Advice Business NDIS Strategy Tax

Tax Planning for NDIS Providers

15/03/2024

Navigating taxes can seem overwhelming, leading many businesses to procrastinate until the last minute to address them, typically around June 30th. Initially, tax planning may not appear to offer significant advantages, but as your business expands, strategic tax planning throughout the year can yield substantial benefits.

This guide will demystify estimated tax payments, explore ways to optimise business expenses, and ensure compliance. Ultimately, why pay more taxes than necessary when you put in hard work daily?

Previously, we dissected what Tax Planning is in our article Tax Planning: A Strategic Guide To Paying Less And Keeping More. Today, we will delve deeper into practical Tax Planning examples.

Strategies That Save

Onto the real stuff – the strategies that can help your business thrive. Have you thought about deferring income until after June 30th, or bringing forward expenses before the curtain falls on the financial year? Here are some common strategies that save money:

  • Pre-plan Your Expenses: Bring forward necessary expenses before June 30th to have more deductions and lower your taxable income by June 30th.
  • Defer Your Payments: You may consider holding off on paying those invoices until after June 30th if you expect next year to have a higher income.
  • Business Structure Choices: Is your business structure working for you? Review your structure to make sure you are not over-paying on your taxes.
  • Be Asset-Savvy: There’s an instant asset write-off waiting, but why wait till the last minute?
  • Pay Now, Save Later: Pre-paying super can be a win-win, minimising taxes and investing in your future.

If you are new to tax planning, have a read of this article which delves into some of the most common tax planning strategies: Get a Head Start on Your Tax Planning with these Easy Ideas.

Forward Planning & Estimated Tax Payments

Estimated tax payments may not be the most thrilling topic for business management, but grasping their significance can greatly impact your financial standing. As April approaches, insights into your tax responsibilities for the end of the financial year become clearer. While year-round planning is encouraged, now is the ideal time to consult a professional regarding any further actions required before the end of the financial year.

These strategies are not mere financial tactics; they are integral components of a well-devised tax plan. It is advisable to seek professional guidance to ensure that your approach aligns with your specific circumstances and remains compliant. Engaging in simple tasks such as pre-paying interest installments for the upcoming year can enhance cash flow for the next year and enable you to utilise tax offsets promptly.

Likewise, allocating pre-payments towards your superannuation serves not only as a means of saving for retirement but also as a strategy to reduce your upcoming tax liabilities.

Quick Case Study

Let’s explore the process of pre-paying super as part your of Tax Planning. Super contributions hold particular significance, especially for small business owners who are notorious for not paying themselves super, counting on the proceeds from selling their business for retirement funds.

Making super contributions not only looks after future-you, but also reduces your current taxable income. Superannuation plays a crucial role in a well-rounded wealth-building strategy. Consider John, earning $100K annually from his NDIS enterprise before taxes.

  • John’s Income tax stands at $22,967
  • John’s take-home pay amounts to $77,033

By pre-paying $10,000 into his super before June 30th, John can slash his taxable income from $100k to $90k.

  • John’s Income tax then reduces to $19,717
  • John’s take-home pay decreases to $70,283
  • But he retains the $10,000 in his Super account until retirement, saving approximately $3,250 in tax (based on 2023 marginal tax rates).

These funds will accumulate interest for retirement and remain untaxed until that time.

Company Structure – More Exciting Than It Sounds

Choosing between a sole trader, partnership, or company impacts not just how much tax you pay, but how you pay it. Each structure has its advantages and disadvantages, so it’s important to choose wisely.

Sole traders are relatively simple in terms of tax planning – simply declare your income and deduct any eligible expenses. Partnerships, on the other hand, require an agreement between partners regarding how profits will be distributed before June 30th for effective tax planning.

Companies offer a variety of options when it comes to tax planning, such as paying yourself a salary or distributing dividends. It’s important to seek professional advice to ensure your chosen structure aligns with your business goals and tax strategy.

The Power of Tax Planning

Tax planning is crucial for NDIS registered businesses, aiming to maximise entitled deductions and legally minimise taxable income. It’s an ongoing process integrated into your business decisions year-round, not just a yearly task. Simple strategies like pre-paying expenses and maximising super contributions can reduce tax burdens and enhance financial well-being. Remember, you don’t have to navigate this alone. Having a knowledgeable ally by your side can help you make informed decisions, retain more earnings, and ensure compliance with tax regulations. Schedule a chat to discuss estimated tax payments and customise a tax plan for your NDIS registered business to avoid overpaying taxes.

Advice Budgeting Business Strategy

How to Create a Realistic Budget and Effective Forecasting for Your Small Business

17/01/2024

As a small business owner, your financial management should be one of your top priorities. One crucial aspect of this is budgeting and forecasting. However, many small business owners struggle with creating realistic budgets and implementing effective forecasting techniques. This article aims to provide guidance on how to create a realistic budget, explore effective forecasting tools and methods, and identify key financial metrics to assess business performance.

