It’s nearly time to make a finalisation declaration for Single Touch Payroll. There is no need to issue payment summaries to employees you have reported through STP.
Employers must complete the finalisation declaration by 14 July for employees. Employers with a mixture of employees and closely held payees have until 30 September 2022 to make the declaration.
Small employers (fewer than 19 employees) that only pay closely held payees have until the payee’s income tax return due date. Employers will need to liaise with the individual payee about the exact tax return due date.
You may have some payees who have not been reported through STP, so you still need to issue a payment summary for anyone not reported through STP. You will also need to submit a payment summary annual report (PSAR) for any payments outside the STP system.
Once the STP finalisation has been sent to the ATO, the employee’s information will be released in their myGov account and listed as ‘tax ready’.
STP Payroll Checklist
Be efficient and prepare as much as you can now so that you are able to finalise your data by 14 July.
- Check that your business details, including ABN, registered name and address and authorised contact person are correct in your software.
- You should already have necessary details for all employees, both current and any who have terminated throughout the year if you are using STP. The essential information is the full name, date of birth, address and tax file number.
- Review any terminated employees. Is the correct termination date recorded in your software? Are Employment Termination Payments (ETPs) coded correctly?
- Review salary sacrifice payments to superannuation for Reportable Employer Superannuation Contributions (RESC) amounts.
- Check with us for any Reportable Fringe Benefit Tax (RFBT) amounts that should be included.
- Check that all payroll categories are assigned to the correct ATO reporting category. This includes all ordinary earnings, loadings and penalties, allowances, commissions, bonuses, leave payments and termination payments.
- You may have other unusual payments such as those made under a voluntary agreement for contractors or labour-hire arrangements—check that you have reported them correctly.
Finalising Single Touch Payroll
It’s important to verify payroll figures before finalising, in order to minimise the chance of errors and having to re-issue at a later date. The finalisation process is the same whether you are using STP Phase 1 reporting or Phase 2.
Once the payroll year is completed on 30 June, you can then analyse the payroll amounts for each employee and cross-check against the numbers in your profit and loss accounts.
Talk to us today if you would like us to make the STP end-of-year process easier by reviewing and validating your payroll figures prior to finalising the data and lodging with the ATO. The end of the payroll year will be here sooner than you think!
Common Tax Deductions for Small Business
Are you claiming all the business tax deductions that you are entitled to?
There are many expenses common to most small businesses, and there are other expenses that are specific to the nature of the goods or services that your business provides.
- Operating expenses include accounting, administration, advertising and marketing, office premises, office running expenses, trading stock, legal fees, insurance and vehicle expenses.
- Employment expenses include salary and wages, fringe benefits, superannuation and training costs.
- Other operating expenses may include things specific to your business, for example, point of sale systems, freight, professional membership fees, professional education, protective equipment, tools or specialised software.
- Capital expenses include machinery and equipment, vehicles, furniture and computers. Depreciation for these assets may also be deductible if the expense was not written off immediately.
- Repairs and maintenance to assets and business premises.
Expenses must relate to the running of the business and providing the goods or services that your business offers.
Some common expenses that are not deductible are fines and penalties, provisions for employee leave, donations to entities not registered as deductible gift recipients and entertainment.
There may be some expenses you want to check with us such as private usage of business vehicles, prepaid expenses, bad debts, loss of stock and borrowing expenses. We’ll make sure to include all the deductions you’re entitled to.
What’s on the ATO Radar for 2022?
This year the ATO will be taking a closer look at record-keeping, work-related expenses, rental property income and deductions and cryptocurrency transactions.
- Keep records for all business transactions (income and expenses), activity statements and financial reports for at least five years.
- Keep all records relating to employees, contractors and payroll for at least seven years.
- If your business is a company, keep all records for at least seven years, including director meeting minutes.
Other Common Tax Return Issues
- Work-related travel expenses – travel fares, accommodation, meals. The travel should be directly related to income-producing activities and you need records to verify the travel claims.
- Motor vehicle expenses – keep records for fuel, repairs and servicing, finance arrangements, insurance and registration. Keep a logbook to record private travel.
- Fringe benefits – have you captured all benefits provided to employees? Vehicle and entertainment benefits are usually scrutinised. This year you’ll need records of any extra benefits provided to employees because of COVID-19.
- Superannuation – have you paid the superannuation guarantee on time to employees’ super funds? The ATO will examine your Single Touch Payroll records including superannuation payments.
- Current temporary tax depreciation incentives – There are currently three temporary tax depreciation incentives available to eligible businesses:
Talk to us about what applies to your business.
Maximise Your Business Deductions
We can check your business’s eligibility for concessions, offsets, employer incentives and rebates and make sure your business is calculating taxable income correctly, so you don’t pay more tax than you need to!
