BRM Holdich E-News
06 June 2015
SuperStream is a government reform aimed at improving the efficiency of the superannuation system. Under SuperStream, you must report superannuation contributions on behalf of your employees by submitting data and payment details electronically in accordance with the SuperStream standard. All superannuation funds, including self-managed superannuation funds (‘SMSF’), must receive contribution details electronically in accordance with this standard.
These changes took effect from 1 July 2014, with you having until 30 June 2015 to finalise your implementation and comply. However, where you have less than 20 employees you are not required to report under the SuperStream standard until 1 July 2015, and have until 30 June 2016 to finalise your implementation and comply with the reporting standard.
Essentially, reporting under SuperStream operates based on the following information:
- Super fund name;
- Australian Business Number (ABN);
- Electronic Service Address (ESA); and
- Bank BSB and Account Number.
You should liaise with your payroll software provider, superannuation clearing house, and/or default fund to ensure that your superannuation contribution reporting will comply with the SuperStream standard. It is likely that the required information is already implemented by these providers, however in the case of SMSFs you may need to request this information from your employee, their SMSF Administration provider should have attended to this for them.
Please contact us should any further information be required or if we can be of assistance.
Tax planning involves arranging the taxpayer’s affairs in order to comply with the income tax legislation at the lowest possible cost. As such, tax planning is contrasted from tax avoidance, which is the entering into a scheme in order to obtain a tax benefit and can result in significant penalties.
As 30 June approaches taxpayers should engage in tax planning, many strategies require action prior to 30 June in order to be effective. The items in the following sections are by no means exhaustive but provide a number of issues for consideration.
The timing of derivation of income and incurring of expenses may impact the timing of income tax liabilities. Further, such timing may also impact the quantum of tax liabilities where income tax rates and/or the level of taxable income differ between financial years. In addition, changes to existing, or the introduction of new, legislation may also impact.
Please contact us should you wish to discuss any of these items.
Income is assessable when derived, the timing of derivation will depend on whether the business applies the cash or accrual basis. Under the cash basis, income is generally derived when it is received, whereas under the accruals basis income is generally derived when a recoverable debt is created such that the taxpayer is not obliged to take any further steps before becoming entitled to payment. A non-business taxpayers’ income is generally assessable when received.
In any event, tax planning should consider the timing of deriving income.
- Ensure that any income received in advance is identified as this may not be assessable until the services are provided. For this principle to apply, the accounting records must classify the unearned income separately from the income already earned.
- Taxpayers who provide professional services may consider rendering invoices after 30 June. Work in progress of such businesses is not included in assessable income.
- Consider the timing of asset disposals before or after 30 June in terms of applicable tax rates, realised capital gains and losses and the availability of any capital gains tax concessions, such as the 50% discount, small business CGT concessions or rollover relief. However, be mindful of the tax office’s negative view of ‘wash sales’ where an asset is sold and then reacquired in order to realise a capital loss.
Expenses are deductible when the expense has been incurred, this is generally defined as when there is definite commitment to the expense even if no actual payment has occurred. However, small business entities that continue to utilise the cash accounting rules under the former simplified tax system can only deduct an outgoing when it is paid.
Therefore tax planning should consider the timing of expenses being incurred.
- Debtor ledgers should be reviewed prior to 30 June with amounts considered bad written off. Only debts that are bad and written off at 30 June can be claimed, a provision for doubtful debts is not deductible. However, ‘writing off’ does include a board authorisation and financial controller recommendation of the bad debt prior to 30 June even if the physical writing off occurs later. Note that before the debt can be considered bad, appropriate steps must have been taken to attempt to collect the debt. Such steps may include contacting the debtor, issuing reminder notices or taking more formal action. Also note that a deduction can be available for the partial write off of a bad debt.
- A deduction may be available for obsolete stock. Stock should be reviewed and obsolete items written off or reduced in value where appropriate. Relevant considerations include the stock being out of use, out of date, unfashionable or outmoded.
- Ensure that all incurred expenses, including trade creditors, are processed reflecting the appropriate timing. Further, planned deductible expenditure could be brought forward and incurred in the current year.
- Bonuses may also be deductible if they are incurred by 30 June. For this to be the case the employer must be definitely committed to the bonus, the bonus cannot be subject to any later discretion or review. Further, the amount must be determined or be able to be calculated by 30 June, even if the actual calculation happens at a later date.
- Cashflow permitting, consider prepaying expenditure where an immediate income tax deduction is available. Such expenditure includes salary or wages and expenditure that is less than $1,000. Investors may consider prepaying interest on investment loans. Further, small business entities may claim a deduction for expenditure that satisfies the 12 month prepayment rule (the relevant service period does not exceed 12 months and ends in the next financial year).
- Superannuation Guarantee Levy amounts should be paid by 30 June, only contributions received by the relevant superannuation fund by 30 June are tax deductible in that year. The accrual of an incurred superannuation guarantee liability is not sufficient to qualify for a deduction.
- Review asset registers to identify any low cost assets eligible for immediate write off, opportunities to pool assets achieving accelerated depreciation and assets no longer held which should be written off.
- A deduction for personal superannuation contributions may be available where less than 10% of assessable income is received from activities that are conducted as an employee for superannuation guarantee purposes. Note that assessable income includes capital gains, so this test may be passed in years where a capital gain is realised. Note that the concessional contributions cap is $30,000 ($35,000 for those aged over 50) and this cap is inclusive of employer contributions. Similar to superannuation guarantee amounts, only contributions received by the relevant superannuation fund by 30 June can be claimed as a tax deduction in that year.
- Non-concessional contributions as part of a superannuation strategy should also be received by the relevant superannuation fund by 30 June. Note that the non-concessional contributions cap is $180,000, although a bring-forward may be available.
- Low-income earners (including self-employed persons) may consider making a personal non-deductible superannuation contribution to qualify for the government superannuation co-contribution payment.
- From 12 May 2015 the small business immediate asset write off threshold increased from $1,000 to $20,000. Where small businesses have the flexibility to manage their depreciable asset purchases and requirements, consideration should be given to the timing of such purchases in light of this effectively accelerated depreciation write off.
If you have had a new addition to your family or your child has turned 18 please advise us so that we can prepare a Trust Details Report, this facilitates the ability to distribute to them.
Please remember to make your Trustee Resolution for 2015, determining your income distributions. We will distribute draft minutes next week.
Capital Gains Tax
Please contact us should you be contemplating the sale of any assets so that we can consider the implications of the sale and any planning opportunities.
There exist a number of tax concessions which, if available, significantly reduce the capital gains tax payable on the sale of an asset. Where such concessions are not available, in certain circumstances planning opportunities do exist whereby arrangements can be made so that the concessions can be applied.
For example, with some opportunity to plan it may be possible to access the small business capital gains tax concessions. Or it may be beneficial to contribute some of the proceeds from the sale of the asset into superannuation in the same financial year, the resulting tax deduction may offset some or all of the capital gains tax payable.
Further, you are required to report in your tax return where you have applied a CGT concession or rollover, including the sale of non-taxable assets such as the family home. For example, the family home is exempt from CGT but the ATO is using this information to cross reference with land titles records to ensure concessions have been properly applied.
Important: This is not advice. Clients should not act solely on the basis of the material contained in this Bulletin. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. The Bulletin is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.
Level 8, 420 King William Street
Adelaide SA 5000