Car Parking Benefit Readdresses FBT Definition, Employers To Benefit
Tax | 04 18th, 2022|

It’s getting closer to the time that FBT returns need to be lodged, so it’s important to understand that there may be a change to the FBT liability of your business when it comes to one employee benefit.

Car parking as an FBT benefit is provided on a particular day when, between 7.00am and 7.00pm:

  • a car is parked at a work car park for the minimum parking period;
  • an employee uses the car in connection with travel between their place of residence and primary place of employment at least once on that day;
  • the work car park is located at or in the vicinity of the primary place of employment, on that day;
  • a commercial parking station is located within a one-kilometre radius of the work car park used by the employee;
  • the lowest representative fee charged by any commercial parking station for all-day parking within a one-kilometre radius of the work car park exceeds the car parking threshold;
  • the parking is provided to the employee in respect of their employment, and
  • the parking is not excluded by the regulations.

However, a car parking benefit provided in respect of an employee is exempt where:

  • the car is not parked at a commercial parking station;
  • the employer is not a public company or a subsidiary of a public company;
  • the employer is not a government body; and
  • for the income year ending before the start of the FBT year, the employer’s assessable income is less than $10 million or alternatively, it is a ‘small business entity’ (SBE)

Redefining a ‘commercial parking station’ to revisit a prior concept associated with the application of fringe benefits tax may make the perks of coming into the office a little more appealing to employees.

FBT applies to parking provided by employers to their employees where there is alternative parking available commercially available.

Prior to the recent ruling, there was a previous understanding that car parks that effectively charge penalty rates for all-day parking (to encourage shorter stays) would not represent genuine alternative parking arrangements for commuters, and should not trigger FBT liabilities as a result. However, the recent ruling has overturned this, which means that any alternative paid parking would trigger the liability.

This ruling came into effect on 1 April 2022.

This recent ruling on how car parking is treated as an FBT liability should assist in reducing the potential FBT burden on some employers (which should assist them in turn in incentivising employees back into the workplace with benefits).

Other FBT benefits that employers may be able to claim back on in their FBT return could include COVID-19 related benefits (such as office equipment, technology, etc), company cars, meals, entertainment, living away from home allowances, and more. As a result of the impact

If you need assistance with preparing your FBT return for lodgement, consult with a professional as soon as possible so that we can assist you with preparing your return.

Paid Parental Leave Scheme Update For Federal Budget Announcements
Business | 04 11th, 2022|

If you have employees who are expecting to expand on their family (whether they are adopting or looking to become pregnant), the Federal Budget 2022-23 announced a change to paid parental leave that could impact you and your employees.

Single parents and fathers are now eligible for longer paid parental leave after the government proposed an ‘enhanced’ 20-week scheme from announcements made during the Federal Budget 2022.

Under existing arrangements, up to 18 weeks of paid parental leave can be taken by whoever is designated a baby’s primary carer – usually the mother – at the minimum wage, while a secondary carer is eligible to take two weeks. If the secondary carer does not use the two weeks, it is lost.

As a result of the recent announcements made in the Federal Budget 2022-23, the secondary carer’s leave will be merged with the 18 weeks of Paid Parental Leave to increase the government-funded scheme to 20 weeks of leave.

Single parents will see two additional weeks of paid parental leave added to what they normally would be entitled to, whereas two-parent households will be able to split the Paid Parental Leave as they would like. However, this leave must be taken within two years of the child’s birth or adoption.

The ‘use it or lose it’ incentive will not be implemented into the new scheme, but an emphasis may still be placed on the primary caregiver to take the bulk of the leave.

The enhanced scheme will also broaden the eligibility for paid parental leave to include a household income threshold of $350,000 per year.

This fully flexible leave aims to help working parents make caring decisions that suit their specific circumstances and encourage fathers to take up parental leave.

Presently, women who earn up to $151,350 can access paid leave, but women earning more than the threshold are not entitled to this scheme, even if their partner has lesser or no income.

The rate of paid parental leave has not increased either – it is simply that eligible parents will be able to access more of it. This may be a disincentive however to the higher income earner, as taking the paid time off may be less than what they would otherwise earn working.

