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Firm Journal

2 August 2021

When Does A CGT Concession Or Exemption Apply To Your Small Business?

Small businesses are facing a set of challenges once again that can make fulfilling tax obligations seem like a daunting task. However, as a small business, capital gains tax concessions on assets used to conduct your business may be of interest to you. These assets are known as “active assets” and can, for example, be a tangible asset (such as commercial property), or an intangible asset (such as goodwill).

The turnover threshold for such CGT concessions is $2 million, according to the ATO.  If your turnover is more than $2 million, then you need to satisfy an assets test.

There are stringent eligibility requirements and conditions that you must meet in order to access these concessions.

If you have owned an active business asset, you may only be required to pay tax on 25% of the capital gain when the asset is disposed of.

If you are 55 years of age or older, and are retiring or are permanently incapacitated (and have owned an active business asset for at least 15 years), you may not have to pay any CGT when disposing of an asset by sale, gift or transfer. You might also be able to contribute the amount that you make from this exemption to your super fund without affecting your non-concessional contributions limits (you can speak with us about this if you are unsure about this process).

If you are under 55, the taxable 25% of the disposal of an asset can be paid into a complying fund or a retirement savings account. There is then a full CGT exemption on the sale of an active business asset of up to $500,000 (the lifetime limit). Any amounts earned from this exemption to CGT may be able to be paid into your super fund without affecting the non-concessional contributions limit).

Disposing of an active asset, but are going to buy a replacement asset or improve on an existing one? You can defer your capital gain in this instance until a later year. The replacement asset can be acquired one year before or up to two years after the last CGT event in the income year that you choose the roll-over for.

If the asset is a share in a company or an interest in a trust, there will be additional conditions that you will be required to meet as well. If you are a small business, there are other CGT exemptions, rollovers and concessions specific to small businesses that you may be able to access, if you meet the eligibility criteria. These small business CGT concessions will reduce the taxable capital gain and in some cases result in no tax being paid at all on the gain.

Speak with us to find out what you may be entitled to when it comes to CGT and your business to ensure that you are doing the right thing with your tax obligations after selling an asset.

27 July 2021

The Pros & Cons Of A Partnership As A Business Structure

If you’re looking to go into business with someone, the chances are that you might be looking at using a business structure known as a partnership. A partnership is a type of business structure that is made up of two or more people who distribute income or losses between themselves and is a fairly popular form of structure amongst those looking to develop a business.

It offers ease and flexibility to run your business as individuals, eliminates the need to create a company structure and avoid reporting obligations. You’re also not going into creating a business by yourself, which can be an added bonus for some and reduces some of the initial financial burden and uncertainty of the setup.

Just as there are advantages to choosing to set up a partnership, one must also examine the disadvantages.

A partnership generally exists between two or more parties, so disagreements in management may occur, and decision-making may never be truly equal. It can be difficult to add or remove partners into and out of the partnership, and adding more partners can make the partnership more complex to manage.

Partnerships also generally do not receive access to many government grants (barring special exemptions).

A partnership business structure may be the structure for you to employ as they possess the following key elements:

There are three main types of partnerships that you may have come across in your own research. Each one has advantages and disadvantages that you may want to take into account when considering what would be the best suited to your situation.

A general partnership is where all partners are equally responsible for the management of the business. For any debts and obligations that may be incurred by the business, each partner has unlimited liability for them.

A limited partnership is made up of general partners whose liability is limited to the amount of money that they have contributed to the partnership. Those involved in this style of partnership are known as limited partners who are usually passive investors without a role to play in the day-to-day management and running of the business.

An incorporated limited partnership is where the partners involved in this type of partnership can have limited liability, but at least one general partner must have unlimited liability. If the business cannot meet its obligations, that general partner (or partners) become personally liable for the shortfall and debts.

Each state and territory has different legislation and regulations that must be abided by when setting up a partnership. Learn what is legally required from you prior to setting up your partnership, or discuss with us what you may be obligated to do.

