Posts Categorized: General

Special disability trusts

Special disability trusts are a most effective way to provide for a family member who suffers from a severe disability. Special disability trusts provide for the accommodation and care of family member. Such trusts receive substantial social security and tax relief.

Special disability trusts receive the following social security concessions:-

Up to $500,000 can be gifted into a special disability trust before gifts are counted under the asset gifting rules .
The first $669,750 within a special disability trust will not be assessed under the assets test.
The income of a special disability trust doesn’t count against the beneficiaries income test.
All reasonable medical and home care expenses can be paid by the trust.
A special disability trust can also pay up to $12,000 of discretionary expenses.

By transferring a parent’s assets into a special disability trust, a parent can improve their age pension entitlement.

A special disability trust can be established in two way:-

Via a will. However, it must be noted that there is a risk that the provisions of a will may not comply with future laws.
In one’s lifetime. However, this means that on-going costs are incurred from day one.

Does a special disability trust sound like a good option for your family’s situation?

You should only make that decision after receiving financial planning advice from a qualified financial planner. You also need a referral to a qualified lawyer who specialises in this area (we can refer you).

You should also have Centrelink assess your child to ensure they qualify.

What is the company income tax rate for 2018?

What is the company income tax rate for 2018? Sounds like an easy question doesn’t it. And so it should be? It has however proved to be anything but – until now.

Thankfully, and at long last, the Senate has passed the legislation that determines which companies pay the 27.5% income tax rate after 30^th June 2017. Corporate businesses with turnover of less than $25,000,000 for the year ended 30^th June 2018 (and $50,000,000 thereafter) will pay the 27.5% company income tax rate if they pass a new income test. The planned further reductions in the company tax rate did not pass.

Confusion has reigned until now. For the 2017 year, the ATO defined a company as carry on a business where there was a view to making a profit. It was justified on the basis of very old case law (none of which I ever recall studying at university). More notably, it was completely contradictory to what was considered a business where operated within in a trust of partnership or by an individual.

Why did the ATO take this approach?

It meant that dividends could be franked at only 27.5% (despite having paid tax at 30% on those profits). It meant that individuals would either pay more tax or receive a lesser refund. Some consider it to be theft.

So why did the government fix this?

The government was clearly annoyed that the ATO took the approach they did. They proposed legislation a year ago – which has taken until now for our parliamentarians to pass.

So which company businesses qualify for the 27.5% company income tax rate?

Companies that receive less than 80% of its revenue from passive sources. Passive sources include:-

Interest
Rents
Capital gains
Dividends from companies where less than 10% of the issued shares are held.
Trust distributions and profit shares – their character depends on the nature of the income as earned by the trust or partnership.

Franking rate

The same test will also apply to determining the franking rate. That said, one refers to the income derived in the prior year to determine the current year franking rate. Yes, it is possible to be paying 30% tax yet only be able to frank dividends at 27.5% in any one year.

We would welcome any question you may have.

What you need to know about the new Comprehensive Credit Reporting regime

You need to know about the new Comprehensive Credit Reporting regime that came in took effect from 1^st July 2018.

Comprehensive Credit Reporting (CCR) is designed for lenders and borrowers to more openly share data. The goal is to have lenders be able to readily access information about borrowers from a shared source. Gone will be the days that borrowers could relatively easily hide certain information from a potential lender.

Most importantly, CCR requires both positive and negative information be recorded about borrowers.

So what does the Comprehensive Credit Reporting regime mean to you?

This means that possible lenders will be able to access information about one’s recent repayment history. Adverse events will include such things as late payments of monthly credit card due amounts.

Perhaps it is time for you to schedule paying off credit card balances or making a minimum payment a day or two earlier than normal.

CCR is still in implementation. The Big 4 banks were required to be 50% ready by 1^st July 2018. They will be required to be 100% data ready by 1^st July 2019.

Some argue that reporting of the payment history of telcos and power bills should become part of this system as it is with the New Zealand model. It may well be added in time as it is argued that provides a great insight into one’s financial commitment capabilities.