Notably, though, the proposed scheme still does not include superannuation payments in parental paid leave. Paying super on paid parental leave would allow parents to continue building their retirement savings while taking time out of the paid workforce to care for children.

If all goes to plan, these changes to the paid parental leave scheme will take place no later than 1 March 2023.

Paid parental leave is a topic that can be tricky for employers. Having a discussion with a professional can be a way to alleviate concerns about what your employees are entitled to or the risks of failing to match standard employee obligations around the matter.

Superannuation Changes To Affect Pensioners (And What You May Still Need To Take Into Account From Last Year’s Budget)
Super | 04 4th, 2022|

The Federal Budget was released last Tuesday, announcing key changes to taxation and business. For superannuation, the minimum pension drawdown amount was in the spotlight.

The reduction in the minimum pension drawdown amount for superannuation pension recipients has been extended for another year by the Federal Government, as announced in the Budget for 2022-23.

The minimum pension amount will be only 50% of the general amount (the balance from which the pension is drawn). For example, a 65-year old would usually need to draw down 5% of their opening balance as a pension payment throughout the year.

For the 2022-23 financial year, the minimum amount will be reduced 50% (dropping this to 2.5%). This measure is set to cost the Federal Government around $19.2 million dollars for the 2022-23 years, but you need to be alert and conscientious about it.

Why Is That?

Whilst it is a great outcome to keep as much of your money in your super as is possible (if it’s not required for you to live on), you do need to be conscious that at some point, the remaining balance will be passed onto the next generation, potentially as a part of their inheritance.

When this money does change hands and is given to the next generation if the superannuation balance includes a taxable component, then your children may be subject to as much as 17% tax on the capital value of that balance.

Different tax treatments can apply depending on whether your super is being paid as a lump sum, income stream or mixture of both, and if your beneficiary or beneficiaries are classified as ‘tax dependants’.

A tax dependant includes:

  • a current spouse, including defactos
  • any children of the deceased who are under the age of 18
  • any other financial dependents.

If your beneficiaries were not financially dependent of you, such as a spouse or child under 18 years of age, then they will have to pay tax on the inheritance that you have left for them in your superannuation fund.

However, if you take that money out of your super and it passes to your children as a part of your estate instead, there will be no death duties payable (in this instance, ‘death duties’ refers to inheritance tax that may be payable, which has not been an issue since 1981).

The primary reason for the reduction in the minimum pension payment amount is to protect pensioners from having to sell their assets during a volatile period. However, this is a double-edged sword that needs to be carefully considered and weighed against your circumstances.

You May Need To Start A Discussion 

Superannuation can be a tricky area to navigate, especially when you’re trying to do it by yourself.

If you’re approaching retirement, you may have questions about how to prepare for your pension years. These may include

  1. General retirement adequacy – how much money you’ll actually need to retire on
  2. How to manage your finances in retirement
  3. Old age issues that could crop up
  4. Using your home to fund retirement and insurance (and embracing the grey nomad lifestyle)
  5. Recent changes to superannuation measures, including the extended timeframe of the minimum pension drawdown,

Consulting with a professional is the best way to ensure that your pension is currently operating at its most effective level, and they can assist you with understanding what you may need to do to get your affairs in preparation for the future.

COVID Deductions Rely On Work-Related Purposes (So Here’s What You Might Be Able To Claim)
Tax | 03 28th, 2022|

People across different industries may have different items for work that they can claim a deduction on their tax returns for, but this season may see a few common occurrences across individual tax returns for 2022.

On your individual tax return this year, you may notice a few expenses pertaining to COVID-19-related purchases, such as masks, hand sanitisers and RATs tests that you may be able to claim (depending on your circumstances). These deductions may have specific conditions and requirements that must be met, and failure to comply may result in the Australian Taxation Office disallowing these claims.

Masks and hand sanitiser are claimable deductions for those who have required them to work in their industry (e.g. retail, hospitality, education). This is because they can be claimed as PPE (Personal Protective Equipment), but they must be directly connected to how you earn your income (for example, many State governments mandated at various points last year that hospitality workers were required to wear masks while working). If your place of employment did not provide this PPE to you, and you had to purchase it yourself, it may be claimable.

