Advisers to Privately Owned Businesses
Within small businesses, there tends to be only one or two persons who will make all management choices with regards to accounting, finance, personnel, processing or servicing, selling and marketing. This is done without the aid of internal specialists and often with detailed knowledge in only one or two functional areas. The term “knowledge or expertise gap” is an important area which has long been the point of discussion.
Having a full time finance executive or director is not an option for many privately owned businesses. Most often we find that business owners cannot efficiently handle financial matters which results in this part of the business becoming a burden, this is where an external service can help alleviate these issues.
Our clients often feel more secured and confident when they know that their financial affairs are being handled by a professional.
Many businesses face one or more of the following issues:
Rapid and uncontrolled growth resulting in cash flow shortages
Lower than anticipated profits
Lack of adequate finance
Insufficient financial and management information on which to base important business decisions
Lack of adequate management personnel and structure
Inadequate short and long term planning
Deciding whether to purchase another business or to expand
Issues such as these can be resolved with the appropriate information and advice.
Our aspiration is to be able to assist with the growth and maintenance of our clients business.
Unreported ‘cash in hand’ payments to workers no longer tax deductible
Be more informed on tax changes that may impact you. The Australian Taxation Office have released the below article regarding cash in hand payments. The Australian Taxation Office (ATO) today reminded employers that any unreported ‘cash in hand’ payments made to workers from 1 July 2019 will not be tax deductible. ‘Cash in hand’ refers to cash payments to employees that do not comply with pay as you go (PAYG) withholding obligations. Payments made to contractors where the contractor does not provide an ABN and the business does not withhold any tax will also not be tax deductible from 1 July. Assistant Commissioner Peter Holt said the new rules have a dual purpose of levelling the playing field for honest businesses that are doing the right thing by their workers as well as tackling the black economy. “It’s fairly straight-forward: do the right thing and you can claim a deduction. Deliberately do the wrong thing and you’ll miss out on a deduction and risk being penalised”, Mr Holt said. This new measure will take effect for payments made to workers from 1 July 2019 for income tax returns lodged for the 2020 income year onwards and is part of the government’s response to recommendations from the Black Economy Taskforce. “The Black Economy Taskforce estimates that the black economy is costing the community as much as $50 billion, which is approximately three percent of Gross Domestic Product (GDP). This is money that the community is missing out on for vital public services like schools and roads.” Mr Holt said. “Businesses that operate in the black economy are undercutting competitors and gaining a competitive advantage by not competing on an even footing”. In addition to the loss of a tax deduction, employers caught not complying with their PAYG withholding obligations may be penalised for failing to withhold and report amounts under the PAYG withholding system. “This new measure is just one of the many ways we’re tackling the black economy”, Mr Holt said. Mr Holt said “transacting in cash is a legitimate way of doing business, and we recognise that some industries do tend to take more cash than others”. “But when cash is used to deliberately hide income to avoid paying the correct amount of tax or superannuation it’s not only unfair, it’s illegal”, Mr Holt said. Employers who mistakenly classify their employee as a contractor will not lose their deduction where their worker provides them with an ABN. Mr Holt said that payers who attempt to do the right thing but make a mistake do not need to worry; they will not lose their deduction. “Our objective is to support small business to help them get it right. But anyone caught deliberately doing the wrong thing will lose their deduction”. Mr Holt said that employers that failed to withhold or report their PAYG obligations can come forward and voluntarily disclose this to the ATO before we take any compliance action. If they do they will not lose their deduction and may be entitled to reduced penalties. If a member of the community has any knowledge or concerns about an employer paying their workers cash in hand, they can report it to the ATO online at ato.gov.au/ReportAConcern or by phone on 1800 060 062. Reports can be made anonymously. One in five of the reports we received in 2017–18 were about the black economy. More information is available at ato.gov.au/paygwdeductions About the Black Economy Taskforce The Black Economy Taskforce was established to provide a whole-of-government approach to combat the black economy in Australia. It was established in December 2016 to develop a policy framework involving new proposals to tackle black economy activity. The Black Economy Taskforce's Final ReportExternal Link was released in October 2017. The ATO plays a significant role in leading and delivering on the Black Economy Taskforce recommendations accepted by the Government. Since 1 July 2018, the ATO has coordinated an extensive program of work to tackle the black economy. This program of work includes a multi-faceted approach.
