Late Tax Returns

 

Late tax returns

 

Many Australians think it’s too late to lodge a previous year’s tax return. Or they think that, because a few years have passed, they don’t need to lodge anymore.

The ATO is very clear that you have to lodge a tax return for each year that you received any income. The ATO does not just forgive and forget. And the trouble is, if you ignore old late tax returns, you might end up receiving costly ATO fines and penalties.

  • If you have a late tax return, you should lodge it as soon as possible. (The longer you wait, the more chance of an ATO penalty.)
  • If you lodge your late tax return now and you don’t owe the ATO any money, usually they won’t charge any late lodgement penalties*.

It doesn’t matter if you have one late return or a whole bunch of overdue tax returns – the sooner you lodge your returns, the better.

“I don’t have any record of my income for a certain year…”

Have you misplaced your payment summary or group certificate for a particular tax year?

Is that why you have a late tax return?

Don’t worry: We can retrieve your tax records direct from the ATO to help complete your tax return. This can include your payment summary, plus income earned from bank interest and government agencies.
(The ATO already knows a surprising amount of your tax return information before you lodge a return – but you still have to lodge it.)  There is the odd occasion where the ATO will not have your details so speak to us about your circumstances.

Please note: For all late tax returns, we will check information from the ATO. Unfortunately, sometimes the ATO did not receive information from your old employers, etc. Don’t worry, though – we can still help get your return lodged properly.

“But I earned less than under the tax free threshold or no income at all…”

If your income is below the tax free threshold or you had no income at all in any tax year, you are still required to notify the ATO. Instead of lodging a late tax return, you are required to submit a Non-Lodgement Advice. This lets the ATO know that you were not required to lodge a tax return that year.

If you think you are in this category, please contact us. We can check whether you need to lodge a late tax return or a Non-Lodgement Advice and help you get it done. Even if your income is below the tax free threshold there are certain circumstances where you may still be required to lodge an income tax return.

The peace of mind in knowing your tax affairs are up to date can be very relaxing and liberating; it is not hard to get it done so why wait any longer?

“I am afraid of owing the ATO money – I can’t afford to pay.”

When you owe the ATO money, the best thing is to get your late tax returns all up-to-date now, then work with a registered tax agent who can help you arrange a payment schedule with the ATO. The ATO can be very reasonable about payments as long as you get on top of it and are honest with them.

 

PLEASE NOTE:  That registered tax agents are penalised for having clients who have outstanding tax returns and overdue lodgements, The lodgement extension can be lost for all clients and an increase in audits can occur.  In order to protect all our compliant clients we have a policy that we will assist new clients to get up to date however they must remain up to date like the rest of our clients.  We also remind our clients frequently to ensure they lodge on time and those overdue receive warnings, after two strikes we do ask those non compliant clients to find a new accountant.

Posted in Accountant

Wealth Creation for Beginners

Clear all your non-mortgage debts

If you have any credit card or other high-interest debt, pay that off before you even think about saving or investing. Credit cards routinely charge around 20% or more per annum, far more than you’ll ever consistently earn by investing in the sharemarket.

As for your mortgage, it comes with a significantly lower rate of interest. You should of course aim to pay that off quickly, overpaying each month if possible, but even with mortgage-debt you can start investing.

Build your savings

Compare rates and open a high interest savings account. Set up a fortnightly or monthly direct debit or BPAY into your savings account on the same day you receive your regular salary.

Once you’ve got between 3 months and 12 months worth of living expenses built up, (eg. enough to pay the mortgage, electricity, rates, food, the unexpected car service, school fees etc). you can start investing, remembering you should always keep a cash reserve to cover yourself in the event you lose your job, take on a lower paying job, get ill and so on.

Invest regularly in a low-cost index tracking fund

For many investors, saving regularly into an index tracking fund or index tracking ETF is the only investing you’ll ever need to do. (Say some financial advisors – remember to seek professional advice from a licenced advisor)

Like saving into a high interest savings account, set up a fortnightly direct debit or BPAY. You’ll hardly miss the money, and in 20, 30 or 40 years, you’ll be eternally grateful for the wonderful large nest egg your saving and investing will have turned into.

