Avoid the rush: Get ready for June 30

It seems like June 30 rolls around quicker every year, so why wait until the last minute to get your finances in order?

With all the disruption and special support measures of the past two years, it’s possible your finances have changed. So it’s a good idea to ensure you’re on track for the upcoming end-of-financial-year (EOFY).

Starting early is essential to make the most of opportunities on offer when it comes to your super and tax affairs.

New limits for super contributions

Annual contribution limits for super rose this financial year, so maximising your super contributions to boost your retirement savings is even more attractive.

From 1 July 2021, most people’s annual concessional contributions cap increased to $27,500 (up from $25,000). This allows you to contribute a bit extra into your super on a before-tax basis, potentially reducing your taxable income.

If you have any unused concessional contribution amounts from previous financial years and your super balance is less than $500,000, you may be able to “carry forward” these amounts to further top up.

Another strategy is to make a personal contribution for which you claim a tax deduction. These contributions count towards your $27,500 cap and were previously available only to the self-employed. To qualify, you must notify your super fund in writing of your intention to claim and receive acknowledgement.

Non-concessional super strategies

If you have some spare cash, it may also be worth taking advantage of the higher non-concessional (after-tax) contributions cap. From 1 July 2021, the general non concessional cap increased to $110,000 annually (up from $100,000).

These contributions can help if you’ve reached your concessional contributions cap, received an inheritance, or have additional personal savings you would like to put into super. If you are aged 67 or older, however, you need to meet the requirements of the work test or work test exemption.

For those under age 67 (previously age 65) at any time during 2021-22, you may be able to use a bring-forward arrangement to make a contribution of up to $330,000 (three years x $110,000).

To take advantage of the bring-forward rule, your total super balance (TSB) must be under the relevant limit on 30 June of the previous year. Depending on your TSB, your personal contribution limit may be less than $330,000, so it’s a good idea to talk to us first.

More super things to think about

If you plan to make tax-effective super contributions through a salary sacrifice arrangement, now is a good time to discuss this with your employer, as the ATO requires documentation prior to commencement.

Another option if you’re aged 65 and over and plan to sell your home is a downsizer contribution. You can contribute up to $300,000 ($600,000 for a couple) from the proceeds without meeting the work test.

And don’t forget contributing into your low-income spouse’s super account could score you a tax offset of up to $540.

Get your SMSF shipshape

If you have your own self-managed super fund (SMSF), it’s important to check it’s in good shape for EOFY and your annual audit.

Administrative tasks such as updating minutes, lodging any transfer balance account reports (TBARs), checking the COVID relief measures (residency, rental, loan repayment and in-house assets), and undertaking the annual market valuation of fund assets should all be started now.

It’s also sensible to review your fund’s investment strategy and whether the fund’s assets remain appropriate.

Know your tax deductions

It’s also worth thinking beyond super for tax savings.

If you’ve been working from home due to COVID-19, you can use the shortcut method to claim 80 cents per hour worked for your running expenses. But make sure you can substantiate your claim.

You also need supporting documents to claim work-related expenses such as car, travel, clothing and self-education. Check whether you qualify for other common expense deductions such as tools, equipment, union fees, the cost of managing your tax affairs, charity donations and income protection premiums.

Review your investment portfolio

After a year of strong investment market performance, now is also a good time to review your investments outside super. Benchmark your portfolio’s performance and check whether any assets need to be sold or purchased to rebalance in line with your strategy.

You might also consider realising any investment losses, as these can be offset against capital gains you made during the year.

If you would like to discuss EOFY strategies and super contributions, call our office on 03 5120 1400.

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.

5 Signs of a well run business

Every small business owner wants their business to thrive, but it can be tough to keep the money coming in the door while staying on top of all the necessary paperwork.

One way to ensure success is to understand the behaviours that separate a well-managed business from one that’s just muddling through.

Surprising as it may sound, the ATO is keen to help small business owners prosper and to share its insights on running a successful business.