Creating a Realistic Budget 

To create a realistic budget, small business owners need to assess historical data and use it as a foundation for making informed decisions. This can be hard when you are starting up, as you may not have any data to guide you. This is where researching your industry and talking to your accountant about industry standards can be invaluable to get your financial model right. 

If you are starting out, using a system to track your data means that you can quickly see and adapt to trends and patterns as your business grows. 

If you have some data, start by analysing past financial records and identifying trends and patterns. This analysis helps to identify areas of improvement. It will help you set achievable revenue goals, but you will also need to take into account external factors such as current market conditions, industry trends, and potential growth opportunities.

Another step is identifying and allocating expenses. This means categorising expenses into fixed and variable costs. Fixed costs might be rent, utilities, salaries, marketing, inventory, and supplies. Your variable costs change as the volume changes, so these might be the costs of the goods to your business. 

Your reports are only as good as the data, so make sure you assign appropriate funds to each category and monitor the actual performance against budgeted figures regularly. If necessary, adjust the budget to align with business goals and ensure that it remains realistic.

Tools and Methods for Financial Forecasting

Effective forecasting requires the use of appropriate tools and methods. Sales projections are an essential part of forecasting. By analysing historical sales data and considering external factors such as market demand, customer behaviour, and industry trends, you can forecast sales for the month, quarter, year or even five years.

Cash flow forecasting is another essential tool for small business owners. Accurately predicting cash inflows and outflows over a specific period lets you plan for any potential cash shortages or surpluses and make informed financial decisions. 

Conducting scenario analysis is another crucial aspect of financial forecasting. This involves creating multiple financial forecasts based on different assumptions and scenarios to understand the potential impact on your business’s financial performance.

Key Financial Metrics to Measure Business Performance

Measuring and tracking your business’s financial performance is crucial to making informed decisions and staying competitive. To do this effectively, focusing on key financial metrics is essential. 

  • Revenue growth is one of the critical metrics to track. It helps assess your business’s ability to generate sales and increase market share. 
  • Gross profit margin is another essential metric. It measures the profitability of each unit of product or service sold.
  • Net profit margin is equally important as it measures the profitability of your business after deducting all expenses. 
  • Monitoring cash flow is also vital for small business success, as it ensures that you have enough liquidity to cover expenses and invest in growth opportunities. 
  • Lastly, return on investment (ROI) helps to evaluate the efficiency and profitability of investments made in the business.

 

Budgeting and forecasting are crucial aspects of financial management for small businesses. Creating a realistic budget, utilising effective forecasting tools and methods, and focusing on key financial metrics help you make informed decisions and achieve your business’s financial goals. 

Small business owners can stay ahead of the curve by assessing historical data, setting achievable goals, identifying expenses, monitoring cash flow, and tracking financial metrics. If you would like to chat with me about setting up your finance platform for accurately tracking or understanding your financial reports please reach out for a chat. 

 

This blog post is intended for informational and educational purposes only. The information provided in this blog post should not be taken as professional accounting advice or recommendations.

Liability limited by a scheme approved under Professional Standards Legislation.

Advice Budgeting Business

Managing Your Business’s Cashflow during the Holiday Period: Tips from An Accountant

03/12/2023

This is the time of the year when many businesses experience a dip in their cash flow. With several staff members away and a number of public holidays compounding on each other, it’s not unusual for the holiday break to be stressful for business owners. I have seen businesses of all sizes struggle with managing their cash flow during the holiday periods, and I have compiled some tips to help you navigate the festive season while maintaining good cash flow. 

This is the perfect moment to establish positive habits so that next year, you can enjoy the holiday season confident in your business’s financial readiness.

Plan ahead

We all know we should do this, but very few business owners do it. The best time to start planning for the holiday season is at least six months before the year-end festivities begin. Right now, you can analyse your business’s cash flow statements from last year and identify the periods when cash flow was at its lowest. With this information, you can take the necessary steps to minimise the impact of reduced cash flow. Creating a financial calendar that outlines expenses, revenues, or expected inflows will help you stay on track through the year and even set aside a buffer for the next holiday period. 

Track your Spending

Christmas can be an expensive period for businesses, with bonuses, parties and holiday wages. Plan a budget within which your business can run through the holiday season. Adequate budgeting will help you enjoy the festivities without getting caught up in overspending and starting the new year on the back foot with a cash flow crisis.

The start of a new year is a good time to set your business’s financial goals for the year ahead. When you are compiling your forecasts for the year, consider factoring in all costs, including annual leave entitlements and end-of-year bonuses, into your budget. Including these costs in your budget now can help you be prepared for when the festive season rolls around. 

You may even want to consider these expenditures the same as any other recurring business cost and add them as a category to your business expense tracking. Being prepared is key to maintaining healthy cash flow and ensuring your business thrives at any time of the year. 

