High Income Threshold 2013/14

The new high income threshold for 2013-2014 is $129,300.00

The high income threshold affects 3 main entitlements:

1.   Employees who earn  more than the high income threshold and who aren’t covered by a modern award or enterprise agreement, can’t make an unfair dismissal claim

2.   Employees who are covered by a modern award and have agreed to a written guarantee of annual earnings that is more than the high income threshold, don’t get modern award entitlements.  However, they can make an unfair dismissal claim

3.      The maximum amount of compensation payable for unfair dismissal is capped at either half the high income threshold, or 6 months of the dismissed employee’s wage – whichever is less

The information is taken from ‘The Association of Payroll Specialists’ newsletter.

 

Claiming the tax free threshold from more than one employer

If you have casual employee who work for other business as well – it is quite legitimate for the employee to claim the Tax Free Threshold from more than one employer.

If the employee is certain that their total income for the year will be less than the current tax free threshold of $18,200.00 then they can claim the tax free threshold from all their employers, therefore not paying any tax.

The important thing to remember here is that if the employee’s situation changes and they start earning more money and are likely to earn over the threshold amount in the year  THEY must notify their employers so that they can be taxed correctly.

 

If the employees circumstances change then they must complete a new Withholding Declaration (NAT 3093)

Tax Office: Guide to Work-related travel expenses

The Tax Office guide 'Work-related daily travel expenses you can claim' assists individual taxpayers in differentiating the types of travel expenses that can be claimed as a deduction.

 

The Tax Office highlights that you can only claim travel expenses if they are directly connected to your work as an employee. These expenses may include:

• Work-related car expenses;
• Expenses for motorcycles and vehicles with a carrying capacity of one tonne or more, or nine or more passengers;
• Actual expenses such as petrol costs;
• Public transport and taxi fares;
• Parking fees; and
• Short-term car hire.

 

Generally, the cost of ordinary trips between home and work is deemed to be a private expense and thus an income tax deduction cannot be claimed. However the guide notes a particular exception for employees in the real estate industry, where certain situations may warrant these expenses to be deductible.

The guide explains that work related car and travel expenses are deductible when travel is:

• Directly between two separate workplaces;
• From your normal workplace to an alternative workplace whilst still on duty, and back to your normal workplace or directly home; and
• From your home to an alternative workplace and then to your normal workplace or directly home.

Lastly, taxpayers may be able to claim the cost of using their car or vehicle between home and work if they are carrying bulky tools and equipment required for work. This is conditional upon transport to and from work being imperative rather than mere expedience and no secure area for storage exists at the employee’s workplace.

Click here to access the Tax Office's guide to work-related travel expenses.

Tax Office: GST food guide

The Tax Office has made available a GST food guide with the objective of assisting the retail food industry in establishing whether food sold is taxable or GST-free and making the distinction between food and non-food items.

The guide establishes 'simple rules' to be used as a reference when ascertaining GST-free and taxable food items. GST-free food includes but is not limited to the following:

• Bread and bread rolls without a sweet coating;
• Fats and oils for cooking;
• Tea and coffee (unless ready to drink);
• All meats for human consumption (except prepared meals or savoury snacks); and
• Fruit, vegetables, fish and soup (fresh, frozen, dried, canned or packaged).

To address issues directly pertinent to the food retailing sector, the GST food guide outlines requisite criteria to be satisfied before GST law deems an item to be food for GST purposes.

Furthermore, the guide notes that GST legislation stipulates the sale of food to be GST-free unless it is:

• Food for consumption on the premises it is supplied from;
• Hot food for consumption away from the premises;
• Food of a kind listed in clause 1 of schedule 1 of the GST Act;
• Beverages and ingredients for beverages not listed in clause 1 of Schedule 2 of the GST Act; or
• Food as listed in the GST law.

A detailed food list provides information with respect to the GST status on major food and beverage product lines. To access the GST food search function, click here.

Click here to access the GST food guide and detailed food list.

Calxa – animating budgets & cashflow forecasts

The difference between a budget and a cash flow forecast can sometimes be confusing. They can seem to show similar information yet both are very different and have different uses. Both are essential for the accurate financial management of your organisation.

A budget details what you plan to do with your finances for the relevant period of time. This is usually over 12 months, and focuses on profit. In addition:

 

• Accruals and other non-cash adjustments such as depreciation are often included
• A Budget also reflects the planned objectives of what the organization is trying to achieve and is linked to the strategic and business plans
• A budget also provides a benchmark to then monitor performance. After each month you can compare what actually occurred against what was budgeted or planned to occur
• Usually the full year budget is broken down into months

A budget is NOT used to monitor the amount of cash in the bank accounts. That is where the cash flow forecast comes in. 

A cash flow forecast details when the actual receipts and payments are likely to occur.

