Fiskl Advisory - Fiskl Advisory

The Federal Treasurer, Mr Josh Frydenberg, handed down the 2022–23 Federal Budget at 7:30 pm (AEDT) on 29 March 2022.

In an economy emerging from the pandemic, the Treasurer has confirmed an unemployment rate of 4% and an expected budget deficit of $78 billion for 2022–23. As international uncertainties add pressure on the cost of living, key measures in the Budget provide cost of living relief in the form of an increased Low and Middle Income Tax Offset, a one off $250 payment for welfare recipients and pensioners and a 6-month fuel excise relief.

Other measures for business seek to promote innovation, with expanded “patent box” tax concessions proposed, and provide tax incentives for small business to invest in the skills of their employees. A lower GDP uplift rate for PAYG and GST instalments has also been proposed to support cash flows of small and medium businesses.

The full Budget papers are available at www.budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au. The tax, superannuation and social security highlights are set out below.

Individuals

The low and middle income tax offset will be increased by $420 in the 2021–22 income year to ease the current cost of living pressures.
A one-off payment of $250 will be made to individuals who are currently in receipt of Australian government social security payments, including pensions, to ease cost of living pressures.
Additional funding will be provided over 5 years to support older Australians in the aged care sector with managing the impacts of the COVID-19 pandemic.
Costs of taking a COVID-19 test to attend a place of work will be tax deductible for individuals and exempt from fringe benefits tax from 1 July 2021.
A single Paid Parental Leave scheme of up to 20 weeks paid leave will replace the existing system of 2 separate payments.
CPI indexed Medicare levy low-income threshold amounts for singles, families, and seniors and pensioners for the 2021–22 year announced.
The number of guarantees under the Home Guarantee Scheme will be increased to 50,000 per year to assist home buyers who have a lower deposit.

Business

Additional state and territory COVID-19 business support grant programs will be eligible for tax treatment as non-assessable non-exempt income until 30 June 2022.
Small and medium businesses will be able to deduct an additional 20% of expenditure incurred on external training courses provided to their employees.
Small and medium businesses will be able to deduct an additional 20% of eligible expenditure supporting digital adoption.
The Boosting Apprenticeship Commencements wage subsidy will be extended by 3 months.
Concessional tax treatment will apply from 1 July 2022 for primary producers selling Australian Carbon Credit Units and biodiversity certificates.
Access to employee share schemes in unlisted companies will be expanded.
The PAYG instalment system is set for a structural overhaul with a set GDP uplift of 2% to apply for the 2022–23 income year.
Additional funding will be provided to further reform insolvency arrangements, including the insolvent trading “safe harbour”.
Business registry fees will be streamlined over 3 years from 2023–24.
Wholly owned Australian incorporated subsidiaries of the Future Fund Board of Guardians will be exempt from corporate income tax.

Excise and customs duty

Excise and excise-equivalent customs duty on petrol and diesel will be reduced by 50% from 30 March 2022 for 6 months.
The temporary tariff concession for COVID-19 related medical and hygiene products will be made permanent.
Administration of fuel and alcohol excise, and excise-equivalent customs duty will be streamlined.

Superannuation

The 50% reduction of the superannuation minimum drawdown requirements for account-based pensions will be extended for an additional year.

Innovation

Corporate income from the commercialisation of patents, issued from 29 March 2022, in respect to agricultural and veterinary (agvet) chemical products will be taxed at an effective rate of 17% for income years starting from 1 July 2023.
The effective tax rate of 17% for the “patent box” regime will also be expanded to include patents that have the potential to lower emissions.
Following on from the 2021 Federal Budget announcement of the “patent box” regime for medical and biotechnology innovations, the concessional tax treatment will be expanded to include certain overseas jurisdictions with equivalent patent regimes.