Proactive Invoicing

Depending on your business type, during the holiday period, some customers may be late with payments if they fall during their business closure, and the resulting delays can cause a cash flow shortfall for your business. Before the holiday season, encourage customers to make prompt payments or pay invoices early that are due during the holiday period. This can help prevent cash flow issues during the festive season. 

Embracing automation can be a game-changer for managing your cash flow during the holiday period. If your business has regular clients with whom you’ve established a repeating billing cycle, consider setting up automatic invoices. Most accounting software can schedule invoices to be sent out at predetermined intervals, ensuring regularity in your cash inflows. 

This means your business’s invoicing carries on in the background, even if you’re soaking up the sun on a beach or carving up the ski slopes. Not only does this provide peace of mind, but it also frees up valuable time that you can use to focus on strategic tasks, ultimately contributing to your business’s bottom line.

Keep Your Employees Productive

Many employees take time off to travel or rest during the holiday period. The impact on your business’s productivity can be enormous, and then you may find that you scramble to get jobs completed before holiday closures or are starting the year with a backlog of work. 

Some businesses add extra resources in the lead-up to the busy period to make sure jobs stay on track, but resources such as staff need to be paid so it is important to make sure you have budgeted sufficiently. 

Stay Active Online

If you have an online store, online payments provide a seamless customer payment experience. Many businesses will let customers know there is a delay in the delivery of goods and services during the holiday period but will continue to take payments online during this time. But the good news is that although your shopfront may close over this period, your online store stays open. 

 

Final thoughts

Managing cash flow over the holiday period doesn’t have to be a hassle. Proactive planning, expense control, prompt customer communication, and smart employee scheduling can help you avoid the stress of a cash flow shortfall this season. These tips should help you maintain a healthy cash flow so that your business can thrive during and after the holiday season. If you need professional advice on managing your business’s cash flow, please reach out for a chat. 

Business

Knowing the Differences Between a Sole Trader and a Company: Which One Fits Your Business?

10/11/2023

If you are starting a business or thinking about restructuring how your business is organised, you might be juggling back and forth between the options of being a sole trader and forming a company. These two structures offer different advantages and disadvantages, and it is important to be familiar with these differences to make an informed decision. In this article, we’ll discuss the three key differences between a sole trader and a company, and help you identify which structure suits your business best.

Liability 

One of the biggest differences between a sole trader and a company is liability. As a sole trader, you are personally liable for the debts and liabilities of your business, and you will be required to pay your creditors from your personal assets if your business cannot pay its debts. On the other hand, if you form a company, the company will be a separate legal entity that is responsible for its own debts and liabilities, and your personal assets will generally be protected from creditors of the company.

Taxation

Another major difference between a sole trader and a company is in taxation. As a sole trader, you and your business are considered one and the same for tax purposes, and you will be taxed on the business’s profits at your personal income tax rate. In contrast, a company is taxed separately from its owners, and it pays corporate tax on its profits. While the corporate tax rate is generally lower than personal income tax rates, you will need to pay additional tax if you pay dividends to yourself or your shareholders.

Ownership and Governance 

Lastly, the ownership and governance of a business differ significantly between sole traders and companies. As a sole trader, you are the only owner and decision-maker of your business, and there are no formal legal requirements you are obligated to follow. In contrast, a company has directors who control how it is run, and shareholders who own the company. 

There are also strict regulatory standards that companies need to comply with such as preparing annual financial reports, holding annual general meetings, and filing their tax returns promptly.

It is important to weigh the advantages and disadvantages of a sole trader and company depending on your business goals and resources. While a sole trader is more straightforward and less costly to set up, forming a company may offer more protection to your personal assets and establish more credibility with your clients and suppliers. 

Whatever structure you choose, you’ll need to make sure that you are familiar with the legal and regulatory requirements for that structure. By understanding the differences between a sole trader and a company, you can make a well-informed decision and set your business up for success.

Business

What Small Business Owners Need to Know About New Superannuation Changes

01/10/2023

From 1 July 2023, new changes to superannuation have come into effect. When you have looked at your recent financial reports for Q1 of the 23/24 financial year, you would have noticed that your super payments have increased compared to last quarter. 

The new reforms carry an additional charge of 0.5%, a seemingly small figure that can make a significant difference in the overall financial outlook of your business. This is a good example of why you must be well-prepared for regulatory changes so you can ensure that your profit margins can withstand these increased resourcing costs. 

In this article, we will delve into the reasons behind the increase in super and provide insights into what future rises are expected. 

Changes in Super Contribution

In Australia, superannuation, often called ‘super’, is a mandatory retirement savings program funded by employers’ contributions; sometimes employees will make additional contributions. By law, employers must pay a percentage of an employee’s ordinary time earnings into a superfund. As of 1 July 2023, this super guarantee (SG) is set at 11%, marking an increase from the previous 10.5%. This percentage will incrementally rise until it reaches 12% by July 2025. 

