Category: Business


5 things that will make or break your business’ Christmas

By Heaney Business Group

The countdown to Christmas is now on and we’re in the midst of the headlong rush to get everything done and capitalise on any remaining opportunities before the Christmas lull. Busy period or not, Christmas causes a period of dislocation and volatility for most businesses. This dislocation and volatility mean that it is not ‘business as usual’ and for many businesses, it is the change that causes the problem.

Most business owners cope well with consistent trading conditions, where trading and business conditions are predictable as are the solutions to issues that arise, but it is a different story during periods of disruption. Here are some things to watch out for:

1. Ho, Ho, No. The trading stock headache.

If business activity spikes over the Christmas period and you sell goods, then there is a temptation to increase stock levels. That makes sense as long as you don’t go too far. Too much stock post the Christmas period and you will either be carrying a product that is out of season or you will have too much cash tied up in trading stock. Try to work with suppliers who can supply on short notice. Better yet, see if some of your suppliers will supply you on consignment where you only pay them once the stock is sold. It might be better to miss a few sales than carry a trading stock headache into the New Year.

Managing your trading stock is not just about managing cost, consumers will go online if they cannot find what they need in-store. Some savvy retailers are capitalising on this with opportunities to purchase online while instore if stock is not available or providing free shipping codes.

2. The discounting trend

Consumers now expect a bargain and can generally find one. The attraction of the Black Friday sales is that stock is generally available. Those waiting for bargains in the week immediately prior to Christmas can only choose from what’s left.

If you choose to discount stock (or the market forces you to), it’s essential to know your profit margins to determine what you can afford to give away. A business with a 30% gross profit margin that offers a 25% discount (certainly nothing unusual about that in today’s market) needs a 500% increase in sales volume simply to maintain the same position. The result generally is that often businesses trade below their breakeven point and generate losses. So, think carefully about your strategy and what you can sustain.

3. The Christmas cost hangover

Costs tend to go up over Christmas. More staff, leave costs, downtime from non-trading days, as well as increased promotional costs all, mean that the cost of doing business increases. Keep an eye on them. It’s great to get into the Christmas spirit as long as you don’t end up with a New Year hangover.

Many businesses also bring on casual staff. It’s essential that you pay staff at the correct rates and meet your Superannuation Guarantee obligations.  Under the Retail Award, the rate for adult casuals (21 and over) start at $26.76. There is also a 3-hour shift minimum for all casuals regardless of whether you send them home early. Check the pay calculator to find the correct rates.

4. New Year cash flow crunch

The New Year often leads to a quieter trading and tighter cash flow period. The March quarter tends to be the toughest cash flow quarter of the year. You will need a cash buffer going into the New Year. Don’t over commit yourself in the run-up to year-end and end up in trouble in the New Year.

5. Take a lesson from Scrooge

If you work with account customers, start your debtor follow up now. If your customers are under any cash flow pressures, the Christmas period will only increase that pressure. The creditors who chase hard and early will get paid first. Don’t be the last supplier on the list; the bucket may be empty by then.

Christmas is a great time of year. Just don’t get caught up in the rush and let things get out of control.

The Super Guarantee timing trap for employers

By Heaney Business Group

How employers are being caught out by the timing of superannuation guarantee payments.

Employers can generally only claim a deduction for superannuation contributions in the income year in which the contribution is made. Super contributions are made when the payments are received by the trustee of a complying superannuation fund.

It’s not uncommon for employers to be caught out by timing problems. Many in the belief that the contribution has been made at the point the payment is made. Rather than when it is credited to the superannuation fund provider’s account. Many forms of electronic transfer, however, are not guaranteed to be automatic or next day. BPay, for example, may take up to 2 days. A delay that is often not factored in.

Clearing Houses

A new practice statement from the ATO highlights the problem created by the use of clearing houses.

There is a specific element of the law that enables payments made to the Government’s Small Business Superannuation Clearing House (SBSCH) to be accepted as contributions when the clearing house receives them, rather than when the trustee of the superannuation fund has received the contribution. The SBSCH is only available to small businesses with 19 or fewer employees, or with an annual aggregated turnover of less than $10 million.

Private clearing houses are treated differently and as such, employers need to allow sufficient time for their superannuation contributions to be received, processed and paid by the clearing house to the superannuation fund before their SG obligation is discharged.

Take the example of an employer who brings forward superannuation contributions before 30 June to be able to claim the tax deduction in that year.  If a private clearing house was used, and time was not allowed for the clearing house to process the payment, and as a result, the payment was not received by the trustees before 30 June, then the deduction cannot be claimed until the next financial year.