Taxable Payments Annual Report

28^th August is the end date for lodging the ATO’s Taxable Payments Annual Report. This form requires those businesses within the building and construction industry to report all payments to contractors within the building and construction industry.

Building and constructions includes more services than one might think as evidenced by the following link – http://tinyurl.com/y7hrnfxm

You need a good accounting system to simplify the reporting of Taxable Payments Annual Report as you need to report the following for each contractor:-

Name
ABN
Address
Gross payment including GST as well as the total GST amount. It is important to note that for those who run an accrual accounting system, reporting is based not off the date of the contractor invoices, but they year in which they are paid.

If you are struggling with this reporting requirement, we would be happy to help you or refer you to a good book-keeper.

Ways you can lodge the Taxable Payments Annual Report

The main software providers enable the Taxable Payments Annual Report to be lodged from the software.
You can also lodge by paper.
You may also wish to view the following YouTube clip from the ATO on how to lodge the Taxable Payments Annual Report through the Taxpayer Portal.

https://www.youtube.com/watch?v=SRhFsB-k1Uc

So what to the ATO do with all this data?

They crossmatch all payments reported to each business within the building construction industry to their reported income. The ATO had a field day some years ago with a pilot program of plasterers within the Hunter Valley. Obviously it is paying dividends if the ATO still requires this reporting – so much so that it has now been expanded to other industries from July 2018.

2018 Company Tax rate

At last we know what the 2018 Company Tax rate will be for small and medium size businesses! So whilst the House of Reps was in uproar today, at least the Senate did something.

What a joke it is that only now do we know with certainty what tax rate applies from 1st July 2017.

Finally we can finalise Tax Returns with certainty!

If you would like to read more about this, please refer to our August edition of Tips & Traps.

Reasonable travel allowances & how they help you

It is now time for Victorian employers to lodge their annual Pay-roll Tax declaration. One of the dangers of Pay-roll Tax is not complying with grouping provisions.

The grouping provisions assess a number of employers against the remuneration threshold (now $650,000). Remuneration in excess of that threshold is subject to Pay-roll Tax at 4.85%.

Employers can be assessed as a group where:-

There is common ownership and control, or
Where an employer performs duties for another business.

The latter one is commonly misunderstood. Having a larger business answer the phone of a smaller business (with unrelated owners) for 30 minutes over lunchtime can be enough to treat a business as grouped. So it could be that a small business with remuneration of only $100,000 has to pay Pay-roll Tax of $4,850 for the sake of 2 ½ hours a week of phone minding. A phone answering machine or service would seem to make more sense!

If you would like to know more about grouping, you can go to:-

https://www.sro.vic.gov.au/grouping

You can also watch the Victorian State Revenue Office’s video on grouping at:-

https://www.sro.vic.gov.au/videos/payroll-tax-grouping-provisions-webinar

With we welcome any question you may have in respect of this or any other employment related matter.

Personal super contributions

Last year’s super tax changes certainly received substantial press coverage. Most of that though was in respect of the must do corrective (and negative) aspects such as commuting under the $1,600,000 pension balance cap.

There were however some sensible and attractive changes (you may wish to refer back to our 2017 Budget Briefing paper which explored these).

One of the attractive changes is that since July 2017 employees been able to claim a tax deduction for personal super contributions. Until then, employees were denied a personal tax deduction where their employer had an obligation to pay SG (whether they paid it or not). There was an exemption for those whose employment income was minor.

So who are personal super contributions attractive to:-

Those whose employer who won’t allow a salary sacrifice arrangement.
Small business owners who wish to pay the super in their own name rather than having their own business pay it (which would be subject to WorkCover).
Those who may wish to reduce the tax on their other income including interest, rent or capital gains.
Those who can use the money more efficiently – like pay down the mortgage during the year but pull it back at the end of the year to fund the super.
Those who are employees aged over 65 who have more than $1,600,000 in super (and are denied making further non-concessional contributions) and who have already satisfied the 40 hours in a 30 day work test during the year.

Is making personal super contributions best for you?

Well that depends entirely on your personal circumstances.

And the younger you are the more careful you have to be as super is locked away until one reaches what is called preservation age (which can be as late as age 60 even for those who retire early).