The responsibility of making super contributions primarily falls onto the employer. Employers are obligated to pay the super guarantee for employees who are 18 years or over and are earning $450 or more before tax in a month. It also applies to employees under 18 years if they work more than 30 hours per week. This super contribution is separate from an employee’s salary or wage; it is an additional cost to the business. Superfunds then invest these regular contributions to grow the employees’ retirement savings over time.

Engaging contractors also carries super responsibilities that small business owners must know. If you employ contractors who are paid primarily for their labour, you may be required to make super contributions on their behalf. This stipulation applies even if the contractor has an Australian Business Number (ABN) or invoices you for their work. The crucial factor is whether the contract is wholly or principally for labour. If more than half the value of the contract is for the contractor’s labour, then super contributions may be necessary. 

Consequences of Not Meeting Super Obligations

Failure to meet superannuation obligations can lead to severe penalties for business owners. Incorrect, late, or non-payment of super can attract legal action, fines, and penalties from the Australian Tax Office (ATO). The financial ramifications of such oversights can be significant, not to mention the reputational damage these can inflict on businesses. All business owners must ensure they are making accurate and timely super contributions for their employees and eligible contractors to avoid such repercussions.

As your accountant, we make sure you are making the correct super payments based on employee earnings and that you are updated with any changes. However, it is still the business owner’s responsibility to ensure that payments are made punctually, as failure to do so can lead to significant penalties. 

A common strategy many businesses adopt is to set aside a designated amount for super and business activity statement (BAS) payments in a separate account. This dedicated account acts as a financial buffer, ensuring that funds are always available for making these payments. This approach can help alleviate stress on business cash flow. 

Why are Super Contributions Changing?

The superannuation system is changing to better address the increasing life expectancy and financial needs of Australia’s ageing population. As people live longer, the need for sustainable retirement income strategies is becoming more crucial. By increasing the super guarantee (SG) incrementally to 12% by 2025, the government aims to ensure individuals have sufficient funds to sustain a comfortable lifestyle during their retirement years. This approach is designed to alleviate some of the pressure on the public pension system as the proportion of working-age people decreases relative to those in retirement.

The Need for Proactive Business Planning

Businesses need to be proactive and factor in the annual, incremental increases in superannuation into their forecasts and budgets. These small changes can have a substantial compound effect on your business’s overall financial health. The key to managing this lies in proactive business planning. 

It’s important to take into account changes to wages, super and tax while planning your annual budgets and forecasts. Doing so helps to minimise the impact when the super guarantee (SG) increase takes effect each July. 

Should you have any questions or concerns about these changes to the superannuation system – or if you are interested in performing a comprehensive review of your budgets and forecasts – please do not hesitate to reach out.

Advice Business Education Tax

Your Ultimate Guide to Tax and Your Small Business

01/09/2023

The small business sector has been described as the engine room of the economy and the country’s biggest employer – and it’s not hard to see why.
So, it’s important to become familiar with the many possible tax benefits for small businesses. Typically, a small business is defined as having an annual turnover of less than $10 million. However, for the valuable small business CGT concessions, the turnover threshold is just $2 million. Don’t worry if your turnover is higher – you may still be eligible for certain concessions. To prevent businesses from exploiting the system by splitting activities to stay under the threshold, turnover must be calculated from aggregated amounts. This means considering your annual turnover (gross income, excluding GST) from all sources.

As a business owner, you can claim certain business expenses on your tax return to reduce your taxable income. From office supplies to travel expenses, there are various types of business expenses that may be eligible for deductions. While some deductions can be complex, like figuring out the percentage of computer use for work, others are 100% tax deductible. You can start maximising your tax savings by looking into which expenses you can claim.

How do tax deductions work?

Claiming work-related deductions on your tax return is your entitlement. To do so, you must meet the following criteria:

  • Keep records to prove your expenses.
  • Have spent the money yourself.
  • Not have been reimbursed for the cost.
  • Ensure the expense is related to your job.

If an expense is for both work and private purposes, you can only claim the work portion. Tax law requires records to be kept for five years and can include receipts, expense invoices, credit card statements, employee records, vehicle records, lists of debtors and creditors and asset purchases. Records can be kept on paper or electronically but should be easily retrieved. Rest assured that we will guide you through this process and help you maximise your deductions.

What are the different types of deductions you can claim?

Vehicle and travel expenses
The most important thing to remember when it comes to work-related vehicle and travel expenses is that you must keep records, which will make life a lot easier at tax time. Whether it’s your own vehicle expenses, or accommodation and transport expenses for airfares, train, tram, bus or taxi fares – all of these can be claimed. Keep in mind some fringe benefits tax may be incurred for some travel.

