Finding grants to help your business

Many small business owners are feeling the pinch after the tough years of COVID and high inflation, but receiving a business grant could be the helping hand you need.

If you know where to look, some extra dollars from the federal or your state/territory government could make all the difference between merely getting by and a flourishing business.

What grants are available?

Grants for small businesses range from a few hundred dollars to around $10,000. Some also provide support with securing loans, business introductions, or mentoring services.

The best place to start searching for a business grant is GrantConnect, a free database listing all Australian Government grant opportunities currently open to applicants.

Another important resource is the business.gov.au Grants and Programs Finder tool, which can help you find grants, funding and support from Australian Government agencies.

The government’s Australian Small Business Advisory Services program delivers tailored advice on adopting digital tools to save time and money, and to help expand your business. Businesses with fewer than 20 full-time (or equivalent) employees, as well as sole traders are eligible.

Tech companies can check out the government’s Landing Pads program. This helps tech businesses expand into new markets by providing valuable market insights, expansion strategies, network introductions and venture capital contacts.

Each state and territory offers a range of grants to encourage local businesses. Grants vary between states, so check the online database listing the programs for your state/territory to see if any are suitable for your business.

The NSW Government for example, has a searchable Grants and Funding database highlighting financial incentives for businesses, such as payroll tax rebates for employing apprentices and trainees and the $1,000 SafeWork rebate.

In WA, the Grants Assistance and Programs Register includes both national and local grants, including the New Industries Fund: Innovation Booster Grant and regional Local Capability Fund.

For Victorian-based small businesses, check out the government’s Grants and Programs online database.

If you haven’t found a suitable grant or program, another potential source of information is Grants Hub. Although you need to register for access, you can try it out for 14 days for free.

Read the fine print

When ‘free’ money is up for grabs there is always fierce competition, so it’s important to put in a strong application.

The process will be different for each grant, making it essential to read all the information provided before getting started. Also, check that you meet the criteria, as applications will only be considered from businesses meeting the eligibility requirements.

It’s important to tailor your application to meet the grant requirements and check you prepare all the required documentation. This needs to be in the specified format.

Applying for a grant can be time-consuming, so start early and don’t leave it until the last minute to get your documentation together.

Where to start

There are private operators who offer to find business grants for a fee, but details of government grants are freely available on GrantConnect and Business.gov.au, or your state government’s website.

Small business and industry associations sometimes offer grants, so it may also be worth checking the relevant one for your business.

An easy way to find additional funding opportunities can also be to talk to us, as we can help you with government tax programs, such as the small business tax write‑off.

If the grant application process seems too time-consuming, consider hiring someone to help. While a consultant can write your application, grants are awarded on merit and using one will not give you any special access or consideration.

If you need help with finding or applying for a business grant, call our office today.

Navigating FBT and your obligations

Businesses looking to attract and retain staff often provide employee benefits, on top of salary, as a way to sweeten the deal.

Many of these benefits (but not all) can have potential tax consequences – known as fringe benefits tax (FBT) – so it is important to weigh up the effect on your business.

FBT is separate to income tax and is calculated on the value of the benefit provided to the employee. Employers must work out the amount of FBT they owe each year and lodge a return.

It is worth noting that the FBT year is not the same as the financial year. It runs from 1 April to 31 March.

What to report

Most fringe benefits must be reported to the ATO. Some examples of benefits include: the use of a company car outside of work; free parking; gym membership; payment of school fees; tickets or vouchers for concerts, meals or movies; and living accommodation.

Some benefits do not need to be reported and do not incur FBT.i These include a number of benefits provided to employees working in remote areas, such as living assistance.

Other fringe benefits that are exempt from tax include work-related items such as portable electronic devices, computer software, protective clothing and tools of trade.

If the taxable value of an employee’s fringe benefits for the FBT year (1 April to 31 March) is less than $2,000, no reporting is required.

