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Invoicing is an important element of operating a business. It’s how the business receives payments. But if you are tired of having to chase invoices, correct errors and avoid email scams, and noticing an impact on your business’s cash flow, you may want to consider switching to electronic invoicing (or e-invoicing).
E-invoicing is a digital-based method through which you can automatically create, exchange and process invoices. It removes the need for paper-based or PDF invoices that need to be printed, posted or emailed, and for buyers to manually enter or scan them into their software.
E-invoicing does not apply to business/consumer transactions. Rather, its usage is between businesses, contractors and government bodies to facilitate a smoother process of invoicing. E-invoicing allows organisations to send and receive invoices electronically, directly into the organisation’s accounting software. It eliminates the need for manual invoicing processes, both paper-based and emails with PDF attachments of invoices.
To digitally exchange invoices, a business’s software must be connected to the Peppol network. The Peppol framework for e-invoicing is an international standard adopted by over 38 countries globally for more than a decade. Many small business accounting software providers are already using the software compatible with Peppol, which can make adopting e-invoicing for your business a lot easier.
You can start a conversation about e-invoicing and the benefits as a:
- business to your buyers or suppliers
- tax professional or book-keeper to your clients
- digital service provider to your users
- business adviser to your clients
- Industry representative
With the digital transformation of business well underway, electronic invoicing is a step on the path toward opportunities and benefits for organisations beyond simply affecting efficiencies and cashflows. If e-invoicing is a step that you’d like to take for your business, you will need to contact your software provider to determine:
- If you are digitally ready
- How and when they can help
- What you need to do
- If you need to update existing software or add an extra service.
If you have already discussed e-invoicing with your current software provider, you will want to ensure that you are prepared to adopt the practice of e-invoicing for your business. This may include:
- Understanding how your business processes invoices currently could include analysing the state of your invoicing system, the method through which invoices are sent and received, who your top suppliers and buyers are and if you are currently using software and scanning tools to manage your accounts payable and receivable.
- Learning how to implement e-invoicing, such as speaking directly with software and e-invoicing service providers to learn what you need to be ready.
- Planning how your business will ready itself for e-invoicing could involve managing changes in business processes within your organisation, speaking with providers and discussing your options with us.
A relationship has been established around superannuation and mortgage debt that could impact the stability of your retirement.
As prospective Australian retirees approach their preservation ages and retirement, those who are yet to own their own homes may struggle to maintain a comfortable retirement. Retirement plans often work out a prospective financial situation, and assume that an owned home is an already existing asset.
Housing is quickly becoming a critical aspect of retirement, alongside the pension, super and voluntary savings as the main means of ensuring a comfortable retirement for future retirees.
Mortgage debt and the threat of continued payments to pay it off is something that workers must now take into consideration when looking into their retirement, as Australians struggle to pay off their homes. Can it be paid off without the extra income earned from their work?
As more and more Australians retire with healthy superannuation balances, the allure of using that money to pay down a mortgage is strong.
Factors that may be affecting retiree’s mortgage debts could include:
- Higher property prices (now ten times the average wage as compared with three or four times two decades ago).
- A delayed entry into the property market as they save for a deposit, leaving fewer working years to pay off the loan.
- Relatively low-interest rates – currently, every dollar used to pay down a mortgage is saving less than 3% on interest, while in superannuation that same dollar has the potential to return 7 or 8 per cent.
Paying down a mortgage is a growing problem for retirees who are increasingly leaving the workforce with mortgage debt, which is far from the norm among middle-income Australians as recent as a decade ago. Among retirees, homeowners in the years prior to retirement (ages 55-64) had dropped from 72% in 1995 to 42% in 2015-16.
However, those who began their working careers prior to the 1990s face another challenge as they move closer to their preservation age; the superannuation guarantee was only introduced in 1992, which means that many may have accumulated less superannuation than other generations after.
It is understandable that for those approaching retirement, preferencing super over mortgage could seem like a logical move, as the extra funds generated can be diverted back into property on retirement. Using superannuation to pay a mortgage can make some tax sense – in an assets test for the Age Pension, a primary residence is exempt while superannuation is not.