Work-related clothing and laundry expenses
Do you have to wear specific attire for your job? Whether it’s a suit, a uniform with a company logo, or clothes purchased from the store you work in, it’s important to understand your employer’s dress policy. But when it comes to tax deductions for work clothing, there are specific criteria that must be met. They must be specific to your occupation, protective clothing or footwear or a specific uniform.

Working from home deductions
Whether you work from a designated room or not, there are different methods to choose from when claiming tax deductions from home office expenses. Keep all your records and you can even deduct expenses for computers, phones, and other necessary devices. Plus, running costs for electricals are also deductible. Remember, you can claim up to $300 for home office equipment or a decline in value for pricier items. And don’t forget your phone bill if it’s used for work.

Professional associations, magazine subscriptions and trade union fees
As part of your profession, you might be a member of a professional association or a trade union, which fees are deductible. Magazine subscriptions that are aligned with your work, for example, an investor with financial publications are claimable.

Interest and investments
Deductions can be claimed for interest, dividends, or other investment income expenses. When it comes to interest on income expenses, account-keeping fees for investment purposes can be claimed. However, keep in mind that if you have a joint account, you can only claim your portion of the fees.
As for shares and dividends, you can deduct interest charged on borrowed money used to purchase shares. If the borrowed money was used for both private and income-producing purposes, it must be divided accordingly.

Income protection insurance
Including insurance premiums for loss of income in your deductions is a smart financial move. However, it’s important to note that not all insurance policies are eligible for deduction. Life insurance, critical care insurance, trauma insurance, and policies paid for out of your superannuation contributions do not qualify. Make sure to exclude these when claiming your deductions.

Self-education expenses
Claiming self-education expenses can be beneficial if your studies directly contribute to your work. To be eligible, the course you pursue must result in a formal qualification that meets the following criteria:

  • The course must maintain or enhance the skills and knowledge required in your current job.
  • The course should also lead to, or have the potential to lead to, an increase in your income.
  • It’s important to note that you cannot claim expenses for self-education that are not significantly connected to your current employment.

Here is a list of expenses that you can claim related to your self-education:

  • Accommodation and meals (if you are staying away from home overnight)
  • Computer consumables
  • Course or tuition fees
  • Depreciating assets with a cost exceeding $300 (or decline in value)
  • Equipment or technical instruments costing $300 or less
  • Equipment repairs
  • Fares
  • Home office running costs
  • Interest
  • Internet usage (excluding connection fees)
  • Parking fees (only for work-related claims)
  • Phone calls, postage and stationery
  • Student union fees
  • Student services and amenities fees
  • Textbooks
  • Travel to and from your place of education (only for work-related claims)

If an expense is both for your self-education and other purposes, you can only claim the portion that relates specifically to your self-education as a deduction.

Tools and equipment
You can claim a deduction for tools and equipment used for work purposes. If the items are also used for private expenses, you will need to divide the claim. For assets that cost $300 or less and are not part of a set, an immediate deduction can be claimed. For items over $300 or part of a set, you can claim a deduction based on their decline in value. Additionally, the cost of repairing and insuring tools and equipment can also be claimed if necessary.

Tax preparation fees and travel to see your accountant
Remember that you can claim your last year’s accountant fees and travel costs to and from these consultations.

Government Tax breaks for your small business

Although the Temporary Full Expensing scheme has now finished from 1 July 2023 the government has increased the instant asset write-off threshold to $20,000. This means that small businesses with an aggregated turnover of less than $10 million, will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that is first used or installed ready for use between 1 July 2023 and 30 June 2024. The $20,000 threshold will apply on a per-asset basis, so small businesses can instantly write off multiple assets.

Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year after that.

The Small Business Technology Investment Boost offers a generous 120% deduction to digitise its operations with digital assets and services. Eligible expenditure includes digital enabling items, digital media and marketing (such as webpage design), e-commerce (such as portable payment devices) and cyber security systems. The boost is applicable for expenses and depreciated assets from 29 March 2022 to 30 June 2023, with a maximum expenditure cap of $100,000. If the expenditure is on a depreciating asset, the asset must be first used or installed ready for use for a taxable purpose by 30 June 2023.

For small businesses, investing in the skills and training of their staff can be a key factor in success. To support this, the Small Business Skills and Training boost provides an extra tax deduction of 20% on eligible training courses provided by registered external organisations. This boost is available to businesses with an aggregated annual turnover of less than $50 million and runs from 29 March 2022 to 30 June 2024. It’s important to note that the training must be provided by a registered business within Australia and cannot be in-house or on-the-job training. If you’re a small business owner looking to invest in the growth and development of your staff, the Small Business Skills and Training boost provides a great opportunity to do so while also receiving a tax benefit.

When it comes to running a small business, keeping on top of your paperwork may be the last thing on your to-do list. So while you focus on running and growing your business, our team at ASAP Solutions can help with getting your records in order and discovering the right deductions.

To make the most of tax time and get your refund as fast as possible, contact us and lock in an appointment.

