While we hear a lot of talk about the NSW COVID-19 Grants, JobSaver and the federally administered COVID-19 Disaster Payment as the suite of assistance available to small business, the subject of rent relief has not gained the same headlines and media attention.  There is a great deal of confusion about how the rent relief packages work and I am sure many businesses have been too overwhelmed to look into this.

For the majority of small businesses, their two largest costs (apart from the cost of the goods they sell) are wages and rent.  The COVID-19 Disaster Payment is designed to cover the wage expense, but what happens with rent?  Is this meant to be covered by the Grant and Jobsaver?  What if you are still struggling to meet this expense?

The big issue is that that rent relief follows a Code of Conduct, not a defined set of rules.  I think back to high school were we had a code of conduct, but not everyone abided by it.  It was not the law, it was an expectation, and that is why the National Cabinet’s Code of Conduct is not as simple to access.  It required you to negotiate with your landlord and come to an agreement.  If that negotiation fails then you need to take it further (maybe you tell the Playground Duty Teacher), but that doesn’t guarantee an outcome.

The first step to gaining any rental relief is to open the negotiation.  You need to contact your landlord or your landlord’s property manager to start the conversation.

Like any good negotiation, you should come to the table armed with facts.  Right now, you do a have a few tools that can help your negotiation.  Remember, landlords are not necessarily small business owners.  They most likely cannot get COVID-19 Grant or Jobsaver, and they possibly can’t get the Disaster Payment either.  You are asking them to give up your rent because the Code of Conduct says they should.  It would be very helpful if you can help them understand there is some help for them too.

What the Code of Conduct suggests

The following words come directly from the website https://www.smallbusiness.nsw.gov.au/get-help/covid-19/commercial-leases-and-covid-19-faqs

Under those principles, property owners are required to offer tenants rent relief proportionate to the tenant’s decline in turnover. Waivers should make up at least 50 per cent of any rent relief provided. Rental deferrals make up the balance.

The rental deferrals can be made up over a period of two years or the remaining life of the lease – whichever is greater.  Some tenants may already have this in place from the first lockdown and need to renegotiate the deferral from that as well.

Your landlord has a right for proof that your turnover has been impacted so that they can work out the adjustment required (and work out that the relief is legitimate).  Anticipate the need to provide this information and provide it with your request to expediate an outcome.

Read the Small Business NSW Facts and Questions weblink above as it contains some helpful information.  Know your facts before you ask.

What assistance is there for the landlord?

It could be helpful to direct your landlord to the assistance available to them.  The assistance can be in the form of land tax relief or access to a payment of up to $3000 per month from the Hardship Fund.

The land tax reduction is obviously only available to landlords who pay land tax, and most of those who have a 2021 land tax liability should have paid this already for the year.  Revenue NSW will refund up to 100% of the 2021 land tax liability or reduce the land tax payable in line with the amount of the rent reduction given to the tenant.

This is available now through Services NSW at the link below.  There are a number of things you will need to provide in the application, including information to show your tenant was eligible for either the Microgrant, the Grant or Jobsaver, along with other eligibility criteria.  Below is the link to the information and the application.

https://www.service.nsw.gov.au/transaction/apply-covid-19-land-tax-relief

Not every commercial landlord pays Land Tax, so a $40m Hardship Fund has been established providing relief of up to $3000 per month for landlords impacted.  The landlord need to show that their primary source of income is from rent, along with a bunch of other criteria.

This fund has not been opened as yet but it will be available in October.  You cannot apply for both Land Tax relief and this payment, so a decision must be made for the best option. For more details see the website below.

https://www.service.nsw.gov.au/commercial-landlord-hardship-fund-guidelines

What if we can’t come to an agreement?

If you cannot reach an agreement with your landlord you are entitled to apply to the Small Business Commissioner for dispute mediation.  While hopefully it will not come to that, if you do need these services below is a link that explains how mediation works.

https://www.smallbusiness.nsw.gov.au/get-help/disputes/how-does-mediation-work

We know it is tough out there, both for the tenants and the landlords.  Being informed about the relief available as a tenant or as a landlord will hopefully help both parties to come to a reasonable outcome.

Nothing like a change in the eligibility for stimulus money being sent out on a Friday afternoon to ruin your weekend.  We were notified of the need to retest JobSaver eligibility for the fortnight 30 August – 11 September on Friday the 10 September.  The phone calls started, the details were sketchy, yet if you wanted to get this fortnight’s payment you needed to retest now.

Taking a deep breath and uttering a few swear words, I realised there was no point looking at this until Monday as we had not reached the end of the fortnight on Friday.  Maybe some more details would come out over the weekend.

Low and behold, I log in to look at the criteria for retesting and it has changed once again.  We now need to retest for the fortnight 13 September – 26 September.  While this is a very welcome backflip by the NSW Government, it really makes you wonder who is making the decisions and on what basis.

