Your 9 point checklist for paying less tax this year (and why this checklist will be useless to you in a few weeks’ time)

Time is running out.

If you want to take a few simple preventative measures to minimise or defer how much tax you will pay for this Financial Year, you need to do two things:

  1. Read the following 9 point checklist, then
  2. Call or email us as soon as possible so we can make a time to sit do with you to assess which of these preventative measures can be done for you in your circumstances.

Depending on your situation, this tax planning process could save you many thousands of dollars. That’s cash in your bank account, rather than the Tax Office’s.

After all, why pay one more dollar in tax than you have to?

I’m sure you have better uses for your money, such as investing in your future or just investing in the here and now and rewarding yourself with a little ‘lifestyle indulgence’.

Now … to the checklist. Tick each item you think is relevant to you:

❑ Review debtors Your income tax is payable on any invoices you’ve issued, even if you haven’t been paid. Don’t pay tax on any invoice you know won’t ever get paid. Review the list of those who owe you money and write off those ‘bad debts’ now.

❑ Review your stock levels The value of your closing stock directly affects your business profit, the higher your stock value the higher your profit and tax. Review and identify any obsolete or old stock and scrap it or re-value it to its correct value. Individual items of stock can be valued at cost, market value, or replacement value.

❑ Review your business assets Write off any obsolete asset and claim its remaining book value now. There are also new ways assets can be depreciated, called pooling, that will increase the depreciation expense. This isn’t suitable for all business, but it is worthwhile reviewing.

❑ Defer income — A simple tip that can defer a lot of tax for you If your cashflow allows, you may consider deferring some of your invoices until July. If the income was not invoiced this financial year, it can’t be taxed this financial year. Before taking this option we recommend having a budget to manage these months income and expenses. We can help you with that.

❑ Review your invoices issued If you have invoiced someone in advance for services you will provide in the next financial year, then you may not have earned that income in this tax year. That income may belong in the year you provide the service. Again, this is something we can work out with you when we meet for tax planning.

❑ Pay the June quarter superannuation Superannuation if paid on time is deductible when paid. Since you have to pay the 9.5% superannuation by 28 July, bring it forward a month and pay it now and claim the deduction now. Why wait a whole year to reduce your tax?

❑ Using all of your superannuation cap If maximising your superannuation is part of your retirement plan, then don’t forget to contribute as much as you can into your super fund. We can guide you as to how much you can contribute. It’s a missed opportunity not to do this each year.

❑ Employee bonuses Bonuses to employees are deductible when the business has committed to paying them and it is not subject to any discretion. So finalise and sign off on the bonuses to be paid and reduce this year’s tax.

❑ Capital Gains Tax (CGT) Minimising your capital gains tax is often about timing. Ensure the asset has been owned for at least 12 months. If you already have a capital gain, are there any investments making a loss you can sell? Do you qualify for any capital gain rollover relief concessions? (Again, we can guide you here.) CGT is a whole topic on its own, and the potential savings are so great, it is definitely an area in which you should seek our guidance.

If you ticked any of the above items, then we need to talk. And soon.

Call us now on 3421 3421 (Brisbane) or 5474 8955 (Sunshine Coast) or email Rob, Sam, Peter or Myself to make a time to meet and discuss your tax planning options.

Changes to super contribution limits: How it will affect you

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It’s that time again.

With the 2016 Federal Budget came several shake-ups, in particular the changes to contribution limits. With many other changes announced in the budget now passed by Parliament, you can have more certainty when it comes to planning your Self-Managed Super Fund (SMSF). Especially regarding the SMSF contributions you might wish to make to your fund.

The Government is lowering both the concessional (pre-tax) and non-concessional (after-tax) contribution limits as of 1 July 2017.

Knowing this—and with tax time fast approaching—it’d be wise to start getting your financial ducks in a row.

SMSF contribution limits

One of the original proposed measures which received a lot of comment and caused concern, was the $500,000 lifetime non-concessional contributions (after-tax contributions) limit. This proposed measure was dropped and replaced with a $100,000 annual limit on after-tax contributions.

Pre-tax contributions will be limited to $25,000 for all taxpayers, beginning on 1 July 2017. Below is a summary of the changes for both concessional and non-concessional SMSF contributions.

