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Carving up your GST


Apportioning your GST obligations

For many small businesses, reporting the GST you collect after issuing tax invoices to customers can be a headache. But there is a way to save time and make the bookkeeping process a bit easier - if you meet the ATO's eligibility criteria.

Splitting your expenses for GST

Unfortunately, many common business expenses claimed by small business owners - like your home telephone and internet, computer and other electronic devices, vehicle purchase and running costs, and home power use - often have a private use component.

As only the business use portion of an expense can be claimed in your tax return, small business taxpayers regularly face the fiddly task of splitting their expenditure between business and private use.

The same goes when it comes to filling in the GST section on your BAS, as you can only claim GST credits for expenses used for business.

So each cost needs to be divided into their business and private components and the GST applying to each component calculated.

This can be tedious if there are lots of small monthly expenses to claim in your quarterly BAS.

Making an annual GST election

If these calculations are too time consuming, the ATO allows smaller businesses to make an 'annual private apportionment'.

Although it's a cumbersome name, making an annual private apportionment is an easy process and can help streamline your BAS preparation.

With this option, the ATO permits small businesses to simplify their accounting for business and private expenses by making an annual election. This allows you to claim the full amount of GST on payments you make in your quarterly BAS and adjust it in a future activity statement.

For example, if you pay $220 for your telephone service, $20 of the cost is GST. If your usage of the phone is 30 per cent business and 70 per cent private, you are only entitled to a GST credit of $6 (30 per cent of $20) in your BAS.

If you elect to use an annual private apportionment, however, you can claim a $20 GST credit for the purchase in your next BAS. When you lodge your business's annual income tax return after the end of the financial year, you adjust your GST credit amount. This can either increase the amount of GST you pay or reduce your GST refund for the financial year.

Annual apportionment: Who's eligible?

The ATO recognises that staying on top of bookkeeping tasks can be tricky for many small and micro business taxpayers, so eligibility for annual private apportionment focuses on them.

To be eligible, you need to be a small business with an annual turnover of less than $10 million, or a non-business enterprise with a GST turnover of $2 million or less. You also need to be lodging your GST reports quarterly or monthly.i

Eligible businesses can choose the annual apportionment option at any time and can start at the beginning of the next tax period for which their BAS is due.

The ATO doesn't require notification if you decide to use annual private apportionment, but you do need to keep a record of the date you decided to take advantage of the option and the date you commence.

Adjustment is via your BAS

The rules applying to annual private apportionment are fairly straightforward.

You can use the option on all business expenses that have both a business and private component, unless the business portion of the expense relates solely to making input-taxed supplies.ii

When it comes to making the annual adjustment for your GST credits, this is normally done in the BAS covering the same quarterly time period as your annual income tax return is due.

For example, if you claim a full GST credit in your 1 July to 30 September 2019 quarterly BAS, you make the annual adjustment in the BAS covering the tax period for the December 2020 quarter. This is because the due date for your annual income tax return for the 2019-20 financial year is 31 October 2020.

As you can see, it's complicated. If you would like some help with your GST reporting requirements, call us today.

https://www.ato.gov.au/Business/GST/In-detail/Managing-GST-in-your-business/Reporting,-paying-and-activity-statements/Annual-private-apportionment-of-GST/?page=2#Eligibility

ii https://www.ato.gov.au/Business/GST/When-to-charge-GST-(and-when-not-to)/Input-taxed-sales/

 

The STP reporting clock is ticking: Are you ready?

If you're a small employer with 19 or fewer staff, the countdown to your first single touch payroll (STP) report has already begun.

The STP regime is a key part of the ATO's plan to digitise and streamline tax and super reporting, and it intends to make the reports a normal part of doing business in Australia.

But many small business owners are only now starting to realise just how much this new online reporting regime will affect their business.

This is a worry, as the reform has been called the "biggest compliance change for employers since the introduction of the GST".i

So are you ready for your first reporting deadline?

When do I need to report?

The ATO's final deadline for the first STP report from small employers (with 19 or fewer employees) is 30 September.

As the introduction of STP is a big change for small employers, the ATO has announced it will be taking a flexible approach to employers' first report, so you can start reporting any time from 1 July to 30 September 2019 and still be reporting on time.

