CGT concessions for shares and trust interests

Posted on 24 November '19, under business.

For taxpayers wishing to access the small business capital gains tax (CGT) concessions for shares in a company or interests in a trust, they must first meet the standard requirements as well as further conditions in place for such entities.

A taxpayer can apply for small business CGT concessions to lower or dismiss their capital gain from the disposal of CGT assets. If the CGT asset is a share in a company or interest in a trust, further conditions that will need to be met are:

  • The taxpayer must have carried on a business just before the CGT event or meet the maximum net asset value test.
  • Meet the 90% test, satisfied when the CGT concession stakeholders in the company or trust where the shares or interest are held have a total small business percentage in the entity of at least 90%. The percentage can be held directly or indirectly through multiple included entities.
  • The company or trust in which the shares or interests are held must either be a CGT small business entity for the income year or meet the maximum net asset value test. The rules for determining whether an entity is connected with the company or trust for this purpose are modified. Under the modified connected entity rule, the company or trust controls another entity if it has a control percentage of at least 20% or more, in that other entity.

The share or interest must satisfy the modified active asset test which looks through to the activities and assets of the underlying entities. The asset of an underlying entity will only be an active asset if the previous conditions have been met

Annual leave and pay over the holidays

Posted on 24 November '19, under legal.

As the holiday season approaches, so does the shutdown period for many businesses. This is the time of year when it is easier to take off work due to many businesses slowing down, however, there are questions that surround this period, namely if you will get paid or not.

When calculating leave over the Christmas and New Year period, for permanent staff that would typically work on the public holidays, those days must count as a public holiday rather than a day of annual leave. Regular employee rights apply to Christmas Day, Boxing Day and New Years Day public holidays. If you work in an industry that may require staff to work these days, normal requirements and relevant penalty rates are in effect. Employees can choose not to work on a public holiday on reasonable grounds such as how much notice the employee received or whether employers expected them to work on a public holiday. Employers do not have an automatic right to terminate an employee if they refuse to work on a public holiday.

Employees may be instructed to take their annual leave for the remaining days during the shutdown period. Employers can require this if the relevant award allows it or, if the industry’s award does not have a stance on compulsory annual leave over the holiday period, employers can still require employees to take annual leave if the business typically shuts down over Christmas. You cannot compel your employees to take their leave each year. However, an employee cannot unreasonably refuse your request to take annual leave, if they have accumulated it over a long period.

Employees that have not accrued enough leave to cover the holiday period can arrange with their employers to take leave in advance or unpaid. Workers who do not agree to this, however, cannot be forced by an employer to take unpaid leave unless the industry award allows them to. If not, employers will have to pay workers at a normal rate for the period of the shutdown.

Super when you’re self-employed 

Posted on 24 November '19, under super.

If you are a sole trader, or in a partnership, then you are not obligated to make super guarantee (SG) payments for yourself. However, you should still consider making personal contributions to super to help you save for retirement.

Your methods of contributing to super can depend on how you pay yourself. For example, if you receive a wage, then you can set up a regular transfer into super from your income before tax. If your income is from business revenue, you can periodically transfer a lump sum into your super depending on your cash flow.

When contributing to personal super contributions with your after-tax income, you may be eligible to claim tax deductions on them. Before claiming a deduction, you must give your selected super fund a ‘Notice of intent to claim or vary a deduction for personal contributions’ form, and received an acknowledgement from your fund.

You can contribute up to $25,000 a year in concessional super contributions, which are the contributions you can claim tax for, and an additional $100,000 a year in non-concessional super contributions, which you don’t claim deductions for. If you are aged 75 years or older, you are only able to claim tax deductions for contributions you made before the 28th of the month after you turned 75.

Introducing ASFP

Posted on 24 November '19, under tax.

Plans are underway to carry out a system change during the December closure of the ATO, to introduce Activity statement financial processing (ASFP). This change will move the majority of taxpayer financial information into one accounting system that will have multiple accounts.

ASFP will shift activity statement and franking deficit tax accounts from the current ATO system into their primary accounting system, covering all the different taxes they administer. This change is intended to help improve ATO digital services by delivering simplified transaction descriptions and summary views of “statement of account transactions” with the ability to view full account transaction if required.