This may become a more common approach for retirees and those looking to retire within the next few years. However, you should consider what the best approach is for your situation, and whether paying off the mortgage with your super is worth it in the long run. Consulting with a professional before taking any action should be your first step in this process.
Employees will no longer need to meet the monthly minimum income threshold of $450 to receive superannuation guarantee payments from their employers from the 1st of July 2022.
At this point in time, employers are not required to pay super guarantee payments to their employees if they have not earned $450 per month. It does not matter if employees are working for multiple employers – if they have not earned $450 per month from a single employer, they are still not eligible for superannuation guarantee payments.
For those employees working in lower-income jobs or in part-time or casual employment who may not reach that minimum income threshold, this has meant that they have been missing out on critical payments to their superannuation. With a significant portion of these workers being women, it has also been a contributing factor to the widening ‘gender gap’ in superannuation.
Next month’s removal of the minimum income threshold means that these employees will now be able to accrue super through the payments made by their employer and help address a long-term equity issue that had been in place in superannuation for years.
These changes should come into effect by the 1st of July 2022 and, though they may not necessarily improve the retirement outcomes of individuals, the savings resulting from these payments into super will be boosted and all workers will as a result be provided with superannuation coverage, regardless of whether or not they earn more than $450.
If you are an employer who did not have to pay super guarantee payments to your employees and will need to do so starting next month, you can find out your compliance requirements by speaking with your trusted adviser.
If your business earns a part of its income in cold, hard cash, be prepared to have the Australian Taxation Office’s eyes on you this tax time.
To protect honest, compliant Australian businesses, the Australian Taxation Office (ATO) has placed a strong emphasis on targeting the cash and hidden economy (known to be a part of the shadow economy).
For example, they may be keeping a close eye on a sole trader electrician, whose reported earnings over the financial year versus their actual spending isn’t adding up. Or perhaps you have a side hustle (such as freelancing or selling plants at the market), and earn some cash-in-hand alongside your full-time job’s income.
The ATO will be watching these businesses and individual traders that deal predominantly in cash, with a focus on those that:
- Fail to meet super or employer obligations, and fail to register for GST or lodge activity statements.
- Operate outside regular small business benchmarks specific to their industry.
- Show discrepancies between what they have reported and ATO collected data relating to electronic payments.
- Operate and advertise as cash-only.
- Income does not correlate with the lifestyle of the business owner, i.e., assets and spending habits exceed what is expected of someone with their reported income.
- Pay their employees cash-in-hand.
- Estimate their sales and income.
- Use the ‘no sale’ and ‘void’ buttons on cash registers when taking cash payments.
- Do not reconcile at the end of the day and do not keep cash register tapes.
- Are reported to the ATO by members of the community or any third party regarding potential tax evasion.
- Are part of an industry that is known for dealing primarily in cash-only.
When out visiting cash-only businesses, the ATO will be working in unison with local authorities and industry associations to ask questions and discuss:
- Why the business operates primarily or only in cash.
- The need to lodge tax returns and activity statements.
- How to be compliant in relation to tax and super obligations.
- Different claims and tax deductions businesses can make.
- The general community’s preference for having EFTPOS or electronic payment options available to them.
- Benefits of electronic payment and record-keeping facilities.
- Relaying tools and services businesses can use if they are struggling to ensure they are compliant with Australian tax laws.
If the ATO comes across a business that is doing the wrong thing or failing to meet its obligations, they have a duty to take action. This may result in the business facing an audit and possible prosecution.
Its imperative that you are fulfilling your obligations and know where you stand, particularly with;
- Bookkeeping and record-keeping requirements
- Reconciliations between till takings (z-totals) and banking
- Consequences of failure to report all income (penalties, fines, interest, additional tax, additional GST)
- Consistency of business income between prior and current years, and with reference to lifestyle
If you do make a mistake upon completing your tax return but make a voluntary disclosure detailing your errors, the ATO will work with you to rectify this and create a solution.
