A belated Happy New Year! Wishing you all a financially prosperous year full of much success.
This year has gotten off to a flying start!
In this edition of MHP News we cover some of the following topics;
- MHP Client Portal
- Division 293 Tax
- Changes to Deductions for Non-Compliant Payments to Workers
- Rental Property Tips
- Single Touch Payroll (STP)
- Contractors vs Employees
Division 293 Tax- Information for Super Funds
Are you now having to pay Division 293 tax and wondering why?
From 1 July 2012, individual taxpayers are liable for Division 293 tax if their income for surcharge purposes plus low-tax contributions is greater than the applicable threshold, which decreased from $300,000 to $250,000 from 1 July 2017.
Division 293 tax is charged at a rate of 15% on the lesser of an individual's taxable concessional contributions and the amount above the $250,000 threshold. This amount is known as 'taxable super contributions'.
If you have recently lodged you 2018 income tax return then you may have now been identified as being accountable for Division 293 Tax.
If you fall into this category, you will receive a letter outlining
The Australian Taxation Office has given you the opportunity to choose how this amount is paid. Payment can be made using any combination of the methods below.
Pay the Division 293 tax personally using the payment information at the bottom of your Division 293 tax assessment.
Elect to release the funds from any of your existing superannuation balances by completing a Division 293 election form online. In order to do this you will need to access the ATO online services via your myGov account and complete the Division 293 election form before the payment due date. The ATO will then request that your nominated superannuation fund to release the funds directly to pay the tax.
Please contact our office should you have any questions in relation to this matter.
Changes to Deductions for Non-Compliant Payments to Workers
The rules for claiming deductions for payments to workers are changing.
From 1 July 2019, you can only claim deductions for payments made to workers if you have met the pay as you go (PAYG) withholding obligation for that payment. So in short, you will lose your deduction if there is a withholding or reporting requirement and no amount is withheld or reported to the ATO.
- withhold the amount from the payment before you pay your worker
- report that amount to the ATO.
If you have reported an incorrect amount by mistake you will not loose your deduction but, you must rectify your mistake as soon as possible.
Please contact us should you require further clarification pertaining to this matter.
Rental Property Tips
Attention rental property owners!
The ATO have put together their top10 tips to help you avoid some common tax mistakes this year.
Did you know.................
1. You always need to keep evidence to support your claims.
2. You need to make sure your property is genuinely available for rent.
3. That initial repairs and improvements can't be claimed in full in the year the expenses are incurred.
4. That borrowing expenses of more than $100 must be claimed over five years.
5. That the costs of buying a property can't be claimed as deductions.
6. You can only claim interest as a deduction for the part of your loan that relates to your rental property.
7. Capital works can be claimed at 2.5% of the cost for 40 years.
8. You can't claim deductions for periods when you're using the property yourself.
9. If you co-own, declare income and claim expenses according to your legal ownership.
10. When you sell, be sure to work out if you make a capital gain or capital loss.
Here is a handy publication developed by the ATO providing further details on the above; Top 10 tips to help rental property owners avoid common tax mistakes (PDF 329KB)
Get all the details pertaining Rental Properties at www.ato.gov.au/…/Rental-properties/Top-10-tips-to-help-rent…
SINGLE TOUCH PAYROLL (STP)
Single Touch Payroll (STP) was introduced by the ATO and reporting started gradually on 1 July 2018 for large employers with 20 or more employees.
For employers with less than 20 employees STP will commence 1 July 2019. The Legislation has now been passed and this will happen! The ATO will put in place some transitional arrangements but, all employers will need to report in line with the STP guidelines/rules from 1 July 2019
The ATO has advised that unlike the introduction of the Superannuation Clearing House, they WILL NOT be providing a portal or STP product to assist you meet these new obligations.
They have however worked with some of the accounting software providers to develop simple, cost effective (less than $10 per month) solutions for businesses who need to report through STP, but do not currently have payroll software. These solutions may include mobile apps, simple reporting solutions and portals. These solutions will best suit employers with one to four employees who need to report through STP, but do not currently have payroll software.
