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Archive for the ‘Uncategorized’ Category

ATO STIMULUS

Posted on: March 25th, 2020

Hi All,

There has finally been some clarity put forward by the ATO so I have included a few points below. When we lodge your quarterly BAS for March 2020, June 2020 and September 2020 we can review everything in more detail.

The ATO will provide tax-free cash flow boosts of between $20,000 and $100,000 to eligible businesses, delivered through credits in the activity statement system, when eligible businesses lodge their activity statements. If you are eligible, you do not need to separately apply and upon lodgement of your activity statement, your first amount will automatically be credited to your account but no earlier than 28 April 2020.

Eligible entities who received initial cash flow boosts will receive additional cash flow boosts, for the periods June to September 2020, equal to the total amount of initial cash flow boosts received. This will be delivered in either two or four instalments depending on your reporting period.

Eligible businesses must have held an ABN on 12 March 2020 and lodge your activity statement to receive the credit.

Eligible payments include: salary and wages, director fees, voluntary withholding from payments to contractors etc.

In addition, you must also have either:

  • Derived business income in the 2018–19 income year and lodged your 2019 tax return on or before 12 March 2020.
  • Made GST taxable, GST-free or input-taxed sales in a previous tax period (since 1 July 2018) and lodged the relevant activity statement on or before 12 March 2020.
  • However, you may still be eligible where you don’t have any income tax assessment for prior year.

Initial cash flow boost

Eligible businesses that withhold tax on their employees’ salary and wages will receive a credit equal to 100% of the amount withheld, up to a maximum of $50,000. The minimum credit will be $10,000, even if the amount required to be withheld is zero. However you will not be eligible to receive any more cash flow boosts until your PAYG withholding exceeds $10,000 over the relevant periods.

Monthly lodgers will receive a credit that is calculated at three times the rate (300 per cent) in the March 2020 activity statement, to align with quarterly lodgers.

The total of all initial cash flow boosts across all of the relevant periods cannot exceed the maximum limit of $50,000. This is a little vague but it looks like the ATO will do a second payment up to $50,000 which will then equal the total of $100,000 overall (as above).

Examples

  1. If you pay a salary of $1,000 for the March 2020 Quarter with $0 withholding on the BAS. The ATO will still provide a credit to you on $10,000 as the minimum payment.
  2. If you pay a salary of $160,000 for the March 2020 Quarter with $50,000 withholding on the BAS. The ATO will provide a credit to you on $50,000 as the maximum payment. There would be no additional tax payable when you lodge your personal tax return with a salary of $160,000 as the company would have withheld the $50,000 PAYG. You can therefore take money out of the company tax free.

Other Considerations

  • Superannuation would still be payable on all salaries made.
  • Business still need to report the salaries through STP.
  • Paying a salary can be more tax effective then paying a dividend (to get the credit).
  • If the salary generate a tax loss, that loss would carry forward to FY2020 which would also be beneficial for the 2020 tax returns.

There is further information here:  https://www.ato.gov.au/Business/Business-activity-statements-(BAS)/In-detail/Boosting-cash-flow-for-employers/

In the meantime please let me know if you have any questions.

Research and Development (R&D).

Posted on: March 10th, 2020

Who is R&D For?

Many company developing novel products or services will spend hundreds of thousands of dollars, without realising they might be able to get government assistance in the form of an R&D subsidiary through AusIndustry and the ATO.

Who is Eligible?

If you have a company and you are researching and developing a novel product or service, that is you are creating new knowledge, then you should consider applying for the R&D Tax Incentive.

Applicants need to self-assess their eligibility for the R&D Tax Incentive. As a self-assessment program, companies assess for themselves whether their activities satisfy the definition.

What Can You Get?

If you are eligible, you can get a 45% refundable tax offset for eligible companies with an aggregated turnover of less than $20 million per annum.

What Activities are Eligible?

Activities are eligible if they meet the definition of R&D activities. This includes activities whose outcome cannot be known or determined in advance on the basis of current knowledge, information or experience, but can only be determined by applying a systematic progression of work that: a) is based on principles of established science; and b) proceeds from hypothesis to experiment, observation and evaluation, and leads to logical conclusions.

Could the Outcomes Have Been Known in Advance?

The definition requires that the outcome of the experiments could not have been known or determined in advance on the basis of current knowledge, information or experience. This requirement will not be satisfied if: a) experiments merely confirm what is already known; or b) the outcome of the experiments could be deduced or determined by a competent professional in the field on the basis of current knowledge, information or experience.

Please also see:

https://www.industry.gov.au/data-and-publications/ausindustry-rd-tax-form-0

Cryptocurrency Business & Tax

Posted on: February 13th, 2020

Brief Background

Following its establishment in 2013, the Cryptocurrency Exchanges industry has become one of the fastest growing industry in Australia because it caters to rising interest in cryptocurrencies as a form of payment. These opportunities are expected to contribute to growth in enterprise and employee numbers over the next five years.

