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Small Business Tax Accountant: Essential Guide for Owners

Wed, 10 Dec 2025 06:21:15 GMT

Running your own business can be rewarding, but navigating Australia’s tax landscape can quickly become overwhelming. At Interactive Tax Consultants, operating in the Eastern Suburbs of NSW, we understand that staying on top of tax obligations is one of the biggest challenges most owners face. That’s why our team of experienced specialists offers dedicated support as your small business tax accountant, helping you reduce stress, save money, and stay compliant. Trust us to help you uncover financial opportunities and gain the peace of mind you deserve so you can focus on growing your business.

Why Every Business Needs Tax Advice

If you own a small business, you’re juggling staff, customers, inventory, and decision-making—often all at once. Unfortunately, tax and compliance issues are rarely top of mind until an important deadline approaches, and by then, errors or missed deductions can lead to significant headaches. Having a reliable small business tax accountant on your side is crucial for keeping everything in order and maximizing your financial outcomes.

Engaging a seasoned professional means your records are accurate, your obligations are met, and your deductions are claimed correctly. The right accountant will work proactively to identify savings and help you plan for the future, reducing your risk of ATO audits and penalties.

Common Mistakes Made by Small Business Owners

Many owners inadvertently make errors that could have been avoided with proper accounting guidance. Here are some frequent issues we see that a small business tax accountant helps to resolve:

Mixing Personal and Business Finances
One of the most common pitfalls is blending business and personal expenses. Keeping those finances separate is essential for accurate tax reporting and regulatory compliance. Our accountants help implement simple systems so you can confidently track and claim the right deductions.
BAS and GST Complications
Australian tax compliance is complex, with regular Business Activity Statements (BAS) and Goods and Services Tax (GST) obligations. Missing a BAS lodgment or making GST errors can be costly. As your small business tax accountant, we ensure deadlines are met, submissions are correct, and you’re prepared for any ATO enquiries.
Missing Valuable Deductions
Many business owners miss legitimate deductions because they simply don’t know what’s claimable. From vehicle expenses to technology costs and professional fees, having an expert identifies potential savings that can make a real difference to your bottom line.

How Our Team Adds Value

We believe that a small business tax accountant should do more than just lodge returns. At Interactive Tax Consultants, our value comes from proactive planning, clear advice, and strong client relationships. Our approach involves getting to know your business so we can recommend strategies tailored to your goals and industry.

We help you understand your cash flow, plan for tax instalments, and manage superannuation obligations. By regularly reviewing your numbers, we’re able to alert you to trends or risks as soon as they arise.

Learn more about how our tailored tax solutions support growing businesses like yours.

Planning for Success With Smart Structures

Choosing the right structure—sole trader, partnership, company, or trust—can substantially impact your tax and legal obligations. A small business tax accountant will explain the benefits and responsibilities associated with each structure, making sure you’re set up for long-term advantages.

We commonly help clients restructure as they take on new partners, expand operations, or look for ways to optimize for succession and retirement. Getting the structure right at the outset, or revisiting it as your needs change, can save you both time and money down the track.

Embracing Technology for Simple Compliance

Advances in accounting software have made staying organized and compliant so much easier. Your small business tax accountant should be comfortable integrating programs like Xero, MYOB, or QuickBooks into everyday operations. We provide guidance on the tools best suited for your business, helping automate invoicing, payments, and reporting.

With secure digital portals, document sharing and real-time access to your financial records, managing tax can become much less stressful. Our clients benefit from ongoing support to make sure their systems remain up-to-date and efficient.

When Should You Engage a Professional Accountant?

All businesses benefit from timely professional advice, but there are key moments when partnering with a small business tax accountant is especially valuable:

Launching a new venture
Hiring staff or contractors
Planning major purchases or expansions
Facing changes in tax laws
Falling behind on tax returns or BAS

If any of these scenarios sound familiar, now is the ideal time to get trusted advice. Our team is committed to providing services in the Eastern Suburbs and surrounding communities, helping businesses in every stage of their journey.

Why Choose Interactive Tax Consultants?

At Interactive Tax Consultants, we offer more than technical expertise—we build relationships founded on trust, transparency, and results. Our small business tax accountant team combines local knowledge with up-to-date industry insight to deliver service you can always count on. We communicate proactively, making sure you’re never in the dark about your obligations or opportunities.

We are proud of our reputation for friendliness and reliability. Every client can expect customized support, whether you’re a sole trader, a family trust, or a growing company.

Let’s Build Your Financial Success Together

If you’re ready to hand over the tax worries and focus on growing your business, now’s the perfect time to work with a small business tax accountant who truly cares. Serving the vibrant Eastern Suburbs community, we help owners like you make smart decisions, claim every eligible deduction, and sleep easy at night.

Reach out to the team at Interactive Tax Consultants to start with a personalized assessment of your situation. Contact us today or call 02 9212 1982 to discover how simple and rewarding expert tax management can be for your business.

Avoiding Errors: Benefits of a Small Business Tax Accountant

Fri, 08 Aug 2025 22:09:11 GMT

Navigating the maze of tax regulations can be overwhelming for any business owner. With a myriad of rules and financial details to consider, errors can easily creep in, resulting in costly fines and penalties. For businesses in the Eastern Suburbs, NSW, Interactive Tax Consultants provides a lifeline with their expert small business tax accountant services. Here, we’ll delve into the significant advantages of hiring a professional to manage your tax affairs.

Expertise and Knowledge

Hiring a small business tax accountant ensures that you tap into a wealth of expertise and knowledge. These professionals are well-versed in the latest tax laws, regulations, and compliance requirements that can affect your business. A small business tax accountant in Eastern Suburbs, NSW, like the ones at Interactive Tax Consultants, stays updated with the ever-changing tax landscape, guaranteeing your business is always compliant.

Understanding Tax Deductions

Tax deductions can significantly reduce your taxable income, but identifying them is complicated. An experienced accountant knows exactly which deductions your business is eligible for. They’ll ensure you claim everything you’re entitled to, helping you save more money.

Navigating Tax Credits

Tax credits are another area where accountants shine. They can identify key opportunities like research and development credits, lower your tax burden, and help your business stay competitive.

Time Efficiency

As a business owner, your time is invaluable. Handling taxes is time-consuming and complex. With a certified small business accountant, you can focus on core aspects of your business while they handle the intricate tax details. This expert management is crucial for optimising your time, especially during peak business periods.

Avoiding Last-Minute Rushes

One of the key benefits of having a small business tax accountant is avoiding last-minute rushes during tax season. They work with you year-round, ensuring everything is in order when the deadline approaches.

Year-Round Support

Tax accountants provide ongoing support beyond just the annual filing. They ensure constant monitoring and adjustment to your financial strategy, helping you stay ahead all year round.

Cost Savings

One of the most significant benefits of hiring a small business tax accountant is the potential for cost savings. Errors in tax filings can lead to penalties and increased tax liability. A small business tax accountant can identify all eligible deductions and credits, ensuring you pay no more than necessary. Their expertise can save you substantial amounts, safeguarding your business finances.

Reducing Litigation Risks

Proper tax management reduces the risk of litigation due to improper filings. This saves you additional costs for legal fees and settlements, contributing to your overall cost savings strategy.

Maximising Profits

With savvy financial handling, a small business tax accountant helps maximise your profits. They plan your tax strategy to enhance your income, freeing up resources to reinvest in your business.

Accurate Financial Reporting

Accurate financial reporting is vital for the success and longevity of your business. A small business tax accountant helps ensure your financial statements are precise and timely. They employ meticulous methods to verify and cross-check information, reducing the risk of errors significantly. This attention to detail is crucial for maintaining a healthy cash flow and achieving financial stability.

Ensuring Transparency

Transparency in financial reporting builds trust with stakeholders. An accountant ensures your books reflect actual business performance, maintaining reliability and investor confidence.