If you find yourself in this situation, please find a list below of possible STP payroll solutions as released by the ATO;
AccXite Pty Ltd
BAS Off Pty Ltd
Cristabel Pty Ltd
Easy Pay Slip Pty Ltd
Employment Hero Pty Ltd
e-PayDay Pty Ltd
Etax Accountants Pty Ltd
Free Accounting Software
Intuit Australia Pty Ltd
LodgeiT Pty Ltd
Myaccountant Technology Pty Ltd
MYOB Australia Pty Ltd
OB Secure Messaging
Reckon Australia Pty Ltd
Single Touch Pty Ltd
SRI Enterprise Software Pty Ltd
Xero Australia Pty Ltd
We will continue to keep you updated with any changes and the implementation of STP as the 1 July 2019 date approaches.
Don't know what Single Touch Payroll (STP) is?
Single Touch Payroll is a change to the way employers report their employees' tax and super information to the ATO.
STP will require you to have your payroll transaction data transferred to the ATO each time your employees are paid. This may require you to use a software solution that will transmit the data to and from the ATO on your behalf.
This payroll or reporting system must be STP Compliant, so that each pay cycle you can report the following items to the ATO:
- each employee's name and tax file number (TFN)
- tax withheld on the gross
- ordinary time earnings for the period, and
- any superannuation guarantee obligations.
The ATO will then report to you each month or quarter the correct amount of PAYG tax withheld to pay in your activity statement. Also, each quarter there will be information available regarding your superannuation obligations to either pay the ATO clearing house or your independent provider.
As part of the new regime, the reports and liabilities owing will be available to you in real time. This means that, if you wish, you will be allowed to make payments towards PAYG tax withheld and superannuation contributions in your pay cycle before the due date.
If your system is already automated with reports that can provide the information listed above for every pay cycle, all you need to do is confirm if your product is STP compliant.
However, if your system is still manual it is now time to discuss and review your internal processes. The STP regime is mandatory for employers of more than 20 staff from 1 July 2018, and will be mandatory for all employers by 1 July 2019.
Our advice is to become STP ready to avoid any fines or penalties in the future from the ATO. In the event that you need a solution or just want your system reviewed, we are happy to help by advising a suitable cost effective solution.
We are here to help you through the process if you need it. Please do not hesitate to contact our office for support.
Contactor Vs Employee
Before you employ you must determine if you will be employing your worker as a Contractor or an Employee. This is significant, as it will affect your tax and super obligations and there may be penalties if you get it wrong.
So what are the differences? Essentially, an employee works in your business and a contractor is running their own business. The table below developed by the ATO will help you to determine if a worker is an employee or a contractor for tax and superannuation purposes. There are also links in in the table you can access for more information about each item.
Ability to subcontract/delegate: the worker can't subcontract/delegate the work – they can't pay someone else to do the work.
Ability to subcontract/delegate: the worker can subcontract/delegate the work – they can pay someone else to do the work.
Basis of payment – the worker is paid either:
- for the time worked
- a price per item or activity
- a commission.
Basis of payment: the worker is paid for a result achieved based on the quote they provided.
A quote can be calculated using hourly rates or price per item to work out the total cost of the work.
Equipment, tools and other assets:
- your business provides all or most of the equipment, tools and other assets required to complete the work, or
- the worker provides all or most of the equipment, tools and other assets required to complete the work, but your business provides them with an allowance or reimburses them for the cost of the equipment, tools and other assets.
Equipment, tools and other assets:
- the worker provides all or most of the equipment, tools and other assets required to complete the work
- the worker does not receive an allowance or reimbursement for the cost of this equipment, tools and other assets.
Commercial risks: the worker takes no commercial risks. Your business is legally responsible for the work done by the worker and liable for the cost of rectifying any defect in the work.
Commercial risks: the worker takes commercial risks, with the worker being legally responsible for their work and liable for the cost of rectifying any defect in their work.
Control over the work: your business has the right to direct the way in which the worker does their work.
Control over the work: the worker has freedom in the way the work is done, subject to the specific terms in any contract or agreement.
Independence: the worker is not operating independently of your business. They work within and are considered part of your business.
Independence: the worker is operating their own business independently of your business. The worker performs services as specified in their contract or agreement and is free to accept or refuse additional work.
The ATO have developed a handy 'Employee or Contractor decision tool' to assist you work out if your worker is an employee or a contractor for tax and super purposes. Follow the link below to access this tool.
Did you know that apprentices, trainees, labourers and trade assistance are always treated as employees and companies, trusts and partnerships are always treated contractors.
