Making NRAS claims

By December 3, 2019 Tax

The national rental affordability scheme (NRAS) started on 1 July 2008, encouraging large-scale investment in affordable housing. It offers tax and cash incentives to providers of new dwellings for 10 years, granted they are rented to low and moderate income households at 20% below market rates.

Though the NRAS is no longer taking new investments, property owners within the scheme will soon be receiving letters from the ATO to remind them of their claim requirements.

The two key elements of the NRAS are;

  • An Australian Government contribution in the form of a refundable tax offset or direct payment to the value of $8,394.10 per dwelling per year in 2018-19. The Australian Government contribution is 75% of the total annual incentive.
  • A state or territory contribution in the form of direct financial support or an in-kind contribution to the value of at least $2,798.03 per dwelling per year in 2018-19. The state or territory contribution is 25% of the total annual incentive.

Owners of NRAS rental property are eligible to claim a refundable tax offset if:

  • The Approved Participant has provided them with advice of their entitlement based on the certificate received from the Housing Secretary, and;
  • The claim is made in the year to which the certificate relates.

Deductions can be claimed for expenses incurred with a NRAS rental property, excluding the contribution amount received from the state or territory. The contribution amount is non-assessable, non-exempt (NANE) income for tax purposes.

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Does your SMSF meet the sole purpose test?

By December 2, 2019 Super

If you have a self-managed super fund (SMSF), then you need to meet the sole purpose test to be eligible for the tax concessions that are normally available to super funds. The sole purpose test aims to ensure that SMSFs are maintained for the purpose of providing benefits to members upon retirement or for beneficiaries if a member dies before retirement.

The sole purpose test is not a formal process that trustees have to go through, but more of a standard rule of thumb they should follow when making decisions relating to their fund and investments. If the sole purpose test is contravened, the fund will lose its concessional tax treatment and be subject to the highest tax rate. Members could also be disqualified as a trustee and face civil and criminal penalties such as fines or imprisonment.

If you or anyone else get some sort of financial, pre-retirement benefit when making investment decisions and arrangements other than increasing the return of your fund, then it is likely that your fund does not meet the sole purpose test. The test is divided into core and ancillary purposes, where regulated funds must be maintained for at least one core purpose and can add one or more ancillary purposes but cannot be run only for ancillary purposes.

The core purposes are paying benefits to:

  • Members on or after retirement from gainful employment.
  • Members when they have reached a prescribed age.
  • Dependents if the member dies.

The ancillary purposes are:

  • Termination of a member’s employment where the employee made contributions to the fund on behalf of the member.
  • Cessation of employment due to physical or mental health reasons.
  • Death of the member after retirement where the benefits are paid to the member’s dependants or legal representative.
  • Death of the member after attaining a prescribed age where the benefits are paid to the member’s dependants or legal representative.
  • Other ancillary purposes approved in writing by the regulator (ATO or the Australian Prudential Regulation Authority).

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What to include in a business partnership agreement 

By December 1, 2019 Business

Entering into a business partnership can come with conflicts and misunderstandings between you and your new associate. This is why having a written agreement that clearly outlines your rights and responsibilities is important for maintaining a healthy business relationship between partners. Here are some key areas to include in your partnership agreement:

  • Name of partnership: agree on a name for your business. This may seem simple but many partners have different ideas for what they think the business should be called.
  • Contributions to the partnership: work out and record how much each person initially contributes to the business, whether it’s cash, property, or services, and decide what percentage each owner will have.
  • Admitting new partners: agree on a procedure for admitting new partners so that you can equally decide on a new person.
  • Distribution of profits/allocation of losses: decide how profits and losses are allocated to partner shares.
  • Partnership decision-making: to avoid conflict when it comes to making unanimous or individual decisions, set up a decision-making process that everyone is happy with.
  • Death, disability, or withdrawal: if a member of the partnership wants to withdraw from it, or is forced to due to death or disability, then a buy/sell agreement is needed to manage the situation. Consider who you trust to make decisions on your behalf, who would inherit the shares of your company etc.
  • Resolving disputes: to deal with situations where you and your partners can’t agree on something, set up a mediation clause where everyone can agree on a procedure to resolve major conflicts.
  • Management duties: work out some guidelines on how the business will be managed. This can include who is responsible for dealing with customers, supervise employees, manage bookkeeping, negotiate with suppliers, etc.
  • Partner time off: work out how leave will work, including paid and unpaid sick leave, vacations, annual leave etc.
  • Non-competition clause: if you’re concerned about a partner leaving and then competing with the partnership’s business, you can include a clause that restricts them from doing so within a defined time period.