9 July 2021

Should You Join An Employee Share Scheme?

Known as an employee share purchase plan, share options or equity scheme, employee share schemes are used to attract, retain and motivate employees. Schemes can vary depending on the company (and the terms of the scheme can differ depending on the company) so it is important to consider carefully what the pros and cons are before becoming involved in an employee share scheme

Employee share schemes are designed so that you can receive or buy shares in the company that you work for. Often those shares are available to you at a discounted rate from what is currently the market price. Employee share schemes are a great way to reward or remunerate employees for their work. They also incentivise employees to stay with your company for longer and share in its success

There are different ways of paying for shares, such as:

You may be able to receive shares as a performance bonus or as remuneration instead of a higher salary. In a large company, this may come as “ordinary shares” which give an equity investment, but in a smaller company, you may only receive dividends.

Each share scheme is different, so look at the terms and conditions of the offer. Check:

8 July 2021

Your Future, Your Super – What Does This Mean For Your Superannuation?

There has been a shakeup within the superannuation industry after the latest government reform passed through the Senate. You may have heard of Your Future, Your Super, which was introduced during the Federal Budget announcements of 2020-21, and wh

Your Future, Your Super was introduced during the Federal Budget 2020-21 announcements as a reform measure to address growing concerns about the performance of the superannuation industry. 

 

Under the reform, superannuation funds will now face an annual performance test, public ranking by the Tax Office and the loss of an easy source of new members. 

One of the most notable changes that have been introduced (as of 1 November 2021) is that Australians will no longer be required to fill out paperwork to avoid getting a new super fund when they switch jobs. 

This measure has been designed to reduce the prevalence of unintended multiple superannuation accounts. The onus will be on the employer to check with the ATO if their employee has an existing super account, known as a ‘stapled super fund’, to pay the employee’s super guarantee into. 

Super funds will also be subjected to a new annual performance test run by the Australian Prudential Regulation Authority (APRA), and underperforming products (those who show returns below 50 points ) will be labelled as underperformers. If your super is sitting in a dud fund and your nest egg is in an underperforming product, the trustees will be required to notify you within 28 days. Funds that fail the test twice in a row could be blocked from taking on new members. 

 Worried about how your superannuation fund may be performing, and not sure who to ask? Come have a chat with us.

6 July 2021

Do You Need A Receipt For That Claim? ATO Cracks Down On Work-Related Expenses

The ATO is warning those submitting their tax returns this year to take care when submitting ‘other’ work-related deductions to claim back, as they are closely scrutinising. If you are planning on claiming work-related deductions this tax return season, you will need to show:

 

To ensure that you remain compliant with your tax obligations when claiming work-related expenses, you should ensure that you have access to all of the relevant information that you will need to prove that the amount being claimed is eligible as a deduction. 

Here is a guide as to what we will require from you to prepare your income tax return. Please note that these documents may not apply or be needed by everyone.

Income

To prove income, you will need to give us evidence of the following: 

 

Work-Related Expenses 

You will need to provide us with documentary evidence of the following to claim these as deductions:

5 July 2021

Choosing A Structure For Your Business: The Co-Operative Explained.

Sometimes you might want to set up a structure where you will share in the spoils with everyone that deals with that structure.  There is a specific type of structure for this and it is known as a Co-Operative

 

A co-operative business structure (or co-op) is a legally incorporated business entity that is designed to serve the interests of its members. Co-operatives may be profit-sharing enterprises or not-for-profit organisations. 

 

A cooperative business serves members by providing goods and services that may be unavailable or too costly to access as individuals. There are two types of cooperatives that businesses can be set up as.

 

Distributing cooperatives are able to distribute any annual profits to members of the cooperative. They are required to share the capital that they make, and members of this type of cooperative must own the minimum number of shares specified in the co-op’s rules.