Advice NDIS Personal Tax

Fringe Benefits for Support Workers

09/08/2023

Working as a support worker can be hugely rewarding. Whether you have worked in the profession for a long time or just starting out, it is important to know what extra benefits you may be eligible for. Beyond the many advantages of personal satisfaction, advancement opportunities and the development of interpersonal skills, there are a variety of fringe benefits that may be available.

So, what is a Fringe Benefit?

Fringe benefits are additional forms of compensation beyond regular salary or wages that employers offer to their employees. Examples of these benefits include health and dental insurance, life insurance, disability insurance, housing allowances, education assistance programs, childcare programs, employee discounts, and more. Employers provide fringe benefits as a means to attract and retain skilled employees and to enhance job satisfaction. These benefits also serve as a way for employers to express their gratitude for employees’ commitment and efforts, fostering loyalty and boosting morale within the workplace.

There are different types of fringe benefits, these include:

  • allowing an employee to use a work car for private purposes
  • providing car parking
  • paying an employee’s gym membership
  • providing entertainment by way of free tickets to concerts
  • reimbursing an expense incurred by an employee, such as school fees
  • giving an employee a discounted loan
  • giving benefits under a salary sacrifice arrangement with an employee.

The following are NOT fringe benefits:

  • salary and wages
  • employer contributions to complying super funds
  • shares or rights provided under approved employee share acquisition schemes
  • employment termination payments (including, for example, the gift or sale at a discount of a company car to an employee on termination)
  • payments deemed to be dividends under Division 7A
  • benefits provided to volunteers and contractors
  • exempt benefits, such as certain benefits provided by religious institutions to their religious practitioners.

What taxes have to be paid on Fringe Benefits?

In Australia, it is the employer’s responsibility to ensure that the correct amount of tax is paid on any fringe benefits provided. Employers are required to pay Fringe Benefits Tax (FBT) on certain benefits given to employees, their families, or other associates. This applies even if the benefit is provided by a third party under the employer’s arrangement. The amount of FBT to be paid is determined by the taxable value of the fringe benefit and must be self-assessed and reported through an FBT return for each financial year (April 1 to March 31).

Making the most of your salary

To unlock the full potential of your income as a disability, aged care support worker or not-for-profit employee using salary packaging has many benefits. This ATO-approved method allows you to minimise your tax obligations on specific expenses. If you work in the not-for-profit sector, you have the opportunity to salary package and enjoy savings on a wide variety of daily costs.

The main benefits include:

1. Saving on everyday living expenses

Want to enjoy tax savings on everyday living expenses such as mortgage, rent, bills or other everyday items? The great news is you may be eligible! You may be able to access salary packaging up to $15,900 every Fringe Benefits Tax (FBT) year (1 April – 31 March) for expenses like these.

2. Meal entertainment benefits

Did you know it’s possible to save money while enjoying a meal out? Via salary packaging meal entertainment benefits can provide the opportunity to enjoy tax-free savings and potentially save hundreds of dollars each Fringe Benefits Tax (FBT) year. With a salary package of up to $2,650 for meal entertainment expenses. Take advantage of this opportunity from 1 April to 31 March.

3. Car leasing

Salary packaging of a car, also known as a novated car lease, is one of the easiest and most cost-effective ways to buy and run a car. With a novated lease, you pay for your vehicle expenses using a combination of your pre and post-tax salary. This could reduce your taxable income and the amount of tax you pay.

Fringe benefits play a pivotal role in creating a supportive and attractive work environment for support workers. They not only supplement the basic salary but also enhance the overall remuneration package, making a position more appealing. Additionally, these benefits contribute to improved employee well-being, job satisfaction, and loyalty. For those who often work in demanding conditions, fringe benefits like health insurance, education assistance, and childcare programs can significantly improve their work-life balance. Employers providing these benefits demonstrate a deep respect and appreciation for their employees’ commitment and hard work, fostering a positive and productive workplace.

If you need assistance with your tax or have any queries regarding fringe benefits, get in contact with Amanda today and book a chat.

This blog post is intended for informational and educational purposes only. The information provided in this blog post should not be taken as professional accounting advice or recommendations.

Liability limited by a scheme approved under Professional Standards Legislation.

employee
Advice Business Education Strategy Tax

How To Reduce the Impact of the Minimum Wage Increase on Your Business

10/07/2023

Raising the minimum wage has many benefits for workers – providing them with a higher gross income, increased buying power, improved standard of living, and greater disposable earnings. However, it’s important to acknowledge the challenges that small business owners face with mandatory increases. Payroll is one of the biggest financial commitments for any business, and a sudden jump in minimum wage can significantly impact profit margins. From 1 July 2023, these include:

  • Australia’s minimum wage will increase by 8.6 per cent, and award workers will get a 5.75 per cent pay boost
  • The new national minimum wage will be $23.23 per hour, and $882.80 per week, based on a 38-hour week
  • Super guarantee rate increases to 11%

Despite these challenges, it’s crucial to recognise that minimum wage increases can actually enhance productivity within a business. Higher wages attract a more stable and experienced workforce which leads to reduced staff turnover and improved efficiency and effectiveness. While navigating the effects of raising the minimum wage can undoubtedly be challenging, the long-term benefits of a more satisfied and loyal workforce can ultimately outweigh the initial financial strain.