Budgeting and Forecasting

Accurate reporting aids in effective budgeting and forecasting. It allows you to plan better, forecast future expenses, and allocate resources efficiently.

Tailored Tax Strategies

Every business is unique with specific needs and goals. A certified small business accountant provides personalised tax strategies tailored to your business’s financial situation. They analyse your financial position and develop strategies that optimise your tax liabilities. Their focused approach ensures your business benefits maximally from available tax advantages.

Long-Term Planning

Tailored strategies also involve long-term planning. Accountants help structure your finances for future growth, ensuring sustained profitability and compliance.

Custom Solutions

Accountants offer custom solutions to fit unique business scenarios. Whether you’re a startup or an established entity, they provide strategies suited to your situation.

Audit Support

Facing an audit can be daunting for any small business owner. With a small business tax accountant, you have a skilled professional ready to help. They provide much-needed support during audits, representing your interests and ensuring compliance. Their expertise helps you navigate through the audit process smoothly, reducing anxiety and potential penalties.

Preparing Documentation

Preparation is key during audits. Accountants assist in preparing all necessary documentation. Their organised approach streamlines the process, ensuring you’re ready for any scrutiny.

Mitigating Risks

An accountant’s involvement reduces the risks of penalties during an audit. Their expertise ensures your compliance, mitigating potential financial losses.

Streamlining Business Decisions

A small business tax accountant helps streamline business decisions by providing insightful financial advice. Their analyses can guide your business towards more profitable ventures and avoid financial pitfalls. This strategic support is invaluable, particularly for decision-making processes that affect the long-term success of your business.

Offering Critical Insights

Accountants offer insights backed by detailed financial data. These insights guide decisions that align with your business’s financial health.

Facilitating Growth

Their advice is pivotal for facilitating growth. Accountants help identify profitable ventures, ensuring your business expansion is financially viable.

Legal Compliance

Tax laws are complex and stringent. Non-compliance can result in hefty fines and legal troubles. A certified small business accountant in Eastern Suburbs, NSW, ensures your business adheres to all tax regulations. They provide peace of mind, knowing your tax filings are accurate and legally compliant, preventing potential issues before they arise.

Detecting Compliance Issues Early

Early detection of compliance issues can save you from legal troubles. Accountants regularly monitor your filings, detecting and resolving issues promptly.

Staying Updated with Changes

Legal compliance includes staying updated with regulatory changes. Accountants keep you informed, ensuring continuous adherence to new laws.

Prevents Common Pitfalls

Many business owners unknowingly make errors in their tax filings. A small business tax accountant prevents common pitfalls such as incorrect deductions and missed deadlines. They offer guidance, ensuring every aspect of your tax obligations is met meticulously. This proactive approach mitigates risks associated with tax filing errors.

Regular Reviews

Regular reviews by an accountant prevent common mistakes. They scrutinise your accounts, ensuring every detail is correct and compliant.

Educating Business Owners

Accountants educate business owners on tax laws and filing requirements. This knowledge helps avoid mistakes and enhance financial literacy.

Enhances Financial Health

Overall, the input from a small business tax accountant significantly enhances your business’s financial health. By optimising tax liabilities, ensuring compliance, and providing sound financial advice, they contribute to the sustainability and growth of your business.

Sustainable Growth

Optimised financial handling fosters sustainable growth. Accountants help balance expenses and investments, ensuring your business thrives long-term.

Building Financial Security

Using an accountant builds financial security. Their comprehensive strategies ensure your finances are robust, paving the way for future success.

Secure Your Business’s Future Today

Interactive Tax Consultants in the Eastern Suburbs, NSW, offers unparalleled expertise in tax management for small businesses. Don’t let tax errors jeopardise your business’s success. Contact Interactive Tax Consultants today and secure your financial future with professional small business tax accountant services. Your business deserves the best, and Interactive Tax Consultants is here to provide it.

The Top Benefits of Hiring a Small Business Tax Accountant

Tue, 15 Jul 2025 13:55:27 GMT

Navigating the financial landscape as a small business owner can be overwhelming. From ensuring compliance with tax regulations to managing cash flow and growing your business, there's a lot on your plate. For businesses, hiring a small business tax accountant in the Eastern Suburbs, NSW, can be a game-changer. Here are the top benefits of entrusting your financial matters to a professional and why it might be the smartest move you make this year.

Expertise in Tax Regulations

One of the primary benefits of hiring a small business tax accountant is their deep knowledge of tax regulations. Tax laws are constantly changing, and keeping up-to-date can be challenging. A professional accountant stays informed about the latest changes and ensures your business complies with all tax requirements, reducing the risk of costly penalties.

Maximising Deductions

A skilled tax accountant is adept at identifying potential deductions and credits specific to small businesses. From office supplies to equipment purchases and travel expenses, they know how to maximise your deductions, ultimately lowering your tax burden. This expertise can result in substantial savings and improved financial health for your business.

Personalised Financial Strategy

Every business has unique financial needs and goals. A small business tax accountant provides personalised strategies that align with your specific situation. Whether you're looking to expand, minimise costs, or improve cash flow, having a tailored financial plan is crucial to achieving your objectives.

Efficient BAS and GST Handling

Handling Business Activity Statements (BAS) and Goods and Services Tax (GST) can be cumbersome for small business owners. Missteps in these processes can lead to significant fines. A small business tax accountant ensures your BAS and GST reporting are accurate and timely, preventing any issues with the Australian Tax Office (ATO).

Improved Cash Flow Management

Cash flow is the lifeblood of any business. Proper management of cash flow ensures that your business can meet its obligations and invest in future growth. A tax accountant helps monitor, regulate, and optimise your cash flow, providing advice on savings and investments to keep your business financially healthy.

Audit Support and Representation

Facing an audit can be a stressful experience. Having a professional accountant on your side provides peace of mind. They ensure all your financial records are accurate and compliant and represent you during audit procedures. This guidance and support can make the process much smoother and less daunting.

Utilising Modern Accounting Software

Integrating modern accounting software enhances efficiency and accuracy in managing your finances. A small business tax accountant familiar with the latest tools can help streamline your operations. This technology integration not only saves time but also provides real-time insights into your financial standing, helping you make informed decisions.

Ongoing Training and Support

At ITC, we believe in empowering our clients through education. Our accountants offer training and continued support on essential accounting principles and the use of software tools. This ensures you have a solid understanding of your financials and can confidently make strategic decisions for your business.

Strategic Tax Planning

Long-term tax planning is vital for sustained success. A tax accountant helps forecast your upcoming tax liabilities and provides strategies to minimise them. This proactive approach ensures that you remain competitive and profitable, safeguarding the future of your business.

Reduction of Stress and Time Savings

Running a small business is a time-consuming endeavour, with many tasks demanding your attention daily. Hiring a small business tax accountant frees up valuable time, enabling you to focus on other critical aspects of your business like customer service, marketing, and expansion. By delegating financial responsibilities to a professional, you reduce stress and streamline operations.

Enhanced Business Growth Opportunities

With a professional accountant managing your finances, you're better positioned to pursue growth opportunities. They offer insightful advice on investment strategies, help you understand the financial implications of business decisions, and guide you through the process of expanding with strong business solutions . This expert guidance can be instrumental in driving your business forward.

Holistic Financial Health Monitoring

A small business tax accountant doesn’t just look at your finances during tax season; they play a crucial role throughout the year. They can identify trends, flag potential issues early, and help you make strategic adjustments to improve your financial health. This ongoing monitoring translates into more stable and predictable financial performance, so you can focus on innovation and growth without financial disruptions. Regular check-ins and reports keep you fully informed, allowing for proactive decision-making.

