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Archives for K & A News

2018 Budget Overview

The Government handed down the 2018/19 Federal Budget on Tuesday 8th May 2018.  Some of the important proposals include:

  • The introduction of the ‘Low and Middle Income Tax Offset’, a temporary non-refundable tax offset of up to $530 p.a. to Australian resident low and middle income taxpayers for the 2019 to 2022 income years.  This offset will apply in addition to the Low Income Tax Offset.
  • Providing tax relief for individual taxpayers by progressively increasing some of the tax brackets (including an increase in the top threshold of the 32.5% personal income tax bracket from $87,000 to $90,000 from 1 July 2018), and eventually removing the 37% tax bracket entirely.
  • The $20,000 immediate write-off for small business will be extended by a further 12 months to 30 June 2019 (i.e., for businesses with aggregated annual turnover less than $10 million).
  • From 1 July 2019:
    – Increasing the maximum number of allowable members in an SMSF from four to six members;
    – Ensuring that unpaid present entitlements (or ‘UPEs’) come within the scope of Division 7A; and
    – Denying deductions for expenses associated with holding vacant residential or commercial land.
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Single Touch Payroll Update

Single Touch Payroll (STP) is a new reporting framework requiring employers to provide payroll and superannuation information to the Australian Taxation Office (ATO) as and when employees are paid.

The framework represents a significant change for business, both in the way that employers report and the level of detail being shared with the ATO and we remind businesses of the importance of checking their current HR practices and procedures.

Once an employer starts reporting, employees will be able to access payroll and superannuation information via ATO online services. Employees should also be aware there may be changes to the way employers issue payment summaries.

The start date for ‘substantial’ employers with 20 or more employees is 1 July 2018 and employers with 19 or less employees will be included from 1 July 2019.

All employers are required to count the number of employees on their payroll on 1 April 2018 to find out if they are a substantial employer (note that this can be done after 1 April, but they need to count the employees who were on their payroll on 1 April).

They must count each employee (not the full time equivalent), including full-time, part-time and casual employees, as well as those employees based overseas or absent or on leave (paid or unpaid).

Employers that are part of a company group must include the total number of employees employed by all member companies of the wholly-owned group.

However, employers don’t have to include the following in the headcount:

• any employees who ceased work before 1 April;
• casual employees who did not work in March;
• independent contractors;
• staff provided by a third-party labour hire organisation;
• company directors or office holders; or
• religious practitioners.

Note that, although directors, office holders and religious practitioners are not included in the headcount, if the employer starts reporting through STP, the payment information of these individuals will need to be reported (because the payments are subject to withholding and are currently reported in the Individual non-business payment summary).

Employers don’t need to send the ATO the headcount information, but they may want to keep a copy for their own records.

Once an employer becomes a substantial employer, they will need to continue reporting through STP even if their employee numbers drop to 19 or less (unless they apply for and are granted an exemption).

We have provided a checklist for our business clients to help prepare for Single Touch Payroll and ask that you contact us as soon as possible if you require further assistance.

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Superannuation Guarantee Amnesty Introduced

The Government has introduced legislation to complement the superannuation guarantee (‘SG’) integrity package already before Parliament by introducing a one-off, twelve month amnesty for historical underpayment of SG.

The Bill provides incentives for employers to come forward and “do the right thing by their employees” by paying any unpaid superannuation in full, as well as the high rate of nominal interest (but without the penalties for late payment that are normally paid to the Government by such employers).

Employers that do not take advantage of the amnesty will face higher penalties when they are subsequently caught – in general, a minimum 50% on top of the SG Charge they owe.

In addition, throughout the amnesty period the ATO will still continue its usual enforcement activity against employers for those historical obligations they don’t own up to voluntarily.

Please ensure that you are correctly complying with superannuation guarantee obligations, particularly in light of new Single Touch Payroll reporting requirements. The amnesty will run for twelve months from 24 May 2018.

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Single Touch Payroll Start Date is Looming for ‘Substantial’ Employers

Single Touch Payroll (STP) is a new reporting framework that requires employers to provide payroll and superannuation information to the Australian Taxation Office (ATO) as and when employees are paid. STP aligns payroll functions with reporting obligations and employers who fully report will not have to comply with a number of existing obligations.  STP will be mandatory for ‘substantial’ employers with 20 or more employees from 1 July 2018 and will be expanded to include employers with 19 or less employees from 1 July 2019. The framework represents a significant change for business, both in the way that employers report and the level of detail being shared with the ATO.