Once you start reporting, you will be required to send the ATO information about your employees' salaries and wages, PAYG withholding and super information each pay day (normally weekly, fortnightly or monthly).

Micro businesses (with four or fewer employees) that have a non-computerised payroll may be eligible to report quarterly until 30 June 2021 through their registered tax professional. Quarterly reporting may also be available to businesses providing irregular employment (such as seasonal work).

Employers in a family owned business, company directors and non-business employers (such as carers with a withholding payer number) do not need to start STP reporting until 1 July 2020. This exemption is automatic, but you can start reporting before the deadline.

ATO approach to non-compliance

The ATO has announced it will be taking a 'light-touch' approach to enforcement during the first 12 months, with no penalties for mistakes or late reports imposed during the first year.

The regulator has guaranteed that no penalties will be applied if an employer gets something wrong and corrects it within an appropriate period, particularly as last-minute adjustments often occur with pay loadings and allowances for employees.

Exemptions are available for STP reporting if you are experiencing hardship or operate your business in an area with limited internet capabilities.

The relaxed approach to reporting is unlikely to continue once the STP system is fully up and running. After the first year, all non-exempt employers need to be signed up for STP reporting and, if you are a micro business, you must have applied for quarterly reporting.

Tips for meeting the reporting deadline

With the 30 September deadline fast approaching, here are some tips to ensure your business is prepared for the big day:

  • Start reporting straightaway

If you already pay your employees using a digital solution like MYOB, Xero or QuickBooks, moving to STP reporting will be fairly simple, as most software packages are now STP-enabled. This means you can start reporting straightaway and avoid a last-minute rush in September.

  • Apply for a deferral

If you currently don't use the internet or digital software to do the payroll or accounting for your business, you will need to decide whether now is the time to move to a computerised payroll system.

If you need more time - or some assistance - before you can start using a computerised system to do your STP reporting, you can apply to the ATO for a deadline deferral to a date no later than 30 June 2020. Requests for a deferred starting date are not automatically granted and you must apply prior to 30 September 2019.

  • Talk to us about what you can do

If you are uncertain what to do about STP reporting, contact our office straightway so we can help you plan how to comply with your reporting requirements. This may mean you will need to make changes to your existing business processes, so you have the necessary information available.

You can also talk to us - or a payroll service provider - about completing the necessary reporting on your behalf each pay cycle.

  • Sign up for a low-cost digital solution

If you don't have the necessary payroll or accounting software for reporting an STP pay event to the ATO, the regulator has compiled a list of low-cost (less than $10 per month) STP providers suitable for smaller employers.ii

If you are thinking about moving to a new STP-enabled software package, the ATO maintains a list of commercially available solutions.iii

If you would like more information about your Single Touch Payroll obligations or how to implement an STP solution, call today.

i How to get 'in the zone' and focus on growing your business, Reckon Software, 2019. https://ddvqhbgjmdkmq.cloudfront.net/wp-content/uploads/sites/2/2019/04/29063947/In-The-Zone-Report.pdf

ii https://www.ato.gov.au/business/single-touch-payroll/in-detail/low-cost-single-touch-payroll-solutions/

iii https://api.gov.au/productregister/

Symes Accountants hosted local high school student, Alison for a week of work experience in July 2019. Below is her personal overview of her experience with our team.

From the 15th to 19th of July, I completed work experience at Symes Accountants for my Cert III in Business, to help get a better understanding of what it is like owning a business and how it operates behind the scenes. I believe this experience was valuable and an eye-opener for me, as I was able learn from this experience.

During my week, I mainly spent my time in the administration office with Kristy Koen and Kateena Jenkin (Business Support Team). Here I was able to ease into the accounting field as I didn't understand much about accounting. I was also able to learn how they run the business, what they did within the administration office, and the procedures they must follow in their work. Especially during the first and second day, I realised that administration is important in helping the business run successfully. They support the accountants by arranging meetings with their clients, without interrupting other meetings they may have. They help to try and make everyone else's job a lot easier, so they don't have to waste their time. Everyone is nice to each other and were happy to help each other out with any problems they may have. This allowed the Symes team to work efficiently and do things correctly to a high standard.

