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Monday 28 April 2014

New Rates and Thresholds for Superannuation Caps

New Rates and Thresholds for Superannuation Caps
Concessional contributions general cap 
Income year
Amount of general cap

Concessional contributions cap for those aged 59 years or over on 30 June 2013 and those aged 49 years or over on 30 June 2014  
Income year
Cap for those aged 59 years or over on 30 June 2013
Cap for those aged 49 years or over on 30 June 2014

Non-Concessional Superannuation Cap (for personal after tax super contributions)
Threshold increase from $150,000 to $180,000 from 1 July 2014.

Superannuation Percentage
Due to increase from 9.25% to 9.50% from 1 July 2014, however there is currently legislation before Parliament that may pause this increase.

Maximum Contribution Base
Currently this is $48,040 per quarter; from 1 July 2014 it will be $49,430 per quarter.

Monday 21 April 2014

Getting Employees Superannuation Correct

Given there are currently widely publicised changes happening in the super world, it might be a good time to check that you are correctly meeting your superannuation obligations.
Each year the ATO focuses on different industries to check they're on the right track. This year they're paying particular attention to three industries:
  • hairdressing and beauty services
  • clothing retail
  • management advice and consulting services

The ATO is working with businesses to help business understand their obligations. If you're not sure you understand your obligations, you can:
  • attend a free ATO webinar that outlines the employer obligations
  • watch an ATO short video on YouTube on how to work out if they have a super obligation and how to meet that obligation
  • call 13 10 20 between 8.00am to 6.00pm (local time), Monday to Friday, except public holidays
Common mistakes made by employers include:
  1. not paying the right super contribution (the current rate is 9.25%)
  2. missing the quarterly cut-off dates (28 October, 28 January, 28 April and 28 July)
  3. not paying super for contractors if the contract is wholly or principally for the labour of that person
  4. not keeping accurate records that show:
  5. the amount of super paid and how it was calculated
  6. eligible employees have not been offered a choice of super fund
  7. how reportable employer super contributions were calculated
  8. not providing an employee's tax file number (TFN) to their super fund
  9. failing to lodge a super guarantee charge statement

Monday 14 April 2014

Property Settlements - beware of the GST

The ATO has recently disallowed claims for input tax credits related to the purchase of commercial “real property” because the buyer or their representative did not check that the vendor was registered for GST at the time of settlement.  Real property includes land and buildings, an interest in land, rights over land and a licence to occupy land.

One-off transactions may still be considered as being part of an ‘enterprise’ for GST and tax purposes. Any property transactions made with the intention of being profitable may be part of an enterprise. This may apply even if the vendor is not normally in business. If the transaction is the realisation of a capital asset then it may not be seen as part of carrying on an enterprise.

Factors to consider in property transactions:

  • Is the vendor registered or required to be registered for GST?
  • Are special rules being applied to the sale? For example, special rules may apply to residential premises, commercial premises, retirement villages, farmland, going concerns, margin scheme and non-resident property owners.
  • Does the contract specify appropriate GST treatment? The contract should include a clause that recognises whether the price is inclusive or exclusive of GST and another clause that addresses any reference to the margin scheme.
  • Are there any settlement adjustments? This should be addressed in the contract if settlement adjustments such as outgoings, rates, water and so on are to be considered on settlement.
  • Is a tax invoice required? If the sale is taxable, the vendor is registered for GST and the margin scheme has not been applied, then a tax invoice is required.
The margin scheme is available to the vendor. This is where GST is calculated on the margin of the sale (the difference between the purchase price or appropriate valuation) and the sale price. GST is not calculated on the entire sale value of the property. It is only available in certain circumstances and this is something that must be calculated by a tax agent. 

Remember to discuss this type of transaction with your Accountant/Tax Agent, prior to entering into the contract 

Saturday 12 April 2014

Records in Could Software - If I Stop Paying.....

Whose obligation is it to keep the business records when it's all online?
What happens to your data when you stop paying the subscription?

Different companies have different policies regarding keeping the data file of a business after the subscription has finished.

We recommends keeping all business records for 7 years.

We put these questions to the software companies:
If I stop paying my monthly subscription, what happens to my business records? How do I access those records, can I re-activate the subscription, do I have a read-only version, and can I access stored documents?

Once you stop paying the following are the consequences:
  1. MYOB Live Accounts/Essentials range
    Product moves to a read only format. Remains available for 60 days. The program provides PDF reporting tools or data extraction. Reactivation of subscription is available within the 60 day period.

    AccountRight suite
    A backup of the datafile should be obtained and "Checked out" to use on your local computer (Offline).
    A local only version of program can be obtained to continue full use without "Live" services.
    If ceasing payment then file will be "Read Only" on your local machine for as long as you retain the data. All data is available for export via reports.
  2. Intuit QBO
    Access stops when payment stops, however Intuit will retain the data for 7 years. Access to the data will be re-activated when payment is started again.
  3. Reckon
    Reckon One: When payment stops, a read-only version is available. Access to the data will be re-activated when payment is started again. Reckon Hosted: Download the data to your local server. Read only version is always available. All data is available for export via reports.
  4. Xero
    In the event a subscription is deleted by the subscriber, or cancelled following non-payment, by default the data is retained on servers for 7 years. Total removal of data from servers can be undertaken if we are explicitly requested to do so in writing by the subscriber. Xero can reinstate a deleted subscription and currently do not apply an administration charge for this. If there are no unpaid invoices, generally they will reinstate within 24 hours. If there are unpaid invoices they ask the invoices to be settled, (if the subscription was cancelled due to non-payment, rather than deletion by the subscriber). Depending on how quickly this is actioned could impact the reinstatement time. A read only version is not currently available.
  5. Saasu
    No advice on this topic has been received to date but we hope to have information soon.

