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The end of the 2015 financial year is almost upon us. To assist you in closing off the current financial year and preparing for the New Year, we have assembled a brief listing of issues to consider that will hopefully ensure that the end of year is as smooth as possible for you.

The below list is by no means exhaustive or detailed, so please use it as a prompt in your year end planning process.

If you would like more detailed information on any of the below matters, or if there are any other issues specific to your business on which you require advice, please feel free to give us a call.
                                                                                                                                                                     
If you missed our 2015 Budget Summary newsletter or would like to revisit please Click Here
E M P L O Y E R S

Superannuation


Pay superannuation contributions by 30 June 2015 to obtain a deduction in 2015 financial year. Otherwise, ensure super is paid by 28 July 2015 to receive a tax deduction in the 2016 financial year.
 
We remind you that super contributions must be paid on a quarterly basis and paid into the super fund by the 28th day after the end of the quarter. If paid after the 28th, no tax deduction is available, super guarantee charge and ATO penalties apply.
 
For the 2016 financial year, the superannuation guarantee percentage will remain at 9.5%. The rate will remain at 9.5% until 30 June 2021 and then increase by 0.5% each year until it reaches 12%.
 
PAYG Payment Summaries

PAYG payment summaries must be given to employees by 14 July 2015 and lodged with the ATO by 14 August 2015 for most employers. 
 
An extension may apply until the due date of your tax return if you pay wages only to closely held employees and the ATO is notified.
 
Ensure the following are included:
  •  Reportable Superannuation Contributions: Generally refer to salary sacrifice contributions and contributions in excess of that required by SGC (9.5%) or industrial awards. The ATO have identified a number of businesses have not been recording these correctly and have been incorrectly including the SGC (9.5%). Don’t forget to include superannuation for directors which may not be on payroll reports.
  • Reportable Fringe Benefits: A fringe benefit is generally defined as a benefit not being salary, wage or other cash remuneration, derived from employment.  If the value of certain fringe benefits you provide exceeds $2,000 in the 2015 FBT year, you must record the grossed-up taxable value of those benefits in the relevant employee’s 2015 payment summary. If Champion’s prepared your FBT return, we would have provided you with details of the reportable fringe benefits with the FBT return.
 
Payroll Tax

Applicable where your salaries, superannuation, taxable fringe benefits and deemed employee costs for NSW are over $750,000 for the year. Registration required where monthly amounts are over $61,644 (based on a 30 day month).
 
Rate - 5.45% - 2015 financial year
  • Annual reconciliation due to be lodged and paid by 21 July 2015.
  • OSR are targeting Contractors as “deemed employees” and Entity Grouping provisions.
 When preparing the annual payroll tax reconciliation, don’t forget to include:
  • Superannuation for directors which may not be on payroll reports.
  • Superannuation life policies may be considered to be super contributions and may need to be included.
  • Fringe benefit taxable amounts - gross up Type 1 and Type 2 aggregate amounts by 1.886
 

Staff Bonuses/Directors Fees


These expenses may be deductible prior to actual payment, provided the employer is committed to paying these amounts. The employer needs to quantify the amounts, inform the staff and retain evidence of this decision prior to 30 June 2015.
 
Don't forget to deduct PAYG Withholding and in most cases Superannuation Contributions will also need to be paid on these amounts.
 

Accounting Systems

 
For MYOB Desktop Payroll Users, there will be an update required to your tax tables as of 1 July 2015.  If you are not on the most current version and not subscribed to MYOB Cover/AccountRight Live, you will not receive this update automatically.

Employee Share Schemes (ESS)

The offering of shares, options and other equity rights at a discount to its market value may fall within the employee share scheme (ESS) taxation rules.  Under the ATO reporting requirements, employers are required to:
  • provide employees with a ESS statement by 14 July 2015; and
  • provide the ATO with an ESS annual report by 14 August 2015
 The reporting obligation arises in respect of employees who reside or work in Australia or have resided or worked in Australia during any part of the vesting period, regardless of where the company making the ESS awards is based.  Penalties can apply for failure to report. 
 
