Selling your management rights business? Six quick tips for successful letting appointments

Looking to put your management rights business on the market?

This is rarely a straightforward process. So, in the interests of a smooth, incident-free transition, it’s important to ensure your business is in the right condition for sale.

Letting appointments with the unit owners are a particular area of preparation that I see being regularly overlooked by the business owner.

The importance of letting appointments

The letting appointments documents are extremely important to any management rights business as they are essentially the only vehicle by which a property manager can derive income from a unit owner.

These forms appoint the manager as an agent of the owner; they lay out a variety of services with the set fees that will apply.

Letting appointments can be entered into for a specific one-off period or on an ongoing basis.

Note that there are important differences between old legislation forms (PAMD 20a) and new legislation forms (Form 6).

The main six areas to focus on with letting appointments

I recommend to managers and clients who are looking to sell their businesses to conduct an ‘audit’ of their letting appointments.

The proposed purchaser of your business will ensure that their own specialist accountant reviews all letting appointment forms as part of the verification process. So why not get them right from the start?

Focus your audit on ensuring that the following is in order:

1. The property owners’ details are correct and current.

2. Your licence details are correct for all forms you have prepared.

3. The agreement is a continuing agreement or, if a single appointment, the term has not expired.

4. The agreement is assignable. In the case of the new forms, they are automatically assignable, whereas one of the old forms needs to contain a correctly executed assignment clause.

5. The agreement is signed and dated by the property owner and manager.

6. The fees and charges detailed in the agreement are consistent with what is currently being charged in your system.

 

Need assistance with your letting appointment audit?

The above details can all impact the income of your business – and therefore its sale value. Yet they are all-too-common oversights from managers looking to sell their management rights businesses.

If you need assistance with an audit of your letting appointments, we can help – please contact our office.

 

When financial verification doesn’t stack up: Your 3 options

You’ve spent so much time and effort tracking down the perfect business and the ideal location for you to get started… so what happens when you get hit by the hammer-blow: the financial verification side of things doesn’t stack up?

This can be so frustrating. You’ve ticked off all the following from the must-do list:

  • Arranged finance from a specialist management rights finance broker/banker
  • Engaged a specialist management rights solicitor to aid in the purchase process
  • Engaged a specialist management rights accountant (me, of course J)
  • Established business structures and signed contracts

Then your specialist management rights accountant undertakes the financial verification process and the profit is less than the agreed profit stipulated in the contract for sale.

You’ve spent considerable money on all these specialists and the business profit is less than expected. So what now??

Three options when financial verification fails

It’s a surprisingly common situation for a purchaser to find themselves in.

There are many reasons for the profit not being as high as expected – and they’re not all as sinister as you might first think.

For instance, there are different periods of review, non-specialist accountants preparing sales figures, vendors preparing sales figures, poor record-keeping, letting pool numbers, and others.

You essentially have three options in this situation:

1. Proceed with the contract/purchase

If there is only a small difference and you assess that you’re still happy with the return for the money you’re investing, you might proceed as per the contract terms.

You will need to discuss this with your specialist finance broker/banker to ensure that you still have the capacity to borrow the same amount of money for the purchase. But there should be no reason why you cannot proceed with the contract unchanged.

2. Negotiation

This is the most common path of action. Say the profit comes in at $10,000 under; you can request a reduction of $10,000 using the originally agreed profit multiplier.

The vendor and the purchaser will negotiate and generally meet somewhere in the middle. The purchase price is altered and the purchase process moves on.

3. Contract termination

If the profit is significantly less than the contracted figure, you may want to terminate the contract.  Generally, negotiation will be pursued prior to this, to see if you can agree contract alterations with the vendor. If there is no agreement, termination will ensue.

This is the least favourable outcome for both parties as everyone has invested significant time and resources in getting a deal to this stage.

 

If you find yourself in this situation as a purchaser, remember you have options and assess the situation in your best interests. Take into consideration all the time and effort it took to get to this stage and the reasons you signed the contract in the first place.

Recently we welcomed 2 staff members to the McAdam Siemon team.

Olivia has joined the McAdam Siemon team in the position of Reception to gain experience whilst she completes her accounting qualification.

 

Olivia has a background in Criminology and Criminal Justice and has worked with multiple community services organizations. Olivia also has experience in accounting administration having worked for a private accounting firm in the past.