Are You Paying Your Staff Correctly? Woolworths $200m plus Remediation

By Heaney Business Group
are you paying your staff correctly

Woolworths is the latest company to facing fallout from the underpayment of staff. In what is believed to be the largest remediation of its kind. Woolworths have stated that they have underpaid 5,700 salaried team members with remediation expected to be in the range of $200m to $300m (before tax).

The discovery was made as part of a 2-year review following the implementation of a new enterprise agreement but could have been occurring since the implementation of the modern award in 2010.

In a statement, Woolworths stated:

are you paying your staff correctlyAnnual salaries for store team members are set to cover ordinary working hours and reasonable overtime. However, team members are entitled to be paid the higher of their contractual salary entitlements, or what they otherwise would have earned for actual hours worked under the GRIA. The review has found the number of hours worked, and when they were worked, were not adequately factored into the individual salary settings for some salaried store team members.

Woolworths Group is committed to fully rectifying these payment shortfalls and an extensive plan is in place to ensure salaried team members’ pay is correct and compliant moving forward.

Interim back payments will be made to affected staff identified in the initial review before Christmas. Woolworths states that full remediation will be made as soon as practicable to all other staff impacted.

We cannot stress the importance of ensuring that staff are paid at the correct rates. If staff are underpaid, it is not simply a matter of making a catch-up remediation payment. Underpayment of superannuation entitlements, in particular, will incur significant penalties and charges.

To ensure that your staff are paid at the correct rate. You can do this by checking the Fair Work Ombudsman’s pay and conditions tool and see their guide to audit your pay rates.

Calculating Superannuation Guarantee: The New Rules

By Heaney Business Group

From 1 July 2020, new rules will come into effect to ensure that an employee’s salary sacrifice contributions cannot be used to reduce the amount of superannuation guarantee (SG) paid by the employer.

Under current rules, some employers are paying SG on the salary less any salary sacrificed contributions of the employee. Currently, employers must contribute 9.5% of an employee’s Ordinary Time Earnings (OTE) and they choose whether or not to include the salary sacrificed amounts in OTE.

Under the new rules, the SG contribution is 9.5% of the employee’s ‘ordinary time earnings (OTE) base’. The OTE base will be an employee’s OTE and any amounts sacrificed into superannuation that would have been OTE, but for the salary sacrifice arrangement. Let’s look at an example:

Pablo has quarterly Ordinary Time Earnings of $15,000 which would ordinarily generate an entitlement to $1,425 in SG contributions ($15,000 x 9.5%). He salary sacrifices $1,000 a quarter, expecting his superannuation contributions to rise to $2,425 for that quarter.

However, his employer uses the sacrificed amount ($1,000) to satisfy part of the employer’s mandated SG obligation, and only makes a total contribution of $1,425, mostly consisting of the employee’s $1,000 salary sacrificed amount.

Under the new amendments, Pablo’s $1000 sacrificed contribution will no longer reduce the charge. Therefore, the charge percentage would only be reduced by 2.83% ($425 / $15,000 x 100). As the employer is required to contribute 9.5% of the OTE base, they must contribute an additional 6.67% to meet their minimum SG obligations. The employer has a shortfall of approximately $1,000 (6.67% x $15,000).

As sacrificed contributions no longer reduce the charge Pablo’s employer will need to contribute $1 425 (mandatory employer contributions) in addition to the $1,000 employee sacrificed amount, to avoid a shortfall and liability for the SG charge.

The amendments also ensure that where an employer has not fulfilled their SG obligations and by calculating superannuation guarantee the superannuation guarantee charge is imposed. The shortfall is calculated using the new OTE base.

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Tax alert: Distributions to non-resident beneficiaries

By Heaney Business Group
distributions to non-resident beneficiaries

The ATO’s recently released interpretation of the tax treatment of capital gains distributed by an Australian discretionary trust to non-resident beneficiaries will have a significant negative impact for some.

Two new determinations released by the ATO deal with the complex and technical issues. These arise when a resident discretionary trust makes a distribution of capital gains to non-resident beneficiaries. The ATO’s view is that in some circumstances, non-resident beneficiaries can be taxed in Australia on gains relating to foreign assets. Which would not have been taxed in Australia had they been made by the beneficiary directly.