When it comes to index tracking funds, Vanguard Investments has few peers. The US giant, the largest mutual fund in the world, has been operating here in Australian since 1996.

Their Vanguard Index Australian Shares Fund (ASX: VAS) tracks the S&P/ASX 300 index, investing in around the largest 300 Australian companies and property trusts listed on the Australian Securities Exchange (ASX). PLEASE NOTE – this is not a recommendation to go and invest in Vanguard Index Australian Shares Fund. This is purely an example.  You should do your own research and seek the specialist advice of an Financial advisor to determine which product suits your needs.  We can refer you to some registered advisors if you do not already have one.

For many people, especially those looking to invest regularly, this is the only fund they’ll ever need.

The minimum initial investment is $5,000, and additional investments made via BPAY are only $100. Management costs up to the first $50,000 are 0.75%, falling to 0.50% on the next $50,000 and to 0.35% on the balance over $100,000.  There are other funds that have different levels of investments which may be better suited to your needs so please do your research.

Buy individual shares

You might not be entirely satisfied with investing in an index tracker alone.

Firstly, if you want to beat the returns of the index, and it is possible to do so, you’ll need to look outside a tracker.

And secondly, we suspect you’ll find it’s challenging, fun and hopefully ultimately rewarding by investing in individual companies.

Again you may not feel comfortable in doing this by yourself and an share broker can assist you with recommendations, and purchases and sales.  A financial advisor can also assist you.

So there you have it. A simple and hopefully very effective plan for you to generate wealth, over the long-term.  Give us a call for a referral to a financial advisor , we have a couple of advisors that we have experience in dealing with that we would be happy to refer you to.

Posted in Investments

What happens to your assets if your beneficiary goes bankrupt? – Bryan Mitchell

Using a Testamentary Discretionary Trust Bankruptcy is a very real possibility for anyone in business, even as fears about a slowdown in China, the over-heated property market and fluctations in the stock market abound. While many canny business people structure their current circumstances to avoid losing assets in the event of bankruptcy, very few have given thought to what might happen if one of their adult children goes bankrupt. What happens to your assets, if left to a bankrupt child in your will?

Those assets are lost to your child’s creditors.

But there is a way of planning for this possibility.

A testamentary discretionary trust is a type of trust created under a will, comes into existence only upon the administration of the deceased estate and has four elements: the trustee(s), the assets, the beneficiaries and the discretion.

One of major advantages of using a testamentary discretionary trust is for asset protection. There are three examples assets can be protected.

Bankruptcy

Consider this scenario: you have retired after a lifetime of work, and you have your home, your super, and some investments. You’d like to pass on these assets for your son’s benefit and the benefit of his children.
Your son is a successful businessman, but the GFC hit him hard. He lost revenue and staff, and now the banks are closing in, threatening to sell off his assets to repay their debts. If you were to die, and your will passes your assets directly to your son, your assets could be used to satisfy your son’s creditors.
Section 116 of the Bankruptcy Act 1966 says that when someone becomes bankrupt, all property vests to the trustee in bankruptcy.
But S116 (2)(a) adds that this does not extend to property held in trust for another person.

A better approach is to use a testamentary discretionary trust to be created to come into effect upon your death. The trust will own the assets rather than passing directly into the name of your son. Making your son a beneficiary of the trust means that he can obtain the benefits of the assets held in trust without the risk of owning the assets outright.
If Sam goes bankrupt, the creditors can’t place a claim on the assets in the testamentary discretionary trust.

This part of the law is extremely complex. Simply creating a testamentary discretionary trust will not solve the problem. The trust must be structured in a certain way, and tailored to meet the client’s specific circumstances. If the trust is properly structured and carefully planned, none of the beneficiaries has an absolute entitlement to capital or income, and for a trustee in bankruptcy to say otherwise would then impact on the rights of other potential beneficiaries.

High-Risk Professions

Because a testamentary discretionary trust is the legal owner of the assets, rather than a person, it is highly attractive to beneficiaries who are at risk of being sued, such as solicitors, doctors, company directors and business owners. Any legal action against them personally cannot take the assets of the trust, which protects the assets for future generations. It is common for such professionals to take care not to own assets in their own names throughout their career, but what about the people they might receive an inheritance from?

