Know more about the Accounting News

Have you taken an Odometer Reading for FBT?

Fringe Benefit Tax (FBT) applies to benefits to your employees that are additional to their salary or wage, such as personal use of a company vehicle.

Make sure you have your records in order, to take advantage of exemptions that might reduce your tax bill.

The Fringe Benefit year is 1 April to 31 March. In order to accurately account for your motor vehicle use, remember to take an odometer reading for the FBT period ending March 31st.

FBT lodgement and payment is due 21 May (or 25th June for electronic lodgements through us, as your tax agent).

Getting your bookkeeping ready for a digital future

Keeping up-to-date records of your business transactions isn’t the most glamorous part of being an entrepreneur, that’s for sure. But, in reality, having accurate and up-to-date bookkeeping is actually one of the core ways to keep your finances (and your business) under control.

Digital bookkeeping is the future of your finance

The digital age has revolutionised the way many business owners carry out their bookkeeping. From digital accounting to real-time data, the modern bookkeeper is now equipped with the tools and resources to make the job easier, more efficient and (crucially) less time-consuming.

When your bookkeeping goes digital, that means:

• Your data entry process gets automated – receipts, invoices and other supporting documents can all be scanned using OCR software. This gives you a digital copy of the paperwork, but also digitises the data and pulls it into your online ledgers. There’s no need for tedious manual data entry, and you also reduce the chances of human error.
• Your digital records are available 24/7 in the cloud – instead of searching through messy hard drives or dusty filing cabinets, all your financial documentation is available at the press of a button. You can pull up the documents you need at any time of day, from any location with internet access. And everything is safely encrypted and backed up.
• Your tax returns can be filed digitally – with all your bookkeeping data saved and accessed via your cloud bookkeeping/accounting software, your tax returns become a lot more straightforward. Whether it’s quarterly GST/VAT returns or annual corporation tax returns, you have all the data the tax office needs, ready to send in a digital format.
• Your finance data goes real-time – scanning and digitising your receipts at the time you make the transaction doesn’t just keep your records up to date. It also gives you real-time data on all your income, expenditure and operational costs. Instead of working with management information that’s months out of date, you have informative real-time data on which to base all your big business decisions.
• You’re 100% in control of your finances – by embracing the benefits of digital bookkeeping, you kick your finances into shape. You and your finance team have accurate real-time records of all income and outgoings, and can stay in complete control of the financial management of the business. Your accounts are in tip-top shape and you’re ready to file your tax returns at every significant period throughout the year.

Talk to us about switching to digital bookkeeping

If you want to transform your bookkeeping, now’s the ideal time to go digital.

Talk to our team and find out what bookkeeping or accounting software is right for your business.

Once you see the efficiency, accuracy and long-term benefits of digital bookkeeping, you’ll understand why going digital is a no-brainer, whatever type of business you run.

The new ATO tax education course is here – what does it mean for you

New powers have been given to the Australian Taxation Office (ATO) to direct you to undertake a tax education course in lieu of an administrative penalty for infringements such as late lodgment or insufficient tax records.

The ATO will use this option in their compliance activity if they believe that you:

• have failed to comply with your record-keeping obligations, and
• are not disengaged or deliberately avoiding your tax obligations.

The alternative option will initially be given to small businesses. If you are running a company, you may need to name an individual who will take the course on behalf of the company.

It is expected that the course will be free, take approximately 2 hours to complete, and be delivered in an online platform.

If you receive an education direction, you will be required to complete the course within the time period specified by the ATO. The time period may be varied in certain circumstances, or if you provide a reasonable request prior to the end of the relevant period.

Once you complete the course, you will be required to provide that information to the ATO.

The best way to avoid the education direction is to ensure that your tax records are up to date and that you comply with tax substantiation requirements.

Factors that will lead the Commissioner of Taxation to issue an education direction include when you:

• have shown a genuine attempt to comply with the law but have made an unintentional error or have knowledge gaps
• have disengaged from the tax system, or
• are deliberately avoiding your tax obligations.