·    A cash flow forecast reflects when the actual income and expenditure is transacted into/from the actual bank account

·    It is not based on accrual accounting and adjustments, such as, depreciation are excluded

·    The full year cash flow forecast is mostly broken down into a month by month basis. But in some instances it can be further broken down into fortnightly or even week by week depending on the circumstances

The main difference between a budget and a cash flow forecast is based on: 

1.      The type of the transaction and;

2.      The timing when receipts and payments will occur

 

As a simple example: a budget will record the income when you have sent out the invoice whereas your cash flow will record it when you actually receive the amount into your bank account.

One point worth mentioning is not to assume that debtors will pay the following month. Often it may be later which is why it is important to know your Average Debtor Days which may show that payment occurs typically 64 days after sending out the invoice.

This also highlights the value of knowing some important Key Performance Indicators (KPI’s) such as:

Ø  Debtor Days

Ø  Creditor Days

Ø  Inventory turnover days

Ø  Working capital ratio

Understand the difference between a budget and a cash flow forecast and you will be well on the way to managing your finances.

'Accounting Software' or 'Business Operating Software'

Are you using your software as 'Accounting Software' or 'Business Operating Software'?  What is the difference? Does it matter?

When you started your business, you had an idea, then a plan and you made it happen.  One of the ways you made it happen was to keep records - customers, stock you sold and your expenses. Keeping records, gathering information, allowed you to make better decisions for your business. All those things are about operating your business.

You knew you needed to keep records for GST, Income Tax  and compliance. So you picked an accounting software to help you keep your records.  How did you implement using the software in your business?  Is it after the actual transaction has happened? Is it historical? Does it help you and your business?

By altering how you record your business transactions - you could turn your accounting software into 'Business Operating' software. Gathering 'real-time' information about your business.  Don't double handle bits of paper, use the computer and your software to its best advantage.

Below are four simple changes to your accounting software, changing it into Business Operating software.

1. Clients Details:  Do you capture your clients details - not only for the invoice but for later marketing to them.  Loyalty programs are structured marketing efforts that reward, and therefore encourage, loyal buying behaviour. To use Loyalty programs to its best advantage you need clients details.
 
2. Invoices:  Do you create a manual invoice and then later the bookkeeper inputs into the accounting software? Can you change your practice and input the invoice, with all its detail, directly into the accounting software? What will that do? It saves you double handling, its keep your Debtors listing accurate. It allows you to look/search on historical sales and marketing to clients who have bought those goods previously from you.

3. Bank Feeds: A feature where your bank transactions are synced with your cloud accounting software.  This handy feature can cut down your manual data entry and allows you to see what is really happening with your money in the bank.

4. Orders to Suppliers: Suppliers are essential to almost every business, supplying materials and services you need to do business.  They can also be important sources of information, helping you evaluate the potential of new products, track competitors' actions and identify opportunities.  Keep all their details within your system.

Many industries have traditionally had 'front-of-house' software that captures specifically information for marketing to customers.   There are specialty programs called CRM (Client Relationship Management) which are available but most account software will keep track of your clients and allow you to extract their details so you can market directly to them, without you going to the expense of a CRM program.  Most software allows you to email directly to your clients and suppliers, making contact cost-effective, accessible, easy and immediate.

These changes generally, only require you to instigate some planning, training & implementation time.  You receive in return more value from your accounting software and some 'real-time' gains for your business

Changes to fuel tax credits

Fuel tax credits provide a credit for any fuel tax (excise or customs duty) included in the price of fuel used in business activities, machinery, plant and equipment or heavy vehicles.

From July 1, 2013, most fuel tax credit rates were reduced by a carbon charge introduced under the new Clean Energy Laws.

For most businesses, the correct rate to apply as of July 1, 2013 will be the rate in effect on the day the fuel was purchased. Businesses with heavy vehicles travelling on public roads will continue using the rate in effect when completing their Business Activity Statements (BAS).

The carbon charge will not affect the fuel tax credit rates for renewable fuels or fuels used in:

• Heavy vehicles travelling on public roads;
• Specified activities in the agriculture, fishing or forestry industries; and
• Industries that do not involve the combustion of the fuel.

For those industries that are affected by the carbon charge, the following rates will apply for liquid fuels:

Examples of business use	Fuel type	For fuel acquired from July 1, 2013
Mining Nursing and medical Electricity generation Construction Manufacturing Property Management Landscaping	Petrol	32.347 cents per litre
	Diesel and other liquid fuels	31.622 cents per litre
Supply of fuel for domestic heating	Heating oil and kerosene	31.622 cents per litre

The current fuel tax credit rate for heavy vehicles travelling on public roads from July 1, 2013 is 12.003 cents per litre.

Click here to access the Tax Office guide on fuel tax credits.