Tag Archives: ATO

Superannuation Guarantee and SuperStream

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One day, you look forward to retiring and enjoying the Superannuation you have earned throughout your career. From 1 July 2022, you must pay Super to all employees. The only exception will be employees under 18 who work less than 30 hours. The Super payment is known as the Superannuation Guarantee (SG) contribution and is paid into a superannuation fund as part of their wages. In this guide, we will explain what you must do and how you go about paying Superannuation.

The superannuation guarantee scheme requires employers to provide sufficient superannuation support for their employees. Employers must contribute a minimum percentage of each eligible employee’s earnings (ordinary time earnings) to a superannuation fund or retirement savings account (RSA).
ATO

WHY do I have to pay Superannuation?

Superannuation is a government requirement to help workers provide for their retirement.

  • The SG is currently calculated at 11% of an employee’s ordinary time earnings.
  • The super guarantee rate increased from 10.5% to 11% on 1 July 2023.
  • Businesses will be fined if they do not pay Superannuation or pay super at the correct rate.

WHAT else do I need to understand?

The employer must pay the SG at least four times yearly by the quarterly due dates.

  • you must pay (via electronic funds transfer or Bpay) and report super electronically in a standard format, ensuring you meet SuperStream standards
  • your superannuation payments must go to a complying superannuation fund – most employees can choose their own fund
  • if you don’t pay the SG on time, you may have to pay the superannuation guarantee charge
  • This does not apply if you are self-employed or a sole trader, and your super contributions are only for yourself
  • Due dates for the contribution payment each quarter are 28 January, 28 April, 28 July, and 28 October
Super Administration

Whilst the SG is a cost to the business from a wages perspective, the good news is that the administrative part of the process has been made simple for small businesses. Instead of making individual payments to each employee’s super fund, you make a single payment totalling all employee contributions. You have these choices:

  1. If your Payroll software is SuperStream compliant, you can use it for the process. Ensure that the system covers both the SuperStream-compliant information and the payment.
  2. The Small Business Superannuation Clearing House (SBSCH) offered by the ATO is a free service you can use to make superannuation guarantee (SG) contributions. Eligible businesses have 19 or fewer employees or an annual aggregated turnover of less than $10 million. The big benefit here is they will split the payments across all the different super choices your employees may have made.
  3. Large Super funds have the facility to do it for you. Check with your fund to see if this is possible for your business.
  4. A messaging portal can take your information and make it SuperStream compliant, then send it to the relevant funds. You also provide them with a single payment to cover all employees.

HOW do I pay an employee Superannuation?

When a new employee starts who falls into the SG, you should:

  1. Offer your employees a choice of funds and provide them with the standard choice form.
  2. Provide them with information to help them understand Superannuation and investment options. Note: You cannot provide investment advice unless you are a licensed advisor.
  3. Provide the employee Tax File Number to their fund
  4. Keep records showing you have offered a choice and have paid. These records must be in English and kept for five years.

HINT

This process will be further simplified if you use an automated payroll tool (see our essential guide on payroll software). 

Employees may also make additional salary sacrifice contributions that will be taxed at a concessional rate of 15% up to a limit at which point extra tax must be paid. (This might have the benefit of reducing the employee’s tax obligation). You are required to report this through the same mechanism above as an employer.

Your obligation to pay Superannuation to any one individual is capped. Current rates can be found here.

SUMMARY – Superannuation Guarantee

Superannuation is compulsory for all employees earning more than $450 a month. Employees can choose their fund, and you must report all payments to the ATO, which offer a special service if you have under 19 employees. Remember to budget for this cost in your business calculations.

Car Leasing and vehicle financing

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Your business needs a vehicle, and you do not have the spare cash to buy it outright. What options do you have? This guide will look at the options for car leasing.

WHY do you need a Car Lease?

Your vehicle represents your business and your key means of earning revenue. Unfortunately, few businesses have enough cash to buy a vehicle outright, so financing must be sought.

WHAT are my vehicle financing options?

Business loan – a financial institution lends you the purchase price. If your business is brand new, you will likely need to provide personal guarantees.

Credit Card – high interest and reduces your credit limit

Car Lease – essentially, you rent the car for a period with the option to buy at the end. Great for freeing up money that can be spent on other things

Hire Purchase – similar to lease, but the business owns the asset after the last payment is made

Chattel Mortgage – business car loan where the vehicle is security for the loan

Car Subscription Service –the car is provided for a fixed weekly fee with the option to swap or stop the subscription with short notice.

Long-Term Rental – fixed cost for a fixed term and may or may not include insurance, fuel, and maintenance.

HOW do I decide if car leasing is right for my business?

Leasing is suitable if a new vehicle is required every 3-5 years. Remember, a newer car will be more reliable and give a good impression of your small business. Some leases may have a balloon payment at the end of the lease, or you have the option to buy outright.

A car lease does not necessarily have to be a direct cost to the business. A small business owner may allow employees to salary package a novated lease.