This change makes significantly more sense.  Jobsaver was designed to cover businesses during the lockdown period.  Parts of regional NSW have now come out of lockdown, so there is a requirement to retest to be eligible.  This really should be based on the region you live in.  It is ludicrous that the NSW Government expect businesses in Sydney who have been locked down for over 12 weeks, with no real end in sight, to have to retest.  But retest they will – unless the rules change again this week.  Nothing surprises me anymore.

Essentially, despite getting the notification in your inbox asking you to declare that you continue to meet the eligibility criteria, I ask you not to make that declaration yet.  Today is 13th September.  You will not be able to make this declaration until 26th September.

The declaration is twofold.  Firstly, you need to declare that you have maintained the staffing levels (at least maintained the employment relationship) that you initially agreed to.  Secondly, you need to declare that you are still experiencing a 30% decline.

The catcher on this – it must be a comparison to the same period that you originally compared to.  If you compared to 2019, then compare to 2019, if you compared to 2020 or 12 June 2021-25 June 2021 then you need to compare to those periods.  You can’t switch to the best period. Your comparison should also be on the basis that you report your BAS, either Cash or Accrual.

Below are a few common questions or things you need to know that have been asked over the past few weeks.

  • Can I still get the COVID-19 Business Grant as well as JobSaver?

The COVID-19 Business Grant was designed to cover the first 3 weeks of Sydney lockdown.  Many regional businesses or Tradies will not qualify for the Business Grant.  JobSaver was designed to take over after those first 3 weeks.  So, while you should qualify for Jobsaver if you got the Business Grant, you don’t necessarily qualify for the Business Grant if you qualify for Jobsaver.  You only qualify for the Business Grant if you can demonstrate the decline in turnover between 26 June – 17 July.  If your decline in turnover is after that date you are ineligible for the Business Grant and can only get JobSaver

  • Do I have to pay Jobsaver to my staff?

No, despite the name Jobsaver is for the business, not for wages.  You can use it to help pay wages but you do not need to pass this on to your staff.  If your staff are working reduced hours or have been stood down you need to direct them to Services Australia for the Disaster Payment.

The reference to saving jobs is because you need to declare that you will maintain the employment relationship.  It does not mean the funds need to be paid to your staff. You can stand your staff down if you don’t have work for them. Standing down staff does not end the employment relationship.

  • How do I record this in my accounts?

Jobsaver needs to be paid to the business, not to you personally.  It is what we call NANE (non assessable, non exempt) income.  While you don’t pay tax on this, you still need to show it as income in your business accounts.

I suggest you set up a new income account called NSW JobSaver Payment and record the funds there.  There is no GST on this income.  If you have received the NSW Business Grant set up a separate income account for this, again free from GST.

  • Deductions for expenses incurred in earning NANE income

The ATO have updated their guidance about the various government grants that are non assessable.  They have advised that any expenses incurred regarding the application process are not tax deductible.

If your accountant or bookkeeper has proportioned their invoice to include the application for the grants you need to proportion your tax deduction accordingly.  However, if the expense is incidental to expenses that would normally be incurred in carrying on your business you can claim a deduction for the whole expense.  The wording of invoices will be important in determining this.

Stay tuned.  The rollercoaster has not come to a halt as yet.  I am sure there will be more twists and turns are we continue this ride.  It certainly makes it difficult to predict too far into the future.

Some businesses are not necessarily great when it comes to marketing.  For example, much like accountants, tradies are good at what they do and believe that their strengths are in their technical skills – and marketing is left to those people who work in sales.  The thought of marketing and sales brings up images of the pushy used car sales person, and that is not what your business is about – right?

I truly believe in service industries (and let’s face it we are all here to provide a service to someone), the best type of marketing is the provision of excellent customer service.  If you go above and beyond in the services you provide, customers will tell their friends.  There is no greater complement you can get than a referral from a customer. Even if you think you are too busy for new customers right now, isn’t it great to have that choice?  What a nice problem to have – too many people wanting to use your services.

Think about your business – are you doing something just a little different to your competitor to earn a great reputation?

I want to talk about a business that is nailing the service model – and it is not a trade business, rather an online fashion business.  I love good news business stories and this one ticks many boxes as it evolved in regional NSW.  You may have heard of it – it is called Birdsnest.  (If you are a guy reading this you will not have heard of it so don’t stress).

I know what you are thinking – what can an online fashion business have to do with my family’s trade business?  I am constantly looking for ideas and inspiration everywhere.  When an experience stands out to me enough to tell other people about it, there must be something to learn from that business.  Let’s start with their story.

Birdsnest is located in Cooma NSW which has a population of around 7,000.  If you are not sure where Cooma is, it is the town on the way to the NSW snow fields where you stop at McDonalds before you hit Jindabyne.  Some people stop at the McDonalds a little earlier on their journey to the snow – in Goulburn.  Goulburn is where my business is based.  Both towns are famous for their McDonalds, sheep and for being cold.  Neither would be considered a place to go to build a national business.