Monday 7 April 2014

End of Financial Year - Preparations

Prepayment Rules

What is a Prepayment?
Prepayments are payments that are made in one reporting period for goods or services that will not be received until a future period or are received over a longer period of time. This is often the case for expenses spread over a number of months (subscriptions or insurance premiums) and where the expense relates to separate financial periods.

The liability or the payment itself should be recognised in the first period it applies. i.e. when the invoice comes in or the payment is made.

Some businesses will expense all payments (even where it is an expense that covers the whole year) immediately, when the amount is below a predetermined threshold. This threshold amount can be different for accounting purposes, as distinct to any tax treatment, explained below.

A “Prepayment” is considered an asset to the business until such a time as the goods or services have been received. So the payment or the recognition of the purchase will be allocated to the “Prepayments” asset account initially.

Some examples of common prepayments are:
·       Rent
·       Airfares and accommodation
·       Subscriptions
·       Contract payments
·       Insurance
·       Advertising
·       Booking for conferences, major events etc

Prepayment Rules for TAX - Small Business (Under $2milliion turnover)
You are allowed to claim items straight away if:
· Purchases less than $1,000
· Goods or services received in the same income year as they were paid in
· Prepayment of salary or wages (under a contract of service)
· Required to be incurred by either:
o   a law of the Commonwealth, a State or Territory (for example, statutory fees or charges payable to a government body such as vehicle registration fees)
o   an order of a court of the Commonwealth, a State or Territory

The 12 month rule – small business (Under $2 million turnover)
The 12 month rules applies If:
· You incur an eligible prepaid expense for something to be obtained over a service period of 12 months or less, and
· The service period ends in the income year following the year you incur the expense. You can claim the expense straight away.

Example for immediate deductible expense:
A company makes a prepayment of $19,000 on 1st March 2013 for a service from 1st April, 2013 to 31st January, 2014. This satisfies the 12 month rule as it runs for less than 12 months and finishes in the next financial year, therefore the entire cost can be expensed immediately.

Item not received until next tax year
If there is no part of the goods or services received until the next tax year be sure to advise the tax agent to consider whether it is still a deductible item for tax in this year. Typically if the item is not received or no part of the service is provided until the following year it may not be deductible for tax in the year of payment.

Goods or Service received over more than one year
If the 12 month rule is not met you must treat it as a prepayment, for tax, and apportion the payment over the period of the service/goods for up to 10 years.

Example for prepayment:
A company makes a prepayment of $200,000 on 1st June, 2013 for goods to be delivered in monthly batches from 1st August, 2013 to 30th July, 2014. This does not satisfy the 12 month rule as it runs for more than 12 months and covers 2 financial years. The payment will have to be apportioned out to relate to the relevant financial year.

Bookkeeping Processes
When you are accounting for prepayments, you need to create an asset account for the initial payment. This then shows on the balance sheet how much prepaid expense is still unapplied.

GST can be claimed at the time of payment regardless of whether you are on cash or accrual reporting.

Processing the Prepayment:
You have prepaid $4,400 on workers’ compensation insurance. You need to code the payment to the Prepaid Asset. Note that you can claim all the GST up front. (We have considered GST as 10% of the total amount to be paid).

Your monthly journal entry: move the pro-rata ($4,000 / 12 = $333.33) amount from the prepaid asset account to the relevant P&L expense account. GST has already been accounted for therefore no GST reporting is required in this journal.

Tuesday 1 April 2014

Self-Managed Super Funds - Changes from 1st July 2014

From the 1st July 2014, changes to SMSF administration will be brought in. Please speak to your accountant regarding implementing changes as required.
  1. The biggest change is that from 1st July, SMSFs must be able to receive contributions electronically from employers. This means that SMSF trustees will need to obtain an electronic service address for the delivery of contribution messages. SMSFs will need to provide their ABN, bank account details, and electronic service address to all employers paying into the fund, by 31st May 2014. This is to comply with the new SuperStream data standards coming into force from 1st July 2014.
    Note that for SMSFs not receiving contributions from employers, this does not apply-- they do not need to register for electronic payments.
  2. Other changes address the powers that the ATO has to investigate non-compliance by the SMSFs with their obligations. The most common areas of non-compliance are to do with loans, borrowings, sole purpose breaches, in-house assets, arms-length and related party investments. The ATO has said that it will review every Auditor Contravention Report submitted. SMSFs are regulated directly by the ATO.
    SMSF trustees can face personal liability for penalties of up to $10,200 if found to be in breach of compliance regulations.

    For relevant information on record keeping and administration -,-record-keeping-and-administration/
  3. Did you know that Australia Post offers a SMSF Gateway Service? It is low cost and user-friendly to allow trustees or administrators of SMSFs to comply with the new data standards, more details available here.

There is a dedicated email address to send SMSF queries to,