Alan is a financial planner in a partnership of four. A regular audit discovered that one of his partners has been conducting business dishonestly, investing funds on behalf of clients that the clients did not authorise. A group of clients launches legal action against the partnership for damages.  Fortunately Alan owned very little in his name, preferring to keep assets well out of his (and his creditor’s) legal reach. However, when his father died in the same year, his strategy fell apart. His father had made no provisions in his will to take into account Alan’s risk of being sued. The assets were inherited in Alan’s name, and used immediately to satisfy his creditors. Rather than his father’s assets being used for his family’s benefit, they were lost.

A testamentary discretionary trust established by his father would have avoided this scenario. The assets would have been owned by the trust and the creditors would not have been able to touch them. This is a what-if scenario rarely considered by someone who doesn’t know succession law thoroughly.

Spendthrift

Finally, a testamentary discretionary trust can be used to protect assets where a family member has a vulnerability. Inheriting a chunk of assets or money is not always in the best interests of a beneficiary, and a trust can distribute income or capital with discretion not available under a normal will.

An example would be for a child with a gambling problem. Rather than receiving his share of the estate in one big transaction, a trust can distribute an income stream or small capital distributions so that the gambler can’t lose the assets. In this way, assets can be protected from his compulsion for the benefit of his children or other family members.

Bryan Mitchell is an Accredited Specialist in Succession Law (Qld).

Posted in Asset Protection

Superannuation Guarantee and excess contributions

As an employer, you are required to pay compulsory superannuation to provide for the retirement of your employees and some contractors. The minimum super guarantee payable is currently 9.5% of an employee’s ordinary time earnings (i.e. their ordinary hours of work, including commissions, shift loadings and allowances but not overtime payments).

The super guarantee must be paid at least four times during the year, on the 28th day of the month following the end of each quarter (e.g. super accrued for the July to September 2015 quarter must be paid to the employee’s superannuation fund no later than 28th October 2015).

Failing to pay the superannuation by the due date will result in your business being denied a deduction for that expense. This can significantly increase the tax liability of your business.  Furthermore, failing to pay by the due date requires you to submit documentation by no later than 28 days after the due date for the late paid superannuation with an admin fee and interest on the superannuation components.  If you are severely behind in the superannuation, the ATO can come after you personally for the unpaid superannuation.

There are certain circumstances where you are NOT liable to pay super on an employee’s wages, these being:

  • If the employee earns less that $450 in a calendar month;
  • If an employee is under 18 years old and works less than 30 hours per week;
  • If the employee is a private or domestic work (e.g. a nanny, housekeeper or carer) and works less than 30 hours per week;
  • Non-resident employees you pay for their work outside Australia;
  • Some foreign executives who hold certain visa or entry permits;
  • Employees under the Community Development Employment Program;
  • Members of the army, naval or air force reserve for work carried out in that role;
  • Employees temporarily working in Australia who are covered by a bilateral super agreement.

You have to pay super guarantee for contractors (even those who have quoted an ABN) if:

  • Their contract is wholly or principally (i.e. more than half the dollar value of the contract) is for their labour;
  • For their personal labour and skills, and not to achieve a result. This may include physical labour, mental effort or artistic effort;
  • To perform the contract work personally (i.e. they must not delegate the work to someone else).

Excess Concessional Contributions Assessments

The contributions made into superannuation are subject to certain annual contribution caps. These are dependent on the age of the member and also the type of contributions being made. Exceeding these caps can result in significant tax consequences, as the additional contribution amounts are taxed at the top marginal tax rate, currently 49%.

The most common instance where we see employees incur an Excess Concessional Contributions Assessment is where their employer has failed to make their compulsory superannuation guarantee contributions for several years and then pays the outstanding amounts into an employee’s superannuation fund in one lump sum. This can result in the employee having to pay the excess contributions tax. Where the contributions actually related to a prior year, the employee can apply to the tax office to have these contributions “reallocated” to the year to which they related. Generally, the employee is required to pay the additional tax up front to the tax office and then if their application for reallocation of the contributions is successful, the ATO will refund the tax amounts. This process can take some time and in some instances our clients have waited 6 months for the additional tax amounts to be refunded to them. This can be a significant burden for the taxpayer, given that they have no control over when their employer pays their superannuation or if they pay it on time.