 Put simply, a novated lease is a car finance package that allows your employer to make lease payments for you from your pre-tax income for the term of a lease whilst you are still employed. This has the effect of reducing your taxable income, which in turn, reduces your income tax. 

Most often, a lease will include running costs such as registration and servicing. The employee will be liable for Fringe Benefits Tax (FBT), which is based on a forecast that uses the value of the car and the distance of your business travel vs personal use to determine an amount.

If the business takes out the lease, there are two options, a Finance Lease or Operating Lease. With a finance lease, the vehicle is bought by a finance company and rented out to the lessee over a lease period. At the end of this period, the lessee must either purchase the car from the finance company by paying the residual value or lease the vehicle again. Operating leases are like a finance lease, except the lessee is not responsible for the residual value at the end of the lease – the car is handed back to the finance company. Some businesses with a high turnover of vehicles use operating leases to reduce administration costs. Operating leases can include all charges for a fixed monthly payment.

Your accountant can help you understand the costs of buying vs leasing.

HINT

For a business, depending on the circumstances of use and current legislation, lease payments are tax-deductible. The car leasing advantage is a more predictable cash flow. This vehicle financing method should not significantly affect the small business’s borrowing power for other purposes. The lender may claim the GST on the car’s purchase price if you are eligible. Only the vehicle’s price, exclusive of GST, is financed, lowering monthly payments.

When deciding, do not take the first deal offered to you. Different companies will offer different prices. Make sure the leasing company is reputable, and last but not least, be realistic about how much you can afford each month.

SUMMARY – compare companies for car leasing

Car leasing is a cost-effective way to get your business mobile without borrowing money. Ensure your business or individual can support the payments and that you compare leasing companies to get the best deal.

Tax return for small business

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If you are paying taxes, you are making money. All small businesses have tax and reporting obligations, and this guide will help you understand what is required to do a tax return for a small business and where you can get help.

A tax return is the completion of documentation that calculates a business’s income earned with the amount of tax payable to the Australian Tax Office (ATO).

WHY should you do a tax return?

  1. It’s the law
  2. You may get a refund
  3. It helps you understand the true position of your business

Irrespective of your business structure, you must submit an annual tax return. Sole traders and partnerships will be taxed at the individual income rates as part of your personal income. Companies must lodge a tax return as a separate legal entity and pay tax at a rate of 26% (in 2020/21 dropping to 25% in 2021/22 details here) of every dollar earned.

WHAT do I need to understand about small business taxation?

Your taxable income = assessable income – deductions

Assessable income is your total earnings before tax from an everyday business source such as sales and other business activity like capital gains. It does not include GST.

Deductions are any expenses incurred in running your business.

Sole traders must include any salary or wages in their tax returns, and the ATO will calculate if any tax is owing or a refund is due. A sole trader not paying themselves a salary, including PAYG withholding tax, is likely to receive a PAYG instalment for estimated income to be earned.

Partnerships must lodge a partnership tax return. Then as an individual partner, you must lodge an individual tax return for your share of income or losses. The partnership does not pay income tax; rather, the partners themselves do.

Trusts and beneficiaries must lodge a trust tax return. Then as an individual trust beneficiary, you must lodge a company or individual tax return for your share of income or losses.

Companies lodge a company tax return and pay company tax on assessable income. Companies might pay PAYG (pay as you go). The ATO will inform you if you need to pay PAYG instalments; however, as a general guide, expect to pay it if your assessable income exceeds $2 million. PAYG is a means to collect tax throughout the year versus waiting until the end of the financial year. You can also make a voluntary payment or apply for a variation if you feel your circumstances have changed.

HOW do you lodge a tax return?

A tax return should be lodged by 31 October for the previous year. Exceptions may apply if you use a registered tax agent or file a company tax return. A tax return must be lodged every year you run a business, even if you don’t expect you will have to pay tax.

You can lodge a tax return:
  • By paper
  • Online via myTax if you are a Sole Trader
  • Via a registered tax agent
  • If you are a company, trust, or partnership by standard business reporting (SBR). See our guide on accounting software

If you are required to pay PAYG on your business earnings, this will become part of your BAS reporting and payment requirements. More details on this can be found in our BAS guide. The benefit of having PAYG is that tax is paid during the year, and you can budget to make these payments rather than having a large lump sum payable at the end of the year.

After you have lodged an electronic tax return, the ATO aims to finalise the return in approximately two weeks. The ATO warns that processing may be delayed if there are incorrect or incomplete details in your return.

When completing your income and deductions for business:
  • keep accurate and complete records of your assessable income and expenses
  • use the correct method for calculating and reconciling the amounts you claim
  • report all income and deductions to ATO at the right time
  • pay any amounts owed on time
  • only use valid business deductions
    • the expense must have been for your business, not for private use
    • if the expense is for a mix of business and personal use, you can only claim the portion that is used for your business
    • you must have records to prove it

Types of expenses that are not deductible include entertainment expenses, traffic fines, and private or domestic expenses such as childcare fees or clothes for your family. GST cannot be claimed as an expense if you have already claimed it as a GST credit.