Getting the basics right

Since it’s charged with keeping an eye on almost four million Aussie small businesses, the tax regulator is well placed to know what works and what doesn’t when it comes to keeping the doors open.

According to the ATO, when a small business is operating well, it tends to get the basics right. That means keeping good records and having in place effective tools so you can easily reconcile your business’s income and expenses.

1. Keep informed

The ATO finds business owners who are operating effectively take the time to understand their tax and super obligations and to keep on top of any changes affecting their business’s processes.

2. Know your cash flow

Small businesses that are well managed use a cash flow projection or budget tool, as this is the main reason small businesses fail. If you don’t have clear insights into your cash flow position and are not carefully managing the business’s income and expenses, it can be a recipe for trouble.

If you are using cloud-based accounting software, cashflows and budgets can be easily integrated into your everyday reports. Get in touch with us on our contact page if you need any guidance to assist with the implementation of cash flows and budgets in your software.

3. Declare all income

Well-run businesses declare all their income – including any cash income – in their income tax return. Although it’s the ATO’s job to collect tax, it argues small businesses not declaring all their income are heading for trouble down the track.

4. Split your expenses

It’s important to carefully apportion (or split) your business expenses between private and business use.

5. Keep up to date

The final marker of a well-run business is that all its details are up to date – particularly with the ATO. That means keeping your ABN details, contact information and bank details current and easy to find.

Although many of these indicators are straightforward, it’s surprising how many small businesses don’t take these simple actions.

Behaviours to avoid

Just as there are habits that mark a well-run business, there are behaviours common to operations heading for trouble.

Businesses that omit income by depositing it into private accounts or mortgages, or that don’t declare cash sales or record director’s fees correctly, are not on top of things.

The same goes for failing to account correctly for private use of business assets or funds. If you are claiming an excessive business portion of an expense with both personal and business use, it’s a sign of poor management. As is claiming private expenses as a business expense, or not having the necessary records to substantiate your claims.

Making errors because you don’t understand your tax responsibilities is also a sign that things are not being well-run.

Bring in the professionals

With so many rules and regulations, it’s not surprising that business owners may occasionally overlook some of their obligations. There is an easy solution though.

Well-run small businesses seek professional advice when they need it. We can work with you to improve your business overall, not just to meet your tax obligations.

In fact, the ATO’s 2017-18 research and audit work with around 120,000 small businesses indicated that those who have regular contact with a tax professional are more likely to report correctly.

ATO deputy commissioner for small business, Deborah Jenkins recently gave her top three tips for effectively managing your business: maintain good business records, keep an eye on your competition using the ATO’s Small Business Benchmarks and take care of your mental health because running a small business can be very stressful.

If you think your business could do with a financial tune-up, give us a call today on 03 5120 1400.

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.




Tax deductions for your home-based business

Using your home as the base for your business is increasingly popular, particularly due to COVID-19, with many of Australia’s 2.1 million enterprises with four or less employees now based at home.

As a result, the ATO is busy revisiting the rules on the tax deductions you can claim for a home-based business. Your claimable expenses will depend on how you operate your business, so it’s worth checking the current rules to ensure you know what’s what.

Your business structure matters

The structure (sole trader, partnership, trust or company) you use to operate your business affects your entitlements and obligations when claiming expense deductions.

Sole traders and partnerships can claim a deduction for the costs of running their business from home. What you can deduct is governed by whether or not you have an area of your home set aside as a ‘place of business’.

Trusts and companies, however, must have a genuine market-rate rental contract or agreement in place with the property owner covering which expenses the business is responsible for paying.


Different types of expenses

For home-based sole traders and partnerships, there are two main types of claimable expense.

Running expenses are the increased costs from using your home’s facilities for your business, such as heating, cooling, cleaning, landline phone and internet, equipment and furniture depreciation, and equipment repairs.

These can be claimed if you have a separate study or desk in a lounge room, even if the area doesn’t have the character of a place of business.