Please let us know if you need more information about this with regards to your tax situation.

Your upcoming tax calendar for April and May

As we come up to the end of March, we have our final 3 months to finalise tax planning for the 2023 income year.

Despite the need for tax planning, April and May are also critical months to ensure all your tax lodgments are complete to avoid any penalties.

In order for you to be across your tax obligations, below are the key compliance dates coming up. If you have questions or need help with any of the following, we are here to help.

KEY TAX DATES – APRIL/MAY 2023

• 21 April 2023 – GST – Monthly Activity Statement and payment for March
• 21 April 2023 – PAYG withheld – Monthly Activity Statement and payment for March
• 21 April 2023 – PAYG instalment – Activity Statement and payment for monthly reporters for March
• 28 April 2023 – GST – Quarterly Activity Statement and payment for the January to March 2023 quarter if you do not lodge with us
• 28 April 2023 – PAYG withheld, FBT instalment and PAYG instalment – Quarterly Activity Statement and payment for the January to March 2023 quarter if you do not lodge with us
• 28 April 2023 – Superannuation guarantee – Lodgment and payment of superannuation guarantee statement
• 9 May 2023 – 2023-24 Federal Budget
• 15 May 2023 – Income tax – Due date for payment of outstanding 2021-22 income tax for companies and superannuation funds.
• 15 May 2023 – Income tax – Due date for lodgment of 2021-22 income tax returns for all taxpayers if your lodgment date was not earlier, and you are not eligible for the 5 June concession.
• 21 May 2023 – GST – Monthly Activity Statement and payment for April
• 21 May 2023 – PAYG withheld and PAYG instalment – Monthly Activity Statement and payment for April
• 25 May 2023 – BAS – Quarterly Activity Statement lodgment and payment due date for the January to March 2023 period if you are lodging with us
• 28 May 2023 – Fringe benefits tax – 2022–23 lodgment and payment of fringe benefits tax return if you do not lodge with us.

Anything keeping you up at night?

If you’re facing operational issues, tackling people challenges, or have health and safety questions, give us a call, email us or text us. We are here to help.

Super Guarantee Rate Rises in July to 11%

In July 2023, the superannuation guarantee statutory rate will rise to 11%. Annually, the rate is increasing by 0.5% until July 2025 when it will reach the legislated 12%.

Prepare Now for the July Rate Rise

• Review your current superannuation costs for all employees, both hourly and salaried.
• Review any salary packaging arrangements. Is the agreement inclusive of superannuation or is super paid on top of the agreed salary?
• For salary packages inclusive of super, you will need to check the contract’s wording to make sure you apply the changes correctly. This change may also impact annualised salary arrangements.
• Calculate your revised payroll costs from July, showing the current wages and superannuation expense compared to the new rate from July. Highlight the increased amount per month or quarter, so you know precisely what the impact will be.
• Discuss the super rate increase with your employees now. Let them know that there will be an increase of 0.5% each year from now until July 2025 when the statutory rate will reach 12% and remain there.
• Remember – short payment or late payment of super can incur hefty penalties – plan now for higher payroll expenses from July, so you don’t get caught short.

If you’d like help reviewing payroll costs and employee agreements, talk to us now, and we’ll make sure you have accurate reports to make planning for the rate rise easy.

Getting organised now means that you’ll be well prepared for your business’s increased costs when the first payment is due later this year.

What are the risks of taking out a personal guarantee on a loan?

To fund the growth of your business, you’ll almost certainly need to take out a business loan at some point. But many lenders will ask you to provide a personal guarantee against this business loan – and there’s a risk element to consider when taking out finance.

So, what does offering a personal guarantee on a secured loan actually entail? And what are the principal risks of becoming a guarantor?

Understanding the key risks of a personal guarantee

When you agree to offer a personal guarantee, you’re essentially promising to repay the loan if the business can’t make the payments – and to do this out of your own money or assets. This might seem like a small step to take, but giving a personal guarantee can have serious consequences if your business is unable to repay the loan.