What will change under STP:

  • Salary and wages, allowances, deductions and PAYG withholding will be reported to the ATO in ‘real time’ when payroll is periodically processed at each pay run.
  • Superannuation liability will be reported at each pay
  • Employers will be required to use STP enabled
  • STP reports will become the approved form for reporting PAYG withholding, and from 1 July 2019 the ATO will pre-fill amounts on the
  • Employers will not have to submit an annual PAYG report to the
  • Employers will no longer be required to provide payment summaries as employees will be able to access their information via a myGov

What will remain the same:

  • The due date for PAYG withholding and superannuation
  • The requirement for employers to provide employees with
  • The timing of your pay cycle – employers can continue to pay employees weekly, fortnightly or

Getting Ready for Single Touch Payroll

Step 1: Find out when you need to comply

Mandatory reporting will start from:

  • 1 July 2018 for businesses that employ 20 or more people, and
  • 1 July 2019 for businesses that employ less than 20 people.

  Count your employees. A headcount is required as at 1 April 2018.
The table below will tell you who to include:

Employee-Headcount

  Check if your payroll software has a deferred start date. Some payroll software providers have asked the ATO for more time. If granted, the deferral will apply to existing customers of the specific software version.

Step 2: Connect your business systems

Employers will need to use STP enabled software.

  Find out if and how your existing payroll software provider will offer STP reporting. You may need to choose a new payroll provider if you currently report on paper or your existing provider will not offer STP.

Step 3: Review your payroll processes

STP means real-time reporting of payroll, PAYG withholding and superannuation to the Government and its associated agencies:

  Check your HR practices and procedures including PAYG, superannuation, leave allowances, timeliness of payments and
compliance with the Fair Work Act 2009 – visit www.fairwork.gov.au

Step 4: Start reporting your payroll

  You can start reporting as soon as your software is available and before the mandatory start time, if you wish.

QBO and Single Touch Payroll:

QBO will support STP reporting. The changes are currently under development.
There is no estimate on when STP reporting will be available, however it will be ready for use before 1 July 2018.

If you need help:

If you have concerns or require assistance in relation to any aspect of Single Touch Payroll please contact our office. We also recommend the ATO website which is regularly updated with STP information: www.ato.gov.au/Business/Single-Touch-Payroll/

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Extension of the SBE Immediate Deduction Threshold

In the 2017/18 Federal Budget handed down on 9 May 2017, the Federal Government announced that it intended to extend the ability of Small Business Entity (or ‘SBE’) taxpayers to claim an outright deduction for depreciating assets costing less than $20,000 until 30 June 2018. This Budget Night announcement has now been passed into law.

To qualify for an immediate deduction for depreciating assets purchased by an SBE taxpayer costing less than $20,000, the asset needs to be first used or installed ready for use on or before 30 June 2018.

The ‘aggregated turnover’ threshold to satisfy the requirements to be an SBE taxpayer has increased from $2 million to $10 million, as of 1 July 2016. As a result, more business taxpayers than ever before will be eligible for the $20,000 immediate deduction for depreciating assets.

Please contact our office if you need any assistance in determining if your business is an SBE, whether an asset purchase you are considering will qualify as a “depreciating asset” and/or what constitutes being “used or installed ready for use”.

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Client Portal

Many of our clients now prefer receiving correspondence via electronic methods. As a result we have reviewed our delivery methods and introduced an online client portal.

The online client portal will improve the way we exchange information with our clients. The client portal is convenient, efficient and secure.

The client portal allows you to access and retrieve your tax and accounting information, whenever you need to.

Importantly, it also offers industry best practice high level security and is the recommended method for sharing information online.

Using your own secure login the client portal allows you to view, digitally sign and return your documents – at the click of a button!

Your accountant will discuss portal activation with you during this tax year.

If you have recently started using or you are about to begin using our client portal, please refer to the information sheet we have included on the portal page on our website. You might like to print them out and keep them close by as you start navigating the portal!

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QBO Client Support and Training Sessions

QBO seminars

We are offering more QBO training seminars for clients later in the year. The seminars will be tailored to address areas of concern for those in attendance. These training seminars are free for Kelly & Associates clients. Please contact reception on 5224 1022 to register your interest.

Should our clients have any issues or queries relating to QBO, the QBO customer support provides an excellent free service. The QBO Customer Support Phone Number is 1800 046 038.

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ATOs Disclosure of Tax Debt Information of Businesses

From 1 July this year, the ATO will be able to pass on to credit agencies the tax debt information of businesses that have not effectively engaged with the ATO to manage these debts.

The criteria to be applied by the ATO is that a business has a tax debt greater than $10,000, the debt is older than 90 days, is not in dispute and the business has no payment plan with the ATO.

The disclosure of the debt is not automatic and will be at the discretion of the ATO. The ATO will notify a business that it intends to refer its tax debt to a credit bureau before it passes on the information.

Should any clients be in a position where they will meet the criteria outlined by the ATO from 1 July, 2017, then please contact our office and we can provide advice on the most appropriate course of action.