Yet that is exactly what Birdsnest has done.  It employs 140 local staff in Cooma.  Their online fashion business has that point of difference due to its customer service focused.  In their own words:

Over 85,000 women have told us about their body shape, favourite colours, their lifestyle and other elements that are important to them in creating the perfect wardrobe. We have responded by designing our own in-house labels to address those needs. Our range now consists of nine ‘bird brands’ along with carefully curated styles from our favourite brands and suppliers which we hope you love. We are constantly trying to extend the size range and offer sizes 8 to 18 in most styles with some now up to size 24.

Yes, they have lovely clothes, but it is the service that sold me.  The first time I purchased something from Birdsnest I got the typical email saying my parcel was on its way – as is typical with online shopping.  I was really surprised when the parcel arrived the very next day.  Not only was my parcel beautifully packed but there was a hand written note thanking me for my purchase, and welcoming me to the Birdsnest family.

I also received the beautifully curated seasonal brochure which I shared with my Aunt.  She purchased something and called me to express her delight at the speed of the delivery, the packaging and the personalised note.  All this would have taken only a few extra minutes to do, but it made the brand stand out.  I was an instant fan and so was my Aunt.

I ordered something from Birdnest later and along with my package and the hand written note, I received a cookbook.  This 60 page book contained the favourite recipes of the Birdsnest staff.  It shared their names, job roles and reasons why these recipes were so special to them.  It bought the culture of the workplace into my home and made me realise why the customer service is so exceptional.  The people are real, they have stories.  The business has a story, it is a regional business making it big, while maintaining its country values.  As the person buying the clothes, I want to be part of the story as well.  This is better marketing than any paid advertisement I have seen.

I am not suggesting you make a cookbook or write a personal note to each client, but how much attention do you pay to customer service?  Do you (or your staff) answer the phone with a smile? Do they arrive on time for a quote or a job?  Do you provide a text message to update your customer on the arrival time?  Do you provide your quotes and invoices in a professional manner?  Do you thank your customers for the business they have extended to you?

The public do not necessarily know which business has the best skills.  Go onto any community Facebook page and you will find people asking for recommendations.  We rate our Uber drivers and our AirBNB hosts on their service.  It will not be long before we will be doing the same thing with our Tradies, Accountants and other service providers.  Maybe we already are doing this (Google Reviews, Facebook Reviews)?  Don’t be left behind.  Start thinking about what you can do to stand out from the crowd.  Get inspiration from others, and sometimes that means looking beyond your industry for ideas.

Sometimes it is the smallest things that create the best results.

Working with small business owners, and being a small business owner myself, there is a common theme that we tend to sweep under the carpet – but it is something that we should all talk about. We should be talking about it with each other a lot, because we may be able to help each other. Yet we hide what is going on, sometimes until it is too late.

Until I became a business owner I had no idea of the stress and anxiety involved in running a small business. The roller coaster ride of emotions mean that one minute you are thinking everything is going great only to have is snapped away instantly when another “challenge” raises its ugly head. This may happen once a month, once a week or a number of times a day. Any wonder small business owners are becoming a focus for mental health awareness programs. According to a recent Everymind study 57.6% of business owners reported stress levels outside of the normal range.

Whether we like it or not there is still a stigma attached to asking for help when you are just not coping. Many business owners wear a mask most of the time to hide what they really feel. I know I do. Sometimes that mask cracks (usually in the privacy of our homes, to the detriment of those we love) but most of the time the mask is firmly in place so we can demonstrate to the world how successful and in control we are. We don’t always have someone to talk to and share what we are feeling.

The anxiety and stress is often linked to the bank balance for small business. There are some that are lucky enough to have great cashflow, but most small business owners are struggling. How do you feel when you see your Business Activity Statement? How do you feel when you call the ATO to make a payment arrangement and are spoken to with no respect or empathy by the public servant on the end of the line who has no understanding of the challenges you are facing? How do you feel when the bank manager says “no” to you and asks why you have not managed to save money as your results look good, even though you have a stack of money tied up in Trade Debtors, or you have reinvested everything into your business? These people have no idea what you are going through and what that means for your confidence and health.

Not only do I see it from my clients – I feel it too. So here are a few things that may help you feel not so alone on your business journey.

· Just because you are in business does not mean you are rich. There is a perception that a business owner has heaps of money and can afford anything. I know my family expect me to pay for everything because I am the business owner so I must have the money. While my family are out enjoying themselves I am at home, usually working so that we can earn enough money to cover our costs. Some weeks I cannot afford to pay myself because people have not paid my business. Some nights I do not sleep trying to do the numbers in my head to work out how we will get through – particularly at Christmas time which is meant to be a time of joy and celebration, but not for the small business owner. We do not have the certainty of a weekly pay cheque like others and we are at the whim of our customers. If this sounds familiar to you, you are in the majority of small businesses. Cashflow is the biggest factor to cause small business to fail and without doubt the biggest stress factor.

· You are not the only one who has a payment arrangement with the ATO. I probably don’t really need to elaborate on that but I assure you that many businesses have ATO debts and payment arrangements.