She has recently taken on completing a Master of Professional Accounting as she wishes to pursue a career in Tax Accounting.

She brings with her a passion for customer service and a keen interest in tax accounting.

Madeline joins the team as an Undergraduate Accountant.


Currently completing her final semester at the University of the Sunshine Coast, Maddy will be assisting Samantha O’Rielley in our bookkeeping department.

Preparing your Management Rights for Sale

          

Preparing your Management Rights for Sale

This week the RAAS group held a conference in order to educate all those interested in preparing their business for sale.  A range of speakers from different specialties, [Accounting, Legal & Banking], were invited to speak to the group at the Maroochydore Surf Club.  Peter O’Rielley from our firm was invited to provide that specialist advice.  From all reports the conference was well attended and participants took the opportunity to educate themselves on some of the issues that need to be considered when preparing for sale.  If you were unable to make the conference but would like to hear more about how McAdam Siemon can assist in this area, then please give Peter a call.

Updated Form  6 from 1 August 2016

 

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Updated Form  6 from 1 August 2016
Version Number will change to Form 5

The Office of Fair Trading (OFT) has released another version of the Owners Agreements [Form 6] commencing 1 August and replaces the previous version.

The previous version lasted only 1 month, so please take note, it will be superseded when issuing new owner agreements from 1 August.

All previous PAMDA 20A’s and Form 6’s that have been issued prior to this date of course remain in effect and can continue to be relied upon.

Therefore, any new agreement you enter with new owners, the Form 6 that you are required to complete from 1 August 2016, must be on the latest “Form 6 V5 1 August 2016” in order to be valid.

Click here to access this form

Employer Alert

 

Empolyer Alert 

The end of the financial year is only days away

Employer Alert

As an employer you need to:

  1. Provide PAYG Payment Summaries to your employees by the 14th July 2016.
  2. Please ensure you send the ATO, your PAYG withholding payment summary annual report by the 14th August 2016.
  1. Use the latest tax rates to calculate employee withholding tax from 1st July 2016. While there have been no changes to tax rates for 2016/17, to check the latest rates, go to ato.gov.au/taxtables
  1. Ensure your accounting software payroll rates are updated from the 1st July 2016 and the file is ready for the first pay run of the 2017 year.
  1. All employee Superannuation Guarantee Charges have been met for the 2015/16 financial year. Please note the June Quarter SGC is due by the 28th July 2016.

 

If you have any questions on your EOFY obligations to the ATO, please do not hesitate to contact us.

Using EOFY to strengthen your business

McAdam Siemon Business Accountants Upper Mt Gravatt, Noosa Heads & Maroochydore. Specialising in Accounting, Taxation, Management Rights, SMSF Administration, Business Advisory, Business Valuations , Management Rights specialist accountants

Using EOFY to strengthen your business

(source: Sean O’Meara) 

With the end of the financial year quickly approaching it is critical that small business owners use this time to make a strong plan for the year ahead. It is vital to analyse your business and try to find any opportunities and improvements that can be made, no matter how small they may seem.

The additional administration time required at EOFY can make the lead up to 30 June extremely stressful. So the keep your business goals in check. Here are some strategies that will improve your business to maximise your growth in 2016/2017.

It’s time to review your businesses situation 

You are probably already using reporting throughout the year to track your revenue, gauge your sales trends etc but it is important to take a second look at how your business performed on the whole and compare this to previous years.

“By looking at year-on-year sales and revenue we can see how public holidays or seasonal changes affect the business and enables us to do more accurate forecasting, rostering and budgeting for the year ahead. It also helps us make informed decisions on whether to spend now or later,”

Take advantage on the low interest rates

Interest rates remain low so it could be an opportunity to invest in capital equipment and paying off debts. 

Review business partners and suppliers

Ensure you are getting an excellent price for quality products. New businesses keep coming into the market, so be sure to do your research and renegotiate with your present partners and suppliers.

Your customers are probably reviewing their own strategic plan and making changes for next year so don’t forget to let them know that their business matters to you.

Take a long – term view of your cashflow 

  • How is your cashflow?
  • Is your business seasonal, with peaks and troughs?

Do some advanced planning -review your budget and anticipate what may happen in the year ahead. It may be all that is needed to free up liquid assets and ensure ongoing profitability. This is the best way to ensure you have safeguards in place to keep your business afloat during low times. 