The ATO is starting to match the data that it obtains from ESS reporting against the information disclosed in employees’ income tax returns.  Employers should consider this when deciding how to report for their employees.

SuperStream Requirements

If you employ 20 or more employees you must comply with the SuperStream requirements by 31 October 2015 (this has been extended by 4 months as previously the deadline was 30 June 2015) and all employers must be using SuperStream by 30 June 2016.  If you need further information please give us a call.

NSW Payroll Tax Rebate

The NSW Job Action Plan Payroll Tax Rebate scheme is designed to promote employment in NSW and provides a rebate of between $4,000 and $5,000 per new employee position employed and retained since 1 July 2011.  The actual calculation can be quite complex, but it is worth investigating your eligibility if your full time equivalent headcount has increased since 1 July 2011.  The scheme has been extended by a further 4 years to 30 June 2019.

We have had significant experience in lodging claims and have successfully applied for rebates for clients of up to $100,000.
 
If you would like to discuss this or would like some help with investigating your eligibility or lodging a claim, please give us a call.

Just contact Champion's if you have any questions... 
B U S I N E S S E S
Taxable Payments Reporting – Building & Construction

Businesses in the building and construction industry that pay contractors for building and construction services must lodge a Taxable Payments Annual Report with the ATO by 21 July 2015. 

Business Travel 

Special substantiation rules apply to expenses in relation to overseas and domestic travel.  The effect of the substantiation rules is that travel expenses are not deductible unless the following two conditions are satisfied:
  • Written Evidence - Business travel expense, involving staying away from home for at least one night must be substantiated by documentary evidence such as a receipt, invoice or similar document from the supplier.
  • Travel Diary - An employee must keep and provide a travel diary (or similar document) for travel involving the employee being away from his/her usual place of residence for a continuous period of six or more nights. 
 
Inter-Entity Transactions 

If you are charging a management fee to a related entity, it’s important to ensure that the management fee amount being charged is commercially reasonable (special rules apply in the case of Services Trusts). The Tax Office is looking very closely at this area, particularly whether a management agreement is in place.
 
You need to ensure you are charging GST (if required) on inter-entity transactions unless you are grouped for GST.
 
Bad Debts

Review your aged debtors listing for any bad debts and physically write-off before 30 June 2015 from your debtors’ ledger. Bad debts are claimed as a tax deduction in the year they are written off.  Remember to also claim back the GST.
 
Repair and Maintenance Expenses 
 
If your business requires any significant repairs to machinery or premises, you may wish to do this before 30 June 2015 to secure your tax deduction for the 2015 year.
 
You can claim a deduction for repairs to machinery, tools or premises you use to produce business income, as long as the expenses are not capital in nature or an addition/improvement to an existing capital asset. These allowable claims include the cost of:
  • painting
  • maintaining plumbing
  • repairing electrical appliances
  • replacing broken parts of fences or broken glass in windows
  • repairing machinery
To repair something generally means to fix defects, including renewing parts. It does not mean totally reconstructing something. You do not have to own the property or item that is repaired.
 
Inventory (Stock) 

If your business carries stock or inventory, you must do a stocktake at 30 June 2015.  Identify any obsolete stock and scrap it prior to 30 June.
 
Any stock that has a lower market or replaceable value can be written down and a deduction can be claimed for the decrease in the cost. There are three different methods of valuing stock: cost, market selling value and replacement price.

Different methods of valuation may be used to value the same item of trading stock in different income years, and similar items may be valued using different methods in the same income year.
 
Work In Progress (WIP) 

For manufacturing businesses, ensure you have accurate records to record your WIP (costs) at 30 June 2015. Work in progress must include, all direct costs e.g. material costs and direct labour and manufacturing overheads e.g. rent, which is involved in the manufacture of a product which has not been completed by 30 June 2015.
 
For service businesses, ensure you have accurate records to record your WIP (time) balance at 30 June 2015. You can also review the WIP for any amounts which can’t be billed and write off to clean up your WIP records (note this does not affect tax). Generally in service businesses, WIP is not taxable until it is invoiced.
 
