June 2013 ISSUE
In our June edition of Connect we cover the implications of the federal budget hand-down, some last minute tax tips, end of year superannuation tax-planning and much more.
Last Minute Tax Tips for June 30th In tax and accounting, timing is important. With the close of the financial year nearly upon us, there are some measures you can take to ensure you make the most of the time left.
1. P ay staff or personal superannuation
contributions before 30th June. Contributions must be paid and closed to obtain a tax deduction this year.
4. C heck stock on hand – Write off or write down damaged or redundant stock items.
5. T rustees of trusts – You must decide
2. A s a Primary Producer, remember
to check your Farm Management Deposits. If you have had a good year consider lodging further deposits.
3. P repayments – Small business with
on the distribution of 2013 trust income no later than 30th June 2013.
6. D id you buy a car during the year
turnover under $2 million may be able to prepay expenses for up to 12 months and gain a deduction this year.
INSIDE THIS ISSUE
•C loud accounting: Servicing your financial needs in the 21st century
• F ederal Budget
for work use? Have you prepared a logbook? If not, start one now. Log books which start this year and span 12 weeks into next financial year can be used for your 2013 income tax return.
•E nd of year
Superannuation Tax Planning
•E nd of year
Business Tax Planning
•B anking Tip
7. R ecently purchased an investment
property? Consider obtaining a quantity survey and report to maximise your tax claims.
8. B ring forward “big ticket” expenditures eg. Major property maintenance.
9. M ake the time to contact your
compensation for contractors
accountant. There is no better way of finding out what to do before the end of the financial year.
•S ome other ATO changes
•S taff Profile
•F rom behind the desk • In-House announcements
Cloud Accounting: Servicing your financial needs in the 21st Century.
Businesses using cloud accounting systems are able to see their reporting results on a daily, weekly and monthly basis. Consequently you can see exactly how your business is performing and make appropriate decisions when changes need to be made. How is this possible? Powers Senior Accountant David Butler explains how ‘Cloud Accounting’ software can help your business succeed. David Butler Senior Accountant More and more clients have been requesting information on our ‘Cloud Accounting Services’, so we thought it was time to explain what it is to be ‘In the Cloud’. Cloud Accounting is an ever-changing technology directed to enhance the dayto-day small business. Almost all Bookkeeping software packages are developing strategies to put themselves at the top of the ‘must-have’ lists for small businesses. These strategies are all driven to save time and money for the end-user. The term ‘in the cloud’ is a broad term used on a day-to-day basis by almost all accounting firms who are striving to deliver the most up to date practices for
their clients. Powers Financial Group are no exception, offering the best and most affordable software solutions by subscribing to almost all software providers, enabling us to support our clients in the most effective manner. What does ‘in the cloud’ really mean? In simple terms, ‘in the cloud’ describes data which is accessible simultaneously to both the client and business adviser via the internet, meaning the data need not be stored on the user’s computer. Different accounting-based applications have different adaptations to their use of the term ‘in the cloud’. Most of these adaptations differ only by where the actual program is stored. Some platforms require the accounting software to be installed on a computer and only the data is accessed via the internet. Other software providers
host the entire program via a web browser, enabling the user to access both program and data by simply using a website instead of installing the program onto the computer. How secure is it? Security is the most obvious concern for most people in the decision making process of whether to move to a cloudbased system. Security was also the first step addressed by Software Providers in creating successful cloud-based accounting packages. When internet banking was first released, people were concerned that their money wasn’t safe. In today’s world few businesses would be able to get by without it. The most popular cloud-based accounting platforms in todays market are using the same security systems used by internet banking providers. The banks are providing
Federal Budget Highlights 2013 The federal budget was released in May and there are some items to be aware of. For our full budget breakdown and more information, go to www.powers.net.au/newsletters/publications or contact your Powers accountant. Individuals
•M edical Expenses tax offset abolished The net medical expenses tax offset (NMETO) will be abolished.
