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Champion's end of financial year checklist 30 June

This month's articles

Superannuation obligations: Employees vs Contractors
Director penalty regime update
Small business employment incentive grant
Importance of email etiquette
What attracts the ATO's attention - Part 1
Charity Work
Up Close & Personal
Quote of the month
 

SUPERANNUATION

Superannuation obligations: Employees vs contractors

 
Employers must be able to differentiate between an employee or a contractor in order to meet their superannuation obligations.
While employees work as a part of a business, contractors provide services to a business through their own business. Employers that fail to acknowledge this difference risk being penalised.

Problems generally emerge when a worker is paid as a contractor for a number of years and they are found by the ATO to be an employee. This means they were eligible for superannuation guarantee and other employee rights and entitlements. More often than not, employees will not mention the incorrect treatment until they finish working for the employer.
 
We list some of the factors to consider in determining the difference between an employee and a contractor.
 
Employers who make a classification error may get a monetary penalty for failing to meet PAYG withholding requirements and a super guarantee charge for making incorrect superannuation contributions. They may also liable for backdated PAYG, superannuation guarantee payments and payroll tax.
 
Employers can refer to the legal definition to reduce the risk of paying penalties and charges. Section 12 of the Superannuation Guarantee (Administration) Act 1992 (SGAA) determines employees to be those who work under a contract that is wholly or principally for the labour of an employer. Whereas, a contractor is defined as a person who is paid to do work of a private nature for less than 30 hours per week.

   
Characteristics
 
     Employee       
 
  VS
 
            Contractor
 
Basis of payment

 
The work is paid on a time basis
 
 

 

The worker is paid the amount they quote to complete the work.
 

Provision of
equipment



 


Employers provide workers with the necessary equipment to perform their role in the business.
 






 


The worker provides most of the equipment to complete the work.


 
Commercial risk



 


The business is legally responsible for the work performed by the worker.


 





 

The worker is legally responsible for their work.  This means they will be required to pay if there is a defect in their work.
 
Ability to
sub-contract


 

The worker cannot pay someone else to do the work.

 
 
The worker has the freedom to pay someone else to do the work.

 
DIRECTOR RESPONSIBILITIES

Director Penalty Regime Update


Following a number of recent cases involving directors claiming that penalties under the director penalty regime should not apply to them, the ATO has released an update to counteract any misunderstandings.
Directors have a legal responsibility of ensuring that their company meet PAYG withholding and SGC obligations, which is why the overarching objective of the regime is to ensure that directors comply with certain taxation and superannuation responsibilities.
 
In an attempt to help directors (and those who are about to become directors) gain a better understanding of the regime, the ATO has issued a fact sheet that outlines obligations in regards to unpaid and unreported PAYG and Superannuation Guarantee Charge amounts.
 
These obligations include, but are not limited to:
  • Directors being personally liable for unpaid PAYG withholding or SGC amounts.
  • Penalties still applying even if an individual is no longer a director of a company, or is a newly-appointed director.
  • A director penalty notice will be issued to collect company debts where the company hasn’t engaged to resolve outstanding obligations.
  • Payment being the only option to remit the penalty if the associated company liability was not reported within three months of the due date.
BUSNESS INCENTIVES

Small business employment incentive grant


The budget announced that they will spend around $27 million to create a new Small Business Employment Incentive Scheme for non-payroll tax paying small businesses that create new jobs. This will therefore apply to NSW businesses that have a taxable wages bill of less than the current annual threshold of $750,000.
If you are not liable to payroll tax but do employ workers in NSW you may be eligible for a grant of up to $2,000 per full time equivalent employee when you hire new people for your team. A pro rata grant is available for part time and casual workers who remain in place for over 12 months.

The grant will apply to new positions offered from 1 July 2015 where the employee remains with you until after their one year anniversary. The grant becomes payable after the anniversary date.

In order to be eligible you need to –
  • Register with the Office of State Revenue within 60 days of hiring the new employee;
  • Have an active ABN;
  • Not become liable to payroll tax within the 12 month employment period.
In addition, you cannot claim the grant if your number of full time equivalent employees does not substantially remain at the higher number over the period. Amongst other items, you should note that you can also not claim the rebate if the employee has payroll tax exempt wages or was a previous employee.

The scheme is expected to be in place for all new roles created until 1 July 2019.
COMMUNICATION

Importance of email etiquette

 
When it comes to professional email communication, the importance of using the correct email etiquette cannot be underestimated.
Emailing is one of the most common forms of communication used in offices today, with the average worker spending around a quarter of their day engaging in email correspondence.
 
However, many employers and employees tend to ignore the rules for writing, grammar and polite communication when emailing, perhaps because it seems like a shortcut form of correspondence.
 
