Mogg Osborne Pty Ltd 2014 Year End Reminders and Obligations Another financial year is about to finish! As a business owner, there are many obligations that you need to consider and action over the next few weeks. We have outlined some of these below to assist you. Key 2014 Year End Reminders Date Before 30 June 2014 1 July 2014 14 July 2014 or before 21 July 2014 28 July 2014 14 August 2014 or before Action Required Ensure your employee superannuation payments are received and allocated by your employees super fund prior to 30 June 2014 to ensure a tax deduction for this year. Keep in mind that close to 30 June Superannuation Funds are inundated with contributions, so allow plenty of time for this to happen. Any payments made between 1 July 2014 and 28 July 2014 will count towards your Superannuation Guarantee requirement but will not be tax deductible until the 2015 financial year. If you operate through a trading company, review shareholder loan accounts and make minimum loan repayments. If you operate through a discretionary family trust ensure that a Trust Distribution Resolution for each Trust is signed by 30 June 2014. Review the Tax Planning Tips attached, to reduce your tax prior to 30 June 2014. If the Small Business Entity rules don t apply to you carry out a stocktake by 30 June 2014. Superannuation guarantee rate increases from 9.25% to 9.5% Employees aged 70 and over are entitled to superannuation guarantee contributions. Record Motor Vehicle odometer readings Provide 2014 PAYG Payment Summaries to all employees Taxable Payments Annual Report due for lodgement with the ATO. Quarterly Superannuation contributions due for employees (for the period 1 April 2014 to 30 June 2014). THIS IS A KEY DEADLINE! (Note: If you fail to meet your requirements by 28 July 2014, you must complete a Superannuation Guarantee Charge Statement and forward it to the ATO together with underpaid superannuation plus administration fees and interest by 14 August 2014. Superannuation Guarantee Charge payments are NOT tax deductible.) Lodge your 2014 Annual PAYG Payment Summary Statement with the ATO. Penalties apply for late lodgement.
2014 Year End Reminders and Obligations Page 2 NEW Superannuation Rates Have you updated your Payroll Systems? From 1 July 2014, employers need to increase the minimum rate for superannuation guarantee contributions from 9.25% to 9.5%. This rate is proposed to increase in future years as well. Note: If you use the XERO online accounting and payroll system, you do not need to update the superannuation rates, since XERO will automatically do this for you on 1 July 2014. Another great reason for using XERO! Deadline for 2014 PAYG Payment Summaries You need to provide your 2014 PAYG Payment Summaries to your employees and other workers by 14 July 2014. Action Step: If you have any doubt about how to correctly complete your 2014 PAYG Payment Summaries, please contact us for assistance BEFORE you prepare them. Building and Construction Industry Reporting From 1 July 2012, new tax reporting rules applied for businesses in the building and construction industry. Businesses have to lodge an annual report with the ATO setting out details of payments made to contractors. This will assist the ATO to reduce the cash economy by ensuring tax is paid on all income including cash payments. You should have been recording for the financial year, the following details of all payments made to contractors from 1 July 2013 for building and construction services: The ABN of the contractor The name and address of the contractor The gross amount paid for the financial year, including GST The total GST included in the gross amount paid If you use computerised accounting software, your system should be able to track this information for you and prepare the required Taxable Payments Annual Report. Action Step: Ensure that you lodge your Taxable Payments Annual Report with the ATO no later than 21 July 2014. Payroll Tax Payroll tax applies to all entities that have an Australian payroll that exceeds state-based limits. The limits and rates applicable to each state for the 2014 year are as follows: Victoria: 4.9% of the excess of Annual Gross Wages over 550,000 or Monthly Gross Wages of 45,833. NSW: 5.45% of the excess of Annual Gross Wages over 750,000.