· You do work harder than everyone else. As business owners we are always worried about our staff and their wellbeing. We make sure they take regular breaks and take days off when they are not feeling well. We make sure they schedule regular holidays and leave work on time. But what about you? I bet you are the first to start work, the last to leave, work even if you are sick, and don’t take as many holidays as you should. Did you work over Easter this year? Did you work over the Christmas break last year? Did you continue to work while you were on holidays? Do you check your emails and catch up on work over the weekend? Do you even get a weekend? Do you work late at night or early in the morning?

· You give away your time or skills for free because that is what people expect. How often do friends or family ask you to pop over for a beer so that you can fix their leaking tap, broken power point or whatever it is that you are skilled in. Although beer is nice, it does not pay the bills. We all do it, we all take advantage of other people to a certain extent, and we don’t mind a bit of it, but I am sure deep down it frustrates you. Your time is precious and you devoted a lot of time to master your skills. It is OK to be a little frustrated when people take advantage of you.

What I really want you to know is that you are not alone. There are many people out there feeling exactly the same way you do. Everyone copes differently. Some throw themselves even deeper into work, others drink too much to take away the pain. You are likely to snap when your work mask comes off and this can affect your family relationships.

I am not a counsellor and I certainly don’t have the answers. All I can do is let you know that I understand how it feels. I rarely talk about my own struggles as I really don’t think anyone cares to listen. If I do try to speak about how I am feeling with my family they try to tell me how to solve my problems, but that is not what I am after. Sometimes I just want someone to listen and care. Sometimes I just need to have a cry and get some reassurance that everything will be ok, that every problem can be solved. Right now I am feeling pretty good about things, but that may all change by the end of the week. My emotions are intrinsically linked to my business and I can’t tell you what will trigger the next downslide as small business is full of surprises.

If you are a business owner and feel this way please talk to someone. If someone is talking to you, please listen and offer your support. If you think you need professional help, don’t be afraid to ask for it. You are taking a brave step in the right direction and that will help everyone in the long run.

 

With the Fringe Benefits Tax year ending on 31 March, it is a good opportunity to look at the difference between providing a fully paid car for your employees (subject to fringe benefits tax), or instead providing them with a car allowance.  This article will help to explain the difference and hopefully assist with making this decision.  If you are an employee who does get a car allowance, this will help you to understand how to get the best tax benefits from it.

What is a car allowance?

A car allowance is a payment to an employee of a set amount (usually as part of their pay) to assist with the running costs of a car.  Typically, a car allowance is only provided when a car is a necessary part of being able to perform the job role.  It is common for such jobs as sales representatives and real estate agents.

The payment of the car allowance is an expense to the business providing the allowance.  It is an expense that is very similar to a wage payment.  The responsibility for justifying the business usage of the car is transferred from the business to the employee.  The employee is the owner of the car and responsible for all of the expenses relating to that car.

The employee receiving the car allowance will need to justify how this money was spent when they do their tax return.

What is a car fringe benefit?

If a business provides a car to an employee that is owned or leased by the business, a potential car fringe benefit exists.  The justification for the business usage and any resulting fringe benefit tax falls to the employer.  For more details on motor vehicle fringe benefits see an article I have previously written at the following link.

https://www.tradiewags.com.au/wagtips/2019/5/12/fringe-benefits-tax-part-2-the-motor-vehicle

If your car is provided by your employer or provided under a salary sacrifice arrangement you are not able to claim motor vehicle expenses in your individual tax return.  The tax deduction has already been claimed and essentially you are double dipping.

Paying a car allowance and tax

Many employees wrongly assume that a car allowance is a tax free payment.  This is not true.  A car allowance is taxable income to the employee and will be included in their tax return.  Like all allowances, it is a trigger for your tax preparer to discuss whether there is an offsetting deduction that could apply.

If you want your car allowance to be paid without tax being withheld you will need to apply to the ATO to vary your PAYG Withholding.  The ATO will assess your application and advise your employer of a different withholding rate that may apply to your pay.  For more information (or to apply for a PAYG Withholding Variation) please see the link below.

https://www.ato.gov.au/individuals/working/in-detail/payg-withholding/payg-withholding—varying-your-payg-withholding/

Note, the ATO states that an employer cannot vary the withholding rate until they receive an official variation notice from the ATO.  Variation notices only last for one financial year.  With the increased scrutiny on payroll by the ATO and your obligations as an employer to withhold money on staff wages, I strongly suggest you follow these rules and only change the tax withholding rate on advice from the ATO.

Maximising your car allowance deductions

If you are getting a car allowance it is essential that you keep a log book for your car.  Without a valid log book you will only be able to use the Set Rate Method (cents per kilometre) to claim your car expenses.  This is capped at 5000km.  The rate in 2020/21 is 72 cents per kilometre, so the maximum claim is $3,600.

While this is a great claim for someone who does use their motor vehicle moderately for work, it is not a particularly good claim if you are receiving a $10K or $15K car allowance and using your car extensively for work.

If you do have a log book your claims can be as follows (taken straight from the ATO website):

Under the logbook method:

  • Your claim is based on the business-use percentage of the expenses for the car.

  • Expenses include running costs and decline in value but not capital costs, such as

    • the purchase price of your car

    • the principal on any money borrowed to buy it

    • any improvement costs.