Choosing ITC for Your Accounting Needs

Our commitment to small businesses in the Eastern Suburbs, NSW, is unwavering. We understand your challenges and goals and are dedicated to helping you succeed. With our expert service, you can rest easy knowing your finances are in good hands.

Make the Smart Choice Today!

Take the leap towards a stress-free financial future. Reach out to ITC today to discover how we can support your tax accounting needs. Whether your business is just starting or you're looking to optimise existing operations, our expert small business tax accountant in the Eastern Suburbs, NSW, is here to help. Call us now at 02 9212 1982 for personalised assistance. Let ITC be the partner that helps your business flourish!

Small Business Tax Accountant in Eastern Suburbs: 5 Facts

Thu, 12 Jun 2025 15:02:55 GMT

If you’re running a small business in the Eastern Suburbs, NSW, then finding a certified small business accountant in Eastern Suburbs, NSW should be a top priority. At Interactive Tax Consultants, we’re more than just your local tax professionals—we’re trusted partners committed to supporting your business through every financial season. Whether you're just starting out or restructuring for growth, understanding the value a small business tax accountant can bring is essential.

Here are five crucial facts about why working with a local small business tax specialist matters.

1. Local Knowledge Means Tailored Solutions

Eastern Suburbs businesses face unique tax and compliance conditions. As a certified small business accountant in Eastern Suburbs, NSW, we bring years of experience working with sole traders, partnerships, and companies across the region. Our in-depth understanding of state and federal tax regulations means your business remains compliant while maximising tax effectiveness.

We provide guidance on GST, PAYG, and deductions—everything tailored to suit your business type and industry. This localised knowledge helps you make smart decisions that benefit your bottom line.

2. Tax Time Doesn’t Have to Be Stressful

Filing tax returns, preparing Business Activity Statements (BAS), and managing ongoing compliance can be overwhelming. That’s where we come in. At Interactive Tax Consultants, we make tax time simple and stress-free.

We’re known for helping small businesses in the Eastern Suburbs submit timely and accurate returns. We don’t just handle paperwork—we analyse your finances to find deductions and opportunities that others might overlook.

3. Structure Matters More Than You Think

Choosing the right business structure can significantly impact your tax position and asset protection. As a small business tax accountant in Eastern Suburbs, NSW, we specialise in setting up tax-effective and asset-protective business structures.

Whether you're launching a new venture or thinking of restructuring, we assess your goals and liabilities to recommend the best setup. It’s not just about now—it’s about preparing for future growth and safeguarding your assets.

4. We Do More Than Just Tax Returns

Many people think accountants only come into play during tax season. The truth is, we support your business all year round. At Interactive Tax Consultants , we provide ongoing tax compliance support, BAS lodgement, PAYG instalments, and business advisory services.

Our goal is to keep your business running smoothly and profitably with continuous support and professional insight. As a small business tax accountant in Eastern Suburbs, NSW, we ensure that nothing falls through the cracks.

5. Trusted Local Support You Can Rely On

We’re proud to be known as the trusted local specialists for small businesses in the Eastern Suburbs. Our team takes a hands-on approach to every client relationship. You’re never just a number to us—we understand your business, your goals, and your challenges.

Whether you need help navigating complex deductions, restructuring your business, or setting up for growth, we’re here to help.

Partner with Experts Who Understand Your Business

Choosing the right accountant is one of the most important decisions you’ll make as a business owner. With Interactive Tax Consultants , you're not just hiring a small business tax accountant in Eastern Suburbs, NSW, you’re gaining a financial partner who’s genuinely invested in your success.

Give your business the local advantage with trusted, certified professionals who understand the Eastern Suburbs market. Call us today on 02 9212 1982 or visit our contact page to book your consultation.

Let’s build your business together—smarter, safer, and more tax-effective.

Federal Budget 2023-24

Wed, 10 May 2023 10:34:46 GMT

The 2023/24 Federal Budget was handed down on 9 May. It contains changes to business and personal taxation, superannuation, social security entitlements, as well as cost of living relief.

Following are some of the headline measures, many of which are subject to enabling legislation.

Please contact Interactive Tax Consultants if you have any questions around how these proposals may impact you or your business.

Business

Depreciation made less generous

Temporary full expensing (TFE) will cease and be replaced by a $20,000 instant asset write-off (IAWO) from 1 July 2023.

Under this change, small businesses (aggregated annual turnover of less than $10 million) will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024.

Assets valued at $20,000 or more (which cannot be immediately deducted) will be placed into a small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter.

For larger businesses, the write-off threshold is cut to $1,000.

TFE, which allows eligible businesses with a turnover of less than $5 billion to deduct the full cost of eligible depreciable assets of any value, is however still available up to 30 June 2023.

What this means: This may impact your business’s cashflow when acquiring assets above the relevant thresholds as your depreciation deductions will not be claimable upfront.

Small business energy incentive

This will provide businesses with an annual turnover of less than $50 million an additional 20% deduction on spending that supports electrification and more efficient use of energy. This incentive will apply to a range of depreciating assets (including energy-efficient fridges, heat pumps and electric heating or cooling systems, and demand management assets such as batteries or thermal energy storage) and also upgrades to existing assets.

Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024.

What this means: The bonus deduction provides a tangible benefit to business by reducing its taxable income by an additional 20% for investment in these assets.

Small business lodgement penalty amnesty

A lodgment penalty amnesty program will be provided for small businesses with aggregate turnover of less than $10 million to encourage them to re-engage with the tax system. This will see the ATO remit failure-to-lodge penalties for outstanding tax statements lodged from 1 June 2023 to 31 December 2023 that were originally due between 1 December 2019 to 29 February 2022.

What this means: This enables businesses to re-engage with the ATO by catching up on overdue lodgements, free of late lodgement penalties.

Crackdown on unpaid tax and superannuation

Also on the compliance front, from 1 July 2023 funding will be provided to the ATO over four years to assist it to engage more effectively with businesses to address the growth of tax and superannuation debts.

This compliance action targets taxpayers who have high-value debts over $100,000 and aged debts older than two years where those taxpayers are either public and multinational groups with an aggregated turnover of greater than $10 million, or privately owned groups or individuals controlling over $5 million of net wealth.

What this means: Businesses in these categories should strongly consider getting on the front foot with these debts and, with your tax agent’s assistance, at least enter into payments arrangements if eligible.

Patent box proposals scrapped

The following patent box changes announced in the two previous Budgets will not be proceeding:

the introduction of concessional tax treatment for eligible corporate income associated with new patents in the medical and biotechnology sectors
extension of the patent box income measures to provide the same concessional tax treatment for corporate taxpayers who: commercialise their eligible patents linked to certain agricultural and veterinary chemical products; or commercialise their patented technologies which have the potential to lower emissions.

What this means: given that these proposals never made it into law, this will have no tangible impact compared to what prevails now.

Superannuation

Extra tax for super earnings for account balances above $3 million confirmed

The 15% additional tax on superannuation “earnings” for individuals with account balances above $3 million from 1 July 2025 has been confirmed. This will be in addition to the current superannuation income tax rate of 15%, applying to the whole of fund earnings. No further details were provided in the Budget papers.

What this means: This is an extra tax impost for individuals, though it is forecast to impact less than 0.5% of individuals with a superannuation account. The tax can be paid by the superannuation fund or the individual.

Super Guarantee payable on pay day from 1 July 2026

This will require all employers to pay their employees’ super guarantee at the same time as their salary and wages (e.g. weekly or fortnightly etc. instead of every three months) from 1 July 2026.

What this means: This may impact employer cashflow. From an employee standpoint, however, it will increase transparency of SG payments and also boost retirement savings. For example, the Treasurer says that 25-year-old median income earner currently receiving their super quarterly and wages fortnightly could be around $6,000, or 1.5% better off at retirement.