Email etiquette is especially important for businesses. The way a business composes their emails is primarily a reflection of their professionalism and personality.
 
Basic spelling and grammatical errors, accidently miscommunicating a message's true meaning, or even coming off as being too casual or unprofessional can negatively impact on this reflection, which in turn can be quite detrimental to a business's relationship and future interactions.
 
Despite this, it can be quite easy for simple mistakes to slip into an email exchange as many workers may respond to emails as quickly as possible so they can resume working on more important tasks.
 
This can be easily avoided by spending a little more time on incorporating simple yet effective email etiquette rules into emailing activity. Email is as important as any other form of communication, so certain guidelines must be followed especially when communicating with someone where a more formal, polite tone is required.
 
Make sure emails include a courteous greeting and closing, as this will help make the email seem less demanding or terse. A friendly greeting and closing is crucial for a business that is interacting with a new customer for the first time, as it is important to make a good first impression. Make sure the receiver is addressed with the appropriate level of formality, and that their name is spelt correctly.
 
Emails with mistakes are not taken as seriously as those with no errors. Errors have the potential to make a business look incompetent and unprofessional, so make sure an email undergoes a quick proofread or spell check at the very least before sending.

Have a go at reading an email out loud to make sure the correct tone is being conveyed. Including words like 'please' and 'thank-you' can go a long way when requesting something from customers, so don't forget to include them.
 
Make sure all the necessary information has been included. It is vital that a request or point of view is conveyed correctly, as generalities can result in confusion or pointless emailing back and forth. However, emails should be kept brief and go straight to the point. Long conversations take too long to read and can be saved for the telephone.
 
Just like spelling and grammar, the use of proper sentence structure is very important. Complete sentences should always be used, with the appropriate punctuation and capitalisation. Use multiple exclamation or question marks sparingly, as they might be perceived as being rude or condescending.
 
Overall, businesses should keep in mind that email exchange is very similar to a face-to-face conversation. All the aspects considered when wanting to make a good impression during a formal exchange should also be considered when composing an email.


 
ATO

What attracts the ATO's attention - Part 1

 
To help you get things right and avoid costly review and audit processes, you should consider the “general” behaviours, characteristics and tax issues that attract the ATO’s attention.
General Behaviours and Characteristics affecting privately owned and wealthy groups that analytically “stands out” to the ATO:
  • tax or economic performance is not comparable to similar businesses
  • low transparency of your tax affairs
  • large, one-off or unusual transactions, including transfer or shifting of wealth
  • a history of aggressive tax planning
  • tax outcomes inconsistent with the intent of tax law
  • choosing not to comply or regularly taking controversial interpretations of the law
  • lifestyle not supported by after-tax income
  • treating private assets as business assets
  • accessing business assets for tax-free private use
  • poor governance and risk-management systems.
 
Over the course of our monthly newsletters, we look to expand on the specific behaviours and characteristics drawing the attention of ATO regulators as outlined below.
  • Capital gains tax
  • Consolidation
  • Demergers
  • Private company profit extraction (including Division 7A)
  • Excise equivalent goods
  • Franking credits
  • Fringe Benefits Tax
  • International
  • Non lodgement
  • Professional Firms
  • Research and development tax incentive
  • Revenue losses
  • Self-managed super funds
  • Taxation of financial arrangements
  • Trusts
  • Other issues
We start the series with some aspects within Capital Gains Tax.

Capital Gains Tax

Losses


The ATO focuses on capital losses being applied to capital gains, particularly losses that appear to be exaggerated, fabricated or misclassified to ultimately reduce taxable income.
  • For a company, if from the time when the losses were incurred to the time when the losses were utilised, other information indicates that there was a change in:
    • the ownership of the company (which poses a risk that the taxpayer failed the ‘continuity of ownership test’) or
    • the nature of the business (which poses a risk the taxpayer failed the ‘same business test’).
  • Capital losses artificially generated to offset gains (this may include non-arm’s length transactions used to manipulate elements of the cost base; capital losses realised solely to offset gains through ‘wash sales’; and similar).
  • Entities that incorrectly ‘transfer in’ capital losses (and apply those capital losses).
  • Entities that reclassify capital losses as revenue losses in order to offset taxable income.
  • Mismatches between the income tax return and the schedule.
In particular, large capital losses attract attention, so it is important to be able to substantiate the capital loss reported.
 

Reporting


The ATO often also focus on the actual reporting and payment obligations resulting from a disposal of a capital asset. Particularly where the amount of net capital gain reported is less than what it should be, based on estimates using external data sources such as State Revenue Offices.
Areas that attract attention include:
  • Entities that fail to meet their capital gain schedule lodgment obligations.
  • Companies claiming a 50% CGT discount.
  • Entities that have received cash through a partial scrip for scrip rollover.
  • Entities that disposed of large assets but returned small capital gains or capital losses.
  • Entities who do not meet the conditions to access the small business CGT concessions.
While not all these transactions may be in error, they are significant and it is important to be able to substantiate the size of the capital gain or loss reported.