  • To work out your business-use percentage, you need a logbook and the odometer readings for the logbook period. The logbook period is a minimum continuous period of 12 weeks.

  • You can claim fuel and oil costs based on either your

    • actual receipts

    • estimate of the expenses based on odometer records that show readings from the start and the end of the period you had the car during the year.

  • You need written evidence for all other expenses for the car.

Creating a valid logbook

While there are physical ways of creating a proper log book (see the article below), the ATO are strongly encouraging taxpayers to use the myDeductions tool.

https://www.tradiewags.com.au/wagtips/2019/5/24/keeping-a-proper-log-book

The myDeductions tool can be found on the ATO App which is very handy to have on your phone.  It is useful for any work related expenses, but also has the ability to record your work related travel.  There are three ways it can do this; a point to point trip, a GPS trip or an odometer trip.  The ATO will accept the information on this app as a valid log book.

Simple tips to get the best results from your car allowance

1.       Keep a valid log book (this is essential)

2.       If you have more than one car in the family, use a different car for your private family trips when possible.  This will help you to maintain a higher business use percentage for your work vehicle

3.       Set up a separate bank account that is only used for the allowance and car expenses.  This helps to keep everything in the same place.

4.       Don’t buy a car that is too expensive.  The ATO have a cap on the car cost that can be depreciated and this is currently set at $59,136.  While this does not prevent you from buying a very expensive car, you can only claim the depreciation up to this amount.

5.       Keep all of your records for fuel, services, insurance and registrations.

Wrap up

If you are an employer and you are looking to pay your employee a car allowance, make sure they are aware of their obligations to keep good records.  Only offer a car allowance to an employee who needs a car to perform their work, and make sure you are withholding the appropriate amount of tax from the payment.

Car allowances can work very well for those who understand them and keep their records.

 

Long Service Leave is an entitlement that is payable to most employees under State legislation.  The rules around entitlement do vary from State to State, but in general the entitlement is available to long term employees who have typically worked for more than 5-10 years for the one employer.

For some industries that type of longevity with one employer is almost impossible.  Their work is often project based and projects are not likely to run into a 10 year time frame.  As such, each State and Territory has its own portable long service leave scheme which raises money through various levies and pays long service leave to those entitled based on their overall service in the industry (not necessarily to one employer).

This applies consistently for the Building and Construction industry and each State/Territory has an authority to administer a portal long service leave scheme.  Some States and Territories also cover contract cleaning, security, community services and coal mining (note coal mining is administered by the Federal government).  If you do operate in one of these industries you need to check with your relevant State authority to see what industries they cover.

While the concept is rather simple, the schemes are not as widely known as they should be.  The responsibility to report employee service falls to the employer.  If you are self employed (as in sole trader or partner in partnership), your tax agent will be able to report your service when your tax return is prepared.  However, many “self-employed” tradies operate through a company or trust in which case they are employed and need to report their service as if it is an employer/employee relationship.

Tax agents can find it difficult to know who is registered for the scheme and who needs to have their service reported.  If you are registered you should be getting regular correspondence from the scheme authority and this should be a trigger to report your service.  If you need the help of your tax agent make sure you remind them.

If you are not registered for the scheme but believe you should be, use the links below to check out the scheme for your State/Territory.  Your financial advisor should be able to help you with the registration if you are having difficulties.

In NSW, long service leave is available to building and construction workers once 10 years of service has been recorded.  The long service is 8.67 weeks for 10 years of service and this is paid at the award rate for the type of work performed.  If you are employed under a certified agreement the long service leave will be paid at the agreement rate.  Like everything there are conditions so take the time to see how the scheme can work for you.

If you are entitled to be registered as a worker you can register yourself and let your employer know.  If you have moved house it is important that you keep your contact details updated with the relevant authority.

This is real money that may be owed to you so look into it.  If your long service leave is paid out by an authority it is taxable income, however tax will not have been withheld from the payment.  You need to let your accountant know to include the payment in your tax return and it is strongly recommended you set some of the funds aside to pay the tax bill.

The various authorities for the Building & Construction industry are listed below.  If you work in other industries such as cleaning, security or community service do some research to see if your State or Territory has a scheme that may be relevant to you.

ACT                                    https://actleave.act.gov.au/

NSW                                  https://www.longservice.nsw.gov.au/

VIC                                     https://www.coinvest.com.au/

QLD                                    https://www.qleave.qld.gov.au/

WA                                     https://www.myleave.wa.gov.au/

SA                                       https://www.portableleave.org.au/

TAS                                    https://tasbuild.com.au/

NT                                      http://www.ntbuild.com.au/

 

Compulsory superannuation started in Australia in 1992 and almost 30 years later it is still an obligation that not all employers take seriously.  It is often not until an employee starts to chase their employer for unpaid super that the issue is highlighted and I have seen many salary and wage earners turn a blind eye to their unpaid super, either due to fear of approaching their employer, or that they just can’t be bothered.