 

Non-distributing cooperatives cannot share their profits with members of the cooperative. All profits must further the cooperative’s purpose, and the cooperative may or may not issue shares to the members. Members may be charged a subscription fee if there is no share capital

 

Some popular cooperatives business structures include: 

30 June 2021

ATO Says Different Payments Will Have Different Tax Treatments.

The ATO is looking to make tax season a little bit easier this year, particularly in light of the unique but significant challenges that Australians have been facing over the last year, and are continuing to face. If you received a financial assistance payment, grant or scheme package during the 2020 financial year, you need to be aware of your taxable requirements. There are different tax treatments for different payments that you may have received. 

 

Jobkeeper

Payments that were received from Jobkeeper as an employee will be automatically included in your income statement as either salary and wages, or as an allowance. Sole traders who have received a Jobkeeper payment on behalf of their business will need to include the payment as assessable income for the business.

 

Jobseeker

All information will be included in your tax return (in the Government Payments & Allowances question) when ready. Lodging your return prior to the information being available will require you to add it yourself. Leaving out income will slow your return, so it is important to ensure that you have all of the information when lodging.

 

Stand Down Payments

If you were the recipient of a one-off or regular payment from your employer after being temporarily stood down due to COVID-19, these payments will be automatically included in your return as they are taxable. 

 

COVID-19 Disaster Payment For People Affected By Restrictions

The Australian Government (through Services Australia) COVID-19 disaster payment for those who were affected by restrictions is a taxable payment. This must be included when lodging your tax return.


Tax Treatment Of Other Assistance Payments

The tax treatment of other assistance payments may vary according to what is required and how the income is assessed as. It is best to double-check on the ATO’s website directly to determine how different disaster payments may impact your return. 

 

Early Access To Superannuation

If you received early access to your superannuation under the special arrangements resulting from COVID-19, you do not need to declare that amount in your tax return. Any eligible amounts withdrawn under this program are tax-free.

 

If you require assistance with determining what is taxable income and what is not, or you’re not sure what payments that you received may be applicable to the ATO’s different tax treatments, come speak with us. We’re here to help. 

29 June 2021

Planning Out Succession For Your Family-Run Business

Family-run businesses form an essential part of the economy. Tradition, success and history along with their unique dynamic can create a thriving business that many may wish to see continue.

 

 However, as with any business, the conversation about succession and how to continue the business into the future needs to be had. 

 

With only 1 in 4 family-operated businesses considering their approach to succession formally, succession in a family business is one of the greatest viability risks to the actual business and needs to be addressed accordingly.

 

Every family and family-run business is unique, and every transfer or succession of a family business will also be executed differently. If you are thinking about what your family business’s plan is for succession, you may want to consider keeping these critical factors in mind:

 

 

A succession plan for a family business needs to be created to move forward and should detail all of the actions you intend to take (including the steps involved with both management and ownership succession). 

 

It needs to be flexible, adaptable and ready to evolve, as businesses (as well as families), change over time. Your succession planning process should be transparent and understand and align with the goals you have set out for the business’s further development across the generations. 

 

The most effective succession plans:

28 June 2021

Recent Changes To Your Superannuation That You Need To Know

There were a few changes to superannuation that were passed by the Senate recently.

 

You can now use the bring-forward rule to make three years’ worth of non-concessional contributions (where you don’t claim a tax deduction) up until the age of 67.  

 

Last year the rules had changed to permit a person to make non-concessional contributions up to the age of 67 but the use of the bring forward rule had stayed at an age limit of 65 years old, as it required a full Bill to be passed by both Houses of Parliament.  

 

This new age limit will apply to contributions made on or after the 1st July 2020.  This is particularly good news for people that turned 67 during the year and utilised the three year bring forward rule in anticipation of the law being passed.