After-tax contributions

The $500,000 lifetime limit has been dropped in favour of a $100,000 annual cap. The rules allow the opportunity to bring forward three years of contributions – making it possible to contribute $300,000 in one year.

For the 2016/17 year, it is still possible to make a contribution of up to $180,000 for one year, or to bring forward three years’ contributions – so you are able to make a contribution of up to $540,000. If you do not use this full limit of $180,000 or $540,000 in the 2016/17 year, then you will be limited to the $100,000 annual, and $300,000 bring-forward caps for future years.

Where the bring-forward of contributions has been triggered before 1 July 2017, transitional contribution caps may apply. If you have a balance of $1.6m or more in your SMSF at 1/7/2017, then you will not be able to make further after-tax contributions.

When approaching the $1.6m cap, care will need to be taken with the bring-forward rules, as these are restricted by the new $1.6 million balance restriction.

Pre-tax contributions

The concessional contributions cap is lowered to $25,000 per year for all taxpayers as of 1 July 2017. Taxpayers who were aged 49 or over on 30 June 2016 can make up to $35,000 in pre-tax contributions in 2016/17. Those aged under 49 on 30 June 2016 can make up to 30,000 in pre-tax contributions in 2016/17.

Some of these changes may require you to adjust your SMSF contributions strategies going forward. This will most likely be the case if you have a superannuation balance of over or close to $1.6 million, or were planning on making contributions to superannuation in the next few years that exceed these new limits.

How we can help you with your SMSF contributions

If you are concerned that the Government’s changes to contributions for superannuation are going to affect you, please feel free to get in touch to arrange a meeting. We’ll discuss your situation in more detail and find a solution that works for you.

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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.

I trust my Accountant: why can’t they advise me about an SMSF?

I trust my Accountant: why can’t they advise me about an SMSF?

Written for McAdam Siemon Pty Ltd, by Eric Walters FCPA(FPS) FAICD

 

 

The short answer is – they can, BUT….

Over the past several years, particularly following the Global Financial Crisis (also popularly referred to as: the GFC, the Great Recession, the global credit crunch), the rules and regulations around the provision of advice in relation to financial products have been tightened somewhat: and the regulations dealing with the necessary qualifications and experience of those delivering such advice have resulted in changes in licensing for Accountants as well as increased regulation for financial planners generally.

Whilst the previous provisions (the ‘Accountants’ exemption’) were more often recognised in the breach (‘ignored’) than complied with, the new rules which come into full effect on 1 July 2016 are far more onerous on accountants. Hence it is likely that there will be some reluctance on the part of most accountants to provide even the most basic of advice about whether to start, or indeed to continue, a self-managed superannuation fund (an SMSF) – once they understand how these new rules apply.

Under the Accountants’ exemption, accountants could advise about forming an SMSF – but could not advise about rolling existing superannuation accounts into that SMSF; nor about how to invest the contributions received by the SMSF.

In a change that took effect on 1 July 2014, this exemption is being phased out in favour of a limited licensing regime: accountants who extend their already broad range of expertise to qualify for the granting of the limited licence will need to undertake additional study – and maintain their new skills and knowledge with ongoing professional education.

Under the limited licence, accountants will be able to (amongst a limited range of compliance and associated ‘administrative’ matters) –

  • Advise on the establishment of an SMSF;
  • Advise on the formulation of an Investment Strategy;
  • Provide general information about investment assets – but NOT any specific shares, property of managed fund products; and
  • Provide general information about the various types of personal life insurance – but NOT about any particular insurance company’s product offering.

….and so, in view of the onerous conditions applicable to attaining the limited licence; and the justifiable approach of ASIC in supervising this rapidly expanding area of their responsibility – it is not surprising that many accountancy practices elect to outsource their SMSF advisory tasks to comprehensively-licensed financial planners.

Our position

McAdam Siemon Pty Ltd has operated under the Accountants’ exemption in the past, but since the incorporation of SmartChoice SMSF Administrators Pty Ltd (‘SmartChoice’, as an associated entity of the accountancy practice), refers all requests for advice in relation to SMSFs and their administration to that company.

One of the partners, John Siemon, is a director of SmartChoice: he is qualified and holds a limited advice licence. John will be supported by Susan Stainwald (who works in SmartChoice) who is currently undertaking the requisite licensing process. Under this arrangement, investment advice is often referred to financial planning specialists as appropriate to the circumstances of each SMSF.