Here are some of the risks of giving a personal guarantee:

• Personal liability – by signing a personal guarantee for the loan, you’re putting your own personal assets on the line. If your business defaults on the loan, the lender can come after your personal assets to collect the debt. This means your home, car, savings, and other personal assets are all fair game and could be at risk.
• Negative impact on credit score – if the lender comes after your personal assets, this can have a negative impact on your personal credit score. As a result, it could become more difficult for you to obtain credit in the future. Lenders will see you as a higher risk, which could affect your ability to borrow, take out a mortgage or find personal finance.
• Strained relationships – when you’re asked to give a personal guarantee by a business partner or family member, this can put a strain on your business and personal relationships. Having to repay the loan from your own assets can cause resentment, mistrust and ongoing problems between you and your partner, or family member.
• Difficulty obtaining credit for your business – giving a personal guarantee for a loan may get the business out of a short-term financial hole. But when the business relies on personal loans from directors, this can impact your ability to obtain credit for your business in the future. Lenders see this as a risk and may be less likely to extend credit.
• Risk of bankruptcy – if the business can’t repay the loan and the lender comes after your personal assets, this has the potential to push you into personal bankruptcy. Becoming bankrupt can have serious long-term consequences, including difficulty obtaining credit, loss of assets and damage to your credit score.

Talk to us about your business finance plans

If you’re planning on taking out a business loan, it’s important to consider the possible risks. Make sure you understand the risks involved and have a plan in place for repaying the loan if the worst happens and the business can’t meet the repayments.

We can help you work out a strategy for your business finance plans. We can also connect you with a suitable independent financial adviser or legal expert to explore the risk threats

ATO’s crackdown on residential investment property loans and tax compliance

The ATO has announced the commencement of a data-matching program for property investors to acquire residential investment property loan data from authorised financial institutions.

Sample audits conducted under the ATO random enquiry program indicate a net tax gap of $9 billion for the 2019–20 income year attributable to incorrect reporting of rental property income and expenses.

A significant driver of the gap was incorrect apportioning of loan interest costs where the loan was refinanced or redrawn for private purposes.

Data matching and tax compliance

The ATO will use the data to ascertain information about rental property loans including information such as repayments, interest charged, and borrowing expenses. This information will be used to identify, assess and treat several tax compliance matters including:

Lodgment – confirming that taxpayers with rental properties are lodging tax returns and the relevant rental property schedule on or before the relevant due date;

Income tax – confirming taxpayers with a rental property are correctly reporting interest on loan and borrowing expense deductions in their rental property schedules and associated income tax return labels;

Capital gains tax (CGT) – confirming the calculation of cost base elements used to determine the net capital gain or loss on a rental property used to generate income.

After a return is lodged, the ATO will use the data collected to identify relevant cases for action including compliance activities and education strategies.

If a discrepancy is identified, taxpayers will be contacted by phone, letter or email. Taxpayers will then have 28 days to respond before the ATO takes any action in relation to the discrepancy.

Other matters

ATO’s residential investment property loan data matching program will run from 2021–22 to the 2025–26 income years.

The data collected by the ATO will be made available to tax professionals through pre-filling reports in Online services for agents and practitioner lodgment service (PLS) through standard business reporting (SBR) enabled software.

Individual self-preparers may also access the data collected by the ATO through myTax, specifically the rental property schedule interest on loans or borrowing expense labels and rental income tax return labels.

Should you have any queries in relation to this program and its operation, please feel free to contact our office.

3 cloud accounting tips to save your business time and money

Keeping on top of your accounts is a big part of running a successful and profitable business. But you don’t want to spend ALL your time dealing with accounting tasks, especially when that time could be spent building customer relationships, or developing new products etc.

So, how do you keep your finances in check, while also spending less time on your accounts?

1. Bringing your accounting into the digital age

Switching to cloud accounting can be a revolutionary step for many business owners, especially when you look at the ways you can streamline and automate the basic accounting tasks. By using accounting platforms like Xero, QuickBooks, MYOB or Sage, you get all the basics of small business financial management, but with the benefits of smart automation.