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What you need to know about investment bonds

By November 30, 2019 Money

Investment bonds are a practical investment option for those who earn a high income and seek long term tax efficiencies.

Investment bonds, also known as tax-paid, insurance or growth bonds, work similarly to a managed fund, except they are combined with an insurance policy. There is a ten year rule which allows tax free earnings on the bond if no withdrawals are made in the first ten years and contributions do not exceed 125% of the previous year’s contribution. Most investment bonds offer a range of investment options to cater for differing risk levels such as cash, fixed interest, shares, property or a range of diversified investment options.

Investment bonds are particularly suitable for high income earners with a marginal tax rate higher than 30% who want to build wealth without increasing their personal tax liability. They are also useful for estate planning purposes as beneficiaries other than dependants can be nominated and will not incur tax upon receiving proceeds.

n investment bond can be used as an investment structure for future financial needs of children such as education expenses. Alternatively, investment bonds can be used for supplementary retirement planning as investment bonds are not subject to preservation age, unlike superannuation investments, which may be more viable for those planning an early retirement.

Investments held in an investment bond are generally not subject to capital gains tax (CGT). Where an investment does not qualify for a CGT discount, the maximum tax rate of 49% may apply on earnings whereas an investment bond generates a maximum rate of 30%.

However, investment bonds do carry some risk that individuals should consider before making a decision. Common fees such as establishment, contribution, withdrawal, management, switching and adviser service fees may be applicable depending on your provider and the investment options you choose.

If you do choose to invest in an investment bond ensure you will be able to make regular contributions over the lifetime of the investment and can comply with the 125%. It is important to align your financial and estate planning goals with an appropriate investment structure suitable to your risk profile.

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Using technology to improve workplace safety

By November 25, 2019 Uncategorized

Ensuring the safety of employees in the workplace should be one of the top priorities for managers and business owners. This will not only improve your employees’ health and wellbeing but will help you avoid any arduous paperwork and legal obligations that can arise from even the smallest of injuries. Here are some technological tools you can use to improve the safety of your workplace:

Mobile devices:
Mobile devices such as smartphones, tablets, laptops and hand-held monitoring devices are convenient, easy to use tools that offer a range of workplace safety functions. They can be used to conduct inspections, record hazards, report accidents and communicate information instantly. These allow employees to keep up to date with on safety and health risks and ensure that everyone is aware of what is happening in the workplace. Safety apps offer functions like health and safety checklists, hazard identifications, and notifications to keep workers updated.

3D visualisation technology:
This software produces realistic images that allow you to easily recreate and imagine new or existing workplace sites. This can help employees become more closely aware of their surroundings and allow them to see any potential dangers or risks in advance. They are then able to prepare for the dangers before even being physically present on the site.

Equipment monitoring:
Internet-connected sensors can be installed on machinery used in the workplace to monitor its operation by measuring the machine’s temperature, vibrations, and noise. This helps detect any fault in the equipment, which is then sent to the manager/employer in real-time through the internet. This ensures equipment is kept in good repair and prevents employees getting injured from malfunctioning equipment.

Drones:
These are small aircraft directed by remote control and are fast and easy to use. Drones act as a safety measure as they are able to travel almost anywhere, meaning that they can inspect areas that are potentially dangerous or hard to safely access. Sending a drone to check the area prior to physically going to the site can inform workers of risks without endangering them.

Wearable technology:
These are devices that can be worn on workers’ bodies or accessories such as tool belts, watch bands, or clothing. Wearables often have sensors that can monitor the vital signs of employees (heart rate, skin temperature, blood oxygen level etc) which can be valuable for detecting health failures quickly. Some wearables can track workers’ movements and activity and send alerts to managers/employers if a worker falls or becomes unconscious. Other wearables can monitor the environment of the workplace, measuring elements such as extreme temperature, smoke, moving objects and dust.