•B ye Bye Baby Bonus From 1 March 2014, the Baby Bonus will be replaced by an increase to Family Tax Benefit Part A (FTB Part A) payments.
•D isaster payments exempt from income tax Disaster Income Recovery Subsidy (DIRS) payments provided between 3 January 2013 and 30 September 2013 will be exempt from income tax.
•M edicare levy increase The medicare levy will be increased from 1.5% to 2%. •W ork related self-education expenses capped Deductions for self-education are now capped at $2000 as opposed to no cap at all.
the ‘data’ securely, directly to the software program. These transactions are generally known as ‘bank feeds’. Bank feeds are usually provided on a daily basis directly to your software program. This means your data is always up to date and there is no requirement to key in all your transactions on a weekly, monthly, quarterly, or annual basis. All you need to do is enter what each of the transactions were for. Speed & Automation Common-ledger is also a term that is being used by almost all accounting software providers. This means that the same ledger you have on your software program is also the same ledger your accountant is using to produce your year end accounts. The beauty of this is that any changes or adjustments can be made directly by your accountant, straight into your books at the click of a button.
• Increase to Medicare levy lowincome threshold for families The Medicare levy low-income threshold for families will increase to $33,693 for 2012/2013 income year. The additional amount of threshold for each dependent child or student will also increase to $3,094.
Some other benefits include up to date software 100% of the time with no need to constantly download upgrades or tax tables. We really believe in the benefits these programs are offering to not only the businesses using them but also to us as accountants.
•D rought assistance reform A new Farm Household Allowance (FHA) will be available to eligible farm families in periods of hardship regardless of the source of that hardship.
to around $70 a month for business with 100’s of employees and multi-currency transactions.
We can save our clients time and heartache by being able to ‘logon’ to their software and provide advice or fix entries as required. The days of using surface mail to provide back-ups for year end tax planning and end of year accounts will soon become a thing of the past.
Where to go from here? If you are thinking of embracing your technological side, or just have any questions regarding your options for cloudbased accounting, we would be more than happy to talk to you. Remember this will not only save you valuable time, but also provides more clarity over your business’ figures, makes them easier to keep up to date and as a result allows you to make more informed business decisions.
What are the costs? Most of today’s providers, offer a multitude of pricing options dependant on the requirements of your business. Most of these prices range anywhere from $19 per month for a simple GST cashbook through
Now is the perfect time to start changing gears to get ready for the new financial year and kick-off your online accounting software by July 1. Call your accountant at Powers to discuss cloud accounting for your needs.
End of year Superannuation Tax Planning
With the end of the financial year looming, now is a good time to be thinking about your end of year superannuation strategies. It may also help you to avoid some common traps and tax penalties. 1.Reduced concessional contributions cap Don’t forget to make your contribution, but also don’t fall into the excess contribution cap. The reduction in the concessional contribution for individuals over 50 to $25,000, which took effect from 1 July 2012, may mean you need to take action before the end of the financial year. 2.Claiming a tax deduction for your personal superannuation contributions Remember to speak to your accountant. If you are intending to claim a tax deduction for your superannuation contributions make sure you are eligible to claim the tax deduction and pro-actively seek advice if unsure. 3.Beware of excess contributions tax Investors who want to make large superannuation contributions should exercise extreme care regarding the amount and type of contribution they make to avoid excess contributions penalties. Any type of contribution made during the two preceding financial years may impact on the contributions that can be made this financial year. 4.Government co-contribution Get some free money from the Government. Take advantage of the Government cocontribution by making a non-concessional (after tax) super contribution before the end of the financial year. For every dollar of eligible contributions, the Government contributes 50 cents to your superannuation up to a maximum government co-contribution of $500. For 2012/13, the maximum government cocontribution is payable for individuals on incomes at or below $31,920 and reduces