Tax administration

Companies will be able to choose to have their PAYG instalments calculated based on current financial performance, extracted from business accounting software, with some tax adjustments.
Businesses will be allowed the option to report taxable payments reporting system data (via accounting software) on the same lodgment cycle as their activity statements.
Trust and beneficiary income reporting and processing will be digitalised.
IT infrastructure will be developed to allow the ATO to share single touch payroll data with state and territory revenue offices.
The ATO will be given funding to extend the operation of the Tax Avoidance Taskforce by 2 years.
The start date of the 2019–20 Budget measure for holders of Australian Business Numbers will be deferred by 12 months.

Not-for-profits

Melbourne Business School Ltd, Advance Global Australians Ltd, Leaders Institute South Australia Inc, St Patrick’s Cathedral Melbourne Restoration Fund, and various entities related to Community Foundations Australia, have been added to the list of specifically DGRs for a period beginning 1 July 2022.

Indirect tax

The Indirect Tax Concession Scheme (ITCS) has been granted or extended to various diplomatic and consular representations.

The superannuation guarantee statutory rate has remained at 9.5% since July 2014. However, plans have been in place for some years now, to increase the rate to 12% incrementally.

In July 2022, the rate will rise to 10.5%. From then on, the rate will increase by 0.5% each year until July 2025 when it will reach the legislated 12%.

Prepare Now for the July Rate Rise

Review your current superannuation costs for all employees, both hourly and salaried.
Review any salary packaging arrangements. Is the agreement inclusive of superannuation or is super paid on top of the agreed salary?
For salary packages inclusive of super, you will need to check the contract’s wording to make sure you apply the changes correctly. This change may also impact annualised salary arrangements.
Calculate your revised payroll costs from July, showing the current wages and superannuation expense compared to the new rate from July 2022. Highlight the increased amount per month or quarter, so you know precisely what the impact will be.
Discuss the super rate increase with your employees now. Let them know that there will be an increase of 0.5% each year from now until July 2025 when the statutory rate will reach 12% and remain there.
Remember – short payment or late payment of super can incur hefty penalties – plan now for higher payroll expenses from July, so you don’t get caught short.

If you’d like help reviewing payroll costs and employee agreements, talk to us now, and we’ll make sure you have accurate reports to make planning for the rate rise easy.

Getting organised now means that you’ll be well prepared for your business’s increased costs when the first payment is due later this year.

Farming businesses have unique accounting needs. The specific challenges you face in running a successful and thriving farm, require tailored business advice that goes beyond simply tax and accounting needs.

Not many other businesses rely on living produce and have so many factors that can dramatically affect profit and loss. Farmers are managing assets, liabilities, payroll, compliance, exchange rate fluctuation, costs, revenue, not to mention day-to-day operations.

The following article covers some of the key areas to consider in your farm accounting:

Your land is an asset
Staying up to date with Government subsidy schemes
Adjusting your farm accounting calendar to suit the government’s
Recording changes in land use
Knowing your stock
Understanding depreciation
Accounting for loss
Keeping track of your profitability
Using the internet and the cloud
Working with your accountant

Careful management of farm finances can make or break your business. We’ll keep your farm accounts in top shape and provide the support you need in your farm operation.

Get in touch to talk through your farm business. We are here to work with you.

The ATO’s new directives on the taxation of trust distributions mean it’s essential to review arrangements before the new rules start on 1 July 2022.

If your trust pays adult-child beneficiaries, then you’ll need to know how the new ATO tax guidance rules could alter your beneficiary arrangements. The proposed changes won’t affect every small business operating through a trust arrangement, but it’s important to check that existing provisions meet the new requirements.

The ATO has released several related documents as a draft package that outlines specific taxpayer arrangements it is examining. It is interested in agreements where parents benefit from trust income allocated to their children or other family members, particularly where tax avoidance could be an issue, and family member beneficiaries are unaware of the provisions.

Another area of focus is the application of Division 7A rules to trusts that pay private companies, especially with related business entities and where the trust and company are part of the same family group.

