-refundable offset will be reduced to 38.5%.

If your business is undertaking R&D activities this year, you may want to consider bringing forward expenditure to ensure you maximise your claims for the year ending 30 June 2014 to take advantage of the higher tax offset rates.

The reduction in R&D incentives was announced in the 2014/2015 Federal Budget and is not yet law.

Loss Carry Back Rules Removed?

In the 2012/2013 income year, the loss carry back rules allowed companies to use current year tax losses to recoup tax paid in prior years.  The rules meant that companies were able to 'carry back' up to $1m of tax losses incurred in the 2013 income year to recoup tax paid for the 2012 income year.  The refundable tax offset that could be claimed was limited to the company's franking account balance for that year.

The loss carry back rules were intended to extend to future years so that companies could carry back losses from the current or prior year to recoup tax paid in either the previous year or the year before that. 

The loss carry back rules were originally funded by the Minerals Resource Rent Tax, or mining tax, as most of us know it.   The current Government is seeking to repeal the mining tax and along with it the raft of concessions for business, including the loss carry back rules from 1 July 2013.  However, the current Senate rejected the repeal of the mining tax leaving the status of the loss carry back rules in limbo.  Either the new Senate will pass the repeal of the mining tax after 1 July 2014 and the legislation will apply retrospectively, or the loss carry back rules will continue for another year.  We will keep you updated about this.

Depreciation for Small Business

From 1 January 2014, small business entities (SBEs) will only be able to claim an immediate deduction for depreciating assets costing less than $1,000.  The amendments, if passed by Parliament, reverse the changes made by the previous Government that enabled SBEs to deduct assets costing less than $6,500 from 1 July 2012 onwards.

Depreciating assets costing $1,000 or more will be allocated to the SBE's general small business pool and will depreciate at a rate of 15% in the income year in which the assets are first used or installed ready for use. The assets will then be depreciated as part of that pool at 30% in subsequent income years. 

The changes to depreciation for small business entities are part of the repeal of the Minerals Resource Rent Tax and are not yet law.

Living Away From Home Allowance transition period ends

As at 1 July 2014, all living away from home allowances (LAFHAs) paid to employees need to comply with the new rules introduced on 1 October 2012.  When the new rules for LAFHAs came in, transitional rules were in place allowing existing contracts and arrangements to continue until 30 June 2014 unless they were materially varied.  If you have any employees who are paid a LAFHA, you need to check that there are no contracts utilising the old rules.

The main condition to be satisfied is that the employee must have a normal place of residence in Australia that is maintained for their "personal use and enjoyment" while they are living and working in another location.  This means that the employee cannot rent out their usual residence while they are away. 

In most cases, LAFHAs will also be time limited to 12 months.  The 12 month time limit can be reset if the employee moves to another location.  If the employee is working on a fly-in fly-out or drive-in drive-out basis (there are strict conditions to fall within this category), the LAFHA is not subject to the 12 month limit.

Deadline for 2014 PAYG Payment Summaries

You need to provide your 2014 PAYG Payment Summaries to your employees and other workers by 14 July 2014.

  •   Action Step: If you have any doubt about how to correctly complete your 2014 PAYG Payment Summaries, please contact us for assistance BEFORE you prepare them.

Building and Construction Industry Reporting

From 1 July 2012, new tax reporting rules apply for businesses in the building and construction industry. Businesses will have to lodge an annual report with the ATO setting out details of payments made to contractors. This will assist the ATO to reduce the "cash economy" by ensuring tax is paid on all income including "cash" payments.

From 1 July 2012, you will need to record the following details of all payments made to contractors from 1 July 2012 for building and construction services:

·         The ABN of the contractor

·         The name and address of the contractor

·         The gross amount paid for the financial year, including GST

·         The total GST included in the gross amount paid

If you use computerised accounting software, your system should be able to track this information for you and prepare the required Taxable Payments Annual Report.

  •   Action Step:  Ensure that you lodge your Taxable Payments Annual Report with the ATO no later than 21 July 2014.

Payroll Tax

Payroll tax applies to all entities that have an Australian payroll that exceeds state-based limits.

You should note that in addition to normal salaries and wages, the following items are generally also included in payroll expenses if payroll tax applies:

·         fringe benefits based on the grossed-up taxable value of fringe benefits;

·         all employer contributions to superannuation on behalf of employees; and

·         some contractor or sub-contractor fees.

For more detailed information about whether payroll tax applies to your business, please contact our office.

  •   Action Step: The Annual Return/Reconciliation for payroll tax must be lodged by 21 July 2014 with your State Revenue Office.

WorkCover/WorkSafe

Your WorkCover/WorkSafe insurer sends an annual reconciliation to all registered employers at the end of the financial year.

In completing your annual reconciliation, you will need to include the following items in addition to normal salaries and wages:

·         fringe benefits based on the taxable value of fringe benefits (do not gross-up);

·         all employer contributions to superannuation on behalf of employees; and

·         some contractor or sub-contractor fees.

For more detailed information about what items to include in the reconciliation statement, please contact our office.

Once the reconciliation is received and processed by your WorkCover/WorkSafe insurer, you will be issued with a final assessment or a refund depending on the instalments you have paid during the year.

  •   Action Step: Complete and lodge the Annual Reconciliation with your WorkCover/WorkSafe insurer by the due date.

Goods and Services Tax (GST)

A reconciliation of GST should be performed as at 30 June 2014 to determine if there has been an under or over-payment of GST in the 2014 tax year. If a discrepancy has arisen, then it is possible to amend a subsequent Business Activity Statement (BAS) to rectify the error, however there are limits imposed on adjustments that can be made in this way.

Income declared on your BAS should be reconciled to income declared on your income tax returns.

Also, please note that you are required by law to substantiate all Input Tax Credit claims with a complying Tax Invoice, and you need to retain these documents for a minimum of 5 years.

  •   Action Step: Complete the annual GST reconciliations, and check that you have all required tax invoices and other supporting documents.

ATO Audit Activity

Please note that the ATO and State Revenue Office are constantly increasing their audit activities. In particular, there has been an increase in audit activity for PAYG Withholding, Payroll Tax, WorkCover, GST, Division 7A loan accounts from companies, and Trust distributions from Discretionary Trusts.

We are able to offer a review of your records and record-keeping procedures if you are concerned about your ability to satisfy an audit.

  •   Action Step: Please contact our office if you would like to request this service.

Last Minute Tax Minimisation Tips

Here's a few final reminders about ways to reduce your tax for 2014

1.       Write-off Bad Debts

2.       Write-off any trading stock that is damaged or obsolete

3.       Review your asset register and scrap any obsolete plant and equipment

4.       Pay for repairs, consumables, office stationery, and donations before 30 June 2014

5.       Realise any capital losses you have before 30 June 2014 to offset against any capital gains you may have made.   

Want to talk?

Feel free to call our office any time on 9455 0219 or email us at reception@mjbs.com.au – We can't wait to provide you with better advice now for a beautiful future.