The ATO’s position will be counterintuitive for many as there is a Capital Gains Tax (CGT) exemption for non-resident taxpayers for assets that are not classified as taxable Australian property (TAP). This exemption means that in some circumstances, capital gains and losses are disregarded for non-residents.

distributions to non-resident beneficiariesThe ATO’s view is that this exemption does not apply to distributions from discretionary trusts. Even though beneficiaries of a trust are generally treated for tax purposes as if they had made capital gains personally. What this means is that if a resident discretionary trust makes a capital gain, then the ATO expects that this will be taxed in Australia, even if the gain is distributed to a non-resident beneficiary, even if the gain does not relate to TAP and even if the gain has a foreign source. Given that non-resident beneficiaries will be taxed at non-resident tax rates and may not have access to the full CGT discount, it will be important for trustees to consider this carefully when deciding on distributions for trusts that have a mixture of resident and non-resident beneficiaries.

The ATO’s determinations do not take into account the possible application of any double tax agreements. This is another issue that would need to be considered to reach a conclusion. How distributions are likely to be taxed in the hands of non-resident beneficiaries.

Quote of the month

“The only people who see the whole picture,’ he murmured, ‘are the ones who step out of the frame.”

Salman Rushdie, The Ground Beneath Her Feet

The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.

You can read more of our Blog Posts or Contact us

Super Guarantee Amnesty Resurrected

By Heaney Business Group
super guarantee amnesty resurrected

The Government has resurrected the Superannuation Guarantee (SG) amnesty giving employers that have fallen behind with their SG obligations the ability to “self-correct.”

This time, however, the incentive of the Super Guarantee Amnesty Resurrected is strengthened by harsh penalties for those that fail to take action.

Originally announced in May 2018 and running between 24 May 2018 until 23 May 2019. The amnesty failed to secure its passage through Parliament after facing a backlash from those that believed the amnesty was too lenient on recalcitrant employers.

Since the original announcement, the Government reports that over 7,000 employers have come forward to voluntarily disclose historical unpaid super. The SG tax gap is estimated at around $2.85 billion in late or missing SG payments.

When does the amnesty apply?

Legislation enabling the amnesty is currently before Parliament and if enacted, will apply from the date of the original amnesty announcement, 24 May 2018, until 6 months after the legislation has passed Parliament. Employers will have this period to voluntarily disclose underpaid or unpaid SG payment to the Commissioner of Taxation.

The amnesty applies to historical underpaid or unpaid SG for any period up to the March 2018 quarter.

Qualifying for the amnesty

To qualify for the amnesty, employers must disclose the outstanding SG to the Tax Commissioner. You either pay the full amount owing, or if the business cannot pay the full amount, enter into a payment plan with the ATO. If you agree to a payment plan and do not meet the payments, the amnesty will no longer apply.

Keep in mind that the amnesty only applies to “voluntary” disclosures. The ATO will continue its compliance activities during the amnesty period so if they discover the underpayment first, full penalties apply. The amnesty also does not apply to amounts that have already been identified as owing or where the employer is subject to an ATO audit.

What do employers pay under the amnesty?

Normally, if an employer fails to meet their quarterly SG payment on time, they pay the SG charge (SGC) and lodge a Superannuation Guarantee Statement. The SGC applies even if you pay the outstanding SG soon after the deadline.

What employers pay for failing to meet SG obligations
No Amnesty Amnesty
SGC comprised of: SGC comprised of:
  • The outstanding SG entitlements. (this component might be higher than what it would have been had the entitlements been paid on time)
  • The outstanding SG entitlements
  • Interest of 10% per annum
  • Interest of 10% per annum
  • An administration fee of $20 for each employee with a shortfall per quarter
  • No administration fees
Penalties of up to 200% of the amount of the underlying SG charge (minimum 100% for quarters covered by the amnesty) No penalties
A general interest charge if the SGC or penalties are not paid by the due date A general interest charge

 

SGC amount is not deductible – even if you pay the outstanding amount SGC amount is deductible

 

Under the quarterly superannuation guarantee, the interest component is calculated on an employer’s quarterly shortfall amount from the first day of the relevant quarter to the date when the SG charge would be payable (not from the date the SG was overdue).

The ability to deduct SGC and the reduction in penalties under the amnesty could be significant for employers that have fallen behind with their SG obligations.

If SG is paid late, special provisions exist within the legislation to automatically protect employees from inadvertently breaching concessional contribution cap limits if the unpaid SG is paid to the Commissioner and then transferred to the employee’s superannuation fund. Where the employer makes the payment directly into the employee’s fund, the individual would need to apply to the Commissioner requesting the exercise of discretion to either disregard the concessional contributions or allocate them to another financial year.

What happens if you do not take advantage of the amnesty?

