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November 2020 Newsletter

Contents:

  • Unpacking the Budget
  • Superannuation for the self-employed
  • Significant insolvency reforms – what Directors need to know!
  • Understanding the Payment Times Reporting Scheme
  • Should older Australians downsize their property?
  • Financial ratios for the bank
  • Announcements

Unpacking the Budget

In an uncertain economic climate, the Morrison government has unveiled a sensible and gentle Federal Budget 2020–21 with a focus on assisting businesses getting back to work. What do the changes mean for you and your clients?
On 6 October 2020, in delivering his second budget, the Treasurer, Josh Frydenberg, unveiled an estimated budget deficit for 2020–21 of $213.7 billion. This month, I take a close look at the key tax announcements contained in the Federal Budget 2020–21.
 
 

Superannuation for the self-employed

Superannuation is an efficient way for employees to secure retirement savings through employer contributions. However, self-employed individuals don’t benefit from employer superannuation guarantee (SG) contributions during the accumulation phase.
Self-employed individuals and sole traders don’t really need to enrol in a super fund, but there is no rule that prevents the self-employed from enrolling in a super and accessing its tax concessions.
 

Significant insolvency reforms – what Directors need to know!

The federal government’s announcement that it would undertake the most significant reforms to Australia’s insolvency framework in 30 years is welcome news for many small businesses.
For directors, it will be very important to carefully consider the information in the government’s fact sheet outlining the reform process. BDO’s business restructuring experts identified a number of issues that a director remaining in control of a business under a Chapter 11-styled restructure would need to consider.
 

Understanding the Payment Times Reporting Scheme

To improve cash flow pressures for small business, the federal government has established a public Payment Times Reporting Scheme (the Scheme) whereby businesses and government enterprises with total annual income of over $100 million will need to biannually report on their payment terms and times for their small-business suppliers.
The Scheme draws on a taxation legislation definition of small businesses as those entities with an annual turnover of less than $10 million.

Should older Australians downsize their property?

Older Australians face the dilemma of not being confident about their retirement outcomes, but are among the wealthiest retirees in the world due to a large proportion of their wealth being tied up in the family home, new research has revealed.
Results collated by Household Capital show that only one in four Australians is very confident they have sufficient funding to live well in retirement. The survey revealed that many Australians who did not touch their superannuation during the COVID-19 early access to super scheme are still unlikely to have a large enough portion of their wealth in superannuation to comfortably retire.

Financial ratios for the bank

Securing a business loan is more than just demonstrating that you can generate a profit and have a positive cashflow. Your friendly banker will also be looking at some key ratios before approving your loan.
Three ratios are commonly used by bankers when assessing loan applications. It is important to understand these.
1. Debt Service Coverage Ratio 2. Leverage Ratio 3. Loan to Value Ratio

Announcements:

This month we wish a very happy birthday to Dee!
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Important ATO Dates

In case you missed it:
 
Lodgement Program Due Date
September monthly activity statements 21/10/2020
Quarter 1 (July–September) PAYG instalment activity statement  21/10/2020
Annual PAYG instalment notice 21/10/2020
Quarter 1 (July–September) activity statements 28/10/2020
Quarter 1 (July–September) – super guarantee contributions 28/10/2020
Quarter 1 (July–September) GST instalment notices (forms S and T) 28/10/2020
Quarter 1 (July–September) PAYG instalment notices (forms R and T) 28/10/2020
 
Coming Up
 
Lodgement Program Due Date
October monthly activity statements 21/11/2020
 

JobKeeper

31 October is the due date to meet the wage condition for fortnights starting 28 September 2020 and 12 October 2020.
It is also the due date for new entities enrolling for JobKeeper, and these will need to enrol and submit their “Check decline in turnover” form to the ATO online.
 

Employers – New Tax Tables

Please be aware that the government recently announced some tax changes which will require the tax tables to be updated in your payroll software. Your tax tables need to be updated before the 16th Nov 2020 deadline.

For those using cloud based accounting software this process is done for you e.g. QuickBooks Online, Xero, KeyPay. If you are manually calculating your employees PAYG you will need to find and start using the new rates (see link below).

For more information on these changes, please visit https://www.ato.gov.au/rates/tax-tables/#Importantinformationforthisyear

You do not need to do any backdating, just apply the new tables as soon as possible as the ATO has confirmed that any excess tax that employees pay from 1 July will be included in their tax assessment at the end of the 2020 financial year.

Significant change to claiming the GST on a new motor vehicle purchase and running costs!

Earlier this year there was an amendment to a tax ruling that made it imperative that anyone wanting to claim the GST on the purchase of a vehicle would need to adequately substantiate their claim using the logbook method. Effectively without a valid logbook you can’t claim any portion of the GST back on the initial purchase. A logbook is also required to claim your current running costs!


The LogBook Method

If your business has motor vehicles (under 1 ton & less than 9 passengers) you are probably already aware of the logbook method for claiming business related expenses such as running costs and decline in value.

Earlier this year there was a change to the method for calculating the GST you can claim on your vehicle that now makes it imperative to use a logbook (or diary) for at least four weeks to calculate your business-use percentage for the purpose of calculating the GST you can claim.