Do your trust distribution arrangements need to change?

Trust beneficiary arrangements can be complex, and we want to make sure your trust arrangements meet the ATO guidelines so you don’t get penalised. We’ll examine your situation in detail against the new information and advise you if any changes to trust arrangements are required.

With the ATO’s stronger position on the taxation of trust distributions, it’s essential to review arrangements before the end of this financial year. The new rules are set to apply from 1 July 2022.

Book a tax planning session with us today, so we can make sure you’ve got the best beneficiary arrangement for your business and family.

Disaster Recovery Allowance (DRA) is a short term payment to support those who have lost income as a direct result of the floods in South East Queensland starting in February 2022. You can make a claim until 27 August 2022.

Who is eligible ?

To receive this allowance, you must meet all of the following.

You were 16 or older at the time of the floods,
You are an Australian resident or hold an eligible visa,
You work or live in an affected Local Government Area (LGA),
You lost income as a direct result of the storms and floods, and
You earn less than the average Australian weekly income in the weeks after you had this income loss. ($1,737.10 per week)

If you are part of a couple, you can both claim this allowances. You and your partner will need to make separate claims.

If you receive any of the following payments during your claim period, you are not eligible for Disaster Recovery Allowance (DRA).

An income support payment or pension
Parental Leave Pay
Dad and Partner Pay
ABSTUDY Living Allowance
Farm Household Allowance
A Service Pension from the Department of Veterans’ Affairs.

How much can you receive?

If you’re eligible, you’ll get the maximum equivalent rate of JobSeeker Payment or Youth Allowance, depending on your personal circumstances.

If your income is more than the average Australian weekly income amount of $1,737.10, your payment will be reduced to nil.

How to claim ?

Please click this link for application.

Our thoughts go out to everyone affected by the severe weather events in Gold Coast and surrounds. If you are unsure if you are eligible for this allowance, please feel free to contact us. We are here to help you.

Knowing when a worker is a contractor or an employee can be tricky, but there are penalties if you get it wrong. Learn the key differences that will help you understand the real nature of the employment relationship before you enter into it.

When is a worker an independent contractor or an employee? Plenty of people ask this question as it can expose businesses and individuals to significant risk and costs under tax and employment law.

Sometimes, a person might seek a contracting relationship for perceived tax benefits or the company might want to keep employment flexible. However, by law, it is the nature of the employment relationship that defines whether someone is a contractor or an actual employee. No one can opt out of basic employment standards and entitlements or their statutory tax and superannuation requirements.

So what are the differences between a contractor and an employee? Let’s break it down.

Employees

People working in a contract “of service”, serving the employer under a relevant award, agreement, or employment contract.
Considered part of the business and (generally) told how, where, and when they work.
Dedicate their time and effort primarily to one organisation.
Take no commercial risks and the business is legally responsible for the work done.
Employer provides all or most equipment and systems for doing the work.
Must apply for time off.
Paid by payroll system, with PAYG and any fringe benefits deducted. Eligible for superannuation.
Have all minimum rights under employment laws.

Contractors

People working in a contract “for service”, serving themselves by delivering outcomes to their client(s).
Self-employed, running their own independent business.
Can work freely for a number of organisations (or sub-contract the work out).
Dictate their own time off and may or may not be available for work.
Take commercial risks and are legally responsible for their work.
Use all or most of their own equipment and processes.
Invoice for their work.
Have most workplace rights but different tax, insurance, and superannuation responsibilities

The nature of the employment situation is usually obvious, although project work of fixed duration or finite funding can be complicated. If you’re still not sure, talk to us.

Are you providing rapid antigen tests and other COVID-19 related benefits to employees?

Business owners providing benefits in addition to salary or wages because of COVID-19 need to check if fringe benefits tax could apply.

Although you may be providing various benefits to create a safe workplace and support employees, you may be inadvertently liable for fringe benefits tax.