During the closure, a number of ATO online services will be unavailable. These include;

  • SuperMatch: A service that enables APRA-regulated funds to consolidate member accounts.
  • EmployerTICK: An online service employers can voluntarily use to validate employee details, prior to making the first contribution to a super fund.
  • Fund Validation Service (FVS): A service that enables employers and funds to obtain APRA-regulated funds’ e-commerce details that support SuperStream transactions.
  • Electronic portability form (EPF): An ATO-hosted form that can be used by fund members to transfer the whole balance of super accounts between APRA-regulated funds, or to member’s self-managed super fund.
  • Member Account Attribution Service (MAAS): A service for super providers and life insurance companies to report the opening and closing of accounts, and changes to a member’s account phases and attributes when they occur (event-based reporting).
  • Member Account Transaction Service (MATS): A service for super providers and life insurance companies to report member contributions or transactions more frequently and at a transactional level.
  • Small business superannuation clearing house (SBSCH): The superannuation clearing house is a free online super payments service that can be used by employers with 19 or fewer employees or have an annual aggregated turnover of $10 million or less, to pay super contributions in one transaction to a single location.

Strategies to increase profit

Posted on 12 November '19, under money.

Whether you are struggling to keep up a steady income or wanting to grow your business, increasing sales revenue is often a central goal for businesses. Here are some strategies you can consider when looking to improve profit:

Redesign operations for maximum efficiency:
If you really look at the operation processes of your business, you’ll often find that there are certain systems and routines in place that may not be necessary. Try to eliminate the tasks and activities that do not make valuable contributions to the business. Look for any operation processes that can be streamlined to maximise efficiency and save time.

Increase marketing efforts:
Oftentimes, you’re going to have to spend money to make money. Many businesses benefit from investing in a strong marketing campaign or even looking for cost-effective marketing opportunities on social media. Sharing regular updates on social media about your business, pictures of your products or interesting content your followers will like is a great way to keep your business in people’s minds and build a rapport with your customers.

Take care of existing customers:
While it is easy to get carried away with getting as many new customers and followers as you can, don’t forget that it is often easier and cheaper to make a sale to an existing customer than a new customer who you have not developed a relationship with yet. Existing customers will have more trust in your products or services if they have already had a positive experience with your business. Put effort into maintaining a good relationship with existing customers and focus on cross-selling and upselling products and services to them.

Preventing cybercrime on your business’ social media 

Posted on 12 November '19, under web.

Having a digital presence nowadays is crucial to getting the most out of marketing your business. However, being online puts you at risk of being a target for cybercrime, which means that you and your customers are at risk of being scammed or hacked. Business owners have legal responsibilities to ensure that their business and customer information is safe.

While social media platforms such as Facebook and Instagram have policies in place to prevent people being victim to cybercrime, it is still possible for hackers to dodge these measures and attack your business. It is therefore important that you implement your own safety measures to reduce the risk of being targeted.

Many cybercriminals target business’ social media accounts to get access to a large following of people they can trick or manipulate. It is crucial that your business account has a strong password consisting of at least 8 characters, with a mix of upper and lower case letters, numbers and symbols. Ensure that only authorised users have access to the business’ social media accounts.

When planning a social media campaign, think about ways you can prevent your campaign from being hijacked by hackers to keep you and your followers safe. For example, if your campaign is a competition that involves participation from your followers such as them uploading a photo, think about ways to keep them safe from hackers, such as discouraging them from geotagging their location and ensuring they don’t have their house or any other personal details evident in the picture.

How to prevent non-paying clients

Posted on 12 November '19, under business.

Running a business is hard enough without having to chase up payments from your customers. Here are some measures you can take to prevent yourself from having to deal with the profitability imbalance, negative client relation, and legal ordeals that come with chasing up owed debt.

Research the customer:
Before you enter into an agreement with a client or other businesses, make sure that you know who you’re dealing with and do some research. There are government certified websites available to check whether a company is registered and legitimate. Find out about their history, make sure they are reliable, still in operation and to look for any bad reviews and other people’s experiences with them.