Capitalise on tax breaks 

  • Have you any expenses that can be pre-paid?
  • Think about maximising your superannuation contributions to the relevant caps.
  • Consider investing in areas that will support your business; new equipment and/or technology that will provide your business with greater efficiencies and productivity The Government still has an immediate tax deduction on assets coasting less than $20,000.

Don’t hesitate to give us a call if you would like to discuss anything EOFY’s.

Kind regards

The Team at McAdam Siemon

If you have one employee but less than 19

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If you have one employee but less than 19, You must be Super Stream ready by 30 June 2016

  • Do you have 19 or fewer employees?
  • Are you an SMSF Trustee? Self-managed super funds (SMSFs) must be able to receive employer contributions and the associated data electronically.
  • APRA – regulated funds

From 1 July 2016, the ATO’s SuperStream standards are set to be enforced.

A reminder:

  • If you are a larger employer, you should already be using SuperStream.

A Brief Overview

These new rules require employers to pay and report contributions to superannuation funds electronically. Both the payment and the reporting will need to be completed on the same day.

  • These measures don’t apply to individuals who are making personal contributions direct to their superannuation funds, only employers.

SuperStream will make it easier for you. 

  • You need to use SuperStream when paying employees super.
  • With SuperStream contribution payments are made electronically and you can pay all your employees super; sending all their information through one clearing house; saving you time and effort.
  • Providers must be approved by the ATO and are listed on the ATO website.

You should have already started transitioning by choosing an option to make super contributions electronically: 

  • Your payroll system
  • Your super funds online system, or
  • The Small Business Super Clearing House (SBSCH). This is a free service administered by the ATO whereby you can make super guarantee contributions as a single payment to the clearing house and it distributes the payments to the employees fund/s.

Next: You need to collect the following information on your employees. 

  • Their Tax File Number (TFN) and,
  • A Unique Super Identifier (USI)
  • Super fund ABN
  • For employees who have selected a SMSF for their contributions, they will also need to provide their Fund’s Bank Account details and Electronic Service Address (ESA)

Once this is done, these details must be entered into your preferred clearing house site.

For new employees, the ATO has updated the Super Choice form to include collection of the extra information required.

Start using SuperStream as soon as this process is completed so that any problems can be solved before 30 June, 2016.

If you any questions on setting up SuperStream super contributions for employees, please contact McAdam Siemon.

GOLFING GREATNESS

 

Golfing greatness….
We all strive for it don’t we?

Well I do anyway!  That perfect round where everything drops and you split the fairway every time.  I have been trying for close to 17 years for that one round and it still eludes me; not from lack of trying I might add, probably more so the lack of ability hinders me.

I love golf. I’m a golf tragic and happy to admit it! I would probably prefer to talk about golf with someone than pretty much anything I can think of.

So when the opportunity came about to become involved with the Australian PGA; its members and the golfing industry; I jumped at the chance.

Last year PGA Australia undertook a program on behalf of its members to offer a network of preferred service providers to the industry.  I was part of an intense two – day program exploring the golfing industry as a whole and how it could be better serviced.

The main focus was on PGA Australia members, which include, touring (playing) pros, coaching pros, pro shop owners, and general golfing retailers and support sectors.  This was a valuable process and built on the knowledge of the industry I had already accumulated.  Further work with PGA Australia followed and has resulted in McAdam Siemon Pty Ltd becoming a registered preferred supplier to the golf industry.

In order to build on this foundation, it was necessary to get the word out on the street, to promote the services to the industry.  What better way to do it than through a PGA member.

We chose to sponsor Matthew Field, who has been a PGA member for a number of year now and is searching for his break on tour.  Matt has played in a number of events around Australia and internationally.  Matt is also a key member of the Golf Queensland team and organises many of the events for amateur golf around the state.  We welcome Matt to the McAdam Siemon Team and wish him all the best for the coming year. We hope it is a successful one for him!!

If you would like to read more about Matt and his adventures visit his website at mattfieldgolf.weebly.com.

I have already had the pleasure of working with a number of PGA members so far and the experience has been fantastic.
The industry seems to be growing to high levels and it takes professional members with great knowledge, skill and attitude to succeed.

I hope to offer valuable ongoing support to the industry and its members for years to come, and maybe sneak a few extra rounds in here and there!