Rapid Antigen Tests (RATs) however, must be purchased for a work-related purpose. There have been plans to specifically allow deductions for Covid-19 tests such as RATs by the Government to be claimed on individual tax returns.

This legislation is scheduled to be introduced on 1st July to specifically address this, but a COVID-19 RAT test can still be claimable if it is for a work-related purpose. This is the critical point to understand. It is a claimable deduction in this instance because it has been purchased for a work-related reason, or to be able to attend your place of work.

When claiming a deduction, it is important that you keep accurate records (such as receipts) to provide evidence of your purchase, and that these purchases weren’t reimbursed by your employer. If they were reimbursed, you will not be able to claim it back.

If you were working from home during 2021, you may be able to claim back some of the expenses related to this. One of the ways that you may be able to do so is through the ‘shortcut method’. This method allows you to claim 80 cents per hour for each hour worked from home (from 01 March 2020 to 30 June 2022). Importantly though, this includes everything – you don’t need to make other claims for work from home items such as phone, internet, stationery or furniture/equipment depreciation separately.

Depending on your circumstances, choosing the wrong method means you could cheat yourself out of big dollars on your tax return. Discuss your situation with your trusted tax agent so that you can understand what exactly is required from you in the lead up to tax return time.

Passing The Business To Family? Here Are Three Things You Probably Hadn’t Considered
Business | 03 21st, 2022|

Succession planning for the family businesses has a number of factors that could impact the decision to pass the business onto the next generation. Namely,  you’ll be looking for someone in the family who is willing to assume the responsibility.

But if you intend to pass your business down the family tree there are also a number of taxation, financial and managerial considerations that need to be taken into account for a successful succession.

Taxation Implications

When transferring your family business and placing it in the name of another family member you may trigger a myriad of taxable consequences, including Capital Gains Tax (CGT), wine equalisation tax, fuel tax credits and excise duty. You need to consider, when preparing the business for succession include:

  •     Consulting the ATO to check if you are eligible for tax concessions
  •     Document all business restructuring operations and the tax impact in the succession plan

Consider A Family Trust

It is often suggested before a younger family member gains ownership of the business they should first assume managing responsibilities to prove themselves. If you want to relinquish control gradually rather than permanently, re-structuring the business as a family trust is an option.

Although this may be complicated and incur costs, as a trustee you will be able to have control of the assets from a distance and be able to step in should the need arise in the early phases of new leadership. Family trusts also carry increased tax benefits and concessions that can be taken advantage of.

This is a great solution for those looking to go into semi-retirement or looking to step back from the business but still want some involvement with the process.

Create A Family Constitution

To make the hand-off occur as smoothly as possible a family constitution should be drawn up collaboratively by all, directly and indirectly, involved in the business. The following should be included:

  •     A detailed business plan, stipulating goals, outcomes
  •     Hierarchy of the business, both present and future
  •     Will of the business
  •     Code of conduct for interactions between family members in business

Develop A Succession Plan To Successfully Succeed

A succession plan is designed to assist you in transferring your business to a successor. To do so, it should include the following to further guide the process.

  • Choose A Successor

Identify who you would like to take over your business. If you wish to keep it in the family, you need to be certain that the person who will be taking over is skilled and prepared for the responsibilities to come. Make sure that you consider what is the best path for the business.

  • Value Your Business

Understand how much your business is currently worth by getting your business valued. By doing so consistently, you can mark out how much your business is worth during events, the general day-to-day and more. This valuation may change substantially before you plan to leave, but having a valuation may assist you with planning for your succession.   

  • Keep The Plan Current

Review your plan regularly, as your circumstances and the business’s circumstances may change over time. Having an up-to-date succession plan will ensure you’re always ready in the event that you need to pass the business on earlier than expected. 

  • Make The Final Handover

If the final preparations have been properly made, and you’re ready to go, you should simply be able to hand over the business and step aside. A clear and current succession plan should facilitate a smoother transition with far less chance of disruption to the business’s everyday operations.

Why Keeping Money In Your Superannuation Needs To Consider Death Benefit Taxes
Super | 03 14th, 2022|

Most people will want to keep as much money in their superannuation account for as long as possible. One of the primary reasons behind this is that the longer the superannuation has a chance to stay within the account, the more returns may be seen (depending on how the investment assets are performing).