 

From the first quarter after receiving royal assent (most likely to occur from 1st July), Self Managed Superannuation Funds will be allowed to have up to six members.  The limit is currently four members. For larger families, this will be of particular use and relevance, as the parents involved in the fund may wish to include more than two children (this could potentially be up to four children involved in this case). 

 

Pauline Hanson’s One Nation Party also passed through an amendment into the changes that will remove a charge on excess concessional contributions. Concessional contributions are those where you or your employer can claim a tax deduction on a contribution. 

 

If you or your employer currently contribute over the allowable caps (usually limited to $25,000 but moving to $27,500 on 1 July) to your super, you are charged an amount of around 3% of the excess you contributed and it is calculated from the 1st of July in the year that you made the contribution up until the day your assessment is due.  

 

There are still other charges that will apply to exceeding contribution allowable caps, such as Shortfall Interest Charge and General Interest Charge. The biggest is usually the Excess Concessional Contributions Charge.

 

This change was never announced and was not part of government policy but made it through anyway.  One Nation also tried to increase the maximum allowable tax-deductible contributions for persons aged over 67 years old, but that amendment did not go through.

 

Another change that had not been previously announced was that if you had an amount released from super under the Covid Relief package ($10,000 per year for two years) then you will not be able to claim a tax deduction for the same amount that you contribute back into super up until 2030. 

 

For example, Peter took his $20,000 under the Covid Release package.  Peter contributes $1,000 per month into his superannuation fund and usually claims a tax deduction for that amount.  

 

The first $20,000 that Peter contributes after 1st July 2021 will not be able to be claimed as a tax deduction. This only applies to personal contributions, so if your employer contributes on your behalf this will not impact you.

 

Want more information about super contributions, but not sure where to start? Come speak with us – we can help you with any questions you may have about superannuation.

23 June 2021

Boosting The Business With A Free Resource: Your Customers

More and more Australians bought local products during the past year and rallied behind smaller businesses, which buoyed many shops that may have otherwise struggled to stay afloat. 

To create this kind of loyalty and support it’s crucial to develop and maintain a strong connection with your customers. 

If you are a small business, this is a vital aspect of business management that you will want to have occurred to strengthen customer relationships. 

Make The Customer Feel Special

Customers want to feel special – you can achieve this by approaching each customer as an individual rather than as a customer per se. Making the user interactions tailored to suit each customer’s specific needs/usage of your products will enhance the relevance and improve the authenticity of the interaction. Your customers will feel heard by your business and seen.

Let Your Customer Feel Heard

Always ensure that the customer feels heard – if the customer has a complaint, treat it the same way that you treat a good review, and respond accordingly. This builds trust with the customer and future customers that you will hear them out, and act the best you can to assist. 

Reward Customer Loyalty & Strengthen Connections

Go above and beyond for your customers – if you’re a small business, you can use the closer connection you may have with your customers to your advantage and offer additional loyalty discounts, recommendations, and phenomenal customer support. 

Follow Up With Your Customers

Follow up with customers (new and current) to ascertain reception of products and services, spearhead a proactive approach to appraisals and determine if a poor customer experience has been had. Following up allows customers to feel acknowledged while also granting you access to potential data that you may not have received otherwise. 

Connect Via Social Media 

Ensuring that you remain actively involved on your social media for your business with your customers should increase interaction. With many looking to online platforms to browse products, leave reviews and share favourite products via social media, it makes sense to turn your social media platform into a way to make your brand shine. Actively engaging with customers, responding to comments and questions, and directing your brand’s narrative are great ways to use social media to strengthen your connection.

Your Existing Customers Should Come First

Prioritise the customers you already have over the accrual of potential customers. If you’ve already got an established customer base, one of the best ways to maintain it is to keep them happy. You don’t want to risk losing them during the growth of your business due to less attention and more subpar customer service. The best way to maintain customer loyalty is to ensure that you can meet their needs, follow up with their requests (to the best of your ability) and satisfy their customer service needs. 

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