by 3.33 cents for each dollar above this, cutting out completely once an individual’s total income for the year exceeds $46,920. 5.Pensions For members in the pension phase, ensure that you have received the required minimum pension amount by 30 June otherwise the investment income derived from the assets supporting that pension may no longer be exempt from tax. If you are over 60 and not taking a pension from your super then you are most likely missing out on the opportunity to pay less tax personally and on your super. Yes that is correct. This strategy needs to be discussed with your accountant or super adviser. 6.Investments It is possible for your SMSF to enter into a borrowing arrangement and may be used to acquire your business premises or to buy an investment property. It requires a specific structure, which needs the right advice. It is a way to use your superannuation for acquiring an asset of your choosing. For small business owners, it can be a wonderful opportunity to own the business premises and grow the value of the business and retirement assets. 7. Budget Changes 2013 Under the current law, capital gains arising from the disposal of assets which are supporting income streams are taxfree. The proposals intend to phase out the exemption with capital gains being taken into account for the purposes of the
$100,000 tax-free cap on fund earnings. The Government has indicated that special arrangements will apply for capital gains on assets purchased before 1 July 2014: • for assets that were purchased before 5 April 2013, the reform will only apply to capital gains that accrue after 1 July 2024. • for assets that were purchased from 5 April 2013 to 30 June 2014, individuals will have the choice of applying the reform to the entire captial gain, or only that part that accrues after 1 July 2013, and • for assets that are purchased from 1 July 2014, the reform will apply to the entire capital gain. The Government notes that these rules will ensure that people who have already purchased superannuation assets will have ten years to decide whether they want to restructure their superannuation holdings, before their capital gains start to be affected. Proposed contributions cap to be $35,000 for over 60’s from 1st July 2013. 15% tax surcharge on contributions for those earning more than $300,000. How can we help? If you need assistance with any aspect of your end of year superannuation tax planning, please feel free to give me a call to arrange a time to meet so that we can discuss your particular requirements in more detail.
End of year Business Tax Planning
This is a complex area and often a close analysis is required of the income patterns of the business and its customers. This can only be done in conjunction with Powers and must be carried out before the end of June. •C onsider deferring income until after 30 June, especially if you expect lower income for 2013/14 compared to 2012/13. Most businesses are taxed on income when it is invoiced. Some small businesses may be taxed only when income is received. Income from construction contracts is generally taxed when progress payments are invoiced or received. •C onsider whether any offsets are available.
•C onsider using the small business superannuation clearing house. •C onsider an immediate deduction for small businesses (turnover less than $2M), you can claim for capital acquisitions ($6,500 for capital acquisitions and $5,000 for motor vehicles). Look at acquiring assets prior to 30 June 2013 so the deduction is available, rather than leave until the 2014 financial year.
• If assets have been sold during the year, consider eligibility requirements for the general 50% CGT discount and the small business CGT concessions?
•P rimary producers may be eligible to claim a 15% refundable offset for new eligible tillage equipment installed and ready for use between 1 July 2012 and 30 June 2015.
•H ave statutory obligations in relation to employees (superannuation guarantee contributions, payroll tax) been met?
•R eview your listing of fixed assets and scrap any of those that are no longer being used.
•C onsider maximising your superannuation to the contribution cap to $25,000
•S taff Holidays - where practical, encourage staff to take holidays prior to
30th June 2013 •S taff Bonuses - ensure a cheque has been written prior to 30th June 2013 and PAYG withholding tax deducted • Interest On Investment Loans -taxpayers who have borrowed money for a nonbusiness investment (e.g. rental property) can check with their lenders to see if they can prepay interest prior to 30th June 2013. •D irectors’ Fees - ensure cheques are drawn prior to 30th June 2013 and that PAYG Withholding Tax is deducted. •C ompanies that have paid tax in the past, that incur a loss in the 2012-13 income year, may be able to obtain a refund of some of the tax previously paid. Call your accountant at Powers to discuss your business planning needs.
