Welcome to our June newsletter. As winter sets in and the end of the financial year approaches it’s a good chance to spend some time tidying up and reviewing your finances.
We’ve put together some practical ways to help you get your financial affairs in order, from assessing your current situation and dealing with necessary admin, to checking that your super and insurances are still appropriate.
The recent Federal Budget included some new tax rules you may need to know about including changes for employers in paying the superannuation guarantee, new tax incentives for small businesses and a change of approach by the ATO on debt collection. Read more in our quarterly Tax Alert.
And finally, scammers are becoming increasingly sophisticated so it pays to be aware of the tricks they are using to hoodwink business and individuals alike. We’ve put together a list of common scams to be aware of.
Setting yourself up for success in the new financial year
The start of a new financial year is the perfect time to get your financial affairs in order. Whether it’s tidying up your paperwork, assessing your portfolio or dealing with outstanding issues, there are plenty of practical actions you can take.
Here are some strategies for starting the new financial year on the right foot.
Tidy up your paperwork
Dealing with the paperwork is the task most of us love to hate. But taking a day to trawl through the ‘To Do’ pile and the growing mountain of filing could be a good investment in yourself. What’s more, you might identify some savings.
Set your budget
A lot can happen in a year, so it makes sense to review your budget to ensure it still works towards your goals in the new year. This will help you track your changing expenses and ensure you’re not overspending. And if you haven’t got a working budget, now’s a great time to start. There are plenty of budgeting apps and tools available online that can help you get started.
Assess your portfolio
Another important step to take as you start the new financial year is to assess your investment portfolio.
Some important questions include:
- Why did you start investing and have your circumstances changed? For example, you may have started investing to receive a better return than your term deposits but now that term deposits rates have increased and share markets are challenged, should you revisit that goal?
- What is the investment performance? Is it in line with your expectation and the benchmark?
- Should you consider diversifying into different asset classes?
- Is dividend reinvestment the best option for you or should you take the dividend income into cash?
- Is your risk appetite still the same, or should you be aggressive or more conservative?
Check your insurance
Now is a good time to examine your insurances closely and to consider whether they match your needs and risks. It is also a good reminder to take note of policy renewal dates so that you can shop around to make sure you get the best price.
Understand Federal Budget changes
Keeping up to date with the commentary about Federal Budget initiatives may be useful.
The measures aimed at easing the cost of living will provide a boost to some. They include energy bill relief for concession card holders and energy saving incentives. Meanwhile those with chronic health conditions will benefit from a number of changes announced in the budget.
The Budget also included support for families with cheaper childcare and a more flexible Paid Parental Leave scheme, and incentives for some types of new home building projects.
Review your superannuation
A review – at least annually – of your super account is vital to make sure that:
- Your investments and risk strategy are still right for you
- The fees are reasonable
- Any insurance policies held in your super account are appropriate
- Your employer contributions are being made
- Your death benefit nomination is relevant
- You don’t have multiple accounts incurring unnecessary fees
You might also consider a salary sacrifice strategy, where you ask your employer to make extra super contributions from your pre-tax salary. These additional contributions are taxed at 15 per cent within the super fund, plus an additional 15% if Division 293 tax applies to you (income over $250,000).
Meanwhile, it is not too late to top up your super balance for this financial year using either concessional contributions (from your pre-tax income) or non-concessional contributions (after-tax income). Don’t forget the caps on payments, which are $27,500 for concessional contributions and $110,000 for non-concessional.
It is a good idea to get some expert advice regarding your super contributions, we can assist with the best ways to manage your contributions.
So, set yourself up for a fresh start to the year with some simple strategies to help you achieve your financial goals.
Get your SMSF shipshape for EOFY
If you have an SMSF, it’s essential to get your fund in good shape and ready for June 30 and the annual audit.
It’s particularly important this year, because the ATO is focussed on fixing a number of issues when it comes to SMSFs. These include high rates of non-lodgment and problematic related party loans by SMSF members operating small businesses.
Check your paperwork is up-to-date
Review all the administrative responsibilities of your SMSF to identify any incomplete ones. These include updating the fund’s minutes to record all decisions and actions taken during the year, lodging any required Transfer Balance Account Reports (TBARs), and documenting decisions about benefit payments and withdrawals.
Although it’s easy to forget, SMSFs are required to keep all contact details, banking details and electronic service address up-to-date with the ATO.
Make contributions and payments early
If you want a super contribution counted in the 2022–23 financial year, ensure the fund’s bank account receives payment by 30 June.