No reduction to minimum drawdown for super pensions for 2023/24

The temporary 50% reduction in the minimum annual payment amounts for superannuation pensions and annuities will not be extended into 2023/24.

What this means: Pensions recipients will need to drawdown minimums of 50% more than applies this financial year. Minimum payments are determined by the age of the beneficiary and the value of the account balance as at 1 July each year. Failure to meet the minimum drawdown amounts may mean that the pension will be treated as having ceased at the start of that income year for tax purposes.

NALI changes – proposed multiple reduced

The government is proposing to amend the non-arm’s length income (NALI) provisions that apply to certain expenses incurred by superannuation funds.

Specifically relevant to SMSF trustees, the government is proposing to limit the level of a fund’s income that is potentially taxable as NALI to twice the level of an impacted ‘general’ expense.

What this means: The government had previously proposed that the maximum amount of income, subject to the highest marginal rate, would be five times the level of the general expenditure breach. A reduction to a multiple of two (instead of five) is welcome.

Individuals

No changes announced to Stage 3 tax cuts

The government did not propose any changes to the legislated Stage 3 tax cuts whereby from 1 July 2024, the 32.5% marginal tax rate will be cut to 30% for one big tax bracket between $45,000 and $200,000. The 37% tax bracket will be entirely abolished at this time.

What this means: On the face of it, lowering the 32.5% to 30% and removing the 37% tax bracket altogether seems like a big win for middle and upper-middle income earners. But it will actually be a much bigger win for higher-income earners, in dollar terms. For example, an individual who earns:

$75,000 will be better off by $750 per year compared to now
$125,000 will be better off by $2,225
$200,000 will be better off by $9,075

Low and middle income tax offset (LMITO) not extended

This tax offset ceased from 1 July 2022. The LMITO was introduced by the former Coalition government in 2018. It was only meant to be paid out once but was twice extended due to the pandemic. This offset was not extended on Budget night, and no replacement tax relief was offered to low- and middle-income earners.

What this means: Low-income earners may face an increased tax liability of up to $1,500 when upcoming 2022/23 tax returns are lodged.

Social security and cost of living

Boost to Centrelink payments

A base-rate increase of $40 per fortnight for about 1.1 million Australians on support payments including JobSeeker, Austudy and Youth Allowance.

Jobseeker increased

A JobSeeker payment increase of $92.10 per fortnight will kick in for about 52,000 people aged over 55 who have been on the allowance for nine or more straight months. This currently applies only to those aged over 60.

Power bill rebates

$500 energy rebates for 5.5 million households and 1 million businesses. Relief will be targeted to pensioners, Commonwealth Seniors Health Card holders and households receiving income support including Family Tax Benefit A and B. Income limits apply.

Sole parents

Sole parents will be able to receive the single parenting payment until their youngest child turns 14 – up from the current age of eight.

Rent assistance

15% increase to the rate of Commonwealth Rent Assistance, providing up to an additional $31 a fortnight for about 1.1 million eligible households.

Please contact Interactive Tax Consultants if you have any questions around how these proposals may impact you or your business.

PAYG instalment variations

Thu, 02 Mar 2023 10:55:58 GMT

The ATO is encouraging accountants to educate clients around varying PAYG instalments – this can potentially assist cashflow.

To recap, PAYG (pay-as-you-go) instalments allow business taxpayers to make regular prepayments towards the tax on their business and investment income. This is in contrast to salary and wage earners who already make prepayments by having tax withheld from their income each time they are paid.

Business taxpayers, including individuals who are contractors for PAYG withholding purposes, will automatically be entered into the PAYG instalments system if they earn over the entry threshold in business and investment income in their latest lodged tax return. These thresholds currently stand at:

Individuals (including sole traders and trusts) – your instalment income from your latest tax return was $4,000 or more, and the tax payable on your latest notice of assessment was $1,000 or more, and you have estimated (notional) tax of $500 or more.
Companies and super funds – have instalment income from their latest tax return of $2 million or more, or have estimated (notional) tax of $500 or more, or are the head company of a consolidated group.

If your or your business’s financial situation has changed, your expected tax liability may also change. This means your current PAYG instalments may add up to more, or less, than your tax liability at the end of the financial year.

The good news is that you can vary your instalments so the amount you prepay is closer to your expected tax for the year.

If you pay PAYG instalments using the instalment dollar amount provided by the ATO (option 1 on your Activity Statement), you may want to vary if there has been a significant change in your instalment income this year.

If you calculate your PAYG instalments using the instalment rate (option 2 on your activity statement):

you do not need to vary simply because your income has changed – the payment you calculate will go up and down in line with your income
you would usually only vary if the taxable proportion of your income has changed – for example, if your income has fallen significantly but your deductions for running costs have stayed the same.

There are however dangers in varying. If you vary your instalments downwards and you underestimate your eventual income for the year, you could be left with a substantial tax bill when you lodge your tax return at the end of the year. Also, when the ATO receives your tax return, they compare your actual instalments to the total tax payable on your instalment income for the income year. If your varied instalments are less than 85% of your total tax payable, you may have to pay a general interest charge on the difference, in addition to paying the shortfall. Depending on the circumstances there may also be penalties.

If you are not sure, it is best to not vary your instalments. Any overpaid instalments will be refunded to you after you lodge your tax return.
If you feel your current year business or investment income is likely to be more or less than the dollar amount of your PAYG instalments you are paying, feel free to chat to us about varying your instalments.

Super teething issues

Thu, 02 Mar 2023 10:53:36 GMT

Last year 9,700 individuals applied for compassionate release of super for dental treatment expenses, and 82% were approved. Out of those approved, 9% were for a dependent child’s dental treatment, which could include braces. What is the pathway for access?

While normally superannuation must be preserved for retirement, there are limited exceptions. One of these is compassionate grounds. An individual must apply to the ATO for a determination that an amount of the person’s preserved benefits or restricted non-preserved benefits in their fund be released on compassionate grounds due to the individual lacking the financial capacity:

a. to pay for medical treatment (defined as life-threatening illnesses or to alleviate acute or chronic pain or mental disturbance or medical transport for the person or a dependant)

b. to enable payments to prevent foreclosure by a mortgagee or the exercise of an express or statutory power of sale over the family home

c. to pay for home and vehicle modifications to accommodate the special needs of a severely disabled person or dependant

d. to pay for expenses associated with the person’s palliative care, death, funeral or burial, or

e. to meet expenses in other cases where the release is consistent with items (a) to (d).

Where one of these conditions is met, the benefit must be released as a single lump sum not exceeding the amount that is determined by the ATO to be reasonably required, based on the nature of the hardship and the person’s financial capacity. The ATO must provide a copy of its written determination to both the individual applicant and the trustee of their superannuation fund.

Turning back to dental treatment, point (a) is the relevant release condition. The applicant will need to demonstrate that they are suffering acute or chronic pain such that they require dental treatment to alleviate that pain, and that they are lacking the financial capacity to pay for that treatment. From an evidentiary perspective, an applicant would almost certainly need to furnish the ATO with correspondence from a dentist that speaks to the above, and also evidence of their financial position.

The ‘acute or chronic pain’ requirement means that cosmetic procedures such as teeth whitening, dental veneers, dental bonding, dental implants, dental bridges, dental crowns/tooth caps, orthodontics, and white tooth fillings are all unlikely to qualify.

There is no lifetime limit on the number of applications that you can make. For example, if you had three children who all required braces, then potentially you could tap into your super for each child’s procedure. Before making an application, individuals should consider:

alternative funding sources, such as loans
the impact on your retirement savings, noting the compounding nature of superannuation investments. Each time you dip into your super, you’re killing off the power of compound interest. Instead of braces costing $7000 or more, compounding interest means that it may be several multiples of this by the time you retire.