GST 

Have you remitted GST to the ATO for all disposals of fixed assets, including trade-ins?
 
Ensure you include any GST adjustments arising from the fringe benefits tax return, (e.g. GST on employee contributions) and any prior year balancing adjustments in the June 2015 BAS.
 
CGT Assets 

If you have made significant gains on sale of CGT assets in the 2015 year and have other CGT assets which are worth less than what you paid for them, you may wish to consider selling them now and realising the loss. Be careful, as you can’t sell an asset and then buy it straight back to realise the loss as this would be seen as tax avoidance – known as “wash sales”. The loss can be offset against your gains and therefore reduce any CGT. To claim the loss in the 2015 year, you will need to ensure the sale contract is entered into before 30 June 2015.
 
Fixed Assets

Review your asset register for any assets that have been scrapped during the year. The written down value of these obsolete capital items can be written off, which will increase the tax deduction for the year.  If you do not have a copy of the register, feel free to give us a call to obtain a copy.
 
Accelerated Depreciation for Small Businesses

From 12 May 2015, small businesses (aggregated turnover less than $2 million)  will be able to claim an immediate tax deduction for capital assets costing less than $20,000 (excluding GST).
 
This concession will continue until 30 June 2017.
 
Loans To Shareholders/Associates 

New loans or financial assistance by private companies to shareholders or their associates will need to either have a loan agreement in place (meet minimum interest rate and maximum term criteria) or be repaid (by cash or dividends) before the due date of the company tax return.
 
The private use of company owned assets is also caught under Division 7A and you may need to ensure a market rate is being charged for its use.

Prepaid Expenses 

Small businesses (aggregated turnover less than $2 million) can claim expenses prepaid up to 12 months in advance.  For larger businesses, this is generally limited to expenses below $1,000 and certain prepayments required to be made by law (eg. worker’s compensation insurance and vehicle registration fees).
 
Small Business CGT Concessions

If you sell your business (or active business assets) or the entity that carries on the business, or are considering selling your business in the future, please contact us prior to entering into any agreement to discuss eligibility to access the following four specific small business concessions that may apply to reduce or defer the capital gain:
  • 15 year exemption;
  • 50% reduction for active assets;
  • $500,000 retirement concession;
  • Replacement asset roll-over relief
 It is important to note that capital gain is determined at the date the contract was entered into and not settlement date. In a recent AAT case, it was held that the date of the contract for the sale of the business was when the parties signed the heads of agreement and not when the formal contract for sale was executed.

Just contact Champion's if you have any questions... 
T R U S T S
Trust Distributions

From 16 December 2009, there were changes to the rules for trust distributions to companies, where the amount remains unpaid. The changes may limit the effectiveness of these distributions. Please give us a call to discuss this issue if you are planning on making distributions to companies.

 Resolutions/minutes

Trustee resolutions regarding the distribution of trust income must be made prior to 30 June 2015 or, if the trust deed specifies an earlier resolution date. As in prior years, we will be in contact to ensure the resolution is finalised/documented prior to 30 June.

Just contact Champion's if you have any questions... 
I N D I V I D U A L S
Rental Properties

Quantity Surveyor Reports – It may be worthwhile obtaining a quantity surveyor report so you can claim a deduction for the construction costs and decline in value of any depreciable assets.  The estimated cost is $440 incl. GST for a standard residential property when no site inspection is required or $715 incl. GST for standard residential property when a site inspection is required. These costs are also tax deductible.
 
Prepayments - For outgoings such as strata/rates, interest (refer prepaid interest section)
 
Land Tax Registration – If you own property other than your principal place of residence and the combined value of the land is greater than the land tax threshold, you will need to register for land tax. For NSW, the land tax threshold for 2015 is $432,000.

Personal Service Income

Taxation laws include measures that are designed to limit the deductions available to certain contractors, whether operating as a sole-trader or through a company, trust or partnership; these are known as the Personal Services Income (PSI) measures.  A taxpayer who meets certain specified tests will be treated as carrying on a personal services business and will be able to claim a wider range of deductions.  If you are operating a personal service business you need to be aware of the Australian Taxation Office’s strict approach to income retention and income splitting.
 