Often, people will ask if they actually have to take their money out. The simple answer is no.

You never have to take your own super out if you don’t want to. There are plenty of rules regarding keeping money in super (including the conditions and requirements to withdrawing, meeting preservation ages, etc). There are very few however that force you to take it out, and very rarely will you be forced to withdraw your superannuation if you do not want to.

The only time your super must be paid out is following your death (which, technically, means that you won’t receive that money anyway, it will be your beneficiary/ies who will).

The question though is whether or not you should leave your superannuation in there until you die. It comes down to who is receiving the money from your super.

If the money is being paid out to your spouse, it will be tax-free and there will be no issue with accessing it. You can also keep as much of your superannuation in there for as long as is necessary.

When you are a married couple, you can leave it to each other. However the remaining living spouse will often end up leaving their super to their adult children, and therein lies the catch.

When your super is paid to a child who is over 25 (without a disability), the adult child has to pay 17% tax on any taxable component of their parent’s super. In this situation, taking professional advice to compare the tax consequences of taking your super early (where you pay the tax on the earnings) versus the tax position of leaving it in super and your kids paying 17% on the taxable component instead, may be needed to work out what might be best for your situation.

One of the primary concerns is that those finding themselves in this position, where they have for example $600,000 in super and in their mid-eighties are not paying tax and not regularly seeking advice are the ones whose children end up paying the tax.

It may be that the next generation needs to be involved with their elderly parents’ financial positions to ensure that they are not going to be stung with Australia’s death taxes on superannuation payments.

Remember, this tax is only payable on the taxable component of the superannuation – there are strategies that can be put in place during your sixties that can reduce the taxable component of your super (without taking it out and remaining in your name).

Everyone in their sixties should be taking advice from professionals so that the impact of death benefit taxes are reduced for their adult children when it is mandatory for their parents’ superannuation to be paid out to them.

Common GST Mistakes That You Might Be Making In Your IAS
Tax | 03 7th, 2022|

GST is an area that commonly has mistakes made in it – mistakes that can be costly and require additional measures to correct it if they aren’t caught in time.

Many small business owners continue to make errors when claiming GST credits in their GST returns or Business Activity Statements.

A vast majority of these errors are easily avoidable and often relate to the over-claiming of GST credits. Here are the top ten common GST mistakes that can be made (and what you might be encountering yourself).

  • Residential rental property: Incorrectly claiming GST credits on expenses relating to residential rental properties where the entity is registered for GST.
  •  Bank fees: Generally, annual fees, monthly fees and loan establishment fees are input-taxed, and therefore, there is no GST to claim. However, GST is charged on credit card merchants’ fees and can be claimed.
  • Private expenses: GST is not claimable on private expenses such as personal loans, director fees and drawings etc.
  •  Interest: Interest paid on loan or chattel mortgage repayments or credit card payments does not incur GST, and cannot be claimed.
  • The total cost of a business insurance policy: Insurance policies usually include stamp duty (which is GST-free), however, the rest of the policy is subject to GST. A GST credit cannot be claimed on the stamp duty portion of the policy as no GST is paid.
  • Government fees: GST is not charged on government fees i.e. council rates, land tax, ASIC filing fees, motor vehicle registration and water rates, and therefore, GST credits cannot be claimed.
  • GST-free purchases: Incorrectly claiming GST credits on purchases without GST, such as basic food items, exports and certain health services is a common mistake. Remember not all suppliers are registered for GST, so check the tax invoice before claiming a credit.
  • Entertainment expenses: Claiming the entire GST credits on entertainment expenses where the business has elected to use the 50/50 split method for fringe benefits tax is incorrect. Only 50 per cent of the GST credits can be claimed.
  • Wages and superannuation payments: Both wages and super do not attract GST and cannot be claimed. Wages are not an expense to be included in G11; they are to be reported in W1 in your BAS. Superannuation is not included in BAS.
  • Sole traders and partnerships: When claiming expenses that are used for both private and business use, you must apportion the expenditure to exclude private usage.