In adding up the fringe benefits, the ATO says you will need to make sure you include the employee’s part of any benefits they share with other employees as well as the value of any benefits provided to the employee’s associates, such as their partner.

Doing the numbers

For each employee, you’ll need to calculate their ‘reportable fringe benefits amount’ (RFBA) by multiplying the total taxable value of the benefits provided by an ATO ‘gross-up rate’.

The Type 1 gross-up rate is used where a GST credit entitlement is applicable to the benefit. The Type 2 gross-up rate is used where there is no GST credit entitlement applicable to the benefit. (For the FBT year ending 31 March 2023, the Type 1 rate is 2.0802 and the Type 2 rate is 1.8868.)

This calculation grosses up the pre-tax income the employee would have had to earn to buy the benefits themselves.

FBT and salary sacrifice

Benefits provided to employees through salary sacrificing may also attract FBT.

Under a salary sacrificing arrangement, an employee agrees to forgo part of their salary in return for benefits of a similar value, such as more super or a car. As a result, the employee pays less income tax and the employer pays FBT on the benefits provided.

Extra super contributions made under a salary sacrificing arrangement are not subject to FBT and are treated differently. They are considered employer contributions and are taxed in the super fund.

Claiming deductions

Employers can claim income tax deductions for the FBT they are required to pay. You can also claim an income tax deduction and GST credits for the cost of providing the fringe benefits.

The ATO provides some suggestions for reducing FBT liability. For example, employers do not incur an FBT liability if you give an employee a benefit they would have been able to claim as an income tax deduction if they had paid for it. Your FBT liability can also be reduced if the employee contributes towards the cost.

Fringe benefits can be a valuable and strategic tool in your recruitment and retention toolbox. We can help you understand and comply with the reporting requirements and be clear about the impact of FBT on your business.

i Fringe benefits tax – a guide for employers | Legal database (ato.gov.au)

Tax Alert March 2024

New controls for ATO Online and tax charges non-deductible

Following the use of stolen personal data to access ATO Online accounts, the federal government has tightened the access rules to online tax accounts as part of an increased focus on the vulnerability of small and medium businesses to cyber incidents.

ATO interest non-deductible

From 1 July 2025, taxpayers will no longer be able to claim tax deductions for ATO interest charges.i

Although not yet law, the government made the announcement in its 2023-24 Mid-Year Economic and Fiscal Outlook.

Since deductions for general interest charges (GIC) and shortfall interest charges (SIC) will not be permitted after July 2025, any GIC or SIC later remitted by the ATO need not be included in assessable income.

New fraud controls

Tighter controls for taxpayers’ ATO online accounts will make it more difficult for criminals to commit identity fraud using stolen personal information such as bank and ATO statements and tax file numbers.

The changes mean taxpayers who use their myGovID to log into the ATO will need to use myGovID for all future logins, leaving criminals unable to access the account without it.

The government is urging Australians to upgrade to myGovID when interacting with government agencies online and has released its new Cyber Security Strategy to support small and medium businesses vulnerable to cyber incidents.

Holiday home claims

The ATO is continuing its crackdown on tax deductions for holiday homes by encouraging tax professionals to check how clients are using their property and if they are correctly apportioning deductions in line with the time period the property is producing income.ii

Some holiday homeowners are not reducing deduction claims if they are reserving their property during peak periods or are placing unreasonable conditions restricting the likelihood the property will be rented.

We have been requested to check the number of days the property is blocked out for the owners, how and where the property is being advertised, whether family or friends used the property, and if any parts of the property are off-limits to tenants.

Checking R&D claims

Working in conjunction with the Department of Industry, Science and Resources, the ATO will be undertaking random reviews of companies taking advantage of the government’s R&D tax incentive.

The reviews will be assessing the eligibility of company’s R&D tax incentive activities and expenditure, with companies selected for review being contacted directly.

If common errors are identified during the review process, the ATO will share them with all program participants.