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CGT concessions for shares and trust interests

By November 24, 2019 Business

For taxpayers wishing to access the small business capital gains tax (CGT) concessions for shares in a company or interests in a trust, they must first meet the standard requirements as well as further conditions in place for such entities.

A taxpayer can apply for small business CGT concessions to lower or dismiss their capital gain from the disposal of CGT assets. If the CGT asset is a share in a company or interest in a trust, further conditions that will need to be met are:

  • The taxpayer must have carried on a business just before the CGT event or meet the maximum net asset value test.
  • Meet the 90% test, satisfied when the CGT concession stakeholders in the company or trust where the shares or interest are held have a total small business percentage in the entity of at least 90%. The percentage can be held directly or indirectly through multiple included entities.
  • The company or trust in which the shares or interests are held must either be a CGT small business entity for the income year or meet the maximum net asset value test. The rules for determining whether an entity is connected with the company or trust for this purpose are modified. Under the modified connected entity rule, the company or trust controls another entity if it has a control percentage of at least 20% or more, in that other entity.

The share or interest must satisfy the modified active asset test which looks through to the activities and assets of the underlying entities. The asset of an underlying entity will only be an active asset if the previous conditions have been met

These requirements apply to CGT events after 8 February 2018. If you made a capital gain relating to shares in a company or an interest in a trust before then, you must meet the basic conditions and just before the CGT event you must either be a CGT concession stakeholder in the company or trust or meet the 90% test.

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Super when you’re self-employed

By November 24, 2019 Super

If you are a sole trader, or in a partnership, then you are not obligated to make super guarantee (SG) payments for yourself. However, you should still consider making personal contributions to super to help you save for retirement.

Your methods of contributing to super can depend on how you pay yourself. For example, if you receive a wage, then you can set up a regular transfer into super from your income before tax. If your income is from business revenue, you can periodically transfer a lump sum into your super depending on your cash flow.

When contributing to personal super contributions with your after-tax income, you may be eligible to claim tax deductions on them. Before claiming a deduction, you must give your selected super fund a ‘Notice of intent to claim or vary a deduction for personal contributions’ form, and received an acknowledgement from your fund.

You can contribute up to $25,000 a year in concessional super contributions, which are the contributions you can claim tax for, and an additional $100,000 a year in non-concessional super contributions, which you don’t claim deductions for. If you are aged 75 years or older, you are only able to claim tax deductions for contributions you made before the 28th of the month after you turned 75.

You should also check if you are eligible for extra government co-contributions to your super, which are available to eligible low and middle-income earners to increase their retirement savings. If you have a yearly income of less than $52,697 before tax, and you meet the eligibility criteria, then the government will match 50 cents for every dollar that you contribute to your super from your after-tax income. For example, if you contribute $1,000 to your super, the government’s co-contribution will be $500. This will get paid directly into your super account after you lodge your tax return for the year. There is a maximum amount the government will contribute which depends on your income.

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Introducing ASFP

By November 24, 2019 Tax

Plans are underway to carry out a system change during the December closure of the ATO to introduce Activity statement financial processing (ASFP). This change will move the majority of taxpayer financial information into one accounting system that will have multiple accounts.

ASFP will shift activity statement and franking deficit tax accounts from the current ATO system into their primary accounting system, covering all the different taxes they administer. This change is intended to help improve ATO digital services by delivering simplified transaction descriptions and summary views of “statement of account transactions” with the ability to view full account transaction if required.