If you find that a mistake was made on a previous activity statement, the ATO says you are able to:

  • correct the error on a later activity statement if the mistake fits the definition of a “GST error” and certain conditions are met;
  • lodge an amendment – the time limit for amending GST credits is 4 years starting from the day after the taxpayer was required to lodge the activity statement for the relevant period, or
  • contact the ATO for advice.

If you find this process is too time-consuming or too difficult to complete yourself, the best way to ensure that you remain compliant and avoid making these mistakes is to contact a registered BAS agent for assistance.

A Business Plan Requires Structure – Here Are 5 Things You Should Be Including In It
Business | 02 28th, 2022|

When you are first setting up a business, understanding exactly what you are setting out to achieve can be a daunting task. But a business plan takes some of that stress away by helping to cement your business idea into achievable goals. It can be as simple as dot pointing your strategy on the back of an envelope, or a 30-page report of what your business is hoping to achieve.

However, a formal business plan should consist of specific information that you can present to investors (or a bank, or just your spouse) as an indication of how your business will succeed.

Your Concept

What is the point of the business? In this section, try to outline your plan succinctly.  You should discuss the industry that your business will be operating within, what structure your business will take, the particular product or service

Actioning The Strategy

What goals do you have for your business? When and how will you reach your goals? Do you have a clear set of steps that you need to take to implement your strategy into being?

Why Your Product?

What’s the competitive advantage of your product over the others in your field? Are you a solicitor who specialises in family law? Do you sell vintage merchandise for Aussie Rules football teams?

What niche does your business fulfil that your customers need? Provide solid information about your product to your readers, and explain the reasoning behind why your customers will want to purchase your product, and not those of your competitors.

The Market

Who are your target customers? What demographics do your customers primarily lie in? How will you attract and retain enough customers to make a profit? What methods will you use to capture your audience? What sets your business apart from the competition?

Answering these questions will assist you in planning out your marketing strategy, and demonstrate to your investors that you understand how you will be targeting your customers.

Financial Needs

These will be based on your projected financial statements. These statements provide a model of how your ideas about the company, its markets and its strategies will play out.

Obviously, a report that outlines your business plan is probably preferable to a scrap of an envelope, but the main point to this is working through the business idea in a written form that you can take to your business strategists to formulate a more comprehensive and viable business plan that aligns with your goals.

As you write your business plan, stick to facts instead of feelings, projections instead of hopes, and realistic expectations of profit instead of unrealistic dreams of wealth. Facts—checkable, demonstrable facts—will invest your plan with the most important component of all: credibility.

It’s time to start writing that business plan if:

  • You have a new idea for a business and want to explore its feasibility
  • Your industry is undergoing significant changes and dramatic developments, and you want to map them out for your current business
  • You’re looking to sell your business and want to establish a value for it that can be supported by facts and figures.
  • You require financing for your business idea and want to plan out how you’ll expend the resources you’re committing.

If you’re looking for assistance with planning for your business’s future, you can come speak with us.

Structured Settlement Contributions – What Are They And Why Should You Care?
Super | 02 21st, 2022|

Disasters, be they natural or man-made, can happen to anyone. It could be a car accident, a tree crashing through the roof, or a bushfire hitting your residence. In any case, an event that causes significant harm or impact that affects someone’s everyday life in an adverse way is never pleasant.

Thankfully, as a society, there are laws that provide compensation to people who experience these accidents as a result of someone else’s actions and are significantly impacted. If someone were to be (potentially) disabled for life due to such an incident, there may be a substantial compensation payout.

The idea of this compensation is not only to compensate for economic loss but to also provide a capital amount for the person’s living costs for the rest of their lives. Often that compensation will run to millions of dollars. Sounds like a lot, right?

If you receive compensation for becoming totally and permanently disabled, investing this lump sum should make it last far longer. This action will require careful planning and professional advice. Consulting with a professional on this financial decision may be in your best interest.

One effective strategy that can be used here is to make what is known as a Structured Settlement Contribution to superannuation.  You can then use your superannuation to pay you a pension.  If done correctly, all the money that your investment earns in super should be tax-free and all of the money that you draw out of super should also be tax-free. Removing tax from the equation when it comes to the money that you can draw out of your super will have a massive impact on your ability to have that money last your lifetime.