You can only claim deductions for the portion of your expenses related to running your business. Any part of an expense related to personal use cannot be claimed.

You may also be able to claim motor vehicle expenses between your home and other locations if the travel is for business purposes.

Claiming your business costs

When you calculate your running costs, you can choose the actual cost, fixed rate or temporary shortcut method. Each one is acceptable provided it’s reasonable for your circumstances, excludes your private living costs and there are appropriate records for your calculations.

With the actual cost method you use the real cost of the expense, while the fixed rate uses a set cost of 52 cents for each hour you operate your business. This covers heating, cooling, lighting, cleaning and depreciation. Other expenses need to be worked out separately.

The temporary shortcut method (available until 30 June 2022), is an 80 cents per hour rate covering all your expenses.

Occupancy expenses can’t always be claimed

Your business can claim occupancy expenses (such as mortgage interest, council rates, and home and contents insurance) if the area in your house set aside for your business has the character of a place of business (even if most of your business is conducted online).

Indicators of a place of business include identification (such as an external sign) it’s a place of business, the area is not easily adaptable for domestic use and is almost exclusively used for your business, or you receive regular client visits.

If you are eligible to claim occupancy expenses, they must be apportioned based on the share of the year your home is used for business and the portion of the floor plan.

Recordkeeping is essential

The ATO expects you to keep records for at least five years to show your business actually incurred the claimed expenses.

You must be able to substantiate your claims with written evidence or receipts for all running costs. If you claim occupancy expenses, you need to substantiate your mortgage interest, insurance, council rates and rental agreement with the homeowner.

The ATO also requires you to demonstrate how you calculated your expense claims and separated them into business and private use.

Capital gains implications

A word of warning though. If you claim deductions for the cost of using your home as your main place of business, there may be capital gains tax (CGT) implications when you sell.

If you claim occupancy expenses, the usual main residence exemption may not apply to the proportion of your home and the periods you used it for your business.

If you have recently started working from home or plan to do so, we can help you work out the best method of claiming deductions for your home-based business.

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.


Single Touch Payroll – Changes ahead

Just when you thought you had all your systems bedded down for Single Touch Payroll (STP), the government is expanding the information on employee payments you need to provide.

So, what will the changes mean for your small business?

STP reporting to expand

Under the current STP rules, employers are required to report payroll information to the ATO each time they pay an employee salary or wages, pay-as-you-go (PAYG) withholding or superannuation.

In the 2019-20 Federal Budget, the government announced an expansion of the data it collected through the STP system starting from 1 January 2022.

The change is called STP Phase 2 and under the new rules, employers will be required to report additional information on or before each pay day.

According to the government, the aim of STP Phase 2 is to “reduce the reporting burden for employers who need to report information about their employees to multiple government agencies”.

The additional data collected from 1 January 2022 will also be used in the administration of the social security system.

New STP Phase 2 requirements

The key changes in your reporting include providing extra information on the employment basis for each of your employees (full-time, part-time or casual).

You will also need to provide information on the tax treatment of their salary. This is to help the ATO identify the factors influencing how you calculated your employee’s PAYG withholding. For instance, where your employee has notified you that they have a Study Training Support Loan.

When an employee ceases employment, you will now need to provide information on the reason, for example, voluntary separation, redundancy or due to illness. This will remove the need for you to provide former employees with separation certificates.

Phase 2 also gives you the option to include child support garnishees and child support deductions in your STP report, reducing the requirement to provide a separate remittance advice report to the Child Support Registrar.

More detailed information

Reporting of income types and country codes is also being introduced with STP Phase 2 to help the ATO identify employee payments with specific tax consequences. The government believes this will allow your employees to complete their personal tax returns more easily.

A significant change with Phase 2 will be the new requirement to separately itemise the components of any gross payment amounts such as bonuses and commissions, directors’ fees, paid leave, salary sacrifice, overtime and allowances.

Allowances will need to be reported separately, not just expense allowances that may be deductible for your employees. Any lump sum payments you make to employees need to be reported under new labels.