Tough times may mean a payment plan

With some small businesses facing difficult trading conditions, the ATO is reminding taxpayers in financial distress they may be eligible to set up a payment plan if they are unable to pay their tax bill in full and on time.

Eligible taxpayers who have a tax bill of up to $200,000, may be able to set up their own payment plan using the ATO online or self-help phone services.

Payment plan eligibility requires the business to be viable and able to make an up‑front payment with completion within the shortest possible timeframe to minimise accruing GIC (currently 11.15 per cent).

Medicare safety net thresholds increase

Thresholds for the Medicare safety nets rose from 1 January 2024, resulting in an increase taxpayers need to spend on out-of-hospital medical expenses before qualifying for a higher rebate.

The increase is in line with indexation based on inflation and rose to $560.40 on the original Medicare safety net for concessional and non-concessional individuals and families.

The extended Medicare safety net increased to $811.80 for concessional individuals and families and $2,544.30 for non-concessional.

Translated cybersecurity guides available

The government’s Australian Cyber Security Centre has released five popular cyber security guides in more than 20 languages to help business owners from non-English speaking backgrounds to improve their cyber security knowledge.

The five free guides include a small business cyber security guide, personal and top tips for cyber security, easy steps to securing devices and accounts, and a seniors guide to securely using the internet.

i https://www.ato.gov.au/about-ato/new-legislation/in-detail/businesses/deny-deductions-for-ato-interest-charges
ii https://www.legacy.ato.gov.au/Tax-professionals/Newsroom/Income-tax/Do-your-clients-have-a-holiday-home-/

9 tips for improving your profits

There are many advantages to running a small business. You have the flexibility and independence to make your own decisions, you can turn your vision into a reality and then reap the rewards.

However, there are financial risks and it can be difficult to make a profit, particularly when times are tough and there is strong competition for customers’ dwindling dollars.

In fact, many small business owners are currently taking home less than the average full-time adult wage, according to the Small Business Matters report by the Australian Small Business and Family Enterprise Ombudsman.

If the way you have always run your business isn’t creating the returns you want, it may be time to try doing things differently.

There are lots of areas to explore to improve profits. The good news is that many don’t require extra expenditure, just a different way of doing things, or a new mindset about your core clients and products.

Here are nine ideas that could boost your profit margin and help improve the return you receive from all the hours you put into your business.

1. Go digital

Consider whether it’s time to add some digital solutions to improve the efficiencies within your business. Many manual tasks related to payroll, regulatory requirements and business reporting are ripe for automation. Introducing new software or technologies can see a big reduction in the time required to complete these necessary – but largely unprofitable – tasks within your business.

2. Understand your cash flow

Preparing a cash flow budget and automating your invoicing and collection processes can improve your cashflow and profits.

3. Collect what you’re owed

Taking steps to enhance your post-sale credit control may lose you a few customers, but these are usually the ones increasing your servicing costs by failing to pay on time.

4. Keep on top of essential reporting

Ensure all your business reports (such as BAS, Taxable Payments Annual Report, Single Touch Payroll and tax returns), are up-to-date and lodged online to save time and keep on top of your obligations. It’s also important not to forget your Super Guarantee records and payments, or you risk paying the Super Guarantee Charge.

5. Improve your visibility

Consider whether an enhanced social media presence could spread your message further. Check if your website and Google ranking are properly optimised. If Google cannot find you, potential customers are unlikely to know you exist.

6. Keep your customers close and sell them more

Think about the potential for selling more to your existing customers. Upselling – or the old ‘Would you like fries with that?’ – can add to your bottom line without the costs associated with finding and selling to new customers.

Check your customer ‘churn’ rate to identify how long customers stay with you. Experts estimate it costs between five to 25 times more to acquire a new customer than to keep an existing one. Develop strategies to reduce your churn rate, as increasing retention rates by five per cent can increase profits by 25 to 95 per cent. i

7. Review pricing and products

Analyse your offer to see if unprofitable products need to be eliminated. Review your pricing by working out how much margin you need to cover your expenses and develop a pricing strategy.

