Off to a good money start

You run a small or medium business and you’ve heard about all th­ese new great tech­nolo­gies that could help you im­prove. You have been told you could save time, money, in­crease pro­duc­tiv­ity and a range of other great things. So how do you adapt th­ese techn

Business First - - CONTENTS - by John Co­rias

Small business own­ers look­ing to start the new fi­nan­cial year off on the front foot need to invest time into keep­ing abreast of new tax year changes that may have an im­pact on their small business. The risks of not do­ing so can ei­ther lead to missed op­por­tu­ni­ties or to po­ten­tial dis­as­ter. The Fed­eral bud­get handed down in May con­tained a num­ber of mat­ters that di­rectly im­pact on the majority of small busi­nesses in Aus­tralia.

Em­ployee Su­per­an­nu­a­tion Con­tri­bu­tions

While the bud­get con­tained mea­sures to de­lay the rate of in­crease in the com­pul­sory SGC em­ploy­ers must pay for their em­ploy­ees, the min­i­mum per­cent­age of SGC rises from 9.25% to 9.5% ef­fec­tive from 1 July 2014. Based on cur­rent pro­pos­als the rate will re­main at 9.5% un­til 30 June 2018. Small busi­nesses need to en­sure that this in­creased obli­ga­tion is fac­tored into bud­get­ing for the new fi­nan­cial year. In or­der to en­sure you are pay­ing the proper rate it is es­sen­tial that your ac­count­ing and pay­roll soft­ware is up­dated for th­ese changes. Hang­ing onto old ver­sions of desk­top soft­ware is no longer wise, not that we think it ever was.

Min­i­mum wages in­crease

A re­cent decision handed down by the Fair Work Com­mis­sion has seen the fed­eral min­i­mum wage rise by 3% from 1 July 2014. If your em­ploy­ees are cov­ered by an award agree­ment then this change will most likely im­pact on your wages costs. This is on top of the pre­vi­ously men­tioned SGC in­creases, to be fair the Fair Work Com­mis­sion did set the in­crease at less than the unions ask­ing point, tak­ing into ac­count the ex­tra su­per­an­nu­a­tion con­tri­bu­tions that also take ef­fect from 1 July.

Con­ces­sional su­per cap changes

From 1 July 2014 the con­ces­sional su­per­an­nu­a­tion caps have in­creased to al­low all Aus­tralians to con­trib­ute a max­i­mum of $25,000.00 per fi­nan­cial year into their su­per­an­nu­a­tion. The beg ben­e­fit comes for those aged 50 and over who can now con­trib­ute up to a max­i­mum of $35,000.00. For those small business own­ers ap­proach­ing re­tire­ment or even the younger gen­er­a­tion just look­ing at a com­plete fi­nan­cial plan tak­ing ad­van­tage of th­ese higher con­ces­sional amounts can re­sult in im­me­di­ate tax sav­ings and in­vest­ing in your own re­tire­ment at the same time.

Fuel tax cred­its

With the pro­posed re­moval of the car­bon tax a decision was made in the bud­get to ad­just the fuel tax credit scheme to ac­count for the re­moved costs of the car­bon tax on af­fected busi­nesses. The amount of fuel tax credit el­i­gi­ble to be claimed will drop for petrol and diesel used in off-road ac­tiv­i­ties. Fuel tax cred­its will not drop for ve­hi­cles with a mass greater than 4.5 tonnes trav­el­ing on pub­lic roads. The ATO has also gone out of its way to re­mind busi­nesses that any fuel tax re­bates they re­ceive are ac­tu­ally tax­able in­come that needs to be de­clared in your an­nual in­come tax re­turn on an amount re­ceived ba­sis.

Tax rate changes

There is only one change to men­tion when it comes to ac­tual per­sonal in­come tax rates, but for those af­fected, it can be a sig­nif­i­cant fac­tor in decision mak­ing. For those whose tax­able in­come ex­ceeds $180,000.00 the tem­po­rary budge ‘deficit levy’ of 2% of tax­able in­come will ap­ply to ev­ery dol­lar of tax­able in­come over and above $180,000.00. This levy will re­main in place for the next two fi­nan­cial years. A fur­ther rea­son to en­sure your pay­roll soft­ware is up to date, lest you un­der tax your­self or em­ploy­ees and then re­ceive a nasty sur­prise when it comes time to pre­pare your own per­sonal in­come tax re­turns.

In­crease in Medi­care levy

The cur­rent Medi­care Levy of 1.5% will rise to 2% from 1 July 2014. This will im­pact on the PAYG with­hold­ing that ap­plies to all em­ploy­ees of busi­nesses in Aus­tralia. The Medi­care levy ex­empt thresh­olds re­main in place for low in­come earn­ers and a se­lect num­ber of other ex­emp­tions. The Medi­care Levy Sur­charge im­posed on those who ex­ceed the ap­pli­ca­ble in­come thresh­old’s and do not have ap­pro­pri­ate lev­els of pri­vate health in­surance also re­main in place for this fi­nan­cial year.

Loss carry-back rules re­pealed

In the 2013 in­come tax re­turns a tran­si­tional mea­sure ap­plied where small busi­nesses could off­set 2013 losses against 2012 tax­able prof­its to gen­er­ate a re­fund of tax paid on 2012 prof­its, rather than car­ry­ing for­ward 2013 tax losses. The Gov­ern­ment is seek­ing to leg­is­late that this no longer ap­ply to 2014 tax­able losses. Only time will tell if the Se­nate al­lows this mea­sure to pass. Sadly, the un­cer­tainty of such un­leg­is­lated yet pro­posed changes only serves to add to the com­plex­ity of Aus­tralia business con­di­tions and hin­ders clear and cer­tain business decision mak­ing. With tax laws be­ing passed ret­ro­spec­tively is it any won­der that the big­gest com­plaint of Aus­tralian small business is red tape, gen­er­ated by Gov­ern­ment com­plex­ity.

It pays for ev­ery small business owner to invest time into re­search­ing changes that may ap­ply to their sit­u­a­tion. Some changes can be ad­van­ta­geous in tax plan­ning and min­imi­sa­tion strate­gies whilst other changes, if not ad­hered to, can re­sult in sig­nif­i­cant penal­ties and headaches for small business own­ers. Of course how many small business own­ers ac­tu­ally have the spare time to do this? Not many, would be our an­swer. The most time ef­fi­cient man­ner of keep­ing abreast of such changes may be through an ac­coun­tant or fi­nan­cial plan­ner gen­er­ated news­let­ter, blog or so­cial me­dia pages ded­i­cated to your re­quire­ments. John Co­rias is a Se­nior Part­ner at m.a.s ac­coun­tants, the orig­i­nal ac­count­ing of­fice for small business - Cel­e­brat­ing over 50 years in small business ac­count­ing. www.masac­coun­tants.com.au

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