With so many businesses still affected by COVID-19, it’s important to get the allowable tax deductions right for your business and get in early for your tax return. This way you get more time to plan for payment, or if you are due a refund you will see it in your bank sooner.
If you have income from investment properties, now is the time to start gathering your records and reviewing your expenses for the 2022 financial year.
Income to Declare
All income earned from each property must be declared. If you have multiple properties, keep the records for each property separate to make the tax return more efficient.
- Rent received, whether paid directly to you or through an agent or through an online management platform. Rent includes recurring regular amounts as well as any lump-sum amounts paid in advance.
- Rental bonds returned for example if the tenant caused damage or defaulted on rent payment.
- Insurance payouts received as compensation.
- Expenses reimbursed by the tenant, for example, if they have caused damage and you have paid for the cost of fixing the damages, or if they have reimbursed you for water.
- Extra fees received, for example, letting or booking fees.
- Government rebates, for example for the installation of solar utilities.
You will need statements or recipient-created tax invoices from agents or management platforms and documents for all other payments received.
Deductible expenses for the property are different for residential and commercial properties. Not all expenses related to owning a property are allowed as deductions, so it’s important to check what you can claim.
Expenses You May be Able to Claim This Year
- Advertising for tenants
- Body corporate fees
- Council rates
- Water supply charges
- Land tax
- Cleaning, gardening, pest control and property maintenance
- Agent fees
- Repairs and maintenance
- Some legal expenses
- Loan interest
There are some expenses that need to be claimed over a longer period such as several years or decades. These can include borrowing expenses, capital expenditure, depreciation, initial repairs and capital works.
Some expenses cannot be claimed for. These include stamp duty, loans and repayments, some legal expenses and some insurance premiums.
Get Help to Simplify Your Property Records
Tax matters for property investors can be complex. The ATO keeps a close eye on tax returns that involve property investment, as it’s easy to make mistakes. There are other matters to consider such as the period of rental availability, private use of the property, capital gains tax, legal contracts and positive or negative gearing. This year for many owners there will be insurance claims because of floods.
We’d love to help ensure you are claiming the right deductions to make the most out of your investment property this year and beyond.
Book a time now for your 2022 tax return.
Having a self-managed superannuation fund (SMSF) gives you control and flexibility over how you make investments and prepare for retirement.
It’s important to get your deductions and record keeping correct for the SMSF audit process and the tax return, as there are strict laws governing SMSFs.
An SMSF must be set up as a trust and must also have a legal document called a trust deed. A super fund trust is set up for the sole purpose of providing retirement benefits to its beneficiaries. The trust deed governs how the fund is set up and how it will operate and must be used in conjunction with the superannuation laws.
There are many different investment strategies for SMSFs according to the fund’s trust deed and operations.
Common Tax Deductions
Deductible expenses for SMSFs vary according to the nature of investments and the trust deed, however, there are some general expenses that apply to most funds.
- Operating expenses, such as management and administration fees, audit fees and ASIC annual fees.
- Investment-related expenses, such as interest, investment advice fees, costs of servicing and managing investments, property fees and brokerage fees.
- Tax-related expenses, such as preparing the SMSF annual return.
- Legal expenses including amending trust deeds.
- SMSF statutory fees and levies.
- Insurance premiums for death, total and permanent disability, terminal illness and income protection.
The rules for tax deductibility for SMSFs are different to those for individuals and businesses. Many people are used to claiming deductions for certain things in business or property investment and find they don’t apply to SMSF tax returns. We can help clarify what’s deductible and what’s not.
Expenses must relate to the sole purpose of the super fund being to provide retirement benefits to its members. There may be some items you want to query with us for the audit and tax return to see if they meet the sole purpose test, such as investment training courses, collectibles and artwork, travel expenses or personal computers.
SMSF Annual Return and Records
Once the formal audit of the SMSF has been completed, the annual return must be lodged with the ATO. The annual return is not only a tax return but also reports regulatory information and member contributions. You must keep all records relevant to the annual return.
- Keep all transaction, tax, accounting and financial reporting records for at least five years.
- Keep all records relating to trustee meetings, minutes, investment strategies and appointments or changes of trustees for at least ten years.
Make Your SMSF Management Easy
SMSF management can be time-consuming. We can help with researching and managing investments, checking trust deed compliance, setting investment strategies, keeping records and conducting the audit.
Talk to us now and get ahead for your next annual SMSF return.
In addition to planning for the expected statutory super rate rise to 10.5%, some employers need to prepare for a significant change from July 2022.
Superannuation guarantee increase to 10.5%
The Superannuation Guarantee (SG) rate will rise from 10% to 10.5% on 1 July 2022 and will continue to increase by 0.5% each year until it reaches 12% on 1 July 2025.