8. Be ruthless about expenses

Audit your business expenses and identify any that can be eliminated or reduced by switching to cheaper suppliers or options (such as leasing and refinancing). Try negotiating if you are paying for recurring monthly services. Smarter spending on fixed costs is an easy way to gain extra dollars in profit.

9. Set aside time to plan ahead

Evaluate what is working in your business and what isn’t. Write a detailed business plan for the year ahead so you and your team know where you are headed and what is needed to get there. Consider outsourcing resource-intensive tasks (such as IT or marketing) to free up time so your employees can spend more time generating profits.

Call us today for some help with improving your business’s bottom line.

i https://hbr.org/2014/10/the-value-of-keeping-the-right-customers

Making sure your deductions don’t get personal

It can be easy to overlook your personal use of business assets when it comes to completing your business and self managed super fund tax returns but be warned, the ATO is taking an interest in this area.

The ATO’s Small Business Random Enquiry Program found around 16 per cent of small businesses were either carelessly or deliberately overclaiming expenses in their tax returns.

If business assets are used for a mix of business and private use – such as vehicles and phones – the amount claimed must reflect only the business-related portion of the expense.

The ATO is urging taxpayers to remember this rule when claiming business-related deductions, including those for work-from-home expenses (such as internet and mobile phone usage), and work vehicles.

Rental properties under the spotlight

Holiday home rentals are also an area where many taxpayers are failing to follow the tax rules.

Deductions for holiday home expenses can only be claimed to the extent they relate to producing rental income, so you need to apportion your expenses if the property is only genuinely available for rent part of the year.

Apportionment is also required if you use the property for private purposes during the year, only use part of it to earn rent, or if it is used by family or friends at various times during the year.

Expenses relating solely to the rental of the property (such as agent commissions and advertising costs), don’t need to be apportioned.

Avoiding mistakes

To ensure you don’t invite attention from the ATO, review your treatment of business asset expenses annually, in case your private usage has changed.

New or additional private usage of the asset means you need to recalculate the percentage of business used to determine the correct deduction claim.

Proper business records explaining all relevant transactions (including payment to and receipts from employees, shareholders and associates) need to be kept to support your claims.

Common taxpayer errors

The ATO says there are some common errors when it comes to claiming deductions.

Taxpayers are not permitted to claim any deductions against business income for expenses relating to an asset entirely used for private purposes.

An example is an asset (such as a boat or plane) purchased and used for private purposes.

Deductions can only be claimed for the relevant percentage of business use. For example, if the private use component represents 60 per cent, only 40 per cent of the expense amount can be claimed in your return.

FBT and deemed dividends

Another common mistake is claiming a deduction for an asset giving rise to a deemed dividend. This arises when an asset is purchased through a company and used for private purposes by a company shareholder or their associates.

Under the tax rules, both the company and the dividend recipient must record such dividends in their income tax returns, as the asset is being used for their personal benefit.

Some small businesses also misunderstand the implications of purchasing an asset (such as a motor vehicle), that is used by an employee or the associate of an employee for personal purposes.

When this occurs, the benefit must be reported in the business’s fringe benefit tax (FBT) return and the resulting FBT liability paid.

Fixing lodgement mistakes

To avoid finding your business in the ATO’s spotlight, check you have correctly apportioned all expense claims before lodging your business or SMSF return.

You also need to consider whether the rules for private company benefits and FBT apply to any of your business assets. If you make a mistake with a deduction claim, you will need to amend or lodge an income tax or FBT return to correct your tax position. There are time limits on both business and super amendments.

We can help you to correct any mistakes and to deal with the ATO to ensure your tax reporting is smooth and worry-free.

Your guide for claiming business expenses

You can claim tax deductions for expenses you incur while running your business if they’re directly related to earning business income (also known as assessable income).

Take Rubi for example. Rubi is a sole trader who works as an IT consultant. As part of her work, she travels to deliver seminars and workshops.