Although you need to provide additional information in your STP reports, the way you submit the report, due dates and types of payments covered in your reports will stay the same. Your tax and super obligations and the requirements for end of year finalisation will also stay the same.

Benefits from the STP expansion

The government claims employers will receive a number of benefits from the introduction of STP Phase 2.

A key one is a reduction in the duplicate information you are required to provide to different government agencies, reducing unnecessary interactions with these departments.

You will also no longer be required to send tax file number (TFN) and withholding declaration information to the ATO, as this will be captured in the employment conditions section of your STP report.

By more clearly defining the components making up an employee’s gross income, the government says it will be easier for employers to understand their various obligations.

Assistance with new reporting requirements

The government is working closely with digital service providers to ensure they update their software, so it is ready to commence collecting the additional information from 1 January 2022.

The specific information your business needs to provide for STP Phase 2 depends on the particular software product you use, and how you manage your payroll.

Contact us on 03 5120 1400 if you would like more information or help transitioning your business to the new STP requirements.

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.


Tax Alert – December 2021

As COVID-19 turbulence starts to settle, the ATO is moving away from its supportive position and returning to its more usual compliance focus.

That means taxpayers need to be aware their financial affairs will come under renewed attention in the year ahead.

Data gathering programs increase

In recent months the ATO has announced programs to gather data on various aspects of Australians’ financial lives to use in its ongoing data-matching projects.

Recent programs include gathering data on property management and rental bonds, cryptocurrency, online selling and novated leases for the upcoming financial year (2022-23). The ATO will also be collecting data on payments made by government agencies such as Comcare, the Department of Health, the NDIA, Department of Veterans’ Affairs and the clean energy regulator.

Taxpayers who buy and insure high-value lifestyle assets will also be under the microscope, with the ATO looking to collect details that will “assist with profiling [to obtain] a holistic view of a taxpayer’s wealth”. Under this program, the taxman will be obtaining information from insurance companies for the period 2020-21 to 2022-23 about assets exceeding certain nominated thresholds.

These high-value assets include boats valued over $100,000, motor vehicles (including caravans) and thoroughbred horses valued over $65,000, fine art worth over $100,000 per item and aircraft valued over $150,000. Data obtained from insurers will include individual client identification and policy details.

Overseas gifts or loans under scrutiny

The ATO has also announced it will be increasing scrutiny of undeclared foreign gifts or loans from related overseas entities, including family and friends.

The regulator says it has encountered many situations where Australian taxpayers are deriving assessable income or capital gains offshore but failing to declare these in their income tax returns. The ATO will be looking at arrangements where taxpayers are attempting to avoid tax on foreign assessable income by disguising amounts as gifts or loans.

Anyone receiving genuine monetary gifts or loans should keep supporting documentation. Inheritances count as gifts, so if you receive an inheritance from overseas, get a certified copy of the person’s will or estate distribution statement.

Focus on working from home deductions

On a positive note, if you are still working from home due to COVID-19, you can continue using the shortcut method for claiming deductions until 30 June 2022.

From 1 July 2022, you will need to use either the traditional fixed rate or actual cost methods and meet their eligibility and recordkeeping requirements.

The ATO says it’s currently reviewing the 52 cents per hour fixed rate method to make it easier and simpler to use, given more people will be working from home in the longer term.

Backpacker tax under fire

Employers paying working holidaymakers will need to keep a close eye on developments in this area following a decision by the High Court that tax rates applied to these employees is discriminatory as it is based on nationality.

The decision could affect the applicability of the backpacker tax for workers from countries with double tax agreements with Australia. According to the ATO, this means working holidaymakers from Chile, Finland, Germany, Japan, Norway, Turkey, UK, Germany or Israel.

The ATO is currently considering the implications of the High Court decision and will provide further guidance for employers. In the meantime, employers should continue using the tax rates in the ATO’s published withholding tables for backpackers.

Self-education expense threshold to go

The government has made good on its May 2021 Budget promise to remove the $250 non-deductible threshold for claiming work-related self-education expenses.