It’s getting close to the time of year when your tax return may be on your mind.
You may have even already started looking into what is required to lodge your income tax return. Making sure that your details are correct and that any information regarding your earned income from the year is lodged is the responsibility of the taxpayer and their tax agent.
If during the course of the lodgement of your tax return you fail to meet and comply with the tax obligations expected of you as a taxpayer, the Australian Taxation Office has severe penalties that they can enforce.
Taxation laws within Australia authorise the ATO the ability to impose administrative penalties on taxpayers for failing to comply with their obligations.
As an example, taxpayers may be liable to penalties for making false or misleading statements, failing to lodge tax returns or taking a tax position that is not reasonably arguable. False or misleading statements have different consequences if the statement given results in a shortfall amount or not.
In both cases, the penalty will not be imposed if the taxpayer took reasonable care in making the statement (though they may still be subject to another penalty provision) or the statement of the taxpayer is in accordance with the ATO’s advice, published statements or general administrative practices in relation to tax law.
The penalty base rate for statements that resulted in a shortfall amount is calculated as a percentage of the tax shortfall, or in the case of no shortfall amount, as a multiple of a penalty unit. This percentage is determined by the behaviour that led to the shortfall amount or as a multiple of a penalty unit, which is as follows:
- Failure to take reasonable care – 25% of the shortfall amount or 20 penalty units
- Reasonable care is not taken if the taxpayer failed to do what a reasonable person in the same situation would have done.
- Recklessness – 50% of the shortfall amount or 40 penalty units
- Recklessness is determined as disregarding or showing indifference to a real risk of a shortfall amount arising that a reasonable person would have been aware of.
- Intentional Disregard – 75% of the shortfall amount or 60 penalty units
- Intentionally disregarding the law occurs if there is full awareness of a clear tax obligation, and the obligation is disregarded with the intention of bringing about certain results (underpaying tax or over-claiming an entitlement).
If a statement fails to be lodged at the appropriate time, you may be liable for a penalty of 75% of the tax-related liability if:
- A document that is necessary to establish tax-related liability fails to be lodged
- In the absence of that document, the tax-related liability is determined by the ATO.
To ensure that the statements, returns and lodgements are done correctly this coming tax season, and avoid the risk of potential penalties, speak with a trusted tax professional.
What is the origin story of your business? Why did it begin?
Many people might say publicly that they went into business to make a better future. Others might say that they began the business to pursue a passion. You may have simply wanted to earn money on your own terms, and create a better world for yourself.
More money, more free time, and more control or flexibility around your own work are often the reasons that people go into business. In a perfect world, you would have that control over your own work, be working fewer hours and have more money while pursuing your dream job and career goal. This may sound perfect, but it is rarely the outcome that people get from their own business.
In most instances, people may find that their hours increase, their income drops and though they now possess control, may also find that their business now also has control over them. The amount of work that may need to be done as a business owner can be overwhelming, but it must be completed. Instead of having one boss to answer to, all your customers are now your boss.
Owning a business can grant you more control, but it also comes with these heavier responsibilities and obligations. Being prepared is why consulting with a trusted business adviser can allow you to take the fear out of ‘impossible situations’ for the business, and give you choices.
There are many tasks that now require your focus to keep your business in operation – but to everyone else, it probably seems like you are living the high life as a business owner, answering to no one (if only they knew).
Your business probably started with a dream – a dream that probably did not include becoming a slave to your business or earning less than what you did in your previous job. What was that dream? What was your motivation?
Take stock of the situation you have found yourself in with the business. Relax, reflect, and consider what direction you want it to move in. Where do you want to go? Once you have a general idea, you need to put a little bit of time into planning how you are going to get there. Determine where you want your business to be in five years, or even ten years’ time.
Benjamin Franklin is believed to have once said, “if you fail to plan, you are planning to fail.”
It does not matter what stage of the business you are at, revisiting the business planning stage, even midway through the business, can be a useful strategic tool. Every business needs regular planning. This cannot be stressed enough. The chances of achieving your business goals are improved dramatically if there is a formally noted business plan.