If an employer fails to take advantage of the amnesty and is found to have underpaid employee SG, they are required to pay the SGC which includes penalties of up to 200%. Outside of the amnesty period, the ATO has the power to reduce the penalty in whole or part. However, the legislation enabling the amnesty imposes tougher penalties on employers that do not voluntarily correct underpaid or unpaid SG by removing the ATO’s capacity to reduce these penalties below 100%. In effect, the Commissioner loses the power for leniency even in cases where an employer has made a genuine mistake.

super guarantee amnesty resurrectedWhere to from here?

Even if you do not believe that your business has an SG underpayment issue, it is worth undertaking a payroll audit to ensure that your payroll calculations are correct, and employees are being paid at a rate that is consistent with their entitlements under workplace laws and awards.

If your business has fallen behind on its SG obligations and is eligible for the amnesty. You need to start working through the issues now or contact us to work through the issues for you. There are several calculations that need to be completed and these may take some time to complete.

If your business has engaged any contractors during the period covered by the amnesty, then the arrangements will need to be reviewed as it is common for workers to be classified as employees under the SG provisions even if the parties have agreed that the worker should be treated as a contractor. You cannot contract out of SG obligations.

If a problem is revealed, you can correct it without excessive penalties applying under the amnesty. If you are uncertain about what award and pay rates apply to employees, the FairWork Ombudsman’s website has a pay calculator or you can contact them online or call them on 13 13 94.

Uber Is Not A Taxi Service for Fringe Benefit Tax purposes

By Heaney Business Group

Good News, the outdated FBT rules for Uber Drivers are set for a legislative change.

Treasury has released an exposure draft under the Treasury Laws Amendment Bill 2019.  It seeks to replace the word “taxi” and change it to read “a car used for taxi travel (other than a limousine)”.

The ATO confirmed that the ruling needed to be more exact and therefore required a change. The ruling in question is that the FBT taxi travel exemption only applies to travel undertaken in vehicles licensed to operate as a taxi. This does not extend to a ride-sharing service who provide vehicles that are not licensed as a taxi.

Just to be clear, this does not directly affect Uber drivers themselves. There are no changes to the GST obligations for Uber drivers.  The 2017 Federal Court case that held that Uber drivers were required to be registered for GST, on the basis that they were supplying taxi travel remains unaltered.

The Institute of Public Accountants general manager of technical policy Tony Greco said the proposed legislative fix would end the “red-tape nightmare” for employers.

“The inconsistent treatment of Uber and other ride-sharing services for FBT and GST purposes has created lots of practical issues for employers,” Mr Greco said.

Ride-sharing services do not qualify as taxi travel for FBT purposes, and therefore, the costs of the services are not exempt from FBT, as the FBT legislation turns on whether the vehicle is licensed to operate as a taxi.

As the ATO could not fix it in an administrative manner, it now needs to be changed via a legislative change

Good News Ahead

The good news is the change will mean there will be one less FBT issue to combat for employers. With the modern world changing so fast these antiquated FBT rules could need a bigger overhaul.

Consultation for the draft bill is currently open until 27 September.

Interested stakeholders can provide their views on the proposed amendments on the Treasury’s website, www.treasury.gov.au

___________________________________________________________________

The team at HBG Tax and Accounting are your local Rockingham Accountants. With extensive experience in all areas of Accounting and Tax.

Call us on 08 9594 1963 or visit us at Unit 7, 12 Belgravia Terrace, Rockingham.

Our purpose is to build healthy long-lasting relationships with our clients, staff and within the local community.

At HBG Tax and Accounting, we are passionate about giving our clients that extra much needed support.

HBG Tax and Accounting
www.hbgtax.com.au
https://www.facebook.com/hbgtax
17th September 2019.

The material and content provided in this article is of informative nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained. 

Director Penalty Notices (DPNs)

By Heaney Business Group
Above view of business team sitting around table and working
Reminder

Director Penalty Notices (DPNs) are a way of the ATO collecting companies outstanding tax liabilities. These penalties make directors legally responsible if their company has any unpaid Superannuation Guarantee (SGC) or Pay As You Go (PAYG). Although personal liability doesn’t expand to GST that hasn’t yet been recorded or paid, receipts can still be handed out by the ATO at their own judgement including to companies previously liquidated.

To ensure a companies’ director isn’t issued with a DPN it is important to:

  • Ensure a Companies Reporting is a Priority
  • Understand the Types of DPN
  • Know the Fore Warnings
  • Act Immediately

Ensure a Companies Reporting is a Priority

If a companies’ PAYG is overdue by more than 3 months or their SGC has not been given to the ATO by the deadline, a director will not be able to put a company into voluntary administration or liquidation. This is often done so the director can be cleared of any personal liability. Paying the outstanding amount owed, is the only way to stop a director being personally responsible.