Crystalising capital losses

Thu, 02 Mar 2023 10:51:11 GMT

It’s been a particularly difficult 12 months for investors.

On the superannuation front, we now have two major reports assessing how super accounts fared in the 2022 calendar year. SuperRatings issued its average balanced return recently and found it was minus 4.8%. Late last year, ChantWest undertook a similar exercise – reporting a figure of minus 4.6%. There have been four negative years since 2000. In 2002, there was an identical return of minus 4.8%, and in the horror 2008 GFC year, the average super fund fell 20%.

Regarding property, CoreLogic’s capital city index declined 8.8% from its May 2022 peak to December, down 7.1% in calendar year terms, being the worst calendar year result in 42 years.

It’s important however to be mindful that these losses are merely paper losses. That is, these losses are only realised, and locked in, if:

in the case of property or shares, you sell the asset, or
in the case of superannuation, by selling assets or withdrawing super when investment balances are down.

If you retain the asset, you may be able to ride things out and hopefully the market bounces back. For example, the average return for the average balanced fund since 2000 is 6.1% (a period that takes into account the aforementioned 20% downturn during the GFC) – that’s $30,500 a year for every $500,000 you can get into super. Things should improve!

If you determine that an asset has little potential for future growth and decide to sell and happen to make a capital loss…there is a silver lining from a tax standpoint! You can deduct capital losses from your capital gains to reduce CGT liability. Capital losses must be used at the first opportunity. If you have any capital losses in the current year, or unused capital losses from previous years, you must use these losses to reduce any capital gains in the current year, and use the earliest losses first.

Of course, tax is not the only consideration when weighing up whether to retain or dispose of a CGT asset. Talk to your advisors before selling.

Legislating the purpose of superannuation

Thu, 02 Mar 2023 10:49:35 GMT

On 20 February 2023, Treasury released a consultation paper on legislating the purpose of superannuation. This is an idea that has been around since 2016 when the former Coalition government contemplated doing the same thing.

The government says that legislating an objective of superannuation will provide stability and confidence to policy makers, regulators, industry, and the community, that future changes to superannuation policy should be aligned with the purpose of the superannuation system. It will also ensure members and funds have a shared understanding of the purpose of superannuation throughout both the accumulation and retirement phases.

The consultation paper puts forward the following proposed objective, seeking feedback on it:

The objective of superannuation is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.

To be clear, the purpose of legislating such an objective is to guide future policy makers – any changes they make in the superannuation space should align with the legislated, agreed objective. For example, if the Coalition returned to government, its 2022 federal election proposal to allow first-home owners to tap into their superannuation for a deposit may run counter to the legislated objective and perhaps should not be pursued or supported by Parliament. Also arguably running counter to the legislative objective, would have been the COVID measure allowing individuals to access $20,000 of their superannuation savings, subject to certain conditions. That being said, the objective is not being hardwired into the Constitution, so it would be possible for a future government to disregard the objective if it saw fit.

On the other hand, reining in tax breaks for individuals with for example $3 million or more in their super accounts may align with the objective because it may be arguable that the amount of super in their account is significantly more than is needed for a “dignified retirement”.

The other point to be made around this proposal is that it is not aimed at abolishing current, existing laws that may not strictly align with the new objective. Most notably, this involves superannuation conditions of release that are not aimed at preserving savings to deliver income for a dignified retirement, including:

being temporarily or permanently incapacitated
suffering severe financial hardship, such as being unable to meet immediate family living expenses where you have been receiving government income support payments for a continuous period of 26 weeks and had been receiving that support at the time you applied for early release
compassionate grounds
having a terminal medical condition, or
taking part in the first home super saver scheme.

Unrestricted non-preserved benefits don’t require a condition of release to be met and may be paid at any time. They include, for example, benefits for which a member has previously satisfied a condition of release and decided to keep the money in the super fund. Certain employer termination payments (ETPs) received by the fund before 1 July 2004 may also be included in this category of benefits.

FBT and car logbooks

Thu, 02 Mar 2023 10:47:00 GMT

With the end of the FBT year approaching, are your car logbooks in order?

The operating cost method is used by many employers to calculate their car FBT liability. This method is particularly effective where the business use of the vehicle is high. Keeping a logbook is essential to use the operating cost method.

Employees need to prepare a logbook for any vehicle that you provide them with where there is an element of private use. The logbook period is for 12-weeks, which must be representative of typical usage. For example, a period where an employee is taking a block of annual leave is not representative.

Where employees share a vehicle during a year, each employee will need to prepare a logbook to substantiate their respective business use percentage.

Logbooks are valid for five FBT years (including the year the logbook is prepared), provided there is no significant change in the vehicle’s business use. Once the five-year period expires, a new logbook will need to be kept if you wish to continue using the operating cost method. Therefore, if a logbook was last prepared in 2017/18, a new logbook is required for this FBT year (2022/23).

As noted, a new logbook will need to be prepared where there is a significant change in the business use of a vehicle. Indeed, it is in an employer’s interests for a new logbook to be prepared where the business use of the vehicle increases, as this will result in a decreased FBT liability.

With just weeks to go in the FBT year, if a new logbook is required to be kept, but has not yet been…don’t panic! The 12-week period can overlap two FBT years provided it includes at least part of the relevant year.

The logbook must contain:

when the logbook period begins and ends
the odometer readings at the start and end of the logbook period
the total number of kilometres travelled during the logbook period
the number of kilometres travelled for each journey. If you make two or more journeys in a row on the same day, you can record them as a single journey
the business-use percentage for the logbook period
the make, model, engine capacity and registration number of the car.

For each journey, record the:

reason for the journey (such as a description of the business reason or whether it was for private use). Note that a generic description of a journey, such as ‘business use’, is not adequate
start and end date of the journey
odometer readings at the start and end of the journey, and
kilometres travelled.

These entries should be made contemporaneously, as soon as possible after each trip.

It’s a common misconception among employers with commercial vehicles, such as dual-cab utes, that they are automatically exempt from FBT and therefore there is no requirement to maintain a logbook. This is generally only the case where the private use is negligible.

If you are uncertain about your FBT logbook obligations, contact us .

New work from home record keeping requirements

Thu, 02 Mar 2023 10:44:25 GMT

Are you one of the five million Australians who claim work from home deductions? If so, stricter record-keeping rules may now apply.

For this financial year and moving forward, there are now only two methods to calculate your work from home claim:

Revised fixed rate method (with new rules applying)
Actual costs method (unchanged).

The actual costs method has never been all that popular because you need to keep records of every expense incurred and depreciating asset purchased, as well as evidence to show the work-related use of the expenses and depreciating assets. By way of example, to claim electricity expenses, the ATO suggests that you need to find out the cost per unit of power used, the average amount of units used per hour (power consumption per kilowatt hour for each appliance) and the number of hours the appliance was used for work-related purposes.

For this reason, the fixed rate method has been preferred (or in recent years the COVID shortcut method where you could simply claim 80 cents for each hour worked from home. Note, however, that the COVID-method is no longer available).

The fixed rate method has now been revised. The revised fixed-rate method increases your claim from 52 cents to 67 cents per-hour. However, this rate now includes internet, phone, stationery and computer consumables. Therefore, you can’t claim these expenses separately in addition to your home office fixed-rate deduction. Cleaning expenses and depreciation on office furniture are no longer included in the fixed rate. Therefore, you can now claim these expenses separately.
The record-keeping requirements under the revised fix rate method are now more onerous, also. You now need to keep a record of actual hours worked from home. The ATO will accept a record in any form, but it suggests either: timesheets, rosters, logs of time spent accessing systems, time-tracking apps, or a diary. The ATO will no longer accept estimates, or a four-week representative diary.
This new, strict record-keeping requirement applies from 1 March 2023. For the period before it (1 July 2022 to 28 February 2023) the ATO will accept a four-week representative diary.
Further, under the revised fixed rate method, you will now also need to provide at least one document for each type of expense to demonstrate that you actually incurred that expense. For example, if you receive electricity bills quarterly, you will need to keep one of those quarterly bills as a record to represent that year’s electricity expenses.