What can you do as a small business owner?

1. Operational efficiencies

Transform your business into a cost-saving machine by taking active measures to eliminate inefficiencies and unnecessary expenses. Streamlining processes, adopting automation technologies, and optimising staffing levels can all minimise the impact on the overall cost structure. Exploring how the supply chain may be optimised can also be a useful investigation.

Looking to invest in employee training and upskilling can lead to a more productive workforce. This can result in maximising the value derived from the increased wages. It may include a strategic view on modern award minimum wages and hours worked.

2. Budgetary adjustments

As business owners, it’s important to be proactive when it comes to managing increased labour costs. In order to cope with these changes, comprehensive budget adjustments must be made. This process involves taking a closer look at financial plans and making necessary revisions to accommodate new wage structures. Reassessing pricing strategies, re-negotiating contracts with suppliers, and exploring potential areas of cost reduction are all effective ways to offset the impact of higher wages. By confidently and strategically approaching these adjustments, business owners can maintain financial stability and continue to succeed in their industries.

3. Pricing and Revenue Strategies

With the higher labour costs, businesses must be strategic in re-evaluating their pricing strategies. While increasing prices may be necessary to maintain profitability, it is important to consider market dynamics and customer expectations. Conducting thorough market research, analysing competitor pricing, and assessing consumer sensitivity to changes in prices can assist in making informed decisions. There are also ways to counteract higher labour costs such as exploring alternative revenue streams, diversifying product offerings, or targeting new customer segments. By striking a careful balance between pricing and other business decisions, companies can stay competitive and profitable despite the pressures of rising labour costs.

4. Workforce Planning

Some options for business owners to consider when reassessing staffing needs and labour allocation is to look at the following:

  • Cross-training employees to handle multiple roles
  • Optimise schedules to ensure optimal coverage during peak hours
  • Evaluate the possibility of flexible or remote working arrangements

To lessen the impact of increased wages, owners can adjust their workforce to better suit the changing needs of their business.

5. Employee Engagement and Retention

Now is a golden opportunity for business owners to foster a positive work environment and boost employee morale. Recognising and rewarding employees for their hard work, offering additional benefits, and providing growth opportunities can go a long way in retaining valuable staff members. By investing in employee happiness, businesses can significantly reduce the costs associated with turnover and training. Happier employees also tend to be more productive, engaged, and invested in the success of the business, making it a win-win situation for all parties involved. Ultimately, the minimum wage increase can be a powerful tool for creating a thriving and successful workplace.

6. Collaboration and Industry Support

As a business owner, you need to know that you are not alone in navigating the challenges of the minimum wage increase. Seeking support and collaboration within your industry can go a long way in helping you overcome this hurdle. Trade associations, chambers of commerce, and networking groups offer a unique opportunity to connect with like-minded entrepreneurs and gain access to resources, insights, and best practices. Through these channels, you can share experiences and brainstorm innovative solutions.

Make Changes to comply with new wage laws

Although the wage increase is intended to keep up with the rising cost of living, it poses a significant complexity for business owners. Planning ahead ensures your business remains sustainable and continues to thrive, using the introduction of strategies that work alongside the increasing labour costs. By doing so, you can effectively adapt to the new wage system. We can help you with your budget and ensure your payroll is updated before your next pay run. Contact Amanda today to book an appointment.

This blog post is intended for informational and educational purposes only. The information provided in this blog post should not be taken as professional accounting advice or recommendations.

Liability limited by a scheme approved under Professional Standards Legislation.

Advice NDIS Tax

Expenses & Your Tax – A Guide for NDIS Support Workers

23/05/2023

It’s that time of the year again when we start thinking about preparing for the end of the financial year. As an NDIS Support Worker, the end of the financial year can be overwhelming. Especially for sole traders and micro businesses keeping track of expenses and collating receipts, it can a minefield.

But there are some ways you can minimise your tax. Not every strategy will work for you so it’s important that any tax planning considers your business or personal position and goals. Let’s break this down and look at some common considerations when it comes to tax planning.

Making effective superannuation contributions

To maximise the benefit received from the Australian government, there are two methods you can use to make your super contributions work the most effectively for you.

1. Superannuation concessional contributions

Self-employed contractors and freelancers are often responsible for their own retirement savings, unlike salaried or PAYG employees who typically have this taken care of. As a result, many delay their retirement planning and contributing to their super.