The Treasury Laws Amendment (2021 Measures No.7) Bill 2021 is currently before Parliament. If passed, it will remove the current threshold for taxpayers claiming self-education expenses. It’s also expected to simplify the claims process in your annual tax return.

The start date for the change is likely to be 1 April or 1 July 2022.

Reminder on super stapling

If you are an employer, don’t forget to request super fund details from new employees, now the government’s super stapling rules are in place.

If a new employee doesn’t choose a super fund, you must request their stapled super fund from the ATO if they have one. This fund is linked to them and must be used for your Superannuation Guarantee (SG) contributions unless the employee requests otherwise.

If you would like help getting your tax affairs in order for the new year, contact our office today on 03 5120 1400 and speak to one of our tax accountants or send us a message via our contact page.

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.




The new Director ID: Do you need one?

It’s been a busy year for Australia’s two million plus directors dealing with the pandemic and lockdowns and there’s now a new task on their to-do list.

From 1 November 2021, if you’re a director or want to become one, you will need to apply for the new Director Identification Number (Director ID) being rolled out by the Federal Government.

Directors of businesses and entities of all sizes – including directors and corporate trustees of self-managed super funds (SMSFs) – will all need to apply. If you run your business as a sole trader or partnership, however, you won’t need a Director ID.

Director ID: what is it?

The new Director ID is a unique 15-digit identifier most directors will need before they can take up a directorship.

Before you join a board, you will need to apply for your own Director ID which you will keep forever, even if you change boards, stop being a director, change your name or move interstate or overseas.

This new identifier is part of a broader registry modernisation project combining the Australian Business Registry Service (ABRS) with numerous ASIC registers to form a single system overseen by the ATO.

According to the government, unique director identifiers will create a fairer business environment by preventing the use of false and fraudulent director identities.

Who needs a Director ID?

The new regime casts a pretty wide net and will catch most business entities and organisations.

You will need a Director ID if you are an eligible officer of a company, Aboriginal and Torres Strait Islander corporation, corporate trustee, charity or not-for-profit organisations limited by guarantee, or a foreign company registered with ASIC and conducting business in Australia.

Directors of registered Australian bodies (such as incorporated associations registered with ASIC that trade outside the state or territory in which they are incorporated) also need to apply.

If your organisation has an Australian Business Number (ABN), you can use the ABRS LookUp tool to check whether it is registered with ASIC.

Officers outside the ID regime

Some company officers are not required to apply for the new identifier.

If you are a company secretary but not a director, act as an external administrator of a company, or are called a director but haven’t been appointed as a director under the Corporations Act, you won’t need a Director ID.

Neither will directors of charities not registered with ASIC to operate throughout Australia.

The officers of an unincorporated association, cooperative or incorporated association established under state or territory legislation (unless the organisation is also a registered Australian body), are also exempt.

Applying for your Director ID

From November 2021, you will need to apply for your Director ID on the ABRS website and log in using the myGovID app. The myGovID app is downloaded on your smart device to verify your digital identity and is different to your existing myGov account.

When applying for your Director ID, you are required to personally make the application so you can verify your identity.

There are varying application deadlines for the new identifier, with current directors (on or before 31 October 2021), having until 30 November 2022 to obtain their Director ID.

While existing directors have plenty of time, if you become a director between 1 November 2021 and 4 April 2022, you must apply for your Director ID within 28 days of your appointment to the board.

Directors appointed after 5 April 2022, must apply prior to taking up their directorship.

If you are unable to apply for your Director ID by the relevant deadline, you can apply for an extension.

Once you receive your new Director ID, you will need to pass it on to your company recordholder who is usually the company secretary or authorised agent. The ABRS is not permitted to disclose Director IDs to the public without consent and your details won’t be searchable on the register.

If you would like more information about Director IDs, whether you need one and how to go about applying, please get in touch with one of our advisers on 03 5120 1400 or via our website contact page.

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.