During the closure, a number of ATO online services will be unavailable. These include;

  • SuperMatch: A service that enables APRA-regulated funds to consolidate member accounts.
  • EmployerTICK: An online service employers can voluntarily use to validate employee details, prior to making the first contribution to a super fund.
  • Fund Validation Service (FVS): A service that enables employers and funds to obtain APRA-regulated funds’ e-commerce details that support SuperStream transactions.
  • Electronic portability form (EPF): An ATO-hosted form that can be used by fund members to transfer the whole balance of super accounts between APRA-regulated funds, or to member’s self-managed super fund.
  • Member Account Attribution Service (MAAS): A service for super providers and life insurance companies to report the opening and closing of accounts, and changes to a member’s account phases and attributes when they occur (event-based reporting).
  • Member Account Transaction Service (MATS): A service for super providers and life insurance companies to report member contributions or transactions more frequently and at a transactional level.
  • Small business superannuation clearing house (SBSCH): The superannuation clearing house is a free online super payments service that can be used by employers with 19 or fewer employees or have an annual aggregated turnover of $10 million or less, to pay super contributions in one transaction to a single location.

Businesses will still be able to report using STP, however, these records won’t be processed and displayed until the ATO systems are back up and running. The ATO’s “System maintenance page” and “Superannuation Dashboard” will be updated with dates of planned system outages.

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Strategies to increase profit

By November 19, 2019 Money

Whether you are struggling to keep up a steady income or wanting to grow your business, increasing sales revenue is often a central goal for businesses. Here are some strategies you can consider when looking to improve profit:

Redesign operations for maximum efficiency:
If you really look at the operation processes of your business, you’ll often find that there are certain systems and routines in place that may not be necessary. Try to eliminate the tasks and activities that do not make valuable contributions to the business. Look for any operation processes that can be streamlined to maximise efficiency and save time.

Increase marketing efforts:
Oftentimes, you’re going to have to spend money to make money. Many businesses benefit from investing in a strong marketing campaign or even looking for cost-effective marketing opportunities on social media. Giving your business an instant presence through online networks such as Facebook, Instagram, LinkedIn, or Twitter does not have to cost a fortune. Sharing regular updates on your business, pictures of your products or interesting content your followers will like is a great way to keep your business in people’s minds and build a rapport with your customers.

Get your staff more involved:
Your employees may be inclined to stick to the tasks they have been assigned and leave the business promotion to whoever has that job. Your employees are often the ones directly dealing with customers, engaging in meetings, and making phone calls. Therefore, it is important that you encourage the salesperson in your employees and motivate them to invest in the process of maximising sales revenue. Think about inspiring staff in meetings, providing them with commissions or benefits that will make them want to give back, training them on how to close a sale and how to deal with customers effectively.

Take care of existing customers:
While it is easy to get carried away with getting as many new customers and followers as you can, don’t forget that it is often easier and cheaper to make a sale to an existing customer than a new customer who you have not developed a relationship with yet. Existing customers will have more trust in your products or services if they have already had a positive experience with your business. Put effort into maintaining a good relationship with existing customers and focus on cross-selling and upselling products and services to them.

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How to avoid non-paying clients

By November 18, 2019 Business

Running a business is hard enough without having to chase up payments from your customers. Here are some measures you can take to prevent yourself from having to deal with the profitability imbalance, negative client relation, and legal ordeals that come with chasing up owed debt.

Research the customer:
Before you enter into an agreement with a client or other businesses, make sure that you know who you’re dealing with and do some research. There are government certified websites available to check whether a company is registered and legitimate. Find out about their history, make sure they are reliable, still in operation and to look for any bad reviews and other people’s experiences with them. Look out for those who ask for discounts or complain that your fees are too high. If you get the idea that the client may not pay, consider avoiding the job instead.

Have a signed contract:
Regardless of how much you trust your client, it is still a good idea to have a written contract in place so that everyone is on the same page and you have evidence to refer to in the case of a dispute or confusion. The contract should consist of the terms and agreements, payment schedule, preferred payment method, the exact product or service to be completed and late payment policy. This will encourage your client to make their payments on time, and will also come in handy if any legal action is required in the event that payment isn’t made.

Have a good invoicing system:
Make sure that you invoice customers quickly with professional and easy to understand statements. This helps you keep track of your customers and helps your customers understand the payment requirements. You can set payment terms and policies to ensure that you will be paid how you and your customer agreed.

Ask for deposits or instalment fees:
If you ask for a deposit and the client does not want to pay, it shows that they are probably not trustworthy and may not be willing to make a full payment. If the client does pay you a deposit or instalment fees but does not make a final payment, then you will not have wasted as much time and effort on this work than you would have otherwise.

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