Minimum pension payments to members also need to be made by 30 June to meet the annual payment rules and ensure the income stream doesn’t cease for income tax purposes.
Ensure contribution administration is ready
If your SMSF receives tax-effective super contributions for salary sacrifice arrangements, ensure the fund has all the necessary paperwork before the arrangements commences.
Check you have appropriate evidence (and trust deed authority) to verify any downsizer contributions. From 1 January 2023, SMSF members aged 55 and over are eligible to make a downsizer contribution of up to $300,000 ($600,000 for a couple).
Lodge your annual return on time
Non-lodgment of the annual return is a major red flag for the ATO, particularly for new SMSFs.
Ensure your annual return is prepared and lodged on time to avoid coming under the tax man’s microscope for potential illegal early access or non-compliance.
Consider implications of new tax rules
The planned new tax on member balances over $3 million could create significant issues for some SMSF members, so trustees should review the potential implications ahead of EOFY.
Funds with large, lumpy assets such as business real property should consider the implications and liquidity issues of members implementing strategies designed to limit the impact of the new tax.
Value the fund’s assets
SMSF rules require all fund assets to be valued at market value at year-end, including investments in unlisted companies or trusts, cryptocurrency, and collectible assets. The ATO is monitoring this area, so trustees should organise appropriate valuations as soon as possible.
Ensure valuations can be substantiated if there are audit queries and the process is undertaken in line with valuation guidelines.
Reassess your investment strategy
Review the fund’s investment strategy to ensure it covers all relevant areas, including whether investment asset ranges remain relevant to your investment objectives. Deviations from strategic asset ranges must be documented, together with intended actions to address them.
Review your NALE
Non-arm’s length expenses (NALE) and income are key interest areas for the ATO, so check the fund complies with the rules.
Pay particular attention to all SMSF transactions involving related parties and ensure their arm’s length nature can be fully substantiated.
Get your auditor onboard
Trustees are required to appoint their auditor at least 45 days before lodgment due date, so ensure you have this organised.
Prepare for earlier TBAR reporting
From 1 July 2023, SMSFs will be required to report TBARs more frequently. All TBAR events will need to be submitted 28 days after the quarter in which the event occurred, so ensure you have systems in place to meet the new requirement.
All TBAR events occurring in 2022-23 will need to be reported by 28 October 2023.
Ensure trustees have a director ID
SMSF with a corporate structure must ensure all trustees have a director ID number. Although this was a requirement from 1 November 2022, many SMSF trustees are yet to apply.
Holding a director ID is an essential part of the SMSF registration process and directors must apply via the Australian Business Registry Services website.
Tax Alert June 2023
Budget incentives and crackdowns on unpaid tax debts and rental deductions
Although this year’s Federal Budget was short on big changes when it came to tax, there still have still been some important developments in this area. Here are some of the latest developments in the world of tax.
Small business tax incentives and write-offs
The budget ushered in some valuable new tax incentives for small businesses, including halving the increase in quarterly tax instalments from 12 per cent to 6 per cent for both GST and income tax during 2023-24.
The government also introduced a bonus 20 per cent deduction for businesses with turnovers under $50 million when they spend on energy saving upgrades. Up to $100,000 of total expenditure will be eligible, with the maximum bonus tax deduction being $20,000 per business.
Although smaller than the previous year, the instant asset write-off continues in 2023-24 with up to $20,000 available for immediate deduction on eligible assets.
The planned third tranche of personal income tax cuts due to start next financial year also remained in place, while >the low and middle income tax offset was not extended.
Super changes for employers
Another significant tax change announced in the budget will affect employers. From 1 July 2026 employers will be required to pay their Super Guarantee (SG) obligations at the same time they pay employee salary and wages.
The ATO has received additional resources to help it detect unpaid super payments earlier.
Employers also need to remember the SG amount for employee super rises to 11 per cent from 1 July 2023.
Tax debt warnings sent out
The ATO is continuing to write to directors of companies with tax debts warning if the company hasn’t paid the amount owing or contacted it to make other arrangements, a director penalty notice(DPN) may be issued.
DPNs are issued to current directors and anyone who was a director at the time the company failed to pay. They make directors personally liable for failure to meet pay-as-you-go withholding (PAYGW), GST and Super Guarantee Charge obligations.
Directors receiving these letters need to arrange payment of the overdue amount or enter into a payment plan.