At Champions, we believe in maintaining complete and accurate electronic work papers and supporting reference materials on your behalf, should these reviews or audits be conducted.
OUR COMMUNITY INVOLVEMENT
Charity Work

Over the past few months the Champions Team have participated and donated towards a different range of events. 
“Get On Stage” is a fundraising event for Riverside Theatres’ Beyond the Square – a program like no other in Australia providing creative opportunities in the arts for people with disability by supporting Workshops in the Arts for People with Disabilities (WAPD).  We are proud to again be a Gold Sponsor of this wonderful event which attracts large numbers of individuals who are committed to creating life enriching experiences for others.

The luncheon held in May was hosted by actor John Howard as MC with live entertainment from Casey Donovan (winner of Australian Idol).  The luncheon involves a silent auction, a live auction, mystery balloons, a raffle and raised in excess of $40,000.
This year we became a major sponsor of the Women in Business Forum, which is a unique support and networking opportunity for senior professional women and executives across the Western Sydney Region.

Most importantly, the Women in Business Forum is a champion of corporate social responsibility.

Major events support a nominated charity or not-for-profit organisation and some of the charities the Women in Business Forum has raised funds for are Westmead Medical Research Foundation (WMRF), Asthma Foundation, Variety the Children's Charity, National Breast Cancer Foundation (NBCF), CareFlight, Westmead Children’s Hospital, The Heart Foundation, Northcott, the Liz Ellis Foundation and Alzheimer's Australia.

Our first event as a major sponsor held in June featured Alisa Camplin OAM, Olympic Gold Medallist.

Alisa drew her experiences as a senior executive with corporate giant IBM and her incredible journey to become the first female Australian Winter Olympics medal-winner to reveal the mental skills and high performance techniques that have helped her achieve success.
 
The event attracted over 200 attendees and raised $6,000 for Finnan's Gift. Founded by Alisa and her husband following the death of her son from Congenital Heart Disease.  Finnan's Gift raises much needed funds for state-of-the-art equipment for the Royal Children's Hospital in Melbourne.
 
Since 2007, Tour de Cure has funded 204 cancer Research, Support and Prevention Projects for men, women and children.  Champion’s has been a long time sponsor and supporter of this incredible charity and to date they have raised an impressive $19 million.

Tour de Cure annually selects and funds cancer projects in the following areas:
  • Research projects focused to help find a cure
  • Support projects for those suffering with the journey of cancer
  • Prevention projects that are focused on education and awareness of communities
We sponsored a table at their inaugural ball in 2014 and again on 20 June 2015, The Snow Ball at The Star Event Centre where a whopping $900,000 was raised for cancer research, support and prevention projects!
UP  CLOSE  &  PERSONAL

With Lesley White

 
We are pleased to announce the appointment our new Manager, Lesley White CA.
 
Lesley has over 20 years experience managing a portfolio of clients including high net worth individuals, SME’s and large business groups in various industries including building and construction, residential property development, manufacturing, medical practices, professional services and investment.
Lesley brings with her a broad range of experience and skills in management accounting, superannuation and various statutory reporting.

Can you tell us a bit about your new role at Champions?

My new role at Champions is as a Manager looking after a diverse portfolio of mid tier clients. I have been in the accounting industry for over 20 years and have acted in similar roles in my past jobs however I  have made the move to Champions to provide new and interesting challenges. They say a change is as good as a holiday!

How would you describe Champion's as a firm

So far I have found Champions to be a very professional, innovative and friendly firm filled with staff who are passionate and committed to providing excellent service and advice to their clients.

What do you enjoy doing in your spare time?

Meeting up with family and friends.

What is the last book that your read?

"Where secrets sleep" by Marta Perry

What is your favourite movie?

"Ever After" with Drew Barrymore ( what girl can resist a Cinderella story)

Where is your favourite holiday destination?

I don’t have a favourite as I like to try different places however I do have a family holiday each Christmas/New Year period on the coast of Northern NSW, in places such as Evans Heads, Hat Head etc. with the extended family enjoying fishing, swimming, reading and general rest and relaxation with the people most important to me.

If you were stranded on a deserted island what is the one thing you could not do without?

My husband as he has great survival skills and would definitely increase my chances for surviving!

The only place success comes before hard work is

in the dictionary - Vince Lombardi

 
Copyright © 2015 Champion's Business Growth Advisers Pty Ltd, All rights reserved.
www.champions.com.au
Champion's Business Growth Advisers Pty Ltd · Level 3 · 107 Phillip Street · Parramatta, NSW 2150 · Australia
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