Banking Tip If you have had a profitable year and you have bank loans, it may pay to meet with your bank and see if the interest rate margins applying to your loans can be reviewed. We can assist you in this manner.
Businesses to benefit from changes to workers’ compensation coverage for contractors
From 1 July 2013, the definition of a ‘worker’ for the purposes of the workers’ compensation legislation in Queensland will be narrowed. Article provided by Cooper Grace Ward Lawyers. The new definition will mean that fewer independent contractors will be required to be covered under a principal’s workers’ compensation policy. The changes will particularly affect contractors in the construction and transport industries who are currently required to be covered under the principal’s policy. Broad scope of current definition The current definition of a ‘worker’ under the workers’ compensation legislation in Queensland is very broad and captures many contractors, such as owner drivers and tradespeople who run their own businesses. Although these contractors are often not considered employees for any other purpose (such as superannuation and leave entitlements), they are still considered to be a ‘worker’ for the purposes of workers’ compensation. The definition of a ‘worker’ under the current workers’ compensation legislation includes, among other things, an individual: •w ho is paid for labour only, or substantially labour only; or •w ho does not meet all of the following criteria: • is paid for a specific result; •h as to supply all of the plant,
equipment or tools of trade to do the work; and • is liable for rectifying defects in the work. New definition The new the definition of a ‘worker’ will be: • a person who works under a contract; and • in relation to the work, is an employee for the purpose of assessment for PAYG withholding under the Taxation Administration Act 1953 (Cth). This means that business owners will only be required to include an individual contractor under their workers’ compensation policy if the contractor works under a contract and is an employee for PAYG taxation purposes. This is positive news for businesses because the new definition is easier to understand and apply. No longer will business owners need to undertake a complex analysis of the remuneration structure and method of work between the parties to determine workers’ compensation coverage. Examples of individual contractors who may no longer be covered under the
Did you know? CONNECT P.6
principal’s workers’ compensation policy WorkCover Queensland has issued a statement stating that examples of individual contractors who may no longer be covered under a principal’s workers’ compensation policy are those who: • s upply and operate their own plant, such as earthmoving equipment or trucks, as part of their contract; •w ork mainly or substantially for labour only, quote for the job, provide their tools of trade or rectify defects at their own expense; or •h ave a personal services business determination from the Australian Taxation Office. What businesses should do in response to the new legislation Businesses should review their arrangements with each individual contractor to determine whether the contractor will continue to be required to be covered by its workers’ compensation policy. This will involve: • a nalysing whether the contractor meets the new definition of a ‘worker’ under the workers’ compensation legislation; and • r eviewing the contractual arrangements between the parties.
The 2012/13 Queensland State Budget increased the rate of duty on general insurance products from 7.5% to 9% from August 1, 2013.
Some other tax office changes
In these days of tight budgets, the Commonwealth and State Governments are trying to maximise every avenue of revenue raising. We are seeing this all the time – increased fines and penalties, enforcing of due dates and changes within the Australian Taxation Office (ATO) to maximise revenue and also minimise costs. Some changes in the ATO which may be of interest are: •F rom July 1, 2013 tax refunds will no longer be processed by cheque – all refunds will only be to a bank account and these details MUST be provided on the tax return of the taxpayer . •T rusts are now subject to more rigorous recording requirements, many of which are before June 30 and some by July 31. The July 31 report to be provided to the ATO involves Tax File Numbers of potential beneficiaries of the trust – this may be complex and we may need to
consult with you as soon as possible. •T here are many deprecation changes this year – please call us for details on your specific situation. •D ata matching – the ATO is increasingly using electronic resources to cross check that transactions have been reported – eg. if a real estate transaction has occurred, the relevant State Government Departments will supply details to the ATO who will match with the particular taxpayers returns. Two matching programs announced recently are: •O nline Selling websites •W orkCover program – this involves the ATO checking employer tax obligations (eg PAYG with-holding, superannuation guarantee payments etc.) and also the ATO may then
disclose information to relevant State authorities to ensure that WorkCover obligations are correctly reported. •T axable payments reporting for businesses in the building and construction industry – contact us for further details •T he ATO is bringing in a policy that many forms to be lodged can ONLY via an interactive form on the net. In some cases this can be difficult and confusing because it is not possible to review the entire form before it is filled out! Manual forms are still available but it requires a telephone call to the ATO and then they will be mailed. Tax audits are always a possibility – we do offer Tax Audit insurance – please contact us should you wish to find out further details.