Finally, after almost 30 years the ATO are in a position to be proactive about unpaid super.  From my observation, this is going to be a very big issue that small business (and accountants) will be dealing with. The ATO are not waiting for an employer to make a complaint before they take action. With Single Touch Payroll they are quickly aware of missed or late payments.   It is time for employers to get serious about their superannuation obligations.

Compulsory superannuation must be paid into your staff members superannuation fund (that they have been allowed to choose) on a quarterly basis by the due date.  If the payment has not been made by that date a Superannuation guarantee charge statement must be lodged with the ATO and the calculated Superannuation Guarantee charge must be paid to the ATO.  Due dates are shown in the table below (taken from the ATO website).

Super Due dates.png

 

But it is only a late payment???

If the superannuation is paid late, even by 1 day, the superannuation is no longer a tax deduction. 

If the superannuation is paid late, even by 1 day, the superannuation guarantee charge statement must be lodged and the superannuation guarantee charge must be paid.  This includes a penalty of $20 per employee and 10% nominal interest.

If the superannuation is paid late, the basis of the superannuation guarantee shortfall moves from Ordinary Times Earnings to Salary and Wages.  This means that overtime is included in the calculation.

And it gets worse!  As soon as the superannuation guarantee shortfall is unpaid by the due date the directors of a company become personally liable.  The ATO can issue a range of penalties, including a Part 7 penalty, the maximum of which is 200% of the superannuation guarantee charge payable.

We have already seen the ATO approach some of our clients about superannuation that has been paid late without a Superannuation Guarantee Charge Statement being lodged.  We then need to go back and prepare that statement and pay the nominal interest charge from the time between the oligation arising and the statement being processed (not the date the super was paid). This may mean 4 years of nominal interest at 10% on a payment that was a few days late.

This is going to become common practice.  The ATO will work with employers to educate them about their obligations, but let me assure you that sticking your head in the sand and ignoring your super responsibilities is no longer an option.

 

What can I do to make sure I comply?

The ATO have released a short online course and I suggest that all business owners take an hour to complete this course.  The link is below.  The Commissioner of Taxation will be directing certain employers to undertake this course, but there is absolutely no reason you cannot do the course now and be proactive.  I did it and I found there were some things I was not aware of either (and I work with this day in day out).

https://www.ato.gov.au/Business/Super-for-employers/In-detail/SG-Employer-obligations-course/?page=1#Start_the_course_now

Next, do an audit of your business’s superannuation.  Is it being calculated correctly?  Is it applying to all of your employees?  Have you given all employees a choice of superannuation fund?  Are there any contractors who you should also be paying superannuation for? It is surprising how often there are mistakes that have gone unnoticed.

Have you been late in paying your superannuation in the past?  If so, it is a pretty big chance you did not lodge a Superannuation Guarantee Charge Statement and you probably should talk to your accountant about fixing this up now before the ATO chase you.

Make a BIG note in your diary to update your payroll system on 1 July 2021.  Superannuation goes up to 10% from that date.

Make sure you are paying your super on time.  Many payroll systems now have the ability for you to push the payments through as often as you like.  We are recommending that super payments be made at the same time as payroll so you are always up to date (and it helps with your cashflow as well).

While I may sound like a broken record always stressing the importance of paying superannuation on time,  I am only doing this for you own good.  I have seen the devasting results of superannuation audits.  Understanding your obligations and getting it right the first time will save you a mountain of stress and money.

Jigsaw Tax can help you to understand your obligations and fix up any issues. If you would like our assistance please contact Emily Roper at emily@jigsawtax.com.au. We will assess the situation and advise our costs to assist you.

As tax time is upon us again.  The cycle of what we do is all too familiar after years of experience. While we look at 30 June as the date everything hinges on, our work really does span a full year.

Lodgement dates are peppered throughout the year.  We don’t just lodge income tax returns, we also lodge Business Activity Statements and other compliance obligations such as Fringe Benefit Tax Returns.  Our last lodgement date in the financial year is 5 June for certain individuals and trusts. This left us with 25 days when all of our lodgements should be complete and we can kick up our feet and relax.

If only!  There are always a few clients who are a little behind with their obligations and there is a whole lot of tax planning to be done.  In fact, May and June are two of the busiest months for me as my clients prepare for the new tax year.  Once 1 July hits it is too late for tax planning.

It was not always this way.  In the past I could reliably book a holiday for June knowing the workload was substantially lower and I could rest up before the next wave of work started.  The difference between now and then is that my role as a tax accountant has changed.  I am now more of an advisor to my clients and my advice goes beyond how much tax they need to pay.  My role is to guide my clients so that they can run successful businesses.  Our conversations tap into ideas about cashflow, growth, asset protection, succession planning, staffing, business planning… the list goes on.

With over 30 tax planning meetings I had planned through May and June, it was rather exhausting.  Each meeting requires both the client and myself to do preparation work.  There are always burning questions that I need to answer, financials to update and things to check, but it is during the meeting that I feel energised and inspired.  I love meeting with my clients.  I love providing them with answers and direction.  I enjoy understanding what is motiving them and providing advice that can drive the business forward.

