The end of the calendar year is almost upon us, which heralds the start of the rush towards Christmas and, for some, the “Silly Season”.
There is a saying that nothing gets done between Melbourne Cup and Australia Day, due to the number of public holidays, and the fact that a lot of businesses shut down for 1-3 weeks over the Christmas and New Year period.
Don’t let that be you!
Those 3 months provides a perfect opportunity to finish off the current year with a bang, and to spend some time planning and preparing for the coming year. The holiday period also provides a great opportunity to rest and relax, and recharge your batteries for the coming year.
Take advantage of the opportunity to launch into 2014 and make it your best year yet!
Government Introduces Changes To Tax Laws As Promised
On 24 October 2013, the Government released draft legislation which aims to remove the Mineral Resource Rent Tax as promised in their election campaign.
More importantly for business, and particularly small business, the other changes that are to be made as a consequence of the removal this tax include:
- removal of the loss carry back rules from 1 July 2013 – this means the only year it applies is 2013
- reduce the threshold for instant write-off of assets from $6,500 to $1,000
- remove the $5,000 accelerated depreciation for new motor vehicles
- delaying the increase in the superannuation guarantee charge percentage by holding it at 9.25% until 1 July 2016
- removing the superannuation co-contribution of $500
- removing the income support bonus and schoolkids bonus
The schedule start date of these changes is 1 January 2014, however this is reliant on the legislation being passed by both the House of Representatives and the Senate.
What does this mean for taxpayers?
If you are a small business, this means that any planned purchases of motor vehicles, and assets under $6,500, are best to be made before 1 January 2014. by purchasing before this date you will be able to claim $5,000 plus 15% of the cost of any new motor vehicles, as well as write-off assets costing less than $6,500 each.
The other changes are not affected by any action taken as they remove concessions and benefits, and delay the increase to the rate of superannuation paid on wages and salaries.
If you are unsure of the effect of these changes or wish to discuss their impact for you, contact us at Value Beyond.
Business Benchmarking – ATO Benchmarks Updated
The ATO have updated their small business benchmarks with data from the 2010-2011 financial year.
The benchmarks consist of a number of financial ratios which are taken from information provided in tax returns and activity statements.
These benchmarks are used as a tool to identify businesses that might be avoiding their tax obligations, and consequently are a target for audit. The benchmarks are also used to determine income that has not been reported.
What do the benchmarks mean for me?
These benchmarks are not only a source of data to determine whether you might be on the ATO’s radar, but they also provide valuable information to measure your business against those of others in your industry.
The benchmarks are broken down into different categories of turnover, which provides information for different sized businesses.
The ratios cover expenses such as cost of sales for businesses such as cafes, restaurants and fast food/takeaway, and other ratios such as rent, staff costs and motor vehicle expenses as a percentage of turnover.
By comparing these ratios to your business’ performance, you can analyse areas that may be able to be improved, or areas that need to be maintained where you exceed the industry average.
The small business benchmarks can be found here.
If you are concerned about your business’ performance, or whether you may be seen as a target for audit, contact us to review your situation.
The Value of Paying Your Bills On Time
We all know that paying bills on time is important, and that particularly paying taxes and government fees is very important.
But what is the cost of not lodging and paying ATO and ASIC documents and fees on time?
ATO Penalties and Interest
If returns and activity statements are not lodged on time, the ATO can impose a Failure To Lodge penalty which increases the later the lodgement, up to a maximum of five months.
Days overdue | Small | Medium | Large |
28 days or less | $170 | $340 | $850 |
29 to 56 days | $340 | $680 | $1,700 |
57 to 84 days | $510 | $1,020 | $2,550 |
85 to 112 days | $680 | $1,360 | $3,400 |
113 days or more | $850 | $1,700 | $4,250 |
The ATO also charges a general interest charge (GIC) on late payments, currently at the rate of 9.6%, compounded daily. When an amount has been understated on a tax return or activity statement, then a shortfall Interest charge (SIC) is applied at the rate of 5.6% compounded daily.
ASIC fees and charges
Nearly every document lodged with ASIC has a time limit based on the date of the event or change the triggers the need to lodge the form. For changes of directors and addresses, this is usually 28 days, while other forms might have a lodgement period of 14 days from the date of the event.
If forms are lodged late, or annual review fees are not paid on time, then additional fees are charged.
These late fees are $72 for up to one month late, and $299 for more than one month late – per change made.
The bottom line – if you don’t lodge and pay on time, it can be a costly problem!
GST – should you be on Cash or Accruals?
When registering for GST you have a choice between registering on either a cash or accruals basis of accounting for GST.
You are eligible to account for GST on a cash basis if you meet any of the following criteria:
- you are a small business entity with an annual turnover of less than $2 million;
- you are not operating a business, but are carrying on an enterprise with a GST turnover of $2 million or less
- you account for income tax on a cash basis
- regardless off turnover, you are an endorsed charitable institution, a trustee of an endorsed charitable fund, a gift-deductible entity or a government school.
If you do not meet the criteria, then you must account for GST on an accruals basis.
If you account for GST on a cash basis you must:
- account for GST payable on your sales in the period that you receive them. If you receive a part payment, then you account for GST on that part payment only.
- claim GST credits on purchases in the period that you pay them. If you only make a part payment for a purchase, then you can only claim GST on the part payment.
You must have a valid tax invoice to claim any GST credit.
If you account for GST on a non-cash/accruals basis, then you account for all GST payable and all GST credits for the earlier of either:
- the first tax period in which an invoice is issued in relation to that sale
- the first tax period in which any of the payment is received or made
How Do I Choose Which Method To Use?
If your business collects it sales immediately, or you don’t have a problem with collecting money from debtors, then the accruals basis will suit as you will pay GST at the same time as you would under the cash basis, and it will enable you to claim GST credits as soon as you have an invoice rather than when you have paid.
If you have customers that don’t pay for long periods, and you pay your bills shortly after they are received, then the cash basis will suit your business.
And if you are unsure which method you should be using? Contact us at Value Beyond to review your situation.