If you ever want to chat about Golf, drop me a line.

Happy Golfing

Jordan Spieth World #1 (Left)  Matthew Field (Right)

GST Ruling on Reimbursements

 

McAdam Siemon Business Accountants Upper Mt Gravatt, Noosa Heads & Maroochydore. Specialising in Accounting, Taxation, Management Rights, SMSF Administration, Business Advisory, Business Valuations , Management Rights specialist accountants.

 

GST Ruling on Reimbursements

A decision has recently been handed down by the Administrative Appeals tribunal (AAT) regarding the claiming of tax credits where a property manager was acting on behalf of a property owner.
The agent in the case had been claiming GST credits on expenses they had paid on behalf of the property owner that were related to the maintenance and care of the owner’s property.

The AAT has stated as there is an agency relationship’ between the real estate manager and the owner of the property, any expenses paid to 3rd parties on behalf of the owner of the property could not be claimed as credit on the activity statement (BAS).
These GST credits (GST on purchases) were not allowed to be claimed for these transactions by the agent. The owner would be allowed to claim the GST credit – if the owner of the property was registered for GST. If they are not – the GST credit is lost, and increases the expense claimed on the tax return.

By way of example – the manager of a resort hires a contactor to make repairs to a unit of $1100.00 inclusive $100 GST. This $100 is not allowed to be claimed by the manager of the resort on their BAS. This is to be put into trust accounting software as a GST free purchase. Correspondingly, any reimbursement made to the manager by the owner of the unit must be treated as GST free sale.
By treating this transaction as a GST free purchase in the trust accounting software, it will be then entered into the Managers MYOB/Xero program without GST, insuring that there is no GST being claimed when the BAS is being prepared!

If you would like to discuss your current treatment of reimbursable expenses please don’t hesitate to contact our office for assistance.

2016 represents the 20th year of McAdam Siemon

Well Christmas seems but a distant memory and Easter is just around the corner (I think Hot Cross buns hit the stores on 6 January), kids are back to school and the year is well and truly underway.

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2016 represents the 20th year of McAdam Siemon when John  and I opened our doors on 1 January 1996 at Kangaroo Point and a hole in the wall at Noosa Junction with 4 staff. 

Today we operate out of Upper Mt Gravatt, Noosa Junction and have just opened an office in Buderim.  Sam Hodgetts joined us as a partner in 2013, having started work in the Noosa Office and 12 staff.

It has been an amazing 20 years with us still acting for clients from our inception.

John, Sam, and I certainly appreciate and never underestimate the loyalty shown by our clients through the good times and bad. (luckily lots more good times.) 

This year the team at McAdam Siemon will be focusing on working with our clients so that they can focus and achieve your goals.

To help you achieve this we have developed a number of tools that will allow you to have a better understanding of your business and focus that is required. 

1. Breakeven analysis

2. Using your accounting package effectively and efficiently to save time and money. 

3. Tax planning tool

4. Fathom – to truly understand your business and set goals 

We will discuss these in more detail in future newsletters and of course our experienced team will discuss them in more detail when they meet with you. 

We look forward to our continued close working association with you.

Tax file numbers (TFN)

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Forwarding documents with Tax file numbers

As you would be aware Privacy laws were significantly strengthened a couple of years ago with substantial penalties for both individuals and corporations who breach the rules.
One of the areas covered is dealing with tax file numbers.
It is now assumed that sending of emails is not a secure form of communication.  The tax department is taking a stronger stance on the sending of documents with TFN’s and there are cases of where tax agents have had their licences cancelled because of privacy breaches.
Our system does allow for tax returns to be printed with the TFN’s left out
For this reason we have established the following rules:

  1. No document will be emailed with TFN’s attached
  2. Any document that requires the TFN to be retained will either be posted or uploaded to our secure portal area which you can access via a password.
  3. Annual tax returns, if been emailed, will be sent with no TFN’s attached however your name, entity details will be shown to confirm that the return provided is the correct one.

 
If you have any questions or concern please do not hesitate to contact one of the team at McAdam Siemon.

Brisbane: 07 3421 3421

Noosa Heads: 07 54748955

Buderim: 07  5408 4622
 

A new office in Buderim

McAdam Siemon Business Accountants Upper Mt Gravatt, Noosa Heads & Maroochydore. Specialising in Accounting, Taxation, Management Rights, SMSF Administration, Business Advisory, Business Valuations. New office

We are excited to let you know that McAdam Siemon has a new office in Buderim, saving a huge commute for those of you that travel a long way to visit our Noosa office.

