Monthly Archives: April 2021

Entertainment can be taxing

Entertainment can be taxing.  That’s an understatement as there are 3 aspects – tax deductibility, GST and Fringe Benefits Tax (FBT).  There are 38 outcomes depending on who does with whom where and why.  It therefore requires careful analysis

No wonder the ATO has such a great strike right in FBT audits on entertainment. 

But that’s not all that has to be considered.  For FBT purposes, an employer has to determine which of three methods produces the best result.  Although that said, the actual method for quantifying the FBT taxable value of entertainment is usually best for small employers (but not always!).

You can read more on the following factsheet – FBT Flyer – Meal Entertainment Factsheet

Confused or concerned?  That’s understandable.  We would be happy to discuss your situation.

We take this opportunity to state that the prudent action is to lodge an FBT Tax Return – even if nothing is payable (which is usually the case for small businesses).  This extra step is not a waste of time nor money as it starts the audit clock ticking – after 3 years the ATO can’t go back and audit you; don’t lodge an FBT Tax Return and the ATO can go back as far as they like.

Urgent SG super reminder

Wednesday 28th April is the end date for satisfying Super Guarantee (SG) super obligations for the March 2021 quarter.

But beware as some of the clearing houses have a submission and payment deadline well before then.  May be even today!

SG super is payable on all forms of remuneration including:-

  • Commissions

  • Bonuses (but see below)

  • Directors’ fees and all other forms of remuneration to directors

  • Allowances (except where fully expended)

  • Contractors paid mainly for their labour

But excluding the following remuneration:-

  • Overtime

  • Reimbursements

  • Unused annual leave on termination

  • Remuneration of less than $450 in a month

  • Bonuses that are only in respect of overtime

  • Bonuses that are ex-gratia but have nothing to do with hours worked; which is harder to satisfy than what you might think

  • In respect of employees younger than 18

  • Employees carrying our duties of a private or domestic nature for less than 30 hours in a week (such as nannies)

  • On quarterly remuneration greater than $57,090

  • Non-residents performing work for an Australian business outside Australia

If your payroll system has been set up correctly then it will perform these calculations for you.  We would welcome the opportunity to assist you with this and if need be refer you to a good book-keeper.

SG super should never be paid late as late payments attract substantial interest and penalties.  Furthermore, and SG (and BAS) liabilities that remain unreported and unpaid after 3 months automatically become personal debts of directors.

The SG rate remains at 9.50%.

So if you haven’t paid your employer super obligations already, we recommend doing so today!

 

Do I have to pay FBT on my workhorse vehicle?

Do I have to pay FBT on my workhorse vehicle (think utes, vans and taxis)?

Well it depends.

There has and still is an exemption for private use that is minor, infrequent and irregular.

The problem is the ATO recently announced safe harbour provisions.  And those safe harbour provisions are probably more restrictive than what most people think.

These provisions also dictate record keeping that wasn’t required previously.

Want to know more – then click on the following link.

FBT Flyer – Workhorse Vehicles and new safe harbour provisions

Why is this important?

Well if any private use doesn’t satisfy the safe harbour tests to minor, infrequent and irregular travel then the business is subject to Fringe Benefits Tax.

And this leads to the next point of how important it is to lodge an FBT Return (even if no FBT is payable).   Lodging and FBT Return starts the audit clock ticking.  When three years have passed, the ATO can’t go back and audit that year.  Don’t lodge a FBT Return and they can go back as far as they like.  

Not sure about your exposure?  Don’t want to risk not complying and paying FBT 9and penalties and interest)?  Then call us.

 

How are your customers affected by JobKeeper?

There has been much press about the ending of JobKeeper and what it means.  The press has largely focused on the most exposed industries such as cafes and restaurants, particularly those in the CBD.

So the question is how exposed is your business if your customers are at risk?

At worst, it may be best to not sell to someone who is at risk of falling over. 

So, if

  • it costs you $600 to service a $1,000 sale and

  • they go down owing you $2,000

Then you will need sell someone else another $5,000 just to cover that loss.  It’s a tough assignment at any time let alone in today’s market for many business owners.

The sad reality is that most accountants don’t ensure their clients accurately record and report on the trust cost of servicing the sale of a good or service.  It’s really really important to know this so for so many reasons – but in context to the discussion here, knowing what is at stake when making a sale that may not be collectable.

So think about whether you should continue to sell to existing customers.  Another option is to ask for payment up front.

And now would be a good time to review your terms of trade.  And with that, you should consider whether it is worth protecting your interest under the Personal Property Securities Act (PPSA) – the modern form of Romalpa clauses.  It’s a measure of last resort but can save your bacon.  It’s beyond the scope of a blog to explain how you can use PPSA but we would be happy to explain it to you and refer you to a qualified solicitor to attend to the necessary paperwork.

So in these difficult and unusual times:-

  • Don’t sell to anyone without evaluating their ability to pay.

  • Put the proper protection mechanisms in place.

  • Be crystal clear on what it costs you to sell your goods and/or services.

Want to better understand your situation?  Then ask us as we have decades upon decades of experiences gained from a range of clients operating in an array of industries.