If you have any questions around these stricter rules, and how they may impact you, reach out to us .

ATO finalises Section 100A guidance for Family Trusts

Thu, 02 Feb 2023 11:21:30 GMT

Do you operate your business via a family trust? The ATO released its final guidance material on the application of section 100A on 8 December 2022 – TR 2022/4 and PCG 2022/2. In doing so, it has clarified a number of issues which is welcome.

To recap, the ATO in February 2022 updated its guidance around trust distributions made to adult children, corporate beneficiaries and entities that are carrying losses. Depending on the structure of these arrangements, potentially the ATO may take an unfavourable view on what were previously understood to be legitimate distribution arrangements.

The ATO is chiefly targeting arrangements under section 100A of the Tax Act, specifically where trust distributions are made to a low-rate tax beneficiary but the real benefit of the distribution is transferred or paid to another beneficiary usually with a higher tax rate. In this regard, the ATO’s Taxpayer Alert (TA 2022/1) illustrates how section 100A can apply to the quite common scenario where a parent benefits from a trust distribution to their adult children.

The final guidance is not the law and represents no more than the ATO’s view about how the law applies. It carries no legal authority, and clients in consultation with us as your advisor may consider venturing out into deeper and rougher waters, depending on your circumstances.

Following the release of the ATO material, there are a number of risk management options going forward:

Only distribute to Mum and Dad

This would be quite safe from section 100A scrutiny. No person pays less tax as a result of any agreement, and this is unlikely to be seen as high-risk by the ATO.

Continue to distribute to young adult beneficiaries, but hand over the money

If you are happy to give money to your children, this can be achieved while at the same time optimizing tax.

Charge board and current university fees

If adult beneficiaries are living at home, they should pay board (just as if they had a job). This will not add up to large sums, but arm’s-length board for a full year could come to about $18,000. This allows for some tax arbitrage without handing the kids any money.

Use of bucket company

Having a private corporate beneficiary caps the tax rate imposed on trust income. Franked dividends can subsequently be flexibly allocated through having a trust structure interposed between the bucket company and the beneficiaries. The present entitlement can be lent back to the trustee for use in the business of the trust, although there are minimum repayment conditions. Avoid having the main trust as a shareholder in the bucket company. The ATO considers circular income flows to be high-risk.

Be alert for the “no reimbursement agreement” argument

If you are contemplating making a gift or an interest-free loan to another person, ask questions about the circumstances behind this plan. If it was not in contemplation at the time of the relevant appointment of trust income (up to two years ago), but has arisen because family circumstances have changed recently, there may not be a reimbursement agreement.

If making gifts, go once and go big

You are unlikely to escape ATO attention if you have beneficiaries making gifts or loans year-after-year. So, where there is a strong argument to support the ordinary dealing exception, try to make it once-off, and for a significant amount if possible.

If you are impacted, reach out to us determine which option is best for you and your business.

Can you use your SMSF property upon retirement?

Thu, 02 Feb 2023 11:18:13 GMT

Many SMSF trustees wonder if they can live in their SMSF property once they retire. This is a common question particularly as property is such a popular SMSF investment.

However, despite superannuation being your own money, there are certain rules around accessing your superannuation which prohibit you from not only using your superannuation to purchase a property, but to live it in now and in retirement.

Property as an SMSF investment

Superannuation law allows SMSF trustees to purchase property via their SMSF. However there are strict rules regarding the purchase of property and how it can be used.

For example, the law allows you to purchase property through your SMSF provided the property:

Meets the ‘sole purpose test’ of solely providing retirement benefits to fund members
Complies with the SMSF’s investment strategy which must allow the acquisition of property
Is not acquired from a relatedparty of a member (except for business real property)
Is not lived in by a fund member or any fund members’ related parties, and
Is not rented by a fund member or any fund members’ related parties (except for business real property).

It should also be noted that the title of the SMSF property must be held by the trustees on behalf of the superannuation fund and rent from the SMSF property must also be paid into the SMSF. As owner of the property, your SMSF is responsible for all costs related to the upkeep and maintenance of the property.

As can be seen, the rules around how a SMSF manages investments are stringent and therefore prohibit you from living in a property owned by your SMSF.

What is the sole purpose test?

The sole purpose test is an important rule that must be considered when purchasing investments, such as property, by your SMSF.

For your SMSF to be eligible for concessional tax treatment, your fund must meet the sole purpose test. The sole purpose test requires a superannuation fund to be maintained for the sole purpose of providing retirement benefits to its members, or to their dependents if a member dies before retirement.

In other words, the superannuation sole purpose test dictates that your investments must be for the benefit your retirement and therefore cannot enhance your own personal lifestyle needs. Your SMSF will fail to meet the sole purpose test if your SMSF provides a pre-retirement benefit to yourself as a member of the SMSF.

The risk of contravening the sole purpose test could cause your fund to lose its concessional tax treatment and you as trustee could also face civil and criminal penalties.

What are my options at retirement?

Upon retirement, the only way you can move into a property that has been purchased by your SMSF is by transferring the property from your SMSF to you as a member in your own personal capacity. This is also known as an ‘in-specie transfer’ meaning your SMSF transfers its asset to you personally.

Undertaking an in-specie transfer will avoid breaching the sole purpose test in the event that you reside in the property as you will not be obtaining a present-day benefit or personal use of an SMSF asset.

An in-specie transfer is only possible once you meet a condition of release (such as retirement after reaching your preservation age or ceasing a gainful employment arrangement after reaching age 60) and are legally allowed to access your superannuation.

Beware of tax and duties

It is important to carefully consider any potential capital gains tax (CGT) on a transfer of property between an SMSF and the members of an SMSF in their personal capacity. Generally speaking, if a property is solely supporting the payment of one or more pensions for fund members, CGT may not apply.

Further, any potential transfer or stamp duty must also be considered as it may apply depending on your state or territory jurisdiction.

Take care

Just because you have reached preservation age or are retiring doesn’t mean you can use or live in your SMSF owned property after retirement. If you’re thinking about investing in property via your SMSF or are thinking about taking your SMSF-owned property out of your SMSF so you can use it for yourself, be sure to contact us for a chat before you make any decisions.

The importance of cash flow forecasts

Thu, 02 Feb 2023 11:13:41 GMT

As we enter into the new year, with many economists predicting a slowing of the economy, planning your business’s cashflow is more important than ever.

Studies suggest that the failure to plan cash flow is one of the leading causes of small business failure. To this end, a cash flow forecast is a crucial cash management tool for operating your business effectively.

Specifically, a cash flow forecast tracks the sources and amounts of cash coming into and out of your business over a given period. It enables you to foresee peaks and troughs of cash amounts held by your business, and therefore whether you have sufficient cash on hand to fund your debts at a particular time.

Moreover, it alerts you to when you may need to take action – by discounting stock or getting an overdraft, for example – to ensure your business has sufficient cash to meets its needs. On the other hand, it also allows you to see when you have large cash surpluses, which may indicate that you have borrowed too much, or you have money that ought to be invested.

In practical terms, a cash flow forecast can also:

make your business less vulnerable to external events in the economy, such as interest rate rises
reduce your reliance on external funding
improve your credit rating
assist in the planning and re-allocation of resources, and
help you to recognise the factors that have a major impact on your profitability.

At this point, a distinction should be drawn between budgets and cash flow forecasts. While budgets are designed to predict how viable a business will be over a given period, unlike cash flow forecasts, they include non-cash items, such as depreciation and outstanding creditors. By contrast, cash flow forecast focus on the cash position of a business at a given period. Non-cash items do not feature. In short, while budgets will give you the profit position, cash flow forecasts will give you the cash position.