Following the meeting I write up my notes and list the actions that need to be addressed.  Most of those action points have little to do with tax.  We are helping to educate our clients, put their mind at ease, and drive their business forward.  It feels wonderful to be more than the person who prepares the tax return.

The new financial year will see me doing more of this type of work.  I already enjoy creating content with this blog and my podcast Money Honey, but the new financial year will see me moving away from the day to day number crunching spending more time in the advisory role. More of my time will be devoted to working with clients to achieve their business goals.

Over the past financial year we have been developing our team who are all very skilled.  We have worked with our clients to make their accounting more automated and ensure they are compliant in areas such a Single Touch Payroll and superannuation.  On top of all of this we have been managing Jobkeeper and other stimulus programs.  The work we have put in allows me to take a step back from the daily processing work .  I will still be very much involved with this from a supervisory level, but I probably won’t be the one who puts the numbers in the boxes.   I am very excited to see what the new financial year brings.

We will be running two tailored workshops for our clients – business planning and cashflow management.  Each requires a commitment of at least half a day.  It is a great chance to get out of the office and work on your business with the assistance of myself.  There will be an additional fee for this work, but if you are looking for something more for your business, including 4 hours of one-on-one attention with your accountant, this is for you.

Having a good business advisor goes way beyond how much tax you need to pay.  I am great at crunching numbers but I believe I can offer so much more.   I can combine my knowledge of tax with real world business experience, putting the puzzle pieces together.  It is going to be both fun and useful. Bring on the new year because I am ready.

 If you are interested in one of these workshops please get in contact with Emily Roper our Business Development Manager.  Emily’s email is emily@jigsawtax.com.au and she will be happy to provide you with a quote.

Small Business COVID-19 Support Grant

The NSW Government has announced a major new grants package to help tens of thousands of Small Businesses, Sole traders, Not-for-profits, Tourism, hospitality and Regional NSW businesses across NSW impacted by the current COVID-19 restrictions. The package includes grants of between $5000 and $10,000.

 

What can the grants be used for:
Grant funds can be used for business expenses for which no other government support is available, for example:

• meeting business costs, including utilities, wages and rent
• financial, legal or other advice to support business continuity planning
• marketing and communications activities to develop the business
• the cost of perishable goods that can no longer be used
• other activities to support the operation of the business.

 

Eligible businesses receiving either the Small Business Grant or the Hospitality and Tourism Grant can receive:
• $10,000 for a decline in turnover of 70%, or more
• $7000 for a decline in turnover of 50%, or more
• $5000 for a decline in turnover of 30%, or more

To apply, businesses will need to compare their turnover over a minimum two-week period after lockdown commenced, to a minimum two-week period in June and/or July 2019.

Businesses that were not operating in June/July 2019 may still be able to apply for the grants. These businesses should contact Service NSW to discuss their application.

 

Eligibility criteria.
The grants will be divided into two streams:

Small business
• have fewer than 20 FTE (including non-employing businesses)
• have an Australian Business Number (ABN) registered in NSW or can demonstrate they are physically located and primarily operating in NSW. Only one grant is available for a single ABN

• have total Australian annual wages below the NSW Government 2020-2021 payroll tax threshold of $1,200,000 as at 1 July 2020
• have an annual turnover of more than $75,000 as at 1 June 2021
• have not applied for, or received, the Hospitality and Tourism COVID-19 Support Grant
• have business costs for which there is no other government support available
(Full criteria will be available in coming days on the Service NSW website).

Tourism and hospitality businesses will be eligible for a Hospitality and Tourism COVID-19 Support Grant if they:
• have an ANZSIC code that is classified as a tourism or hospitality business
• have an Australian Business Number (ABN) registered in NSW or can demonstrate they are physically located and primarily operating in NSW. Only one grant is available for a single ABN
• have total annual Australian wages below $10 million as at 1 July 2020
• have an annual turnover of more than $75,000 as at 1 June 2021
• have not applied for, or received, a 2021 Small Business COVID-19 Support Grant
• have business costs for which there is no other government support available
(Full criteria will be available in coming days on the Service NSW website).

 

Sole traders and not-for-profits can apply if they have turnover over $75K and meet all other eligibility criteria.

Regional businesses can apply if they have been impacted by the public health restrictions, given school holidays are an important trading period for businesses across NSW.

 

More information on the small business support grants package will be available shortly on the Service NSW website.
Applications for grants must be made through Service NSW, with the application process due to go live later in July 2021.

If you would like to read more on this topic, here are some links to the above information.

https://www.nsw.gov.au/covid-19/businesses-and-employment/grants-and-loans/2021-covid-19-support-package

https://www.nsw.gov.au/media-releases/major-new-covid-19-support-package-to-help-tens-of-thousands-of-businesses-across

https://www.service.nsw.gov.au/transaction/apply-covid-19-business-support-grant

 

My previous article was about tax planning for business.  Business is unpredictable and requires planning towards the end of the financial year.  For most individual taxpayers, the tax situation is relatively stable from year to year.  While there are a few tips to help you get the best return, it is best to be planning for your tax all the time, not just at the end of the year.