Cryptocurrency Business

I have worked with Cryptocurrency businesses since they first emerged. While most businesses tend to operate at a loss for the first few years, the ATO allows small businesses operators to offset their businesses losses against their other salary income. This is very advantageous as it enables you to get a tax refund during the early Start-Up state of your business.

There are a few conditions that need to be assessed. For instance if your salary is less than $250,000 and your Cryptocurrency business income is more than $20,000 then any net business loss can be tax deductible resulting in an income tax refund.

Determining if you operating a Cryptocurrency Business can depend on a number of factors. The main one to consider are:

  1. Are you operating for the purpose of making a profit?
  2. Do you have significant and regular transactions?
  3. Are you keeping proper records?
  4. How much capital has been invested?

Cryptocurrency Investor

If you are buying Cryptocurrency with the intention of holding them long-term, then you would usually be an investor and not a business operator. This means than the net proceeds you make from the sale of the Cryptocurrency is treated as a net capital gain instead of ordinary business income.  

A significant difference is that a net capital loss from investing cannot be used to offset other salary income. These net capital losses must be carried forward and offset against future capital gains only.

What To Do?

Make contact with me because I can help you!

Business Start-Up

Posted on: February 9th, 2020

Do you have a business idea?

The hardest, but more rewarding part of any business is thinking of your idea to pursue. Luckily, the internet and working from home has enabled many people to start a new business that offers an improvement on a current idea. This can include improvements such as offering a cheaper cost alternative or offering a more customer focused approach.

Think about the current offerings and focus on how you can create something better, cheaper or faster.

What do you need to get started?

If you’re starting a new business is very important to keep your costs low. In some instances it can take a few years before the business generates enough income to pay for itself and to provide you with a wage. Therefore I recommend having enough savings so that you can support yourself for a year if needed.

Having a separate part time job can be a great source of supplement income and also provide a necessary distraction from the loneliness that can accompany being self-employed. I also found a part time job can lead you to more customers and be a great source of marketing material (if the secondary job is in a complementary field).

You also need to address any licensing or regulatory requirements for your industry. For example, do you need a degree or additional licensing or industry memberships?

Get some independent feedback.

It’s good to get started so that people can interact with your product or service and see what they think of it. A fresh set of eyes can help point out a problem you might have missed. Plus, these people can become your first customers, especially if you listen to their feedback and adapt your offering accordingly.

You need to be open to both positive and negative feedback and be able to incorporate it back into your business effectively.

Register your business

You need to ensure you select the correct business structure from the onset. If you are starting a small business it can be good to simply register an Australian Business Number (ABN) in your personal name because this is a cheaper and easier approach during start-up.  

Once your business has signs of growth then you should consider registering a private company (Pty Ltd) or setting up a family trust. This is a more expensive option but it will provide considerable income tax advantages and provide the necessary asset protection. For example, if you own your own home then a company structure can help protect that home in the event that anything goes wrong with your business.

You should also consider registering a business name, trademark and website.

Grow your business.

Whether your buy an existing business or start a small business you will need to expand the sales base and make it more profitable.  

As an accountant I have found that working with people in key industries can be great. For example, I found and made friends with a business bankers, a good financial planner, and commercial lawyers as we can refer each other customers. Building personal relationships alongside business relationship meant that people will always think of you and be happy to refer you customers.

Using social media effectively through organic, influencer or paid campaigns can also help build your business and retain customers. You need to provide useful information in a format that people will want to read.

Direct Selling / MLM and ABN Requirements

Posted on: December 2nd, 2016

abn

The Australian Taxation Office (ATO) is reviewing several Australian Business Number (ABN) registrations of Independent Salespeople within the direct selling /MLM industry. The ATO is becoming increasingly concerned that many people who believe they are conducting a commercial enterprise are in fact only engaging in a hobby or part time recreational activity.

The Australian business landscape is complicated and it is not enough to simply register for an ABN and then rely on that ABN as proof of your commercial enterprise. The ATO’s view is that a business consists of many characteristics including: repeated transactions, a thought-out business plan, a separate office space and an intention to generate a profit, etc.

Our firm sees difficulties for both the Direct Selling / MLM firms and their Independent Salespeople where no ABN is provided by the Independent Salesperson. Particularly as the ATO requires that 49% of the commissions be withheld from the Independent Salesperson and reported and paid by the Direct Selling / MLM firm to the ATO.

However, our firm has been successful in getting exemptions from the requirement to withholding 49% of the commissions where no ABN is provided, up to $10,000 a year in commission. This has proved very helpful for our clients and their sales teams.

Lake Maquarie Accountant

Posted on: April 27th, 2016

Are you looking for a Lake Maquarie Accountant who is a local,  personable and who understands business and personal taxation matters?

Kirk Davis Accounting is now providing accounting, taxation and business advisory services in Dora Creek, Lake Maquarie. This is in additional to our commercial offices in Sydney and Newcastle.

If you need help with year end tax planning, of if your starting a business or if you have any general accounting, tax or GST queries please contact us and we can come to you for a free no obligation meeting.

Our local branch office is on Dora Street, Dora Creek. Phone 0412 776 647

lake maq.