The ATO can use an estimate to give a DPN to a company with overdue lodgements. Once the required information has been reported, the ATO’s estimate can be reduced if the amount owing is less, however the DPN must still be paid.

Understand the Types of DPN

The ATO can issue two types of DPN’s – lockdown and non-lockdown. These notices can be given to companies concurrently depending on their debt. A non-lockdown DPN can be cancelled if the debt is paid, the company is under administration or is in the process of being closed. A lockdown DPN will only be cancelled if the required reporting is completed and debts owing paid.  

Directors Warning

If a company has past, unresolved PAYG or SGC liabilities, it is important for a new director to understand these liabilities can be passed on to them 30 days after their employment. If a director resigns during this time, it does not mean they are no longer liable for the debt either. Settling any amounts owing, appointing an administrator or the company being put into liquidation within the 30 days is the only way to stop a director being personally responsible.

Act Immediately

When receiving a DPN, a director must act immediately as the 21 days given to resolve the issue is not calculated from when a director receives the notice, but the date of issue. Although the ATO may send a copy of a DPN to the director’s accountant, this cannot be relied upon, meaning companies must make updating and reporting any changes to a director’s address a priority. It is encouraged to promptly seek expert advice when receiving a DPN.

Need expert advice – Contact HBG Tax and Accounting

HBG Tax and Accounting work closely with their clients and are passionate about giving them extra and much needed support. Contact the team today on 9594 1963 or visit their office at Unit 7, 12 Belgravia Terrace, Rockingham.

The material and contents provided in this article is of informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained

New Pay Rates effective as of 1st July 2019

By Heaney Business Group
Coins increasing
Happy employees

The start of the 2019/2020 financial year sees new pay rates be implemented. The first full pay period of the new financial year will see a minimum wage increase of 3%. New rates of $740.80 per week or $19.49 per hour apply to the national minimum wage. These rates are applicable to employees not covered by an award or agreement.

The Penalty rates have also been amended in the Hospitality and Fast Food awards industries.

This article was written based on information supplied from Knowledge Shop Newsletter July 2019.

The material and contents provided in this article is of informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.

What Do I Need For Single Touch Payroll?

By Heaney Business Group
Single Touch

Listen to HBG Tax and Accounting’s Directory Gemma Heaney as she discusses;
What You Need to Know about Single Touch Payroll on The Small Business Talk Podcast with Cathy Smith .
Or read on to find out more.

Single Touch Payroll (STP) is a new way of reporting tax and super information to the ATO. Employee’s tax and super information is sent directly to the ATO every time payroll is processed, via a third-party provider or from your own software.

Business administration is time consuming and often complex for those not experienced in the field. The introduction of Single Touch Payroll by the Australian Government (ATO) aims to streamline the process of payroll reporting with the aim to provide real-time visibility of businesses to all small businesses with employees. It may seem a little extreme to some businesses to submit formal reports every pay run, however this process aims to improve compliance and increase transparency in the payroll process of Australian business.

So what do you need to make sure you are running your STP efficiently and correctly before the 1st July 2019 cut off?

  • How Will You Report ?
  • Who Will Report For Your Business?
  • What Software Is Best For You?

How Will You Report?

The ATO will have issued you with an Implementation Guide and Transmission Protocol, which basically means a ‘how-to guide and sending procedures’, to assist you in submitting your STP information to them.

The first step is to determine how you will report through STP. This may depend on the size of your business, and if you currently use payroll or accounting software.

You can choose one of the following options:

  • Report through payroll or accounting software that offers STP reporting
  • Ask a third party, such as a registered tax or BAS agent, or a payroll service provider, to report through STP for you, (however, you must be aware that it’s your responsibility as an employer to make sure they use STP-enabled software)

Who Will Report For Your Business?

Regardless of whether you utilise your own software or you use a third party to report, you must nominate an employee (or yourself) to be the contact for the ATO, to lodge and to authorise STP reports each cycle. This contact is listed in the STP pay events and is usually someone who understands your payroll amounts and how it is calculated, such as your accounts or payroll manager. If you choose to utilise the services of a third party, you will need to link this relationship at a role level with the ATO.

What Software is Best for You?

Find out how your current payroll software provider will offer STP reporting. This may be through an update to your existing software, or an additional service. Older software products may not be updated to offer STP reporting.

HBG Tax and Accounting can take the stress out of STP reporting and are completely STP enabled, with secure electronic platforms that ensure efficiency and compliance every time you process your payroll functions.

Take the guesswork out of payroll and call HBG Tax and Accounting today.