For those already keeping a logbook there is no additional requirements as you can use your existing logbook. Our recommendation is that businesses with a motor vehicle should keep a logbook for a continuous period of at least 12 weeks, by doing so you satisfy the requirements for calculating both:

  •  the GST you can claim on a motor vehicle purchase and running expenses, and
  • business related expenses you can claim for income tax purposes

By keeping a logbook for a continuous period of at least 12 weeks you satisfy the tax office recording requirements for 5 years before you are required to start the process again (if still required and assuming there have been no material changes to your motor vehicle use).

Can I claim the GST on a new car purchase?

Generally speaking, you can claim GST on the purchase of a new motor vehicle if you meet the following criteria:

  • you intend to use your purchase solely or partly in carrying on your business and the purchase does not relate to making input-taxed supplies
  • the purchase price included GST
  • you provide, or are liable to provide, payment for the item you purchased
  • you have a tax invoice from your supplier

How much GST can I claim on a car?

  • When it comes to claiming GST on a car, it’s very similar to claiming GST on any other business expense.
  • You can only claim the GST to the percentage that it relates to earning an income in your business.
  • So you need to keep a logbook. A logbook tracks the number of business-related kilometres that you drive, and your total kilometres in that time. This will give you your ‘logbook percentage’.
  • Your logbook percentage will tell you the percentage of GST, and tax deductions for car related expenses that you can claim in your BAS and tax return.
  • Also note that if you buy a car with a GST-inclusive value above the LCT (Luxury Car Tax) threshold, there are limits to the GST you can claim based on the fuel efficiency of the vehicle

When can I claim the GST on a new car?

  • If your business is registered for GST on a cash basis then you can claim the GST on the new car in the quarter that you take delivery (or settlement) of your car. This is because either your finance company has ‘paid’ for the car on that date. Or, you’ve paid for that car in full from your bank account.
  • Your upfront claim of the GST can be used to fund the first few instalments payable to your finance company.

If you have any questions regarding claiming the GST and/or business-related expenses on motor vehicles please contact our office. We can also provide a logbook or recommend a logbook app to suit you!

Watts Price Accountants (Horsham) 03 5382 3001 or mail@wattsprice.com.au
Knights Accounting (Rupanyup) 03 5385 5330 or info@knightsaccounting.com.au

It’s time to ditch snail mail and embrace eSign for faster, more secure BAS communication!

We have been trialling electronic delivery & signing software with many of our Salary & Wage clients over the last month and have received very positive feedback. We believe that this method of delivery would provide a faster, safer and more efficient experience for many of you. To that end we are looking at expanding the trial to BAS clients for the September BAS.
 
What is eSign? eSign is a generic term we use to describe the sending and receiving of your documents from a secure location via a link emailed to you. It also gives you the ability to sign documents and to return them to us in seconds via your computer, tablet or smartphone. On signing and returning the document via eSign you have indefinite access to your completed document and for convenience you receive a pdf copy via email as well. No more relying on the post, no more paper and quicker processing of your potential BAS refund!
 
We understand that not everyone has an email address, access to the internet and that some people just like to retain paper copies of documents for their records. For these clients we will continue to support you with post or phone and collect options. If this is you then no action is required!
 
If you have not signed up yet to receive your BAS communications by eSign please contact us today by emailing Cris and the team at Watts Price Accountants on mail@wattsprice.com.au or phone on 5382 3001.

Appointment Procedures Due to COVID

Now that Stage 3 restrictions have been removed in Regional Victoria, Watts Price Accountants and Knights Accounting have re-opened the doors and are now able to hold face to face appointments again. For the health & safety of everyone please note the following requirements when attending our office(s):

  • Social distancing rules are still in place and we are all required to maintain a distance of 1.5 metres
  • You are required to wear a face mask
  • You may be asked to sanitise your hands and be subject to a temperature check upon entry
  • If you are experiencing any of the following symptoms –
    • cough, cold, sore throat, fever or
  • Been to a known hotspot or been in contact with someone that has in the last 2 weeks – please do not enter our office(s). Phone our office to discuss your options!

For your safety and convenience, we are:

  1. Still very happy to conduct phone or video conferencing (Zoom) appointments
Please note: In the interim some Partners and accountants will prefer to conduct appointments using one of these options. You will be advised of your options when you are booking your appointment.
  1. We are staggering our appointment times to minimise contact with other clients
  2. The Watts Price front meeting room will be used as an extra reception area
  3. We will be placing hand sanitiser in appropriate locations
  4. Meeting areas are being wiped down after each appointment

These measures are necessary under the current restrictions to protect you and our team. We thank you in advance for your co-operation and look forward to seeing you again soon! If you need assistance please contact us on:

Watts Price Accountants
P: 03 5382 3001
E: mail@wattsprice.com.au
M: PO Box 118, Horsham VIC 3402
 
Knights Accounting
P: 03 5385 5330
E: info@knightsaccounting.com.au
M: 16 Cromie Street, Rupanyup VIC 3388
 
All the best from the Watts Price Team!