On the 18th of July, I began the day at Symes with two meetings with both the teams of accountants and admin. These meetings help Symes know what they are doing for the day and what they had left to do. This allowed them to set goals which helps them to feel motivated to complete their tasks. One of these meetings was a mini training, which required all the accountants to complete a module where there were questions that had to be answered. This was interesting and extended my knowledge and understanding about the accounting field. In the afternoon, I had a talk with Peter Caddy (one of the Partners) about Symes' goals and what they wish to achieve in the future, as well as the importance of everyone's role and how they contribute to the success of the business. On the last day of my placement, I had a quick meeting with Hans van Heuven and talked about my career path and how I wanted to run my own business. This was extremely helpful for me and taught me that when running a business - it is important to have the plan or goal in mind as well as have good support for the business to run efficiently and successfully.

Overall, my experience at Symes Accountants was enjoyable and informative. This experience has helped me understand how a business operates, the roles and the work life of Symes.

Tax Alert: June 2019

With the end of financial year only weeks away, the ATO has announced that one of its key areas of focus this financial year-end will be rental properties, although returns from taxpayers using cryptocurrency assets are also expected to come in for close attention.

To help you prepare for this year's tax time, here's a roundup of some recent developments in the world of tax.

Read more…

Guide to Travel-Related Work Expenses

Travelling for work can be expensive, whether it's visiting clients locally or attending a conference overseas, so it's important to claim everything you are entitled to in your tax return. But be aware that the ATO is paying increasing attention to claims in this area.

The essential thing to consider when claiming any travel expense in your tax return is that it must be work-related and only take you away from home for a relatively short period of time. Any expenses you have paid and already been reimbursed for by your employer can't be claimed. Here are some tips on what you can and can't claim, and the records you need to keep.

Read more…

Is your business financially fit?

The secret to a successful business is to make sure you are not just working IN your business but you are also working ON your business. As the end of the financial year approaches, there's no better time to give your business a financial fitness check.

Of course, the best policy is to continually monitor how your business is faring throughout the year. But if you've been caught up in the day-to-day management then now is a good time to get back on track because you will be looking at your figures for tax time anyway.

Read more…

Are stretch goals right for your business?

Much has been written in various business journals about the mythical stretch goal. Above and beyond your standard SMART goal (specific, measurable, achievable, relevant, time-bound) stretch goals aim to totally transform businesses, pushing them to new heights.

Elon Musk is a famous proponent of this 'shoot for the moon' approach. His company SpaceX aims to do nothing short of put people on Mars. The sheer audacity of the goal has meant they've made some terrific progress.i

On the hand, sister company Tesla recently failed to meet more than 20 of their ambitious projections.ii So, while stretch goals can be transformative, they are also risky business, and only some companies are in a position to take them on.

Read more…

Are you ready for Single Touch Payroll?

If you haven't heard about the introduction of Single Touch Payroll (STP) for employers with less than 20 employees, it might be a good idea to keep reading as this new system represents a big challenge for many small businesses.

With an estimated 730,000 employers required to begin electronically reporting their payroll information directly to the ATO from 1 July 2019, lots of small business operators need to get their head around STP, and quickly.

Read more…

Selling a business? Don't forget about tax

It can take many years and a lot of hard work to build a successful small business. When you finally decide it's time to sell, tax is often the last thing on your mind. Yet it can have a big impact on how much of the sale price you get to keep - and how much goes to the taxman.

The biggest tax issue to consider is capital gains tax (CGT). Although the Government tightened eligibility for its small business capital gains tax (CGT) concessions in 2018, there are still generous discounts available for those who qualify.

Read more…

Take Control of the Future of Your Business

What are your plans for the future of the business? Are you wanting to find more time to relax and enjoy your lifestyle? Are your children prepared to take on the family business when you retire? Have you actually had a family discussion about succession plans?

Succession planning is very much more than about making sure there is enough money in the bank. It is about ensuring the future generation is able to be successful with the day-to-day running of the business without struggling with the weight of a job they are unprepared for, or with experience they don't have.

With the knowledge that every business and family is different, Symes Accountants provides a 5-Step Succession Plan Process which works with every family circumstance.

For more information, download our Family Business Succession Planning brochure here, or contact our team today to arrange your first succession planning meeting.

     
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