Your tax and super obligations if your workers is an employee are;
withhold tax (PAYG withholding) from their wages and report and pay the withheld amounts to us
pay super, at least quarterly, for eligible employees
report and pay fringe benefits tax (FBT) if you provide your employee with fringe benefits.
Your tax and super obligations if your worker is a contractor are;
they generally look after their own tax obligations, so you don't have to withhold from payments to them unless they don't quote their ABN to you, or you have a voluntary agreement with them to withhold tax from their payments
you may still have to pay super for individual contractors if the contract is principally for their labour
you don't have FBT obligations.
How could the upcoming Federal Election affect the way you currently run your affairs and impact on your finances?
- Scrapping of excess franking credits refunds.
- Changes to negative gearing rental properties.
- Reduction in the capital gains tax discount from 50% to 25%
It is great that the relevant political parties are putting forward their policies early so that people can consider what it means to them.
If you would like to discuss any of these proposals and how they impact you, please do not hesitate to call and discuss.
Small Business asset write-off change;
The Government has announced that the instant asset write off has been extended to 30 June 2020 and the threshold increased from $20,000 to $25,000 effective immediately. Legislation will be introduced into Parliament to implement the announcement when sitting resumes on 12 February.
New year, New SCAM
Did you know that there was $800,000 reportedly lost during the month November 2018 to scammers?! The Australian Taxation Office (ATO) is warning taxpayers to be on high alert for scammers impersonating the ATO as, their tactics have changed in 2019.
The ATO received many reports in 2018 of scammers maliciously manipulating the calling line identification so the phone number that appears is different to the number from which the call originated. This is known as "spoofing" and is a common technique used by scammers in an attempt to make their interactions with taxpayers appear legitimate.
REMEMBER The ATO will not:
- send you an email or SMS asking you to click on a link to provide login, personal or financial information, or to download a file or open an attachment;
- use aggressive or rude behaviour, or threaten you with arrest, jail or deportation;
- request payment of a debt via iTunes or Google Play cards, pre-paid Visa cards, cryptocurrency or direct credit to a personal bank account; or
- request a fee in order to release a refund owed to you.
If you are unsure if you are being scammed or not call the ATO on 1800 008 540 to check.
To the latest alerts and for more information visit the ATO; ato.gov.au/scams.
Fuel Tax Credits Increase
Fuel Tax Credits increased on the 4th of February
If you use fuel in heavy vehicles or other machinery then take note of the new rate here.....
ABN: More Than Just a Business Number
Did you know that ABN's are used by emergency services and government agencies to help identify businesses during times of disaster?
If your ABN details are out of date you risk missing out on important assistance, updates or opportunities such as grants.
Your ABN is also used to identify that you are in fact a genuine business.
Keep the following details up to date and current so you can be identified correctly at all times:
- physical location
- postal address
- phone number
If you need assistance to change or update any of your details linked to your ABN we are able to attend to this for you.
Out Of Interest
The Benefits of Practicing Money Mindfulness
Mindfulness isn't often a word associated with money, but being mindful is a skill and practice that holds many benefits when it comes to managing your finances in a more clear, intentional and purposeful way.
A mindful money practice requires you to pay full attention to your money on a moment-by-moment basis. In other words, it's about being present and aware of what you are thinking, feeling and doing with your money.
The mindfulness process begins with observing your inner experience with money: your thoughts and feelings about it.
Read this article produced by MHP Private Wealth's Knowledge Centre and find out how you change the way you think, feel and what you do with your money for the better.
Google- Year in Search 2018
Google Trends analyses the search topics and queries that are made in Google Search. Every year, Google takes this information and publishes it in a video format, 'Google: Year in search'. The result is a visually impressive, and often emotive, showcase of the searches that shaped the year that was. From an Australian context, some of top searched personal finance topics and queries over the last 12 months were as follows:
To watch this video and read more follow this link to MHP Private Wealth's latest article;
Please contact us for any clarification on any tax matters or issues pertaining to your individual circumstances.
Be sure to check out the links below and keep up to date with the due dates for your tax obligations.
We'll be back in April 2019!
McDonnell Hume Partners
You can keep up to date with important accounting and business dates and deadlines. More...
The Tax Facts section where you can learn more about tax requirements within New Zealand. More...
Try out our new online calculators. More...
You can also organise an appointment with one of our staff via our special online appointment form. This is particularly useful if you struggle to find the time during normal business hours to phone. Simply click here to book an appointment.