Data-matching adds investment properties
Residential investment property loans (RIPL) are the latest target of the ATO’s increasingly wide-ranging data-matching program.
Data will be obtained from financial institutions including all the major banks, regional banks and building societies.
The information is being collected following the ATO’s identification of a tax gap of $1 billion for individuals in the 2020-21 financial year due to incorrect reporting of rental property expenses.
Self-education expenses under spotlight
The ATO is currently developinga new draft taxation ruling covering the deductibility of self-education expenses incurred by an employee or an individual carrying on a business.
The draft ruling will reflect the current rules in this area following repeal of several sections of the Income Tax Assessment Act and some new legal decisions. The new ruling is expected to be completed in late June.
Taxpayers claiming self-education expenses recently had the existing requirement to exclude the first $250 of deductions removed.
GST fraud enforcement continues
Search warrants were executed in three states against individuals suspected of promoting the fraud. This follows previous compliance action against more than 53,000 people, with two individuals sentenced to jail time for their GST fraud activities.
Cyber safety checklist released
The ATO is again emphasizing the importance of business cyber safety by releasing a new checklist for small businesses.
The tips include simple ideas for keeping business and client data safe from cybercriminals, such as turning on automatic updates and using multi-factor authentication when possible.
Resources for training staff on preventing, recognising, and reporting cyber incidents are available from the government’s Australian Cyber Security Centre.
Single Touch Payroll (STP) Phase 2
Most employers have now made the move to the mandatory STP Phase 2 reporting, which requires additional information be reported on or before each pay day. The expansion of STP reduces the need for employers who need to report information about their employees to multiple government agencies.
If your business is using a payroll product which is STP ready you will need to start reporting this extra information now. Contact your digital service provider or our office if you require assistance.
Stay safe from scams
Unfortunately scams are not going away any time soon, with over 216,000 scams reported to Scamwatch during 2020, resulting in total financial losses of around $1.75 million dollars.i
Here are some recent scams to be aware of:
COVID-19 phishingWith increased communications being sent out due to the COVID-19 pandemic, this has also created ample opportunity for scammers. By pretending to be from official organisations, scammers aim to find out your personal information (such as your usernames, passwords, bank details, etc.) – this is known as phishing.
There have been emails and SMS messages impersonating the Department of Health and the ATO, providing links to what are purported to be information pages. One example is an SMS which says that you are due to receive a support payment and asks for your bank details.
To know what is real and what’s fake, don’t click on links in messages – instead visit the organisation’s website directly, or call them if in doubt.
Verifying your myGov detailsAnother common example of a phishing scam is receiving an email or SMS asking you to verify your myGov details. Often the message will have time pressure, saying that your account will be locked if you don’t do so within 24 hours.
You will get email or SMS notifications from myGov whenever there are new messages in your myGov inbox, however these messages will never include a link to log into your myGov account.
Automated calls regarding a suspended TFNYour tax file number (TFN) is important for both you and/or your business’ tax and superannuation purposes, which is why hearing it has been suspended can be alarming. Linked to your name and date of birth, this piece of personal information should generally only be shared with the ATO, banks, your superannuation fund, the Department of Human Services and your employer.
Under law, any individual, organisation or agency that is allowed to ask for your TFN information must not record, collect, use or pass on your TFN (unless allowed under taxation, personal assistance or superannuation law).ii
A common scam involves an automated phone message advising you that your TFN has been suspended. The purpose of this is to convince you to pay a fine or transfer money to reactivate it.
The ATO do not suspend TFNs or need you to pay for reactivation, nor will they send unsolicited pre-recorded messages to your phone. So if you hear this scam message, hang up.
Tax debtAnother worrying message to receive is that you have tax debt that needs to be paid off. This scam is often done through SMS, voicemail and direct calls, whereby the scammer pretends to be from the ATO. They then will ask you for payment, which is often through methods such as cryptocurrency or gift cards.
Suffice to say this isn’t regular procedure from the ATO, so if you receive a call or message like this, ignore or hang up.
Scams are ever-evolving but are often based on similar concepts, as shown above. A helpful resource to keep up-to-date with current scams is the Scam Alerts page on the ATO website.
While scammers can be conniving and convincing, it’s important to err on the side of caution whenever you receive an unexpected message or call, or whenever your personal details are requested. Never give out any personal information unless you can independently verify the identity of the person or organisation you are providing it to.
Should you ever be unsure whether someone requesting your financial details is a trusted source, don’t hesitate to get in touch for our advice.