Rubi follows the 3 golden rules for claiming a tax deduction when she travels for business purposes.

  1. The expense must be for her business, not for private use.
  2. If the expense is for a mix of business and private use, she can only claim the portion that is used for her business.
  3. She must have the records to prove it.

Rubi uses the myDeductions tool to store receipts of all her airfares, accommodation, public transport costs, ride-sharing fares, car hire fees and other costs such as fuel, tolls and car parking. She also records her meal costs if she’s away overnight.

Rubi also keeps a travel diary to note which expenses were for business purposes and which expenses were private, such as sight-seeing. The cost of her recent tour of the Tower of London is not included in her deductions. There are some expenses Rubi can’t claim, such as entertainment, traffic fines, and expenses related to earning non-assessable income.

As an employer, Rubi meets her superannuation and employer obligations by reporting her employees’ salaries or wages and paying any tax withheld amounts on time. This allows her to deduct the salaries, wages and super contributions she’s paid during the year.

By the time Rubi is ready to lodge her tax return, her tax agent has everything they need to verify her deductions.

Be like Rubi and perfect your record keeping to correctly claim your business expenses and make tax time easier.

To check your record keeping skills, you can use this record keeping evaluation tool.

Remember, we can help you with your tax and super.

Source: ato.gov.au August 2023
Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/Business/Small-business-newsroom/General/Your-guide-for-claiming-business-expenses/.
Important:
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Market movements & review video – November 2023

Stay up to date with what’s happened in markets and the Australian economy over the past month.

October was a volatile month on the global stock markets and in Australia. The local sharemarket finished October down 3.8 per cent, representing a third straight month of losses.

Investor sentiment reflected heightened anxiety regarding inflationary pressures and uncertainty over rate rises, mixed economic data and concerns about the Israel-Hamas conflict.

Investors are continuing to keep a close eye on oil price movements over fears of an escalation of conflict in the Middle East.

Click the video below to view our update.

Please get in touch if you’d like assistance with your personal financial situation.

Tax Alert September 2023

While the government is boosting the tax deductions available for small business spending on staff training, other taxpayers such as landlords are facing closer scrutiny from the Australian Taxation Office. Here are some of the latest developments in the world of tax.

Amnesty for small business late lodgements

If your small business is not up-to-date with its tax lodgements, it could be a smart idea to take advantage of the government’s current Lodgement Penalty Amnesty.

The program is designed to encourage small businesses to re-engage with the tax system and fix any outstanding income tax, FBT returns and business activity statements due between 1 December 2019 and 28 February 2022.

Taxpayers have until 31 December 2023 to lodge their overdue forms without lodgement penalties being applied (general interest charges still apply).

Businesses with an annual turnover under $10 million when the original lodgement was due are eligible for the amnesty.

Insurance focus for latest data-matching

As part of its ongoing data-matching program, the ATO has announced it will require both income protection (IP) and landlord insurers to provide information on their customers for the period 2021-22 to 2025-26.

Insurers must provide detailed information on the policy and policy owner to help the ATO “identify and educate” taxpayers failing to meet their lodgement obligations.

The landlord data is expected to net records relating to around 1.6 million landlords, while the IP data will cover 800,000 individuals.

New skills and training boost starts

Small business owners keen to upskill their employees can now take advantage of the government’s new skills and training boost if they spend money on these activities before 30 June 2024.

If you have an aggregated annual turnover of less than $50 million, you can claim a bonus deduction equal to 20 per cent of qualifying expenditure on external training courses provided by eligible registered training providers.

You can also claim an additional 20 per cent bonus for expenditure on digitising your business operations and relevant assets such as portable payment devices, cyber security systems and subscriptions for cloud-based services.

Tax penalties increase again

The unit amount used by the ATO to calculate penalties it imposes has increased again, rising to $313 from 1 July 2023.