2014 Year End Reminders and Obligations Page 3 You should note that in addition to normal salaries and wages, the following items are generally also included in payroll expenses if payroll tax applies: fringe benefits based on the grossed-up taxable value of fringe benefits; all employer contributions to superannuation on behalf of employees; and some contractor or sub-contractor fees. For more detailed information about whether payroll tax applies to your business, or for other States thresholds, please contact our office. Action Step: The Annual Return/Reconciliation for payroll tax must be lodged by 21 July 2014 with your State Revenue Office. WorkCover/WorkSafe Your WorkCover/WorkSafe insurer sends an annual reconciliation to all registered employers at the end of the financial year. In completing your annual reconciliation, you will need to include the following items in addition to normal salaries and wages: fringe benefits based on the taxable value of fringe benefits (do not gross-up); all employer contributions to superannuation on behalf of employees; and some contractor or sub-contractor fees. For more detailed information about what items to include in the reconciliation statement, please contact our office. Once the reconciliation is received and processed by your WorkCover/WorkSafe insurer, you will be issued with a final assessment or a refund depending on the instalments you have paid during the year. Action Step: Complete and lodge the Annual Reconciliation with your WorkCover/WorkSafe insurer by the due date. Goods and Services Tax (GST) A reconciliation of GST should be performed as at 30 June 2014 to determine if there has been an under or over-payment of GST in the 2014 tax year. If a discrepancy has arisen, then it is possible to amend a subsequent Business Activity Statement (BAS) to rectify the error, however there are limits imposed on adjustments that can be made in this way. Income declared on your BAS should be reconciled to income declared on your income tax returns. Also, please note that you are required by law to substantiate all Input Tax Credit claims with a complying Tax Invoice, and you need to retain these documents for a minimum of 5 years. Action Step: Complete the annual GST reconciliations, and check that you have all required tax invoices and other supporting documents.
2014 Year End Reminders and Obligations Page 4 ATO Audit Activity Please note that the ATO and State Revenue Office are constantly increasing their audit activities. In particular, there has been an increase in audit activity for PAYG Withholding, Payroll Tax, WorkCover, GST, Division 7A loan accounts from companies, and Trust distributions from Discretionary Trusts. We are able to offer a review of your records and record-keeping procedures if you are concerned about your ability to satisfy an audit. Action Step: Please contact our office if you would like to request this service. Super Co-Contribution A super co-contribution of up to 500 is paid by the government if you make a nonconcessional contribution to your superannuation fund and your income is less than 48,516. You will receive the full 500 amount if your income is below 33,516 and it is reduced by 50cent per dollar above this amount. If you made a contribution in the 2013/14 year, please check your Super statement to ensure the ATO has paid the co-contribution. If the co-contribution amount has not been paid and you believe you are entitled to it, please contact your client manager for assistance. ATO Payment Arrangements Recently we have been advised by the ATO that they are starting to decline Payment Arrangements for clients who have defaulted on their arrangement, or who continuously make payments arrangements for each debt they incur. It is important where possible that your debt to the ATO be paid on time and that Payment Arrangements with the ATO are kept to a minimum for times of hardship. Whilst we will do everything in our power to ensure you are granted a payment arrangement should you require one, unfortunately with the ATO s current harsher stance on debt collection arrangements, we cannot guarantee we will be successful in obtaining the payment arrangement in every single instance. Last Minute Tax Minimisation Tips Attached is a listing of ways to reduce your tax for 2014. Please contact our office if you need clarification on topics or issues listed. Don't forget, the Mogg Osborne Pty Ltd Team are available all throughout the year to assist you with any accounting, taxation, and financial planning requirements. We're here to help you! Kind regards, Mogg Osborne Pty Ltd
2014 Year End Reminders and Obligations Page 5 1. Deferral of Income Defer sales until after 30 th June. 2014 Tax Planning Tips 2. Accelerate Expenses Make tax deductible expense payments before 30 th June. e.g. repairs, maintenance, gravel for driveways, stationery, and consumables. 3. Prepayments (SBE s) Businesses with turnover less than 2 million may prepay leases, rent, insurance, rates, fuel, fertilizers, fodder, chemicals etc. 4. Wages to Children Each child can be paid up to 20,370 pa in wages and pay no tax (if this is their only income). These must be commercially realistic and be paid before 30 th June into the child s bank account. 5. Superannuation Maximum Deductible Amounts per person (age on last day of the financial year) AGE MAX 58 Years & Under 25,000 59 years & over 35,000 @30/06/2013 Superannuation funds pay contributions tax at only 15%. 6. Bad Debts If you have bad debts or likely bad debts make sure these are actually removed from your debtor s records at 30 th June. 7. Lease Plant & Equipment (SBE s Only) If plant & equipment is required before 30 th June, then finance by lease, with a large (say annual) lease payment due before 30 th June. 8. Negative Gearing This involves borrowing a sum of money to purchase assets (i.e. property, shares etc) and prepay the interest on the borrowing before 30 th June. 9. Tax Schemes Beware of quick fix tax schemes. At a very minimum the investment proposal should be accompanied with a Tax Office Product Ruling. The investment proposal should make some profit regardless of the tax benefits.