Cash flow forecasting can be used by, and be of great assistance to, the following entities:

business owners
start-up business
financiers
creditors.

A cash flow forecast is usually prepared for either the coming quarter or the coming year. Whether you choose to divide the forecast up into weekly or monthly segments will generally depend on when most of your fixed costs arise (such as salaries, for example). When you are making forecasts, it is important to use realistic estimates. This will usually involve looking at last year’s results and combining them with economic growth, and other factors unique to your line of business. When forecasting overheads, usually a forecast will list:

receipts
payments
excess receipts over payments (with negative figures displayed in brackets)
opening balance
closing bank balance.

Reach out to us if you would like to know more.

Reduction in downsizer eligibility age

Thu, 02 Feb 2023 11:08:18 GMT

The eligibility age for downsizer contributions reduced from 60 to 55 years from 1 January 2023. This means if you are age 55 or older, you could invest the proceeds of the sale of your family home to your superannuation outside of your standard contribution caps.

Downsizer contributions

From 1 January 2023, if you’re aged 55 years or older you may be eligible to make a downsizer contribution of up to $300,000 (or $600,000 for a couple) to your superannuation fund from the proceeds of the sale of your home where specific requirements are met.

Downsizer contributions can be a great way of boosting your superannuation after retirement. As well as the extra capital they introduce, the contributions can also earn investment income that is either tax-free if you commence an income stream with the funds or be taxed at a concessional tax rate of as low as15% whilst in accumulation phase.

Eligibility requirements

To be eligible to make a downsizer contribution, you must answer yes to all of the following conditions:

You must be aged 55 or over from 1 January 2023 (or age 60 or over for any downsizer contributions made between 1 July 2022 and 31 December 2022. Note, prior to 1 July 2022, the eligibility age was 65 years and over).
The amount of the contribution is an amount equal to all or part of the sale proceeds (capped at $300,000 per person) of a qualifying main residence, where the contract of sale of the main residence was exchanged on or after 1 July 2018.
The home was owned by you or your spouse for 10 years or more prior to the sale. Further, your home must be in Australia and must not be a caravan, houseboat or other mobile home.
The proceeds of selling your home are either fully exempt or partially exempt from capital gains tax under the main residence exemption or, if the home was acquired before 20 September 1985, would have been exempt.
You make the downsizer contribution within 90 days of receiving the proceeds of sale (ie, usually settlement date).
You complete and provide the ‘Downsizer contribution into super form’ (NAT 75073) which is available on the ATO website and provide it to your superannuation fund either before or at the time of making the downsizer contribution.
You have previously not made a downsizer contribution from the sale of another home.

Provided that the above conditions are met:

There is no obligation to purchase a new home or to move to a smaller or cheaper home…you can even move into another home you own! You simply need to sell your home and meet the above criteria to make a downsizer contribution.
There is no maximum age limit to make a downsizer contribution.
The downsizer contribution does not count towards your non-concessional or concessional contributions caps. The contribution is in addition to these caps.
There is no requirement to meet a work test or work test exemption to make a downsizer contribution, and
Downsizer contributions can be made regardless of the size of your total superannuation balance (TSB). This means a downsizer contribution can still be made even if you have more than $1.7 million in superannuation.

Downsizer contributions count towards your super balance

While downsizer contributions can be made regardless of what your TSB is, once the downsizer contribution is made to superannuation it forms part of your TSB.

At this point, the downsizer contribution will increase your TSB which may impact your eligibility to:

Make carry forward concessional contributions
Make non-concessional contributions
Receive government co-contributions, and
Receive a tax offset for spouse contributions.
Similarly, a downsizer contribution will also count towards your transfer balance cap (TBC), which applies when you move your superannuation into retirement phase to commence an income stream.

So if you intend to use your sale proceeds to commence a superannuation income stream in retirement, it’s important to note that you have a personal TBC of up to $1.7 million on the total amount that can be transferred from a superannuation account into a tax-free superannuation income stream. You can find out your personal TBC by contacting the ATO or logging myGov.

Preservation considerations

Although the age to make a downsizer contribution has reduced to age 55, you should be aware that the contribution will be preserved until you satisfy a condition of release, such as retirement after reaching your preservation age (currently age 59) or ceasing a gainful employment arrangement after reaching age 60.

However, if you have retired or met another condition of release that frees up your superannuation, the downsizer contribution could still be accessed to provide an income stream but it will have to be by way of a transition to retirement income stream, which is slightly more restrictive than a regular income stream, such as an account-based pension.

Need advice?

Although making a downsizer contribution may seem to be a straightforward strategy, there are a number of eligibility requirements and nuances that you must be aware of when utilising these rules. If you’re thinking about downsizing and contributing to superannuation but want more information, we can help explain the rules in further detail and discuss how you may benefit from this scheme, based on your particular circumstances.

ATO New-Year Resolutions

Thu, 02 Feb 2023 11:04:24 GMT

The ATO has released its new year resolutions…and there is not a gym in sight! According to the ATO the five new year’s resolutions to keep if you want to stay on top of your tax and super in 2023 are:

1. Know if you’re in business or not

Are you earning an increasing income from a side-hustle?

If you answer yes to a few of the following questions, the more likely it is your activities are a business:

Do you intend to be in business?
Do you intend and have a prospect of making a profit from your activities?
Is the size or scale of your activity sufficient to make a profit?
Are your activities repeated and continuous?
Are your activities planned, organized, and carried out in a business-like manner? For example, do you:
keep business records and have a separate business bank account?
advertise and sell your goods and services to the public, rather than just to family or friends?
operate from business premises?
maintain required licences or qualifications?
have a formal business plan or budget?
have a business name or an ABN?

We can help you make this call as to whether your side-hustle may be a business.

2. Keep business details and registrations up to date

It’s important to keep your ABN details up to date as emergency services and government agencies use this information to support businesses during disasters. Also, if you’re going to earn over $75,000 this financial year, you’ll need to register for GST . Even if your turnover is below this threshold, it may be advantageous to register.

3. Keep good records

Good record keeping helps you manage your business and its cash flow. It also is your defense should the ATO make an enquiry about your affairs, or select your business for an audit. Feel free to approach us if you need assistance with your record keeping practices.

4. Work out if the PSI rules apply to you

The Personal Services Income (PSI) rules are a suite of ATO provisions designed to prevent persons who derive income from their personal services from “splitting” or “alienating” that income with other persons, and therefore minimising the overall tax payable.

If you cannot pass one of the tests within the PSI Rules and do not have a personal services business determination (PSBD) from the Commissioner, then regardless of the trading structure you choose, your PSI income derived will be classified as PSI, which means:

you will be unable to claim certain deductions against your PSI (basically, your deductions will be limited to those of a normal employee)
your PSI, less allowable deductions, will be attributed to you, and therefore included in your individual tax return, and taxed at your individual marginal tax rate as though you were an employee.

We can assist you in determining whether these rules apply to you and answer any questions you may have.

5. Look after yourself

The last few years have thrown some curve balls at small business, so it’s good to be prepared. If you’re struggling, the NewAccess program can help. It’s free, confidential, and designed for small businesses doing it tough.

Chat with us if you want to know more about these hot-button, new year issues.

Missed the Director ID Deadline?

Thu, 02 Feb 2023 10:59:46 GMT

Have you missed the deadline to apply for a director identification number (director ID)?

If so, you can still apply!

The ATO says it will take a reasonable approach with directors who are trying to do the right thing. Importantly, directors who need additional time to apply (beyond 14 December 2022), can request an extension of time by completing an Application for an extension of time to apply for a director ID

To recap, a director ID is a unique 15-digit identifier that a company director applies for once and keeps forever. By allowing regulators to trace directors’ relationships with companies over time, director IDs will help prevent illegal activity and level the playing field for businesses.