It is therefore important that employers are paying their employee superannuation contributions in a timely manner. Employees should also be checking their superannuation accounts regularly and following up with their employer if contributions have not been made.

Plant and Associates Pty Ltd

07 5596 5758

www.plantandassociates.com.au

Posted in Super, Tax, Tax Minimisation Tagged with: ,

Intellectual Property

Intellectual Property

Intellectual property (IP) refers to creations of the mind such as inventions, literacy and artistic works, designs and symbols, names and images used in work.  It includes all types of identifiable intangibles that are protected by legal rights. Eg Copy rights, Patents and Trade marks.

The economic value of IP is based upon the following concepts:

  • Monopoly rights provided to the owner
  • Provides a discernible economic advantage to the holder
  • Is often not considered to be an asset by financial institutions

It is important to protect your IP by seeing an solicitor who specialises in IP protection.

Posted in Accountant, Asset Protection, Super, Tax, Tax Minimisation Tagged with: ,

Fleet and Asset Management

When people think of technology they think of computers and phones.  But there is so much more.  Smarter Technology Systems offers innovative solutions across a number of industries.

Retail

• Stock Management and Ordering.
• Digital analytics.
• Automated Checkout and Payment.
• Store Layout Optimisation.
• Stock Management and Ordering.
• Proximity Based Advertising.
• Digital Signage.
• Wayfinding.
• Asset Management.
• Fleet Management.
• Utilization Management.

Transport and Logistics
• Scheduling and Route Planning.
• Fleet tracking and predictive maintenance.
• Safety and Security.
• Fleet Tracking.
• Asset Tracking.
• Utilization Management.
• Supply Chain Management.
• Real-Time Item Tracking.
• Yard Management.

This is just two of the industries.  check out their website for more information about what they offer and how they can help your business.  www.smartertechnologysolutions.com.au

Smarter Technology Solutions (STS)
Brisbane Technology Park (BTP)
Level 1, 7 Clunies Ross Court
Eight Mile Plains QLD 4113

Telephone: +61730406787
E-mail: info@smartertechnologysolutions.com.au

Posted in Accountant, Asset Protection Tagged with:

Claiming Website Costs

More small businesses are using a website to reach their customers. We understand how important this investment is for growing your business. If you pay for a website for your business, here are some things to remember about claiming the costs so you don’t miss out.

Claiming website costs

If you spend the money before your business starts, you claim the costs over five years once you start operating.

If you spend the money after your business starts, there are different ways of claiming a deduction. Depending on the cost, you’ll either be able to claim the full deduction in that year, or you’ll need to claim it over a number of years.

Claiming ongoing running and maintenance costs

You can also claim an outright deduction for some ongoing expenses associated with running and maintaining your website, such as domain name registration fees and server hosting costs.

Stay tuned

A public ruling on claiming website costs is under development

Plant and Associates Pty Ltd

07 5596 5758

www.plantandassociates.com.au

Posted in Accountant Tagged with:

Thinking of importing and/or exporting goods or services?

If your business imports or exports it’s important that you’re aware of your responsibilities when it comes to GST. This means you’ll get your BAS right, which can save you time and money.

GST and exporting

Exports from Australia are generally GST-free, but be aware of special conditions. For example, if you don’t receive payment for your exports within 60 days, then GST could be charged.

GST and importing

If you’re importing, you’re generally required to pay GST. The GST payable is 10% of the value of the taxable importation. It’s usually paid to the Department of Immigration and Border Protection (formerly the Australian Customs and Border Protection Service) before the goods are released.

If you’re registered for GST, you may be able to claim a credit for any GST you pay on those goods.

So take the time to understand your GST responsibilities before you begin importing or exporting – this will help you get things right from the start.

Posted in Accountant, GST Tagged with: , ,

How to Calculate unit production costs

Many small businesses fail to calculate the cost of producing each new unit they sell, making it almost impossible to accurately determine profitability.  In this article we look at what you need to think about when calculating your cost per unit.