Track COVID-related benefits paid for by the business

COVID-19 PCR and RAT testing
Work from home equipment
Work vehicles that are garaged at employees’ homes
Vaccination incentives
Travel or accommodation costs
Protective gear
Emergency health care

If you pay for COVID-related services for employees, you’ll need to track them in your accounting system to make it easy to determine if you have an FBT liability and if you should report any amounts on employees’ end of year income statements.

The minor benefits FBT exemption may apply for many or all of the benefits you have provided to employees. Still, we’ll need to review your records to ensure that you’re not going to get a surprise bill from the ATO down the track!

Unsure if FBT applies to your business?

FBT is a complex area of tax law, and there are specific tests that must be satisfied to be exempt from FBT.

Book an appointment with us to go through the benefits you have provided to employees. We can look at the minor benefits and otherwise deductible rules to ensure you’re not paying more tax than you need to. If you’re not already registered for fringe benefits tax, we will look at whether FBT applies and register your business if needed.

We’ll also notify you of any amounts that need to be reported on employees’ income statements at the end of the payroll year.

The fringe benefits tax year finishes on 31 March, so now is an excellent time to get ahead and assess whether your business could be up for an FBT bill.

With many businesses still suffering from the financial fragility of COVID-19 and significant cash flow disruptions, the Australian Taxation Office (ATO) has begun enhancing debt collection powers against directors and other third parties.

What is a Director Penalty Notices (DPN)?

A DPN is a formal notification to a director advising that certain tax related liabilities are payable, even when the taxpayer company enters liquidation or administration. The ATO must first give directors a DPN outlining the unpaid amounts and remission options available.

As such, the ATO’s use of the DPN tool to encourage directors to ensure their company continues to lodge its tax compliance and pays tax liabilities on time.

What are the changes from 1 April 2020?

Prior to April 2020, the Deputy Commissioner of Taxation will be able to hold directors personally liable for

Pay As You Go Withholding (PAYG)
Superannuation Guarantee Charge (SGC)

From 1 April 2020, the Deputy Commissioner of Taxation expanded to include

Goods and Services Tax (GST)
Wine Equalisation Tax (WET)
Luxury Car Tax (LCT)

Types of DPN

There are 2 types of DPN’s: Non-Lockdown and Lockdown DPN’s.

Non-Lockdown DPN

These are issued to company directors when outstanding tax is reported within the following time frames but remains unpaid.

Business Activity Statements (BAS) and Instalment Activity Statements (IAS) within 3 months of the liability’s due date; and
Superannuation Guarantee Charge (SGC) statements within 1 month of the payment due date.

The options for the director under a non-lockdown DPN are:

Pay the outstanding amount; or
Place the company into voluntary administration or liquidation (within 21 days).

By putting the company into voluntary administration or liquidation, directors can avoid personal liability of the outstanding amounts.

Lockdown DPN

These are issued to company directors when the company fails to make BAS, IAS or SGC lodgements and the relevant amounts remain unpaid.

The options for the Director under a lockdown DPN are:

Pay the outstanding amount;
Engage with the ATO and make an arrangement for payment; or
Appoint a liquidator, administrator, or a small business restructuring practitioner. However, directors will not avoid personal liability.

Are you at a risk of receiving a director penalty notice? DO NOT WAIT- Contact us immediately to discuss further.

To trade as a business, you need to meet the right compliance requirements. It’s certainly not the most exciting part of creating a business, but setting up the right legal, accounting and tax compliance foundations ensures that you’re doing everything by the letter of the law.

Here are the main compliance steps to think about, and why they’re so important to the smooth running of your business.

Decide on a legal structure for the business

First off, you’ll need to make a decision about the legal structure of the company. There are two key choices here – incorporated (a limited company) or unincorporated (usually either a sole trader, a partnership or a trust). The key difference here is around liability. In other words, do you want your business to be a limited company, where you and the business are treated as separate legal entities? Or do you want to be unincorporated, where you and your business are seen as one single entity.