Non-Commercial Losses

For a business to be commercial under the “non-commercial losses tests”, the business needs to meet certain prescribed tests.  If the tests are not met, any losses arising from the activities have to be carried forward and offset in a later year against future income from the same type of source.
 
If your adjusted taxable income is greater than $250,000 and you satisfy any or all of the non-commercial business loss rules, you are still not entitled to offset these losses against your other assessable income. These losses will be deferred for use in future years.
 
There are special rules for Primary Production businesses.

Tax Free Threshold

The tax-free threshold for the 2015 financial year is $18,200. You can earn up to $20,542 before any income tax is payable, when taking into account the Low Income Tax Offset.
  
Increased Medicare Levy and Temporary Budget Deficit Levy


From 1 July 2014, the Medicare Levy rate was increased from 1.5% to 2%.  Furthermore, individuals earning over $180,000 are subject to the additional 2% Temporary Budget Deficit  Levy.  This additional tax will also be in place for the 2016 and 2017 financial years.  Accordingly, the top marginal rate of tax is effectively 49%.

Government Co-Contribution

Employees and self-employed individuals earning less than $34,488 in the 2015 financial year may be eligible for the government co-contribution payment of $500 if a personal (after tax) contribution of at least $1,000 is made into superannuation. If you earn more than $34,488 but less than $49,488 you could still be eligible for a pro rata amount.
 
Super Contributions

The concessional contributions cap for the 2015 financial year has been increased to $35,000 for those aged 49 years or over on 30 June 2014.  The cap has been increased to $30,000 for all other individuals. Please ensure existing superannuation arrangements are reviewed (particularly salary sacrifice arrangements) to avoid potential penalty taxes.
 
From 1 July 2013 onwards, if you exceed the concessional contributions cap, any excess concessional contributions will be included in your assessable income and taxed at your marginal tax rate (and subject to interest charge), rather than 31.5%. In addition, you will receive a 15% tax offset to account for the contributions tax that has already been paid by your super fund.

If you wish to claim a tax deduction for personal super contributions, you can only do so if your income from employment (includes reportable fringe benefits and reportable super) is less than 10% of your total assessable income for the year.
 
Prepaid Interest Expenses

If you are an individual and have to pay interest expense which is not incurred in carrying on a business, you can prepay your interest expense in the 2015 year and get the full deduction in the 2015 year.

Note the interest cannot be prepaid for more than 12 months and the prepayment period must end in the next financial year.
 
Donations

To claim a tax deduction for donations of $2 or more, the donation must be made to a “deductible gift recipient” and a donation receipt obtained.
 
Note raffle tickets and gifts purchased are not tax deductible.
 
Medical Expenses Tax Offset

For the 2015 financial year, only taxpayers who received a credit for the medical expenses tax offset in their 2014 income tax assessment will continue to be eligible for the offset for all medical expenses if they exceed the relevant claim threshold.  The claim for all other taxpayers will be restricted to expenses relating to disability aids, attendant care or aged care which exceed the threshold.  Note that the final year you can claim is the 2015 financial year, unless you have medical expenses relating to disability aids, attendant care or aged care - in this case, you can claim the tax offset for these expenses up to the 2019 financial year.

Medicare Levy Surcharge (MLS) & Private Health Insurance Rebate (PHIR)

The thresholds for the imposition of the MLS if you are not covered by private hospital insurance are as follows for the 2015 financial year:
  • Singles (no dependants) - $90,000
  • Families - $180,000 (plus $1,500 for each dependant child after the first)
Please note that there is a tiered system for calculating the MLS and the rate of MLS will be 1%, 1.25% or 1.5% depending on your income for surcharge purposes.
 
In addition, the PHIR is also means tested under a tiered system and rate of rebate will be between 0% and 30% depending on your income. If you claim the private health insurance rebate as a premium reduction, you are required to nominate your rate when renewing your policy.  If you quoted the wrong rate, you will have an amount payable or refundable on your 2015 tax return assessment based on your taxable income for the 2015 financial year.
 