There are also other considerations like Section 293 tax.

You don’t want to have excess super contributions as you will issued with an excess contribution notice which can easily happen if you don’t fully understand all the complexities.

Moreover, you should not make such a contribution without first seeking financial planning advice as that advice will consider all of our circumstances, explain the risk and rewards of all strategies (and do so in context of other strategies) and show you the long term results from advanced financial planning modelling software.

A word of warning

There is now just one concessional (deductible) contribution limit for all employees – it is now just $25,000. And that as assessed by when the fund receives the contribution. So a contribution by an employer for the June 2017 SG quarter (which may include salary sacrifice contributions) paid into a super fund in July 2017 counts as a contribution in the 2017/18 year.

You should therefore disregard whatever appears on your pay slip as that just records what has been provisioned by your employer during the year. You must check what has been received by your super fund(s).

$2,345,900 of savings

$2,345,900 of savings is what the MRG group saved its clients as part of its June 2017 tax planning process.

That’s a lot of money to spend on the your business, your family, equipment, holidays, your kid’s education ….

How do we do this?

It was done by following a lengthy checklist which explored clients’ ability to obtain advantages and avoid pitfalls. It was then followed by discussions and reminders to ensure plans were put in place.

And the $2,345,900 of savings doesn’t include all the other savings delivered from our advice given during the year.

While some of our work necessitates that we attend to compliance tasks, we believe the fees you pay your accountant should be an investment. In this regard, the savings we deliver to our clients were not only greater but multiple of what they paid us.

If you like to know more about how you may benefit from our tax planning process then please call us.

Great news – the $20,000 instant asset write-off has been extended

Great news – the $20,000 instant asset write-off has been extended for another 12 months to June 2019.

This concession was supposed to stop at 30^th June 2018. Now you have another 12 months in which you can claim a full deduction on assets costing less than $20,000 ex GST. If you really need any asset(s), you might as well still buy it now. Otherwise, you can now sit back and find the best time to commit a qualifying purchase.

If you want to know more about important considerations and traps, click on the following link:-

http://www.mrsaccountants.com.au/tips-traps-to-the-20000-asset-write-off/

We would welcome your call if you have any queries.

We will of course raise this as part of our year end tax planning process.

And on that subject, we have been quantifying the savings our clients received as part of our planning advise last June. We are both pleased and proud to report the collective savings to our clients has now been quantified to exceed $2,300,000. And that is not even taking into account the savings from other advice during the year!

How To Protect Yourself Against Scammers

Last week was Scam Awareness Week. It’s an initiative of the ACCC. They gave great advice on how to protect yourself against scammers.

There are many forms of scamming. And the methods are continually changing and becoming ever more sophisticated. It’s also on the rise as the losses to scammers last year increased by 23%. Many are linked to computers and other electronic devices but can also include:-

Phone calls – you would be surprised how many clients have received a phone call like the above purporting to be from the ATO.
Door knocks.
Fake supplier invoices.
Stealing identity by stealing personal information from mail boxes.

So what are some of the keys ways you can protect yourself:-

Never give your personal details over the phone or by e-mail.
On your computer, run a virus checker and malware protector. Ensure these are set to update automatically and run a full scan at least once a week.
Use an e-mail washing program. It will allow you to safely preview the text of an e-mail and to check that the sender’s e-mail address is genuine.
Use a password protection program so you can set complicated passwords for all your logins. And change your passwords at least every month.
Email, just like a letterbox, is not safe. Google also reserve the right to use information contained within an e-mail to or from a Gmail email address. Use our client portal service to securely exchange information with us.
Do not accept emails from suspicious addresses.
Be very wary of all other emails. Spammers are now so specific in what they are attacking that we often receive e-mails from major software providers.
Use a banking token / toggle and perhaps set your daily limit lower.
Run a back-up system and regularly test that it is functioning properly.
Use two step software authentication wherever possible.

In short, adopt appropriate practices and always be on guard.

You may also wish to read the ACCC’s scam guidebook – Little Black Book of Scams. https://www.accc.gov.au/publications/the-little-black-book-of-scams

Please call us if you would like a referral to a trusted computer support technician.