Have a signed contract:
Regardless of how much you trust your client, it is still a good idea to have a written contract in place so that everyone is on the same page and you have evidence to refer to in the case of a dispute or confusion. The contract should consist of the terms and agreements, payment schedule, preferred payment method, the exact product or service to be completed and late payment policy.

Have a good invoicing system:
Make sure that you invoice customers quickly with professional and easy to understand statements. This helps you keep track of your customers and helps your customers understand the payment requirements. You can set payment terms and policies to ensure that you will be paid how you and your customer agreed.

Proactive consolidation with ILBAs

Posted on 12 November '19, under super.

Inactive low-balance accounts (ILBAs) are a new category account that needs to be reported and paid to the ATO. This was introduced in the Treasury Law Amendment (Protect Your Superannuation Package) Bill 2019 that came into effect on 1 July 2019 after first being announced in the 2018-19 Federal Budget.

ILBAs are designed to protect accounts from fee erosion. Where possible, the ATO will proactively consolidate super on behalf of an individual.

A superannuation account is considered an ILBA if the following criteria are met:

  • No amount has been received by the fund for crediting to that account for an individuals benefit within the last 16 months.
  • The account balance is less than $6,000.
  • A prescribed condition of release has not been met.
  • The account is not a defined benefit account.
  • There is no insurance on the account.
  • The account is not held in a self-managed super fund (SMSF) or small Australian Prudential Regulation Authority (APRA) fund.

Funds are required to identify ILBAs on 30 June and 31 December each year, then report and pay them to the ATO by the statement date.

  • 31 October in the same year for accounts identified on 30 June.
  • 30 April of the following year for accounts identified on 31 December.

Individuals that have an account that they do not want to be transferred to the ATO as an ILBA, can consolidate super accounts using ATO online services through myGov, contact their super fund for more information or authorise their super fund to provide a written declaration to the ATO.

Time limit on GST refunds

Posted on 12 November '19, under tax.

Small businesses entitled to refunds of GST may not be aware of the four-year time limit on claiming those refunds. Your entitlement to a GST credit ends four years from the due date of the earliest activity statement in which you could have claimed it.

GST refunds are claimed under the indirect tax concession scheme (ITCS), which also covers luxury car tax (LCT), wine equalization tax (WET) and excise. They are a form of “outstanding indirect tax refunds”, which are tax refunds that are entitled to the taxpayer but are yet to be claimed. “Outstanding indirect tax refunds” can be claimed in the following cases.

Refund of a net amount for a tax period:
This applies to those that have yet to lodge an activity statement for a tax period. Small businesses that have GST entitlements that amount to $2,000, (which exceeds the net GST, WET and LCT liabilities for that period $1,500), are able to claim an outstanding indirect tax refund of $500.

Refund of an overpayment of a net amount:
Due to a clerical error, a business owner reports and pays $4,600 net GST for a tax period instead of the actual amount of $4,060. The excess amount of $540 is an outstanding indirect tax refund which the business can claim.

Refund due to an underreported initial net refund entitlement:
A business claims a net GST refund of $3,000 for the tax period and receives the refund. Afterwards, however, it is realised that the actual refund entitlement was $3,200, the excess $200 represents an outstanding indirect tax refund that can be claimed.

Moving your business online 

Posted on 6 November '19, under business.

In order to keep up with the growing demands of digital accessibility and convenience, many businesses decide to partially or completely move their business online. This can help with extending customer reach beyond the geographical boundaries of a physical business, offering customers easy access to your products or services, scaling and growth, and reducing costs on rent, staff, and marketing. Here are some steps to get started on building the digital side of your business.

Set up a website:
Your potential clients will often be getting their first impression of your business from your website, so it is important that you have an effectively executed layout, user interface and design. On top of your products or services, make sure your website includes key information about your business, such as an about page, contact details, FAQs, social media links, or call to action prompt.

Build a social media presence:
If you’re not already on social media platforms, or if your social media presence is weak, focus on creating engaging and relevant social media content for your audience. This can help you build a stronger relationship with your clients, share content they would find interesting and useful, and establish a brand image.

Keep customers updated:
Clients can get frustrated and feel uncared for if they are not told about important changes to your business that will affect them. Whether you’re moving partially or completely online, it is important that you keep your clients updated. This can be done through a simple email, having a sign in-store, and verbally telling them when you interact with them.