The ATO is responsible for addressing the following aspects of the black economy: Under-reporting income and over-claiming expenses Ensuring businesses meet their employer obligations – so they don’t pay employees or contractors cash in hand, underpay wages, fail to withhold tax or not contribute to super Addressing illegal phoenixing (together with Phoenix Taskforce partner agencies) – liquidating and reforming businesses to avoid obligations Preventing tax fraud Dealing with illicit tobacco, duty and excise evasion Targeting intermediaries and agents who enable black economy behaviour Lockwood and Ward do not own the rights to this article. It is being shared to you for informative purposes. This article was created by the Australian Taxation Office who owns the copyright in this material. The original article can be found here. . #PAYG
Tax incentives for early stage investors
In March 2016, the parliament introduced a bill proposing new tax incentives for innovation aiming to encourage new investment in Australian early-stage innovation companies by providing qualifying investors, who invest in such companies, with a tax offset and a capital gains tax exemption for their investments. The new legislation can be quite confusing, so to make it easier we have summarised the changes here. The benefit From 1 July 2016, if you invest in a qualifying early stage innovation company (ESIC), you may be eligible for tax incentives. The tax incentives provide eligible investors who purchase new shares with: a non-refundable carry forward tax offset equal to 20% of the amount paid for their qualifying investments. This is capped at a maximum tax offset amount of $200,000 for the investor and their affiliates combined for their investments in each income year a modified capital gains tax (CGT) treatment, under which capital gains on qualifying shares that are continuously held for at least 12 months and less than ten years are exempt from CGT. Capital losses on shares held less than ten years must be disregarded. Who is eligible? To be eligible for the incentives, an investor must meet the 'sophisticated investor' test under the Corporations Act 2001 or, the investors’ total investment in qualifying companies must be $50,000 or less for that income year. The incentive will be available for investments in companies that satisfy two requirements: That the company is early stage, determined against criteria related to expenditure, assessable income, stock exchange listing and incorporation. That the company is involved in innovation, determined by allowing the company to self‑assess against either a principles-based test or a points-based gateway test, or by receiving a determination from the Australian Tax Office. What is a qualifying startup? Generally, an Australian-incorporated company will qualify as an early-stage innovation company (ESIC) if it meets the tests of being at an early-stage of its development (the early stage test) and it is developing new or significantly improved innovations with the purpose of commercialisation to generate an economic return (the innovation test). The early stage test A company must pass four tests to satisfy the early-stage test: The company must have been incorporated in Australia within the last three income years The company and any of its wholly-owned subsidiaries must have not incurred ‘total expenses’ of more than $1,000,000 in the previous income year The company and any of its wholly-owned subsidiaries must have derived assessable income of no more than $200,000 in the previous income year The company must not be listed on any stock exchange The innovation test In order for companies to determine if they satisfy the innovation test, qualifying ESIC test companies may choose to: Apply their circumstances against the objective tests – must have at least 100 points as judged by the criteria here Self-assess their circumstances against the principles-based test. The company needs to be genuinely focused on developing its new or significantly improved innovation for commercialisation and must have the potential for high-growth, scalability, can address a broader than local market and has competitive advantages Seek a ruling from the Commissioner about whether their circumstances satisfy the principles-based test What are the reporting requirements for the ESIC? ESICs that receive investments from one or more investor entities in a financial year will need to provide information about those entities to the Commissioner by 31 July of the following financial year. ESICs will need to provide this information in the ‘approved form’. If you require any further information or wish to discuss these tax incentives, call us today on 02 9299 7044. Sources: ato.gov.au, innovation.gov.au #ESIC
How Single Touch Payroll will impact you
Single Touch Payroll or STP is a new regulation that will change how information such as wages, super contributions, PAYG withheld etc is reported to the ATO.
Before STP was introduced businesses previously reported such information to the ATO once a year. The reports then would be submitted to the ATO digitally in a specific format. How STP will impact when you report payroll
Previously small businesses would finalise their payroll records at the end of the financial year. They would need to generate and submit to the ATO a: Payment Summary Annual Report. The report would state the amount of wages the business paid, PAYG withheld and superannuation contributions the business made Payments Summary/PAYG Summary for each employee. The PAYG summary would contain information such as the total salary that was paid to the employee, payroll taxes that was collected during the year and the superannuation contributions the employer contributed The introduction of STP means that businesses will no longer need to issue a Payment Summary Annual Report or Payment Summaries to each employee. Why payment summary annual reports are no longer needed STP requires employers to report payroll information to the ATO on a pay-by-pay basis, this removes the need for a payment summary annual report. Instead the employer will advise the ATO once they have made the last pay run of the financial year for their employees.
Why employee payment summaries are no longer needed
The ATO will use STP payroll reports as the single source of information regarding each employee’s wages paid, taxes collected and super contributions. This will remove the need to issue employees with payment summaries. Employees can access the information that used to be contained in payment summaries through their myGov account.
Paper forms for payroll activity will become a thing of the past. Employers will need to submit the information digitally using the SBR (Standard Business Reporting) format.
Businesses will need to check how they are currently completing payroll. Businesses may need to change/upgrade their software or find a service provider that will be able to generate reports that are compliant with the ATO’s standards.
Businesses with less than 20 employees do not have a STP deadline at current. Small Business Advisors predict that STP will become compulsory from 1 July 2019.
For businesses with more than 20 employees, STP commenced on 1 July 2018.
How to be STP ready
Businesses will need to ensure that they have the software/service provider that will enable them to submit compliant reports every payday. Businesses using online payroll software will need to ensure that the software can produce ATO compliant reports. Businesses that use a desktop payroll software will need to find a service provider that can convert the report so it is compliant, and upload and submit the reports on the businesses’ behalf Businesses that use spreadsheets or pen and paper will need to find a service provider that can convert the data into a compliant report and upload and submit the reports on the businesses’ behalf Depending on what method your business is using you may need to find a new service provider or switch to a software provider that is STP enabled and compliant.
Please contact us on firstname.lastname@example.org or 02 9299 7044 if you have any questions regarding STP. #STP
How Single Touch Payroll will impact you