The most common mistake when calculating unit costs, is not including an allowance for the owners salary and super contributions in the overheads.  The formula is total fixed costs plus total variable costs divided by total units produced.  (In simple turns ALL COSTS divided by units produced).

Remember that the fixed costs per unit will decrease the more units you create.  For instance your variable cost may include rent.  (Unless you are in a shopping centre where your contract indicates you pay additional rent on turnover over a certain value then the costs stay the same no matter how many units you create.  (Your rent can increase however if you outgrow the premises).  Variable costs are items that increase the more you produce, for example the materials and packaging for your products.

When calculating your expenses, don’t miss a thing otherwise your profit margin will not be correct.  Allow for taxes, delivery fees, warehouse storage, bank fees and interest, staff wages, payroll tax, and superannuation.  Another cost most people miss is the cost of acquiring customers, advertising and samples.

Having a clear understanding of your unit costs, enables you to create business strategies that help you grow your business profitably.

Posted in Accountant Tagged with:

How to retire comfortably

The following general rule of thumb can be followed, however each individuals situation is different and you really should seek appropriate personal advice:

If you wish to retire on $65,000pa you will need $1.625 million capital as a minimum by retirement at age 65.  (Assuming 25years of retirement)

Age 20 – 30

How to get there

  • Aim to contribute 10% of your gross salary to super over the long term
  • Get onto the property ladder first
  • Build good savings habits
  • Seek financial advice
  • Make sure you know the hidden traps of your super and remember super is not just about the fees – you need to get your investment right.

How to make it last

  • Check the fees and insurance premiums you are paying
  • Retire with no debt on your home
  • Once you have a property under your belt, start thinking about contributing more to super
  • Learn to live within your means
  • Save your next pay rise
  • Know how your super is invested
  • Remember that super is a tax system, not a product, and what you do with it is your choice.

Age 30 – 40

How to get there

  • Have a written plan
  • Pay off your mortgage as quickly as possible
  • Use free cash flow to salary sacrifice
  • Make smart asset-allocation decisions within your super
  • Maximise your personal super contributions as retirement approaches

How to make it last

  • Monitor your super fees
  • Live to a budget now and stick to it even as your reduce your mortgage
  • Consider transitioning to retirement via contract or part time roles to extend your working life
  • Encourage good financial habits in your older kids by charging them board
  • Use proceeds from downsizing to top up your retirement savings.

Age 40 – 50

How to get there

  • Have the higher income earner salary sacrifice up to the maximum concessional contribution limit
  • Have the higher income earner start a savings plan in the lower earning spouse’s name through a family trust

How to make it last

  • Draw a pension at the minimum level.  At 65 this is 5% of the super balance.
  • Invest in an appropriate manner.  This means long term stable investments that can produce a 7% earnings rate not just for the 20 years leading into retirement but throughout the rest of their lives.
  • Keep some savings in cash.  At retirement, have sufficient secure investment buckets either in cash or term deposits to cover pension payments for up to 5 years.  This means that if there is a downturn in share market, you do not need to sell the shares.

Age 50 – 60

How to get there

  • Salary sacrifice pre tax income to super
  • Make post tax contributions to super from surplus cash flow or savings
  • Commence super income streams (Transition to retirement pension)
  • Enhanced structuring and use of super income streams
  • Accumulate wealth in the concesionally taxed super environment
  • Increase exposure to capital growth assets including Australian and international shares and property inside or outside super
  • Accelerate debt reduction or decelerate debt reduction depending on individual circumstances (sometimes redirecting cash flow from debt repayment to other objectives can provide a net wealth benefit.
  • Borrow for investment should the capital objectives not have a high probability of being achieved and the risk profile affords this strategy.

How to make it last

  • Preserve the capital for the long term and resist spending too much on lifestyle
  • Review financial situation annually to work out entitlements to the age pension
  • Consider longevity risk
  • Keep the correct asset allocation for annual draw down requirements
  • Have sufficient capital in defensive assets to be able to meet pension payments throughout the cycle of a market downturn to help protect the portfolio over the long term
  • Have a trusted advisor to help you negotiated the investment market cycles and social security landscape.
Posted in Accountant, Retirement