With most modern cloud accounting software, you can:

• Automate the scanning and digitisation of your expenses and receipts
• Automatically reconcile your bank transactions with your invoices and bills
• Connect your accounts to other time-saving apps for mileage claims or staff expenses.

2. Getting paid faster and with less admin

With a cloud accounting platform driving your business, you also make it easier to send out e-invoices and get paid faster and more effectively. Improving your payment times and cash collection can make a huge difference to your cashflow position, and also sets the right expectations with your customers – making it clear that you require to be made on time.

Using the invoicing function in your business software, you can:

• Quickly send out electronic invoices as soon as a job is completed
• Set up automated invoices to be sent out at pre-agreed points in a project
• Include payment buttons on your invoice, so customers can pay via PayPal or card
• Remove the barriers to payment and speed up payment times.

3. Getting a better overview of your important numbers

Using cloud accounting isn’t just about automating the time-consuming financial admin tasks. By recording and tracking all the financial and non-financial data flowing through your system, your accounting platform can actually provide you with a goldmine of useful real-time information.

With cloud accounting providing your reporting, you can

• Access totally up-to-date real-time information, to improve your decision-making
• Track your performance against targets to see how well the business is performing
• Monitor spending and budgets to keep your cashflow under control
• Understand your return on investment when it comes to sales and marketing activity
• See how promotion has driven sales but reduced your profit, due to discounting.

Talk to us about setting up a more productive kind of accounting

If you want complete control of your finances and business decision-making, updating your accounting software and processes will be key to achieving that goal.

We can help you decide which accounting software is most suited to your business, and how to maximise the benefits you get from automation and real-time data.

Get in touch to talk through updating your accounting.

New Family Trust Tax Rules – Will the Changes Impact You?

If your trust pays adult-child beneficiaries, then you’ll need to know how the new ATO tax guidance rules could alter your beneficiary arrangements. The changes won’t affect every small business operating through a trust arrangement, but it’s important to check that existing provisions meet the new requirements.

The ATO is interested in agreements where parents benefit from trust income allocated to their children or other family members, particularly where tax avoidance could be an issue, and family member beneficiaries are unaware of the provisions.

Another area of focus is the application of Division 7A rules to trusts that pay private companies, especially with related business entities and where the trust and company are part of the same family group.

Do Your Trust Distribution Arrangements Need to Change?

Trust beneficiary arrangements can be complex, and we want to make sure your trust arrangements meet the ATO guidelines so you don’t get penalised. We’ll examine your situation in detail against the new information and advise you if any changes to trust arrangements are required.

With the ATO’s stronger position on the taxation of trust distributions, it’s essential to review arrangements.

Book a tax planning session with us today, so we can make sure you’ve got the best beneficiary arrangement for your business and family.

Your Fringe Benefits Tax Return is due soon

If you are lodging your own fringe benefits tax (FBT) return you need to lodge and pay by the 21st of May. If we are lodging on your behalf, your due date is not until the 25th of June.

If you have been paying FBT instalments on your quarterly BAS, we still need to complete and lodge the annual return to assess whether you have paid too much or too little throughout the year.

Things to consider before finalising the FBT return:

• Have you paid benefits to employees or associates for entertainment, expense payments, loan payments or any other benefits in lieu of wages and salary?
• Have you checked which benefits are exempt from FBT?
• Do you have tax receipts and other records related to the payment of fringe benefits for employees or associates?
• Do you have the relevant employee declarations, log books and travel diaries?
• There are new rules this year for the private use of electric vehicles, work-related COVID-19 testing and FBT small business concessions for car parking and portable electronic devices.

Remember that you must keep records of all FBT related transactions for at least five years.

As there are some exemptions and concessions available, we would be pleased to discuss your FBT return with you, to make sure that you are not overstating your fringe benefits and paying too much fringe benefits tax.

Talk to us now about small business concessions and new FBT rules, and we’ll take care of your FBT return.