Director IDs are administered by the Australian Business Registry Services (ABRS), which is managed by the ATO.

Who?

You need a director ID if you are an eligible officer of:

a company, a registered Australian body or a registered foreign company under the Corporations Act 2001 (Corporations Act)
an Aboriginal and Torres Strait Islander corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act).

An ‘eligible officer’ is a person who is appointed as:

a director
an alternative director who is acting in that capacity.

You also need a director ID if you are a director of a:

corporate trustee, for example, of an SMSF
charity or not-for-profit organisation that is a company or Aboriginal and Torres Strait Islander corporation
registered Australian body, for example, an incorporated association that is registered with the Australian Securities and Investments Commission (ASIC) and trades outside the state or territory in which it is incorporated, or
foreign company registered with ASIC and carrying on a business in Australia (regardless of where you live).

you do not need to vary simply because your income has changed – the payment you calculate will go up and down in line with your income
you would usually only vary if the taxable proportion of your income has changed – for example, if your income has fallen significantly but your deductions for running costs have stayed the same.

Who doesn’t?

A director ID is not required if you are a director of an incorporated association (with no ABRN) registered with the Australian Charities and Not-for-profits Commission (ACNC), company secretary but not a director, acting as an external administrator of a company, run your business as a sole trader or partnership.

It has also been recently clarified by the ABRS that directors who resigned their directorship before 31 October 2021 are not required to obtain a director ID. Deceased directors, as they are unable to personally apply, are also exempt.

In summary, if you run a company that is a small business, are a corporate trustee of an SMSF, operate a not-for-profit or even a large sporting club, it’s quite likely that you’re a director, and therefore you’ll need to apply for your director ID.

Who doesn’t?

The easiest way to apply for a director ID is online at the ABRS website – www.abrs.gov.au/directorID . To access the online application, use the myGovID app with at least a standard identity strength to log in to ABRS Online. You must apply personally – we as your advisor cannot apply on your behalf, however we can advise you around eligibility, and any other questions you may have.

SMSF compliance: what’s on the ATO’s radar?

Thu, 08 Dec 2022 11:29:35 GMT

In a recent speech, ATO assistant Commissioner Justin Micale outlined the ATO’s latest compliance issues for those who operate an SMSF.

ID fraud and investment scams

While ID fraud and investment scams are still quite rare in the SMSF sector, they are becoming more prevalent.

In the 2022 financial year, the ATO identified increasing numbers of individuals who were victims of identity fraud where SMSFs were registered without their knowledge or consent. Luckily for most victims the ATO detected the fraud early so it could protect their super, but not for all.

These scammers are becoming increasingly sophisticated, impersonating well-known Australian companies and using personal details to gain trust.

They use various methods to contact people such as email or cold calling, pretending to be financial advisers and encouraging them to transfer their superannuation into a new SMSF or investment product. The investor is often promised high returns.

Once they have their personal information, they seek to use it to establish an SMSF, rollover money into the fund and steal retirement savings.

This reinforces the need for individuals to treat contact from any third parties in relation to their investment and superannuation choices with an abundance of caution.

Illegal early access

Early access is the most common risk in the sector.

It occurs when individuals access their retirement savings before meeting a condition of release. Not only is this illegal, but money taken out of superannuation early has a detrimental impact on an individual’s retirement nest egg.

There are only limited circumstances where a member can legally withdraw their super early, such as where a member reaches their preservation age and retires, is 65 years old (even if not retired) or has died.

Non-lodgment of SMSF annual returns

The lodgment of an SMSF annual return is a fundamental obligation for all trustees/members including those in retirement phase.

There are around 24,000 funds who haven’t lodged their first return and a further 80,000 lapsed lodgers with one or more outstanding returns.

Lodgment is vital to ensure your SMSF retains its complying status on SuperFund LookUp as funds which have overdue returns by more than two weeks may have their regulation details removed. This restricts the SMSF from receiving rollovers and employer contributions.

Regulatory contraventions

In the 2022 financial year, the ATO received contravention reports for 13,558 funds with 39,997 contraventions being reported. This is an increase of nearly 3.5% in the number of SMSFs with contravention reports lodged and an increase of nearly 6.3% in the number of contraventions reported compared to the 2021 financial year.

The most common contravention relates to members having accessed their retirement savings early, which is often reported as a loan to a member or a payment standards breach.

The main drivers of regulatory contraventions are financial stress, poor record keeping and a lack of understanding of the rules.

Audits

Adequacy and independence were two key issues identified.

Key to a robust audit is the SMSF documentation. Trustees and their advisors must provide their nominated auditor with all the relevant documentation for the SMSF’s accounts and financial transactions for the year.

Record keeping is key. Documentation of an SMSF audit itself is also necessary to determine that the audit has been properly conducted. This is the case even if there were no contraventions.

Trustees also need to appoint auditors who are genuinely independent.

Director IDs

All existing directors, including directors of a corporate trustee of an SMSF, are now required by law to have a director ID by 30 November 2022. It’s not too late to comply, as the ATO is taking a softly-softly approach to compliance in this area.

If you have any questions around SMSF compliance, contact us for help .

Xmas gifts from employers

Thu, 08 Dec 2022 11:25:50 GMT

Christmas is traditionally a time of giving, including employers showing gratitude to their workers for a job well done throughout the year. However, depending on the nature and value of the gift, and also who it is gifted to, such magnanimity can attract unwanted tax consequences. So how as an employer do you gift most tax-effectively this festive season?

Gifts to employees and their associates (e.g. spouses)

The first step is determining whether the gift constitutes entertainment. Gifts that constitute entertainment include tickets to movies, plays, sporting events, theatre, restaurant meals, holiday airline tickets, and admission tickets to an amusement park. On the other hand, the following gifts are not entertainment: Christmas hampers, bottles of alcohol, gift vouchers, perfume, flowers, and pen sets.

Where an entertainment gift costs less than $300 (GST-inclusive) and is provided infrequently throughout the year, there will generally be no Fringe Benefits Tax (FBT), no deduction will be allowed, and no GST credits can be claimed. Where the cost is $300 or more, FBT will apply, and a deduction and GST credits can be claimed.

Where a non-entertainment gift is in play, and it costs under $300, no FBT will apply, but a deduction and GST credits can be claimed. Where the cost is $300 or more, FBT will apply, and a deduction and GST credits can be claimed.

All told therefore, the best result for an employer (at least from a tax standpoint) is to provide a non-entertainment gift under $300.

Gifts provided to third parties (e.g. clients, suppliers, contractors etc.)

Where gifts are provided to these recipients, the $300 threshold has no relevance.

Gifts that constitute entertainment (irrespective of cost) do not attract FBT, cannot be deducted, and no GST can be claimed.

By contrast, non-entertainment gifts do not attract FBT, however a deduction and GST credits can be claimed – again, irrespective of cost.

Cash bonuses

Alternatively, instead of gifts, employers may wish to provide cash bonuses to their staff. From a tax perspective, the attraction of doing so is that it shifts the tax burden away from the employer and onto the employee. That is, the cash counts as assessable income for the employee while the employer can claim a deduction. No FBT is payable by the employer on a cash bonus.

Leave bonus

Another benefit that may be considered by employers is a leave bonus. For example, allowing workers to finish up for the year a couple of working days before Christmas and not have that count against their annual leave balance, noting that this may be a quiet time of the year for business anyway. There are no adverse tax consequences for either party. The added benefit for the employer is that, unlike a cash bonus, there is no immediate cashflow impact.

If you need assistance with the tax treatment of your Christmas giving, including Christmas parties, don’t hesitate to reach out to us .