Contributing to your super through the concessional contribution can provide a tax benefit. This is because your super contributions are deducted from your pre-tax income and are taxed at a lower rate of 15%, with a limit of $27.5k per year. Utilising the concessional contribution can be a productive strategy for reducing your tax rate.

It’s important to know that you can make an additional contribution of up to $110k to your superannuation fund, in addition to the $27.5k concessional limit. However, you cannot claim a deduction for this amount as it comes out of your post-tax income. Contributing to your superannuation is a vital way of saving for your long-term future and is a worthwhile investment.

2. Superannuation co-contributions

The Super co-contribution scheme is an Australian Government initiative to help low and middle-income earners increase their superannuation contributions, by matching a certain number of contributions made into a superannuation fund up to a maximum of $500. So, if you meet the eligibility criteria and put $1000 into your superannuation scheme, the government will match you with an additional $500. This gets paid directly into your super scheme after you have lodged your tax return. However, if you make a personal contribution and claim an income tax deduction for this contribution, you will not qualify for the co-contribution scheme.

Claiming business deductions

It may be beneficial to pay certain business expenses before the end of the financial year, regardless of your income or level of expenditure so you can claim them as a tax offset. Just remember, that if you pay an expense such as a subscription up-front this year you will not be able to claim the deduction next year.

When claiming expenses as an NDIS Support Worker, it’s important to keep in mind a few golden rules:

  • All expenses must be for your business, not for personal use.
  • If the expense is a mix of business and personal use, only the business portion can be claimed.
  • All records and receipts must be up to date and able to prove the purchase.
  • Only what has been paid for out of pocket is claimable. Any employer reimbursements are no longer claimable.
  • Allowances are different, if you receive an allowance for an expense, you can claim it.

Knowing what you can and can’t claim

This can be difficult and sometimes frustrating to decipher so here is a list of some of the more common things you may be able to claim as a NDIS Support Worker.

Clothing

Clothing that is solely used for work purposes is deductible. These include:

  • Protective clothing such as gloves, shoes, scrubs, and masks
  • Compulsory uniforms that are specified in your employer’s uniform policy
  • Occupational-specific clothing that distinctly identifies a person associated with a particular occupation

Equipment

You may be able to claim work-related equipment, such as art supplies, computers, printers, and mobile phones, as a tax deduction. With government pandemic stimulus initiatives, more expensive items could qualify for accelerated depreciation (temporary full expensing). However, before making a big purchase, it’s best to speak with your tax agent for guidance.

Mobile phone bills

If you only use your mobile phone for business, you can claim deductions for both the phone’s cost and the monthly service fees, regardless of whether you have a prepaid or monthly plan. However, if you use the phone for both business and personal use, you can only claim a percentage of the expenses that correspond to the business usage.

Professional fees and subscriptions

There are a variety of professional fees and subscriptions that are claimable. These include annual subscriptions to an association for annual practising certificates, memberships, or accreditation. Union fees or any business-related software, magazines, or licensing fees.

Professional insurance

You can claim insurance expenses as business expenditures if you have professional indemnity insurance to protect your clients, public liability insurance to cover your business in case of an incident, or insurance for all your business assets.

Advertising

Promoting your business, whether its website costs, signs, digital advertising, printing, or newspaper advertising, can be claimed as a business deduction.

Professional development

If you spend money on courses, training, and development to improve or maintain the knowledge, capabilities or skills required for your current job and income, you can claim the expenses.

Travel expenses

Any travelling cost between your home and place of employment isn’t considered as a deduction but if you transport a client during a shift, travel from one workplace to another or any parking, tolls, or public transport you pay would be considered.

Key dates to remember

Besides all the possible deductions, one of the most important things is to remember that your tax obligations aren’t over at the end of June. There are a variety of dates to ensure you are all up to date and compliant with your taxes and obligations. These include:

1st July
The start of the new financial year and where all tax-related obligations centre around. On this date, you can begin applying for your tax refunds for the prior financial year.

31st October
With no extension or tax agent, you’ll have until this date to lodge a tax return.

15 May
If you have a tax agent or accountant, you can submit your completed tax return by the last day of the next financial year.

28 October, 28 February, 28 April, 28 July

If you work for yourself as a GST-registered contractor, freelancer, independent consultant, or sole trader, you will likely have to submit a Business Activity Statement (BAS) or Instalment Activity Statement (IAS) every quarter. These are the dates for filing and paying your quarterly BAS if you fall into this category.

Don’t forget, your tax agent fees are also 100% claimable as a deduction! As Tax Accountants and NDIS Plan Managers, we understand the challenges of managing your expenses as a support worker and offer expert advice to minimise your tax bill and maximise your refund.

Make an appointment today to ensure that you can focus on looking after your clients without worrying about paying more at tax time.

This blog post is intended for informational and educational purposes only. The information provided in this blog post should not be taken as professional accounting advice or recommendations.

Liability limited by a scheme approved under Professional Standards Legislation.

1 2 3 4