ASIC: the Regulator for Financial Advice participants

Whilst the administration compliance of SMSFs is monitored by the ATO, financial planning advice generally is regulated by ASIC. As SMSFs are considered a financial product, advisers dealing with such an entity – whether accountants holding a limited advice license, or comprehensively-licensed financial planners, must be mindful of ASIC’s requirements in administering the legislation and regulations prescribed by the Federal Parliament.

In a couple of recent information papers (INFO 205 and INFO 206), ASIC has provided detail as to what they will be checking on in relation to advice that is provided to trustees of SMSFs, regardless of the license status of the person providing the advice: respectively they deal with the disclosure of ‘risks’ and ‘costs’ to trustees and the members of SMSFs.

Summaries of the above-referenced Information Sheets are attached below: for full details – and for related reading on the ASIC website, refer to the following links: INFO205 and INFO206.

All of the matters covered by these Information Sheets from ASIC are able to be dealt with by a comprehensively – licenced financial planner and/ or by an Accountant holding a limited financial planning licence: the Accountants’ exemption will not allow the provision of such advice by an unlicensed Accountant.

Review of your SMSF decision

If you have been considering either –

  • moving your superannuation accumulations into a self-managed environment, or
  • wanting to review the wisdom of continuing with your SMSF,

John Siemon, is a director of SmartChoice: he is qualified and holds a limited advice licence. John is supported by Susan Stainwald, who is currently undertaking the requisite licensing process. Under this arrangement, investment advice is often referred to financial planning specialists as appropriate to the circumstances of each SMSF.

Call our office on 1300 366 316 to make an appointment to meet with John to gather the information necessary to formulate advice on the matter:

Eric is a Director and Financial Planner at Continuum Financial Planners Pty Ltd: their website has articles on superannuation matters and SMSF particularly – click the link to access these.

 

DISCLAIMER: The information contained in this article is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and any relevant product having regard to your objectives, financial situation and needs. In particular, you should seek appropriate financial advice and read relevant Product Disclosure Statements or other offer documents prior to acquiring any financial product.

 

 

Top Things To Do and Review Before 30 June

Here’s our list of the top things you need to do and review before 30 June arrives:

1. Write-off bad debts. To be a bad debt, you need to have brought the income to account as assessable income, and given up all attempts to recover the debt. It needs to be written off your debtors’ ledger by 30 June. If you don’t maintain a debtors’ ledger, a director’s minute confirming the write-off is a good idea.

2. Trading Stock. Write off any stock that is damaged or obsolete. Complete a stock take (if you are not using the simplified trading stock rules) and remember that stock can be valued at the lower of cost, replacement, or net realisable value. You can use different methods for different stock items.

3. Review your asset register and scrap any obsolete plant. Check to see if obsolete plant and equipment is sitting on your depreciation schedule. Rather than depreciating a small amount each year, if the plant has become obsolete, scrap it and write it off before 30 June. Small Business Entities can choose to pool their assets and claim one deduction for each pool. This means you only have to do one calculation for the pool rather than for each asset. It also allows you to claim an immediate deduction for depreciating assets that are bought for less than $1,000.

4. Repairs, consumables (office stationery etc), trade gifts or donations. To claim a deduction for the 2014/2015 financial year, consider paying for any required repairs, replenishing consumable supplies, trade gifts or donations before 30 June.

5. Pay June quarter employee super contributions if you want to claim a tax deduction in the current year. The next quarterly superannuation guarantee payment is due on 28 July 2015. However, some employers choose to make the payment early to bring forward the tax deduction instead of waiting another 12 months.

6. Superannuation. Don’t forget yourself. Superannuation can be a great way to get tax relief and still build your wealth position. Your personal or company sponsored contributions need to be received by the fund before June 30 to ensure deductibility.

7. Capital gains and losses. Neutralise the tax effect of any capital gains you have made during the year by realising any capital losses that you have. These need to be genuine transactions in order to be effective for tax purposes. It may be possible to contribute assets with unrealised losses to superannuation in order to do this.