However, you need to make sure you comply with all of the rules around making a structured settlement superannuation contribution. These rules include:

  1. You will usually have to be under 67 at the time of making the contribution
  2. The contribution needs to be made within 90 days of getting the money
  3. Two doctors need to certify that you are totally and permanently disabled
  4. The payment must be compensation for personal injury where someone else was at fault or for workers compensation
  5. You must notify your super fund that it is a structured settlement contribution

The contribution will also have no impact on your pension transfer balance limit.  This means that if you make a structured settlement contribution of $2 million then you will now be able to transfer $3.7 million into a pension instead of the usual $1.7 million.

The payments are usually received after a lengthy legal process and it is probably not something that will be top of mind for the 90 days following receipt of the funds but the decision to contribute the amount to superannuation can have a lasting positive impact on your after tax income.

Consulting with a registered professional about your options regarding contributions, withdrawals and general options can give a better understanding of what you might be in a position to do.

End Of FBT Year Is Approaching – Do You Know What Benefits You’re Giving Your Employees?
Tax | 02 14th, 2022|

As a part of your employees’ employment contracts, do they receive benefits such as a car space, gym membership or even a car to drive?

These are what’s known as fringe benefits, which is a ‘payment’ to an employee that takes a different form to salary or wages. This incurs a specific kind of tax separate from income tax known as fringe benefits tax, which is based on the taxable value of the fringe benefits provided. FBT applies even if the benefit is provided by a third party under an arrangement with the employer.

Knowing what is and what isn’t deemed as a fringe benefit will assist you in working out what you might provide to your employees as a benefit for working with you.

Examples Of Items That Are Fringe Benefits

  • Allowing an employee to use a work car for private purposes
  • Giving an employee a discounted loan
  • Paying an employee’s gym membership
  • Providing entertainment by way of free tickets to concerts
  • Reimbursing an expense incurred by an employee, such as school fees
  • Giving benefits under a salary sacrifice arrangement with an employee.

Examples Of Items That Are Not Fringe Benefits

The following are not fringe benefits:

  • Salary and wages
  • Shares purchased under approved employee share acquisition schemes
  • Employer contributions to complying super funds
  • Employment termination payments (including, for example, the gift or sale at a discount of a company car to an employee on termination)
  • Payment of amounts deemed to be dividends under Division 7A
  • Benefits provided to volunteers and contractors
  • Exempt benefits such as certain benefits provided by religious institutions to their religious practitioners.

Employees don’t have to worry about paying the tax on these items, but it is an area of concern that employers need to be careful of. Employers must self-assess their FBT liability for the FBT year (which ends 31 March) and lodge an FBT return.

Employers can generally claim an income tax deduction for the cost of providing fringe benefits and for the FBT they pay. However, there are ways in which you may be able to reduce your liability when it comes to FBT.

These methods include:

  • providing benefits that are income tax-deductible
    • If your employee is given a benefit that they could otherwise have claimed themselves.
  • using employee contributions
    • If your employees contribute to the cost of the FBT themselves through cash payment to the provider of the benefit, the taxable value of the fringe benefit can be reduced by that amount
  • by providing a cash bonus
    • If you provide your employee with a cash bonus instead of a benefit you won’t have to pay FBT, and the employee will pay income tax on the amount.
  • providing benefits that are exempt from FBT.

FBT exemptions can sometimes be changed by the Australian Taxation Office (ATO), which can affect your FBT liability.

One such change was the FBT Retraining & Reskilling Exemption. Under this change, if you are an employer who is providing to their employees who are redundant (or soon to be made redundant) a benefit that encompasses training or education.

The exemption can be applied to retraining and reskilling benefits provided on or after 2 October 2020. This exemption is not to be included in your 2022 FBT return or in your employee’s reportable fringe benefits amount. If you have already lodged your 2021 FBT return though and paid any FBT owing, you can amend your 2021 FTB return to reduce the FBT paid for retraining and reskilling that is exempt.

It’s advisable to consult with a tax agent (such as us) if you need to amend an FBT return (as we are equipped with the tools and skills to negotiate what can be a tricky area filled with complexities and traps). Now’s the best time to speak with us about your FBT liability, what you might need to include in your return and more. Start a conversation with us today.

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