If you have employees, what this will mean depends on your employment agreements. If the employment agreement states the employee is paid on a ‘total remuneration’ basis (base plus SG and any other allowances), then their take home pay might be reduced by 0.5%. That is, a greater percentage of their total remuneration will be directed to their superannuation fund. For employees paid a rate plus superannuation, then their take home pay will remain the same and the 0.5% increase will be added to their SG payments.
Removal of the $450 Monthly Earnings Threshold
The $450 per month eligibility threshold has been removed for most workers.
This means employers will need to pay the superannuation guarantee contribution (SGC) on all ordinary earnings. Particularly if your business relies on a large pool of casual workers who earn less than $450 per month, you’ll notice the extra cost when it comes to paying SGC for the September quarter.
There are some exceptions to the rule – employees under 18 and domestic workers need to work more than 30 hours per week and earn more than $450 per month. Contractors deemed employees for superannuation contributions must earn more than $450 per month. There are different rules for international and temporary workers.
Single Touch Payroll Super Reporting
All your payroll details are reported to the ATO through STP. This includes super amounts owed to employees. Late payment and interest penalties are expensive, so this is one employer obligation you don’t want to miss!
Get Ready for Increased Payroll Costs
Be proactive and start costing your payroll now to budget for the increased payroll costs. You can also let your employees know about the changes coming to their super, so they know about their entitlements.
If you’d like a review of your payroll systems and costs, talk to us today. We’ll help you plan for the impacts of the increased super expenses on your business.
Once you begin trading, you’re faced with a new challenge – successfully managing the course of your brand-new business and making sure it’s a profitable enterprise.
It’s easier to manage your startup’s sales and finances when you have access to the best possible information and data about your performance. Tracking specific metrics and key performance indicators (KPIs) allows you to see how you’re performing against your targets – so you can take action to improve performance, sales, growth and profitability.
But which KPIs should you be tracking?
Sales and conversion rates
An obvious metric to track is the number of sales you’re making each month. You’ll have set a target for these sales in your business plan, so it’s important to record each sale and see how the startup is performing over the first six months of the business.
It’s also important to log and track the drivers that lead to these sales. How many sales enquiries are you receiving? How many of these enquiries are being converted into actual sales? How many customers are being engaged by your marketing campaigns, and is this engagement leading to an interest in your products and/or services.
The more detail you can track from your sales and marketing activity, the more forensic you can get with which campaigns are actually delivering the goods.
Sales revenue and other revenues
When customers buy your goods, that creates income (or revenue) for the business. Ultimately, no business can succeed unless it’s generating enough revenue to keep the wheels turning in the business. So, tracking your sales revenue is a vital measure of your financial health. Tracking your various revenue streams over time keeps you in control of your finances and helps you make the right decisions. You can track performance against your revenue targets. You can forecast how much working capital you’ll have at a future point in time. And you can see if there’s enough cash in the bank to fund your projects and growth plans.
Cashflow and ongoing cash position
Good cash flow management is all about balancing the process of cash coming INTO the business and cash going OUT of the business. Recording and tracking your cash position is easy to do with the latest cloud accounting software and cashflow apps, so there’s no excuse for not tracking your cash position.
Ideally, you want the business to be in a positive cash flow position (with more cash coming in, than going out). But to achieve this, it’s helpful to see these cash inflows and outflows in real-time. With up-to-date metrics on your cash flow position, you can make informed decisions about spending, payment of bills and where additional cash and funding may be needed.
Debtor days and aged debt
When customers fail to pay your invoice on time, that creates an aged debt – money that you SHOULD have received but which the customer has yet to pay. An aged debtor report shows you which invoices are unpaid, which customers haven’t paid, and the total size of this debt.
Your debtor days number is a metric that shows the average number of days it takes your customers to pay you. Anything above 45 days is bad news, so you want to aim to keep this number between 14 to 30 days, if possible. A large amount of aged debt will leave a hole in your cashflow – and that can quickly start to impact on the day-to-day running of the business.
Gross profit margin
Generating a profit is crucial to the continued success of your startup. Having metrics to measure your profitability is an important part of managing your finances.
One common way to do this is to track your gross profit margin. This metric shows the amount of profit made BEFORE you deduct things like overheads and the cost of goods sold (COGS), shown as a percentage. The formula for calculating your gross profit margin looks like this:
Gross Profit Margin = Gross Revenue minus COGS, divided by Net Revenue, multiplied by 100
- Deduct your COGS value from your gross revenue to find your gross profit.
- Divide this gross profit by your revenue.
- Multiply the resulting number by 100 to get a percentage.
- This is your gross profit margin as a percentage of gross profit
- A percentage of 50% to 70% is healthy, but aim for a big margin as possible
By keeping a close eye on these financial metrics and KPIs, you have the best possible insight into the performance of your new startup – and that’s invaluable as your startup journey unfolds.
If you’re at the early stages of planning out your business idea, please do get in touch. We’ll help you set up a custom KPI dashboard to manage the future path of your business