A good business plan outlines your strategy for the next couple of years. It may be used to help support an application for business finance or business grants. Or it could be just for your own use as a roadmap for the growth of your business.
The components of a business plan explain your objectives and the actions required to get your small business from where it is now, to where you want it to be.
The process of creating your business plan will help you focus, crystallise your ideas and identify priorities, saving both time and effort. Your business plan will give you a clear sense of direction and a benchmark enabling you to measure progress.
In the approach to the end of the financial year, the best time to prepare a plan to use for your business over the next twelve months is now. Developing your five- and ten-year plans is also highly recommended. For assistance in preparing or developing your business plans, you can come and speak with us as trusted business advisers.
Labor has made announcements about policies designed to help small business owners, but there is not much detail set in stone at this point. This is to be expected though, as Labor has a vision that will require the Treasury’s assistance to get right.
An announcement has been made regarding a plan that aims for small businesses to be paid on time. Labor wishes to ensure that small businesses are paid within 30 days, which while a welcome announcement for those that are constantly chasing money, is yet to have any concrete information.
More detail is required here in what they mean by this approach, however. You cannot simply legislate that someone has to pay you in 30 days if they are without the means to do so. If it is to do with government departments and needing to pay within 30 days, this may also be a welcome approach.
Mr Albanese has also announced that there will be a reduction in small business transaction costs at the point of payment, with a clear timeline for implementing least cost routing or similar. Least Cost Routing simply means that when a customer pays you with their debit card, they will not get to choose where it is Visa Debit or EFTPOS, but will automatically process through the least cost vehicle.
This could have major savings for small businesses that process a high number of small value transactions using EFTPOS or Visa/Mastercard Debit. It should also be noted that the Reserve Bank is already working on this problem and that you can already talk to your merchant provider about switching to Least Cost Routing.
Labor also has a policy about a beneficial ownership register for companies. Now if you own shares in trust for someone else, you do not need to disclose anywhere who that “someone else” is. The banks will need to know when identifying their client, but the public has no way of knowing. Labor has mentioned that they will bring in a register of beneficial ownership so that people can search for the real owner of a company
There are also multiple other announcements that have been announced at the election by both parties that promised other items, but only time will tell if any changes will be made on that end.
As you grow older, your aim may be to live a long, happy and healthy life. This is hopefully with the mental capacity to make your own financial and lifestyle decisions, and the appropriate superannuation to fund it.
But not everyone is always able to do this as they grow older. In the worst-case scenario, you may find yourself unable to make those choices yourself due to a diminished mental capacity (such as from mental deterioration, illness etc). If you can’t make your financial decisions, this could be bad.
There is often a misconception that people who lose their capacity to make, for example, financial decisions will simply be able to have their partner or spouse step in to make those decisions on their behalf. This is not the case.
Even if you are in a relationship with someone or own property jointly with them, they do not automatically have the power to make those financial decisions for you. This is where estate planning comes into play.
An estate plan records what you want to be done with your assets after your death. It can include documents such as:
- your will
- a testamentary trust (as part of your will)
- superannuation binding nominations
It also covers how you want to be cared for — medically and financially — if you can no longer make your own decisions. This part of your estate plan may be in documents such as:
- any powers of attorney
- a power of guardianship (giving someone the right to choose where you live and to make decisions about your medical care)
- an advance healthcare directive (your needs, values and preferences for your future care)
You may also choose to create an Enduring Power Of Attorney, which is a substitute decision-maker on your behalf. An EPOA is essential for clients who have their own Self-Managed Super Fund (SMSF).
The SMSF regulations require that members of the SMSF are either a trustee of the fund or directors of a company acting as the trustee. If a fund member is incapacitated, the member cannot be a trustee or a Director of a company. If that occurs, the SMSF becomes ‘non-complying’ which means it loses the tax concessions given by the super regulations.
Depending on your state of residence, powers of attorney may have different rights and obligations, particularly with respect to financial matters. Doing research and consulting with us about what your course of action could be if you were to lose your mental capacity for financial decisions could be a great start.