Most start-ups will opt for the incorporated limited company route, keeping your personal and business finances separate and lowering your personal liability and risk.

Open a business bank account

To trade, take payments and pay your suppliers, you need to have a business bank account that’s separate from your own current account. This helps to create a tangible divide between the money you’ve generated from the business, and your own personal cash.

Most high-street banks won’t let you use a personal current account for business purposes. Banks will offer a variety of different business accounts, with varying levels of fees, overdraft levels and additional business features. Set up the business account and then use this account for ALL transactions going in or out of the company.

Set up a bookkeeping and accounting system

It’s a legal requirement for your limited company to keep adequate records and to submit annual statutory accounts. To be able to meet these requirements, it’s essential that you have a bookkeeping process and a reliable accounting system in place.

There’s a dazzling choice of different cloud-based accounting platforms aimed at the ambitious start-up owner. Xero, MYOB and Quickbooks are big names in this space, and all offer easy-to-use systems that make the accounting process relatively straightforward. It’s a good idea to engage an accountant, like us right from the start, to get the best possible accounting advice.

Register for the relevant business taxes

Tax is an unavoidable part of running any business. It’s mandatory for you to register for the relevant business taxes, and you’ll also need to factor in that a certain percentage of your start-up’s profits will end up going to the tax authorities at the end of each financial year.

If you’ve opted for the limited company route, you must register for corporation tax. Corporation tax is paid based on a percentage of your year-end profits, once reliefs and other allowances have been taken into account. Approximately a quarter of your end profits will end up being paid over in tax, so it’s imperative that you put this money away in a separate tax accounting, or ring-fence it in your accounts, so you have the money to pay the bill at year-end.

Other taxes to register for include:

Self-assessment income tax – although you’ll pay corporation tax on your company’s profits, directors are also taxed on their own personal earnings too. If you’re an unincorporated sole trader, this is also the way you’ll be taxed on your business profits, as your personal and business income are treated as the same thing.
Goods & Services Tax (GST) – GST is an indirect value-added tax or consumption tax for goods and services. If you sell products or services that qualify for GST, you’re responsible for collecting these taxes and paying them to the tax authority on a monthly, quarterly or annual basis.
Pay-as-you-go (PAYG) – if you have employees, you’ll need to make income tax deductions from your employees’ wages and pay these taxes directly to the Australian Taxation Office.

Get in touch to talk through your compliance needs. We’ll help you understand which taxes apply and how you register for them.

All employers have to report payments made to employees and closely held payees to the ATO using Single Touch Payroll reporting from July 2021.

Single Touch Payroll (STP) Phase 2 was initially planned for 1 July 2021 to align with the mandatory reporting for all employers, but it has been postponed to 1 January 2022. The ATO will allow employers until 31 March 2022 to start reporting if they don’t have an STP reporting solution in place yet. Some payroll software providers already have deferrals in place to allow a longer time for the transition to Phase 2 reporting.

The planned STP expansion has been extended because of COVID-19 impacts on business and accounting and payroll software providers.

STP Phase 2 will require additional information to be reported with each STP pay event.

Accounting and payroll software products will be upgraded to include broader reporting parameters and categories in line with the ATO requirements for Phase 2.

The Phase 2 expansion will allow employers to report information to multiple government agencies in the STP report. Standardised categorisation of income components will make it easier for employees to interact with Services Australia.

The changes will also include detailed income types, lump-sum payments, itemised allowances, child support and the ability to lodge tax file number declarations from within STP reporting. Employment separation certificates upon the termination of employment will no longer be needed, as Phase 2 reporting will include the reason an employee ceased employment.

If you’d like to review your payroll software and systems before STP Phase 2 starts, talk to us today.

Otherwise, there is nothing you need to change right now – we’ll keep you updated when the implementation is closer.

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