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Super Changes May Require Action by 30 June 2017

The Turnbull Government has made some changes to the superannuation system which will commence from 1 July 2017. These changes will impact many of our clients either now or in the future. We will provide a brief overview of the different changes to the super system but it is our recommendation that clients make contact with their accountant prior to June 30 to discuss how the super changes may affect them.

 

  1. Change to the Concessional Contributions Cap – Time to Review Salary Packaging Arrangements
    From 1 July 2017, the annual concessional contribution cap will reduce to $25,000 for all individuals (irrespective of age). Concessional contributions include your employer superannuation guarantee payments and any amounts salary packaged.Therefore, if you salary package superannuation as part of your wage, we recommend reviewing your arrangements prior to 1 July 2017. You may need to advise payroll to reduce your concessional contributions to ensure you are below the $25,000 cap.

 

  1. New Transfer Balance Cap
    Due to the introduction of the new ‘transfer balance cap’ from 1 July 2017, super fund members with pension balances (in ‘retirement phase’) exceeding $1.6 million will need to partially commute one or more of their pensions to avoid the imposition of excess transfer balance tax.In addition, members in receipt of a transition to retirement income stream (‘TRIS’) will lose the pension exemption from 1 July 2017.This means that the future disposal of any assets currently supporting such pensions will potentially generate a higher taxable capital gain (even though the disposal of the asset prior to 1 July 2017 could be fully or partially tax-free, depending on whether the asset is a segregated or unsegregated asset).Fortunately, to avoid funds selling off assets before 1 July 2017, transitional provisions have been introduced to allow super funds to apply CGT relief in certain situations.Although the choice to apply the CGT relief can be made up until the day the super fund is required to lodge its 2017 tax return, in many cases, action must be taken on or before 30 June 2017 for the fund to even be eligible to make that choice. In particular, funds calculating exempt pension income using the segregated assets method will generally need at least a partial commutation of the pension.Please contact our office if you need any information regarding the super reforms, including what needs to be done to obtain CGT relief (if necessary), whether a TRIS should be commuted to accumulation phase or continued into the 2018 year, and how the new contribution rules will affect contributions in both the current and future years.

 

  1. Change to the Non-Concessional Contributions Cap
    The annual non-concessional (after-tax) contributions cap has been lowered from $180,000 to $100,000. This will affect clients who are making non-concessional (after-tax) contributions to their super and clients who are considering how to maximise their savings for retirement.The calculation of the non-concessional contribution cap is dependent upon the total superannuation balance relative to the limit of $1.6 million and any bring-forward arrangements previously triggered.

 

  1. First Home Superannuation Saver Scheme
    The Turnbull Government has also announced an intention to encourage home ownership by allowing first homebuyers to ‘build a deposit’ inside their superannuation fund. Whilst this announcement has not currently been legislated, it is proposed that individuals, from July 1 2018, can apply to withdraw voluntary contributions made to super after 1 July 2017 for the purpose of a first home deposit. These voluntary contributions of up to $15,000 per year, and $30,000 in total can be released for a first home deposit.

 

These changes to the superannuation system are designed to improve the sustainability, flexibility and integrity of Australia’s super system. Please check to see if you are directly affected and how these changes may allow for you to maximise your savings for retirement. Please consider seeking financial advice from our office.

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Personal Income Tax Changes

The Turnbull Government recently announced a change in the tax threshold from July 1, 2016 that impacts on both individual taxpayers and employers.

For Individual Tax Payers

From 1 July, 2016 for individual taxpayers the marginal tax rate of 37 per cent will start at $87,000 rather than the current $80,000. Individual taxpayers with a taxable income of more than $80,000 will benefit from this threshold change.

The adjusted tax rates table for resident taxpayers is included below, with the changes in bold:

Updated tax rates for resident taxpayers:

Taxable IncomeTax on this income
0 – $18,200Nil
$18,201 – $37,00019c for each $1 over $18,200
$37,001 – $87,000$3,572 plus 32.5c for each $1 over $37,000
$87,001 – $180,000$19,822 plus 37c for each $1 over $87,000
$180,001 and over $54,232 plus 45c for each $1 over $180,000

For Employers

The changes made to the tax thresholds means that for employers the tax tables have changed for employees who earn over $80,000. New tax tables and payroll software updates will apply from 1 October 2016.

Although the threshold change is backdated to 1 July 2016, employers do not need to make any other adjustments or refunds as the ATO will refund any over-payment of tax when employees lodge their 2016-17 income tax return.

All employers, if they haven’t already, should contact their software provider for the relevant payroll software updates or download the latest tax table from the ATO website (ato.gov.au/taxtables).   Please contact our office if you need any assistance with this update.

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