This will allow us to provide you with services more conveniently.

Susan and Adam will be working from the Buderim office  and John will be there each Wednesday or when appointments are made.

For those of you that like to meet either John, Sam or myself at the coast and this office is closer to you, please don’t hesitate to make your appointments with us at Buderim.

Middy’s Complex
Shop 16
29 Main Street
Buderim  Qld  4556

 There is off street parking available.

Random ATO Audits 2016

 

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Random ATO Audits  2016

The ATO has decided not to reduce their random audits in 2016. They have now confirmed that random audits will recommence.
The compliance program will be physically audited, targeting 600 individuals and small businesses and focusing on underreporting and tax evasion.

There is good news for some though.

The ATO has contacted 500,000 taxpayers advising that their tax returns will not be subject to further review. This ATO project is aimed at taxpayers with straight – forward affairs and a taxable income of less than $180,000.
The ‘certainty letter’ is an assurance that the ATO will not review the return unless they find evidence of deliberate avoidance or fraud.

What is a ‘certainty letter’?

This year the ATO is sending letters to some taxpayers as part of a trial to confirm their 2014-15 tax return is finalised.

Thinking about investing?

McAdam Siemon Business Accountants Upper Mt Gravatt, Noosa Heads & Maroochydore. Specialising in Accounting, Taxation, Management Rights, SMSF Administration, Business Advisory, Business Valuations and more.

Thinking about investing, but worried about market conditions? 

Daniel Green may have the solution.

Whilst it’s true that interest rates for investment loans are generally higher, there are very competitive loan options still available to you. By setting up a Principal and Interest (P&I) loan for your investment, you can enjoy similar low rates to those normally offered to an owner occupier.

Many investment loans are interest only, meaning over the period of the loan, the amount owing to your lender will remain the same. With a P&I loan your repayments are calculated on the total loan amount and interest, meaning when you are ready to sell or reinvest, the value of your loan will have decreased.

This could mean increased buying power for your next investment, and more cash available when you sell.

Any taxation matters regarding your investment property should be discussed with a tax professional.

So give Daniel a call today, to discuss making your finance and investment goals a reality.

(O7) 3899 2866

http://www.greenfinancegroup.com.au/

There has been a lot of discussion about China lately

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There has been a lot of discussion about China lately .

Courtesy of The Knowledge Shop
Free Trade Agreements, financial stability and growth and the impact on the Australian economy, and Chinese investment in Australia.  With the help of our international contacts, we explore the impact of China on Australia and give some context to the debate.
According to Austrade, one in every three Australian export dollars earned is from sales of goods and services to China.  On top of that, 80 per cent of the value of Australia’s export growth in 2013-14 was from trade with China.  It’s not surprising then that we have a fixation with the welfare and continued consumption of Australian goods and services by China and China’s rising influence on the Australian economy.

Chinese growth – an insider’s view
China’s economic growth has been spectacular: until recently growing at around 10 per cent per annum from a low economic base to arguably the leading global economy.  While construction and infrastructure projects were the primary drivers of growth, the opening of the Chinese economy to foreign investment in the late 1970s saw it become the ‘factory of the world.’  The fuel to drive this growth was a massive growth in Chinese consumption of resources – steel, iron ore, copper – you name it China needed it.  You can see this consumption growth reflected in Australia’s export statistics.
With an increase in wealth came an increase in consumerism with a growing middle class.  And, with a growing middle class came a property boom with many Chinese able to afford better housing.
Demand for housing escalated and development after development was launched, many snapped up within hours of launching.
The cost of this success was a rapid increase in the cost of living, high property prices fuelled by speculators, and corruption.
With the global financial crisis, demand for China’s goods started to decline creating excess capacity, factory and company closures, and staff lay-offs.  Banks were then asked to reduce their loan exposure and Government projects scaled back.  Starved of funds some companies sought funding from underground banks – shadow funding – paying extreme rates of interest that further aggravated the slow down and excess capacity.

Looking forward
The People’s Bank of China recently reported that it expects economic growth to be 6 – 7 per cent over the next three to five years – although businesses on the ground will tell you it’s lower than this at about 5.8 per cent.  Interest rates were cut for the sixth time in 12 months in late October to try and hit growth targets.