First and foremost, Labor has announced that it will not overhaul a “tsunami” of changes to superannuation. This is good news as change only undermines confidence in the existing system.
Labor is the author of our current superannuation system though significant changes to it have also been made by different Liberal governments. It was the Gillard government that decided to increase the superannuation guarantee rate to 12% but this process was stalled because of the Global Financial Crisis.
Labor is committed to the current program to increase the rate of Super Guarantee up to 12% by 2025 but has stated that it intends to establish a pathway to increase that rate up to 15%.
Labor has stated that it wants to reform the super guarantee so that it applies to low-income contractors.
The Superannuation Guarantee already applies to many contractors. Any change to therefore increase the rate of payment to a contractor by 10.5% may be met with a corresponding reduction to their payments of 10.5% by their employers, as contractors do not have the protection of a minimum wage like other workers. This policy will likely require some consideration and detailed drafting to ensure that it is not abused.
In the 2019 election, one of the policies committed to by Labour was paying super on paid parental leave. This policy has since been effectively dropped. The party does still have the aim of reducing the gender gap currently existing in the superannuation system. At this point, it is unknown what the plan is to address this gender gap until the minister instructs Treasury to come up with a plan. It has also been announced that this may not be something that can be achieved in their first term.
Both Liberal & Labor had also announced that the age would be lowered for making downsizer contributions from the current age of 60 to be 55. This is seen as a measure to increase the supply of inner-city housing by encouraging the downsizing of retirees’ homes.
If you have any questions about how your superannuation could be impacted in the post-election policy-making process, you can speak with a licensed professional for further information.
Registering for an ABN and applying for GST refunds when you don’t own a business or are not eligible is fraud.
The Australian Taxation Office (ATO) has identified a significant number of GST refund fraud attempts, totalling an estimated $850 million to around 40,000 individuals. This fraud involves predominantly participants inventing fake businesses to claim false refunds.
Sophisticated risk models deployed by the ATO, coupled with intelligence received from banks including through the AUSTRAC-led Fintel Alliance and the Reserve Bank of Australia, identified a recent spike in suspicious refunds. Currently, the ATO has stopped $770 million in payments from being issued.
The fraud involves offenders inventing fake businesses and Australian Business Number (ABN) applications, many in their own names, then submitting fictitious Business Activity Statements in an attempt to gain a false GST refund.
Currently, this fraudulent activity has been circulating as online advertising and content, particularly on social media and their platforms.
Reminders For The Community
- The ATO does not offer loans. If you see someone advertising a way to get a loan from the ATO, it’s not legitimate.
- The ATO does not administer COVID disaster payments.
- If you are not operating a business, you do not need an ABN, and you don’t need to lodge a GST return.
- Backdating your business registration so you can apply for a refund will flag you as high risk in our systems.
- False declarations may impact eligibility for other government payments.
- The ATO possess the data matching ability to detect these patterns and stop fraud.
- If something seems too good to be true, seek independent advice from an adviser who has no connection to the arrangement before taking any action, or phone the ATO.
What This Means For Businesses:
- Legitimate businesses may face extra steps to receive their refunds as extra controls are put in place.
- To prevent people from lodging fraudulent claims, the ATO has engaged tighter controls around ABN and GST registration.
Were You Involved?
The ATO is urging anyone already involved to come forward now on a voluntary basis rather than face tougher consequences later. They will be recouping the funds, and there will likely be a better outcome for you if you approach them first.
People who have participated in this fraud may have unwittingly followed advice they have read online, claiming to help access a loan from the ATO, or receive other financial government support such as a disaster payment.
However, for others where there was nothing accidental or unintentional about setting up a fake business in their own name and seeking an unearned refund, harsher penalties could be faced.
If you become involved in this arrangement, you need to speak with the ATO now. They will be able to support you with a range of self-help options. You may be able to correct it yourself, the ATO may be able to assist you, or you may be referred to a trusted advisor like a tax agent (such as us) to help you.