Staff Profile Greg Smith Accountant
Originally from Biloela, Greg is now in his second year at Powers as an accountant. Now based in our Brisbane office, he recently graduated from university and is currently undertaking his Chartered Accounting studies. He enjoys the analytical side of taxation and being able to understand a clients needs as a whole; working to achieve the best possible outcome for them. He plays indoor soccer and golf in his spare time.
From behind the desk If you have managed to digest all of the current news on the budget it may be time to take a break. With the run up to 30 June, it is hard to find the time to reflect on what sort of year you have just had. Are you happy with where you are at? I was recently asked to speak at the local 4WD Club meeting. This sounded really good until I realized that economics & finance would be the last thing they wanted to hear about! Which brings me to my point – have you ever thought about your perfect week? Monday Administration only, Schedule your appointments, Set your weekly goals.
Tuesday - Client meetings, shovel the work out the door, clear the email box; Wednesday – A quick 9 holes of golf, before heading into the office; Thursday - Staff meetings, check on their progress, send out invoices; Friday - Pack the 4WD and put a sign on your desk – GONE FISHING! Saturday/Sunday - No emails, phone calls or work related thoughts! Feeling totally relaxed, head back into the office ready to face another well organised, efficient week! A large part of what I have just written is very possible! It is just Time Management. So why not take the time to prepare the perfect week, month or year ahead.
Come July it is time to set those goals for 2013/2014. Be precise in what you want to achieve, by when – what time, day, month? Then remember to write it down! Look at it every day, and remember these goals with every action you take in the new financial year. It is amazing that by having your goals written down, you will be able to attract the right people, finances and make the best decisions to get you to where you want to be! It’s not a case of where do you find the time - under the couch like loose change - it’s how you use the time that you have. Written by Warwick French - Director of Powers Investment & Finance Services.
BILOELA 54 Callide Street (PO Box 98) Biloela QLD 4715 P 07 4995 6677 F 07 4992 1787 8.30am — 5.00pm
MURARRIE 6A/57 Miller Street Murarrie QLD 4172 (PO Box 115) Morningside QLD 4170 P 07 3890 1808 F 07 3890 1809 8.30am — 5.00pm
BRISBANE L7, 269 Wickham Street (PO Box 310) Fortitude Valley QLD 4006 P 07 3251 4444 F 07 3251 4422 8.30am — 5.00pm
MONTO 3 Newton Street (PO Box 69) Monto QLD 4630 P 07 4166 1366 F 07 4166 1343 9.00am — 3.00pm
Powers are dedicated to the development of our young staff members and are proud to announce some of their achievements. Herb Sinclair recently completed his traineeship at Powers in Business Administration through GAGAL and is now a Financial Assistant. Deborah Rarere recently joined the Brisbane office as a trainee office assistant, and is currently completing her Business Administration Traineeship. Estelle Schluter recently completed her Bachelor of Business majoring in management. Congratulations to our staff members.
For further information on any of the articles in this issue contact your local office:
The information in this document is of a general nature and is provided for information purposes only. It does not take into account your particular objectives, financial situation or needs and should not be used as a substitute for independent advice from a qualified professional. Liability limited by a scheme approved under Professional Standards Legislation, except where *financial services are provided by Authorised Representatives of Professional Investment Services Pty Ltd (PIS) AFSL 234951 ABN 11 074 608 558.