CLIENT FOCUS – Beach Road Holiday Homes

CLIENT FOCUS – Beach Road Holiday Homes

Stunning architecturally designed, eco friendly holiday homes in an idyllic bush setting.

Take the road less travelled, leave the hustle and bustle of Hastings Street behind, take the ferry and come over the river to the Noosa North Shore and explore the natural side of Noosa at Beach Road Holiday Homes

Fringed by native bushland, unspoilt beaches and pristine waterways and situated at the gateway of the Cooloola-Great Sandy National Park,  Beach Road  Holiday Homes allow you to get back to nature without sacrificing 5 star accommodation.   Our luxury, architect designed and eco inspired  homes, sleeping from 2 to10 guests, offer an unparalleled opportunity to relax, rejuvenate and enjoy in an idyllic setting.

Reconnect with family or friends to enjoy good food and wine, spend time with the kids;explore the surrounding bushland; or for the more energetic, enjoy a game of tennis. Beach Road Holiday Homes is the perfect family and friends reunion venue, with all the facilities to make it a memorable occasion.


Book now for the festive season.

Client Focus – Little Kickers

Client Focus – Little Kickers Qld 

  • Have you got young kids and would like them to play  soccer?
  • Has your child a birthday coming up and you would like something different to do?
  • The holidays are coming up – Why not think about enrolling your young kids in a holiday course.

 

Little Kickers provides fun and safe soccer classes for boys and girls aged 18 months up to 7th Birthday, in venues around Brisbane, Gold Coast and Sunshine Coast (free trial classes are available). They also offer day care programmes, holiday courses and birthday parties. Their motto is play not push and we are proud to offer this fantastic programme which has been created to get kids interested in sport by way of imaginative play.
Contact Name: Karen Tannoch-Bland
Website: http://www.littlekickers.com.au
Phone: 07 3299 3361

Superannuation for contractors

June 2015

Management Rights News – Superannuation for contractors

Recently we had a case whereby two contract workers approached the ATO stating that they believed they should be paid superannuation by our client.  Consequently the ATO instructed a superannuation audit.

Whilst the outcome was a favourable one, not the least because the two contractors withdrew their statements on the eve of the deadline to respond, the business owner dutifully completed the 27 page document canvassing all 43 questions.

Employee versus Independent Contractor

As you would surmise, by the size of the ATO’s line of questioning, there are many facets looked at when determining the true relationship of the payer and worker.  No one point on its own will determine the outcome of the business owners’ superannuation obligation but rather it’s the totality of the relationship that is tested.

Here are some of the more common factors that business owners across the board must consider when determining their obligations under the Act.

Is the contractor genuinely carrying on their own business or are they simply working for you in your business?  Let’s look at some of the relevant factors.

Is there a contract – Whilst a legally drafted contract signed by both parties is best practice, the courts and therefore the ATO do recognise that contracts might be verbal.  Verbal agreements though, are subject to dispute, so for the avoidance of doubt, a signed written contract is the recommended option.

Level of Control – Contractors generally maintain a high level of discretion as to how the work is to be performed and sets their own hours.  A worker operating under the direction and control of the payer is likely to be an employee.

Results – A worker who contracts to produce a result or a product rather than being paid an hourly rate is more likely to be considered a contractor.  Being paid an hourly rate is akin to being employed.

Delegation not Substitution – A worker that truly has the power to delegate the work to either an employee of theirs or to other sub-contractors without the business owners say so or permission is more likely to be a contractor.  Furthermore, the payment should be to the original contracted worker, who then in-turn on-pay’s the worker, who actually carried out the work.

Example:- a contract cleaner Brett, arranges with the consent of the business owner for another cleaner, Liz to take his spot for the day.  The business owner then pays Liz for her services.  This arrangement is not truly delegation, but rather substitution.     

Risk – A contractor bears the commercial risk and responsibility for poor workmanship or injury sustained in the performance of the work and usually has their own insurance to cover risks.  By contrast, under an employer/employee relationship, the party deemed to be an employer is the one that generally bears all the commercial risk.

Assets – A contractor provides their own equipment and assets and incurs their own expenses to complete the work, whereas an employee generally performs the work on the payers’ premises using equipment provided by the payer.