The government had already increased the penalty amount for the 1 January to 30 June 2023 period, making this the second increase this calendar year.

If the ATO decides to impose a penalty, the unit amount is used to calculate your actual fine. Activities such as giving false or misleading statements, or behaving with intentional disregard for example, result in a 60 penalty unit fine.

GST food and beverage list updated

If you supply or sell food and beverage products, it’s time to recheck the ATO’s detailed food list showing the GST status of major food and beverage product lines, as the tax regulator recently made around 30 updates to the list.

Although some changes corrected existing entries, new food and beverage lines have been added and some current entries deleted.

The ATO encourages businesses to review this list regularly to ensure they are meeting their GST obligations accurately.

Reminders about tax offsetting rules

The ATO is currently writing to businesses with a debt on hold of more than $10 to explain its tax offsetting process.

Under the offsetting rules, any tax refund and credit entitlements are automatically used to pay off an existing tax debt.

If you have an outstanding tax debt, you can choose to pay all or part of it at any time, including through a payment plan.

New-look ATO Charter

Taxpayers could find their interactions with the ATO improving following the release of its revised Taxpayers’ Charter, now called the ATO Charter.

The Charter explains what you can expect when interacting with the ATO, the regulator’s commitments to taxpayers, and the steps you can take if you’re not satisfied.

Trusts and the new super tax rules

Ensuring you’ve structured your finances tax-effectively is always a concern, but with new tax rules for super on the horizon, many people with large balances are considering alternative vehicles to save for retirement.

Unsurprisingly, this has sparked a renewed interest in an old favourite – trusts.

Trusts have always been popular in Australia, with the government’s Tax Avoidance Taskforce (Trusts) estimating more than one million were in place in 2022.

Separating ownership using a trust

The popularity of trusts for business, investment and estate planning purposes is due to both their flexibility and inherent benefits, particularly when it comes to managing your tax affairs.

At their heart, trusts are simply a formal relationship where a legal entity holds property or assets on behalf of another legal entity.

This separation means the trustee legally owns the assets, but the beneficiaries of the trust (such as family members) receive the income flowing from the assets.

A common example of a trust structure is a self managed super fund (SMSF), where the fund trustee is the legal owner of the fund’s assets, and the members receive investment returns earned on assets held within the SMSF trust.

Which trust is best?

There are many different types of trusts, with the appropriate structure depending on the financial goals you’re trying to achieve.

For small businesses and families, the most common trust is a discretionary (or family) trust. These vehicles are very flexible and can be used with immediate and extended family members, family companies or even charities.

In a discretionary trust, the trustee has absolute discretion on how both the income and capital of the trust are distributed to various beneficiaries.

This gives the trustee a great deal of flexibility when it comes time to allocate income to family members paying different marginal tax rates.

Advantages of a trust structure

Discretionary trusts offer tax, asset protection, estate planning and property holding benefits.

They can also assist with the accumulation of assets for younger generations within your family and provide opportunities for the discounting of capital gains.

For small businesses and farming operations, a discretionary trust can be used to provide valuable asset protection. If your business goes bankrupt or a beneficiary is divorced, creditors will be unable to access assets or property held within the trust as it is the legal owner of the assets.

Building wealth outside super

With new tax rules for super fund balances over $3 million being introduced, trusts also provide a useful tool to consider for continued wealth accumulation.

Unlike super funds, trusts don’t have annual contribution limits, restrictions on where you can invest or borrowing limits. Money can be added and removed from the trust as necessary, providing significant financial flexibility.

Discretionary trusts can also be used with vulnerable beneficiaries who may make unwise spending decisions. The trustee can decide to provide a spendthrift child or a family member with a gambling addiction regular income, but not large capital sums.

Holding ownership of assets within a trust is useful for estate management, as the assets will not be part of a deceased estate, avoiding the possibility of a Will being challenged.

Trusts aren’t always the solution

Although trust structures provide many benefits, there are also tax issues that need to be considered. For example, any trust income not distributed to beneficiaries is taxed at the top marginal rate.