8. Directors’ fees and bonuses. Declare them before 30 June and providing the company is absolutely committed to them, you are entitled to the deduction even if they have not been paid. Again, a director’s minute is a good idea. The directors and employees only need to declare this income in the year of receipt although they need to be formally notified of their entitlements by 30 June.

9. Management fees. Where management fees are being charged between related entities, make sure that the charges have been raised by June 30. Where management charges are used, make sure they are commercially reasonable and there is documentation to support this position. If any transactions are being undertaken with international related parties then the transfer pricing rules need to be considered and the ATO’s expectations in relation to documentation will be much greater. This is an area that the ATO are placing under greater scrutiny.

For Your Business

Trustees must make a decision on distributions by 1 July

Trustees need to decide on distributions of trust income by 30 June (at the latest) to ensure that beneficiaries are presently entitled to trust income for tax purposes. Trustees used to have until 31 August to make a decision but this administrative concession has been removed. If the ATO is not satisfied that the resolutions have been made in time then the risk is that the trustee or default beneficiary will be taxed on all of the trust income.

Defer your income

If possible, defer your income until the new financial year. In particular this can work for service based businesses or where you are billing your clients on a progress payment basis. Make sure that you can manage any cash flow effects that come with this one.

Manage your capital gains and losses

Remember that capital gains trigger on the date of the contract not the date of payment. Also, capital losses can only be written off against capital gains. So, if you are selling assets that will trigger a capital gain try and delay the contract until 1 July unless you have some capital losses that you are able to offset against.

Please contact either John, Rob or Sam, if you would like further information.

Are you interested in Self Managed Super Funds (SMSF)?

SMSF Strategic Advice

We are excited to announce that McAdam Siemon is expanding its service offering and are now able to provide a much wider range of advice, including SMSF advice.

To date our SMSF advice offer (via Smart Choice SMSF Administrators) has been structured to provide administration and accounting services to our clients. This is largely a compliance service to ensure your fund is established correctly and meets all the legal requirements. Due to Government regulatory changes accountants are now required to be licensed to provide any SMSF advice. (via Smart Choice SMSF Strategies Pty Ltd)

As we are always looking for a way to improve our service offering, we have decided to become fully licensed. This will not only enable us to provide SMSF advice but expand our advice services more generally.

So what does this mean for you?

This will be different for every client, dependant on your individual needs and circumstances. It essentially means we now have a wider range of services we can offer you. This doesn’t mean we will be selling you financial advice products, it simply means we now have the ability and expertise to provide strategic advice if it’s of interest to you.

We have included a table of how our services will be structured in future. You might notice some services previously provided by the accounting business have moved across to the advice area. This enables us to provide more comprehensive advice and ensures we are compliant with any legal requirements.

As part of the regulatory change we were required to either hold the license ourselves or become authorised with another license holder, we chose to affiliate ourselves with SMSF Advice, a leading licensee in the market.

Our licensee, SMSF Advice, is a subsidiary of the AMP Group and in partnering with them we are able to draw on in-depth knowledge of the financial services industry. We can leverage a wide range of plans, tools and training to ensure we deliver the best possible advice to you in the most efficient way.

Are you interested in Self Managed Super Funds (SMSF's)?

What’s next?

If you have any specific questions or would simply like to know more about the options available to you, please contact the Partner or Client Manager who looks after you for a confidential discussion regarding your needs.

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.

New Superannuation contribution caps for the year ended 30 June 2015

From the 1 July the following changes have been made to the Concessional (tax deductible) and Non – Concessional (non tax deductible) Superannuation Contribution Caps …….

 Concessional Contribution rates for the year ended 30 June 2015

Under 50 $30,000
Aged 49 or over on June 2014 $35,000

 Non-Concessional Contributions Cap rates for the year ended 30 June 2015

  • $180,000 per person per annum
  • If you are aged under 65 you may be able to make a non-concessional contribution of up to three times the non-concessional contributions cap (i.e.$540,000) for the year. By doing this you activate the bring forward provisions and you will not be able to make another non-concessional contribution for 3 years.

Please note

  • If your employer pays life insurance premiums as part of your contribution to super, the payments could be included as part of the contributions caps.
  • The above caps are per person, per annum.  If you have more than one employer you need to ensure that the contributions caps are not going to be exceeded.

If you would like more information on how this might affect you, please contact us.