The ATO website contains useful decision tools that provides guidance on this issue.

Please view the links below.

Video

Questionnaire

For more detailed advice, please do not hesitate to contact us to make an appointment.

Or call us

Brisbane: 07 3421 3421

Sunshine Coast: 07 5474 8955

 

 

Some highlights for the new financial year

Overseas assets & income? Why the ATO wants you!

The ATO is heavily targeting individuals that have assets and income from overseas. A month ago, the ATO announced an amnesty, called Project DO IT, that allows people to declare unreported assets and income they have received from overseas. These voluntary disclosures have already raised over $13 million in back taxes.

Now, the ATO are backing up that amnesty with a new datamatching program to target those who have not voluntarily declared foreign income. The data matching program will troll through information from overseas tax authorities on Australians with offshore investments and bank accounts; information from Australian and foreign banks on fund flows, interest and account balances; information from informants about offshore accounts, and money transfers to and from offshore bank accounts.

The bottom line is that if you don’t declare income you receive from overseas that you should be paying tax on in Australia, and the ATO catch you, you can expect little mercy.  Don’t assume that just because your foreign income is genuinely not subject to tax overseas that it is not taxable in Australia.

If you suspect you might have a problem, talk to us today to assess your position and manage your approach.

Employers paying Superannuation Guarantee!

Employers can expect a renewed focus from the ATO on superannuation guarantee (SG) payments made to employees. With the increase in the SG rate from 9.25% to 9.5% on 1 July 2014, employers will need to make sure that payments are made on time and that the calculations are accurate. Just be aware that the increase in SG does not necessarily reduce the take home pay of employees. In many cases employee contracts are ‘base plus superannuation’. In this case, the employer absorbs the increased SG rate not the employee.

Are your contractors really employees?

The ATO continues to enjoy a high success rate challenging the treatment of contractors under the superannuation guarantee (SG) legislation.  Despite recent comments made by the Government that the ATO should ‘relax’ its approach to contractors, the ATO has no reason to simply walk away from such a potentially lucrative revenue stream – why would they when the law is on their side?

As there is no real time limit on the recovery of outstanding SG obligations, business owners need to take a proactive approach reviewing arrangements to ensure that the business is not exposed to material liabilities – the start of the new financial year is a great time to do this.

The underlying issue is often that employers take the contractor relationship at face value – that is, what the piece of paper describing the relationship actually says.  The reality is quite different as the law is based on the character of the relationship not what is stated in writing.  So, if your business has contractors (or you are a contractor) performing the same role as an employee, then it’s possible the ATO will classify them as employees for SG purposes.

A genuine independent contractor who is providing personal services will typically be:

  • Autonomous rather than subservient in their decision making;
  • Financially self-reliant rather than economically dependent upon the business of another; and
  • Chasing profit (that is a return on risk) rather than simply a payment for the time, skill and effort provided.

There are a number of tests that can apply to help determine the status of a contractor-such as control, whether the worker has been hired to produce a result, the ability for them to freely delegate work to someone else, risk exposure, ownership of tools and equipment, and the treatment of business expenses, etc.

Employers cannot contract out SG responsibilities by adding fail safe clauses in contracts; and there is no certainty that a contractor using an interposed entity (for example setting up a company and operating through it), is fool proof.

Clear out the old! New Year house keeping

Here is the essential checklist to prevent last year overflowing into this year:

  • Reconcile your GST control account.
  • Does the income declared in your BAS for the last year reconcile to your annual income?
  • Check that the minutes for all director and trustee resolutions pre June 30 are documented and signed off.
  • Make sure your stock take has been completed and documented.
  • If you have paid management fees to a related entity during the year, ensure that all of the tax invoices have been documented and that there is a reasonable commercial basis for the charges applied.
  • Where dividends have been declared to manage Division 7A loan payments, ensure that there are letters on instruction on the file that the dividend is to be credited against the loan account. Dividend statements will need to be completed.
  • If you have cross border related party transactions, make sure you have your transfer pricing file completed with all the requirements signed off.
  • Review all contractors for the year going forward to ensure they would not be deemed as employees.
  • Get your operating budget completed for the year.
  • Get your cash flow budget in place.
  • Check the adequacy of your funding arrangements with your bank.
  • Check that you meet any loan covenants that you have with the bank at June 30.

Please contact the team at McAdam Siemon if you would like further information.