Distributions to minor children are taxed at higher rates and a trust is unable to allocate tax losses to beneficiaries, so they must remain within the trust and be carried forward.

Trusts can be expensive to set up, administer and dissolve when they are no longer needed and the trustee’s actions are restricted by the terms of the trust deed.

If a family dispute arises, running a trust can become difficult and making changes once it is established isn’t easy.

If you would like to find out more about trusts and whether one is appropriate for your business or family, call us today.

Salary sacrifice to cut tax and boost your super

This time of year, people’s thoughts start turning to their tax return, but it can also be a good time to set things up so you don’t pay more tax than required next financial year.

Simply talking to your employer about setting up an arrangement to “sacrifice” some of your pre-tax salary could potentially lower your tax bill – and boost your retirement nest-egg.

Reducing your tax bill

A salary sacrifice arrangement simply involves coming to an agreement with your employer to pay for everyday items or services you would normally pay for out of your after-tax salary directly from your before-tax salary. This might include things like childcare, health insurance or super. The benefit is that this reduces the level of income the ATO uses to calculate your tax bill.

If you set up a salary sacrifice arrangement with your employer, it’s important to understand that while your taxable income is lower, the benefits are still listed on your annual payment summary. For some people, this reduces the tax offsets, child support payments or other government benefits they receive, limiting the value of salary sacrifice.

Salary sacrificing options

The items or services you can pay for using salary sacrifice depends on your employer.

Some employers let their employees salary sacrifice for expenses such as cars, health insurance, school fees and home phones. Others are not prepared to do this, as they may end up paying Fringe Benefits Tax (FBT) on the benefits you receive.

Employers are usually more willing to allow you to package FBT-exempt work-related items such as portable electronic devices, computer software, protective clothing or tools of trade, as these generally don’t result in FBT bills.

Boost your super account

One of the most popular forms of salary sacrifice is redirecting some of your pre-tax salary into your super fund. Most companies are willing to provide this option as it not only helps you build retirement savings, but it can also earn them a tax deduction.

When you salary sacrifice into your super, your contributions are taxed at 15 per cent when your super fund receives the money. For most people this is a lower tax rate than if they received the money as normal income.

A further bonus with salary sacrificing into super is you only pay 15 per cent on any investment earnings you receive inside super, instead of your marginal tax rate for investments held outside super.

Find out what’s on offer

If you’re interested in a salary sacrifice arrangement, it’s a good idea to discuss the subject with your employer or HR team to find out the company’s policy.

It’s also a good idea to talk to us, as the value of these arrangements needs to be weighed up carefully against your reduced take-home pay and the potential loss of government benefits.

These arrangements should be put in writing before you earn the income you are sacrificing, so you need to talk to your employer prior to the start of the new financial year if your salary will change from 1 July.

Tips for employers

Allowing your employees to salary sacrifice can help them reduce their tax bill and it boosts engagement with your business. Another overlooked benefit is if your employee salary sacrifices into their super, you can claim a tax deduction for their contributions, as they are considered employer contributions.

To do this, you need to ensure you create an ‘effective’ salary sacrifice arrangement meeting the ATO’s guidelines. Otherwise the benefits your employee receives are considered part of their taxable income.

Effective arrangements require a clear agreement stating the terms and conditions and they must be documented in writing to avoid any uncertainty or future disputes.

Sacrifice arrangements can only apply to wage and salary payments for work yet to be performed, not past earnings. Salary and wages, leave entitlements, bonuses or commissions accrued prior to the arrangement cannot be used.

A simple way to avoid problems is to document your employees’ salary sacrifice arrangements before the start of a new financial year – or whenever there is a change to their salary – so it covers future earnings.

You need to keep detailed records of these arrangements for five years and list all sacrifice amounts on the employee’s annual payment summary.

If you would like help working out if a salary sacrifice arrangement makes sense for you, call our office today.