Work-Related Travel

Special substantiation rules apply to expenses in relation to overseas and domestic travel.  The effect of the substantiation rules is that travel expenses are not deductible unless the following two conditions are satisfied:
  • Written Evidence - Business travel expense, involving staying away from home for at least one night must be substantiated by documentary evidence such as a receipt, invoice or similar document from the supplier.
  • Travel Diary – You must keep a travel diary (or similar document) for travel involving being away from your usual place of residence for a continuous period of six or more nights. 

Salaray Sacrifice

To ensure the salary sacrifice strategy is effective for your circumstances, the benefits received must be taxed at a lower rate than your salary under the Fringe benefits Tax (FBT) rules.
 
Due to the varying calculations for different benefits under the FBT rules, we are happy to discuss whether a salary sacrifice arrangement is beneficial for you.

Work-Related Car Expenses

There are four methods which can be used to claim a deduction.  These are:
  • Cents per km method;
  • Logbook method ( logbook must be kept over 12 continuous weeks and updated every five years);
  • One third of actual car expenses;
  • 12% of original value method
Note that the Government has proposed to simplified the way individuals can claim a tax deduction for work related car expenses by introducing a flat deduction rate of 66 cents per business km travelled from 1 July 2015.  If you believe that your deductible car expenses are greater than 66 cents average, or you travelled more than 5,000 business kms per year, you will need to keep a logbook in order to claim a higher tax deduction.

Just contact Champion's if you have any questions... 
S U P E R A N N U A T I O N
Minimum Pension Amounts

If you are a member of a self managed super fund (SMSF) and have a pension in place during the 2015 financial year, please ensure that the minimum pension that you are required to receive has been drawn out of super fund prior to 30 June 2015. 
 
The consequences of failing to meet your minimum pension obligations before 30 June would be loss of tax exemption status for the pension account and any pension payments received during the year will be treated as super lump sums for both income tax and SIS Regulation purposes. 
 
If Champion’s prepares the annual compliance work for your SMSF, we would have notified you of your minimum pension amount for the 2015 financial year and will touch base with you as a reminder prior to 30 June 2015.

Contribution Deductions

We suggest that any super contributions you plan to claim a tax deduction in the 2015 financial year are made well before Tuesday 30 June 2015. Note that internet transfers of contributions are not considered paid until they reach the super fund’s bank account.

Just contact Champion's if you have any questions... 
AUDITS

Are you an Audit Target?
Do you have Audit Protection Insurance?


Historically tax audits were targeted at big businesses and the wealthy but increasingly in recent times, the ATO and other Government Agencies are turning their attention to both small and medium businesses and individuals.
 
Have you considered obtaining audit protection insurance to cover professional fees incurred in responding to ATO or other government review or audit?  The audit process can very time consuming and expensive depending on the type of audit and number of periods being audited.  It has been our experience that audit insurance policies can be relatively inexpensive.
 
If you would like to discuss this or would like some help in obtaining a quote from a broker, please give us a call.

P E R F O R M A N C E   &   B U D G E T I N G 

Do you report on performance?
Have you prepared a 2015/16 budget?

Now is a good time to seek further advice in relation to these questions. Preparing real time management reports and having a budget, has a value that goes beyond their use as supporting documents to loan applications and tax returns.
 
We recommend management reports and cash flow forecasts be prepared monthly or quarterly and you have an annual budget for your business. 
 
Regular analysis of the management reports will assist you evaluate the current financial condition of your business and diagnose any existing or potentially future financial problems.
 
Having a budget in place means you can easily decifer over the year, which periods you are performing well in, and you can track this in relation to your budget. You can easily identify any differences and make timely informed decisions to get your business on track to achieve your goals and objectives. Most importantly, a cash flow projection will allow the user to plan future funding requirements or when dividend opportunities exist.
 

Please feel free to contact us at Champion's to discuss planning your business for success.
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