The reason I say this is that tax deductions need evidence.  Evidence may be in the form of a receipt, a diary entry or a log book.  Tax deductions are usually spread throughout the year, not saved until the last few weeks in June despite what the retail advertisers are claim with their End of Financial Year Sales.

Here are my top tips for individuals tax payers, whether it is the end of financial year or not.  I will not be discussing rental properties as a tax deduction in this article.  This is really based on a simple tax return.

 

1.       Keep your receipts

I can’t tell you how many times I have prepared a tax return and the taxpayer tells me they bought heaps of things for work but didn’t keep the receipts.  The ATO are very clear on this – no evidence, no deduction.  I strongly urge you to download the ATO app on your phone so you can take photos of your work-related receipts to keep track of them.

If you want to claim motor vehicle expenses make sure you are recording your work related trips, or better still, keep a log book.

 

2.       Understand what you can claim

I hate quoting tax legislation but the laws that allows you to claim tax deductions is simple.

8-1(1) 
You can deduct
 from your assessable income any loss or outgoing to the extent that:

(a)   it is incurred in gaining or producing your assessable income; or

(b)    it is necessarily incurred in carrying on a * business for the purpose of gaining or producing your assessable income.

Section 8-1, Income Tax Assessment Act 1997.

It then goes on to say that you cannot claim an outgoing to the extent that is of a private or domestic nature.

Basically, the deduction must have some connection with the income you are earning.  If it is partly private it should be proportioned as such, or is not claimable at all.  The ATO give very good guidance on most types of deductions.  I suggest you look at the Occupation and Industry Specific Guides for your profession at the link below.

https://www.ato.gov.au/Individuals/Income-and-deductions/Occupation-and-industry-specific-guides/

While you may be able to loosely connect an expense to your income, remember that the ATO are not stupid.  Is it really worth claiming something you are not entitled to claim and risk getting caught?

 

3.       Understand when items need to be depreciated

There has been a lot of talk lately about the full expensing of capital assets, but this is only available to business owners.  As a wage or salary earner, or if you are purchasing assets for your rental property, the rules are quite different.  You can only write off an asset in full if it costs less than $300.

This means that going out and buying an expensive asset on 30 June will not give you the great tax deduction you are expecting.  Your claim will be made over a number of years depending on the effective life of the asset you have purchased.

 

4.       Spend some money

Now that you know what is deductible, it may be worth bringing forward some minor expenditure to claim the tax deduction this year.

 

5.       Be generous

There are a number of charities out there who would love you to give them a donation.  If you are making a donation make sure you get a receipt, and make sure they have DGR (deductible gift recipient) status.  Without this, you cannot claim the deduction.  You also cannot claim a donation if you get something for it, such as a raffle ticket, a badge or a teddy bear.

 

6.       Make a personal contribution to superannuation

There is a threshold on the concessional contributions you are making into super each year.  Concessional contributions means that someone is claiming a tax deduction for them (or could be if they were paid on time).   Most of the time the tax deduction is being claimed by your employer as part of your Superannuation Guarantee.  However you can personally top up your superannuation to the threshold ($25,000 in the 2020-21 year).

Additional personal concessional contributions are tax deductible and one of the most effective ways to save tax at the moment.  Check with your employer or on your My.Gov account to see how much super has been paid this year.  You may also be able to access some carried forward unused caps from the previous 3 year.  To find out more read the link below to the ATO information about this.

https://www.ato.gov.au/individuals/super/in-detail/growing-your-super/super-contributions—too-much-can-mean-extra-tax/?page=6

 

7.       Working from home

Many of us have spent part of the year working from home due to COVID-19.  If you want to claim home office expenses you have a few options.  The options really depend on whether you have a dedicated home office room in your house.

If you do, you can claim usage of that room at 52 cents per hour.  You can also claim for office expenses such as part of your internet, printing and stationery and the depreciation of your office equipment and furniture.

If you don’t have a dedicated space (perhaps you are sitting at your kitchen table to work) you can use the rate of 80 cents per hour.  That covers everything – internet, printing and stationery and depreciation.

Make sure you have some record to show how you calculated the hours you worked from home to support your claim.

The ATO will expect to see a change in the deductions claimed for those who have been working differently due to COVID-19. If you have been working from home you probably travelled less and you may need to have a new log book. Think about how COVID-19 may have changed what you can claim this year.

 

8.       Prepay expenses

An individual can claim a deduction for expenses it prepays so long as that expense will be used in the next 12 months.  There may be some upcoming expenses that you can pay prior to 30 June to get a tax deduction this year.

My final tip is to not try to lodge your return too early.  The ATO have an incredible amount of data being fed into their systems so your return can be accurately prefilled with information on wages, interest and dividend income, private health insurance and a host of other items.  This information is not there on 1 July.  The ATO suggest you hold off lodging until the end of July to make sure the prefill information is accurate.

Once again we anticipate increased audit activity from the ATO. Stick within the rules and make sure you have evidence about any claims you are making.

Happy Tax Time.