2014 Year End Reminders and Obligations Page 6 10. Travel Allowance (see Reasonable Travel Allowances) If you are employed by your own company or trust and you are required to travel overnight for business, then you should pay yourself a Travel Allowance. No substantiation (i.e. receipts) is required if the claim does not exceed what the tax office considers reasonable. The tax office considers 291.85 per day per person reasonable for Melbourne and 219.80 for Country areas. 11. Plant Costing Less Than 1,000 Small businesses can claim a 100% tax deduction for plant items costing less than 1,000. 12. Farm Management Deposits (FMD) (Primary Producers Only) Funds are placed in an FMD with a bank and a tax deduction is gained for the deposit. The funds must be invested for a minimum of 12 months. When the funds are withdrawn, the amount of the withdrawal is included as assessable income and taxed in the year withdrawn. 13. Obsolete Stock When doing your stock take at year-end, consider valuing old/obsolete stock at its market value (possible zero!!). 14. FBT Exempt Items ( mainly used for business ) Employers are able to provide employees with a Laptop Computer and claim a full tax deduction. Also PDA, Mobile Phone, Brief Case, Tools of Trade. 15. Capital Gains Tax Strategies If you have capital gains and unrealized capital losses, consider realizing (selling) these losses to offset against the gains made Defer disposal to next year but remember the date of disposal for CGT is the date of contract signing NOT settlement date Defer a disposal to ensure the asset has been held for at least 12 months 16. Super Co Contribution If your total income (taxable + fringe benefits +Reportable Super) is less than 48,516 and you make a personal contribution into a complying superannuation fund then you may be eligible for the government co contribution. The maximum co-contribution (500) is available when total income is less than 33,516 and you contribute at least 1000. This also applies to Self Employed people and children earning an income 17. Minor Fringe Benefits Fringe benefits given to employees on an irregular and infrequent basis costing less than 300 are deductible to the employer and FBT Exempt. This could include things such as concert tickets, clothing vouchers, gym subscriptions etc up to the value of 300. 18. Conservation Tillage refundable tax offset. A 15% tax offset is available for no-till seeders used for conservation tillage farming practices. The seeder must be in use between the 1 July 2012 30 June 2015 to be eligible.
2014 Year End Reminders and Obligations Page 7 TAX RATES 2013-14 Taxable income Tax on this income 0-18,200 Nil 18,201-37,000 19c for each 1 over 18,200 37,001-80,000 3,572 plus 32.5c for each 1 over 37,000 80,001-180,000 17,547 plus 37c for each 1 over 80,000 180,001 and over 54,547 plus 45c for each 1 over 180,000 The above rates do not include the Medicare levy of 1.5% Reasonable Travel Allowances 2013-14 Table 1: Employee's annual salary - 108,810 and below Place Accomm. Food and drink B'fast 24.90 Lunch 28.00 Dinner 47.75 Incidentals Total Adelaide 157 100.65 18.20 275.85 Brisbane 201 100.65 18.20 319.85 Canberra 168 100.65 18.20 286.85 Darwin 202 100.65 18.20 320.85 Hobart 132 100.65 18.20 250.85 Melbourne 173 100.65 18.20 291.85 Perth 233 100.65 18.20 351.85 Sydney 183 100.65 18.20 301.85 High cost country centres Tier 2 country centres (see Table 5) Other centres country See Table 4 132 B'fast 22.30 Lunch 25.45 Dinner 43.85 110 B'fast 22.30 Lunch 25.45 Dinner 43.85 100.65 18.20 Variable - see Table 4 18.20 241.80 18.20 219.80 Other items to consider are; - Life Insurance -consider paying via Super - Prepay income Protection Insurance - Home loan refinance Debt Recycle Strategy - Consider Transition to Retirement Income Streams this year and for future years. The advice provided in this fact sheet by Mogg Osborne Pty Ltd, is not to be relied upon without consultation with your Accountant. Please seek advice before implementing these strategies to ensure you use the correct strategy for your circumstances to result in the best possible outcome.