If a prepaid expense exceeds $1000 and you will not receive the goods or service within 12 months, or it is not eligible for an immediate deduction, the expense will need to be apportioned over time.

A capital expense for items such as machinery or equipment will normally be needed to be apportioned over time.

HINTS

The Australian Tax Office provides an online search engine to assist small businesses http://www.sba.ato.gov.au/

You can also book an after-hours phone call http://www.sba.ato.gov.au/Forms/Book-an-after-hours-call-back—small-business-support/

The ATO provides an app providing tax and super information and tools https://www.ato.gov.au/General/Online-services/ATO-app/

If you employ people, you will also have PAYG withholding tax payments you will need to make from your workers’ wages. See our guide on payroll.

SUMMARY – PAYG small business tax

You must pay tax on your assessable income minus deductions. The way you submit a tax return is based on your business structure. You will likely pay PAYG tax in instalments throughout the year, with your tax return determining if any further payments are required or if you are due a refund. Accurate records must be maintained; deductions will only be accepted for valid business deductions.

Close a business

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We understand this is a difficult time for you, and this guide will take you through the steps you should consider to close a business.

The most common reasons for closing a business include the business is no longer viable, costs exceeding income, or you wish to retire, and the business has no value without you.

WHY should you close a business?

There is a fine balance between the emotional desire to be successful and the reality of financial stability.  A decision to close your business might not be needed if you get some help from a business advisor or an accountant.  Similarly, they may also recommend closing your business is the best action. Unfortunately, the truth can be the most painful thing to accept.

Recognising that it is time to close your business may save you from further debt that will still need to be repaid.

If you are closing your business to retire, this can be an exciting time to start a new chapter in your life.

If you are in doubt, these are key indicators that should encourage you to question your business viability.
  • You feel you should close
  • You are losing money
  • Your goals are not being met
  • Many customers but no profits
  • Your product or service is not needed or wanted
  • Nothing you have tried has worked
  • Marketing is making no difference
  • Competitors dominate your industry
  • No long-term customers
  • Your dream is not the reality
  • Home and work life is suffering
  • Employees are leaving
  • Your health is suffering
  • Trouble sleeping
  • You have become negative and angry

WHAT are the steps to close a business?

Once you have decided to close your business, it is best if you work on a plan to achieve this. 

The first step is to decide on a date that will allow you to accomplish the following tasks:
  1. Notify your employees.  This will be difficult for them as well, and you will need to pay out any outstanding wages and leave. Also, ensure that the employee’s superannuation has been paid.
  2. Suppliers. Let them know the date and plan to pay any outstanding debts.
  3. Notify your customers.  It would be best if you showed those who have been loyal to you the courtesy of letting them know you can no longer supply them.  This could be done with a sign on your website or a phone call.  It may also be an opportunity to sell off any remaining stock or assets.
  4. Pay outstanding bills.
  5. Cancel services, including the Internet, power, bank accounts, web hosting, social media accounts, etc.
  6. Sell your business assets.  These can include stock, fixtures, tools, machinery, intellectual property and domain names.
  7. End lease agreements.  This could be for machinery or property but remember, based on the terms you have in your lease agreement, you may still be obliged to continue payments until the end of the lease term.
  8. Taxation responsibilities.  You must pay outstanding taxation debts, including income tax, GST and capital gains. There is also a requirement for you to post final tax returns and a final GST activity statement.
  9. Cancel your ABN. https://www.abr.gov.au/business-super-funds-charities/updating-or-cancelling-your-abn/cancel-your-abn
  10. Cancel your business name. https://asic.gov.au/for-business/cancel-your-business-name/
  11. Keep business records.  Records should be kept for a minimum of 5 years after you close.

HOW can I get help to liquidate?

The following resources may be useful in helping with this process:

Your accountant and or business advisor can assist you with the decisions to keep, close or sell a business.  Business advisors can be found here https://www.business.gov.au/expertise-and-advice.

Suppose a registered company becomes insolvent and goes into liquidation. In that case, a liquidator must be appointed to take control of the company so that its affairs can be wound up in an orderly and fair way for the benefit of all creditors. More details on this can be found here https://asic.gov.au/regulatory-resources/insolvency/insolvency-information-for-directors-employees-creditors-and-shareholders/.

Auction houses like Grays Online can provide a means to sell off your excess stock and assets.

Bankruptcy is a legal process when you are unable to pay your debts. It is a means that allows you a fresh start but may affect your ability to get credit, travel overseas and gain future employment. More details  https://www.afsa.gov.au/insolvency/cant-pay-my-debts/what-bankruptcy

National debt helpline provides free financial counselling  https://ndh.org.au/ or 1800 007 007

Crisis support – Lifeline.org.au  or 13 11 14

Mental health – Beyondblue.org.au or 1300 22 4636

Family dispute resolution – Relationships Australia https://www.relationships.org.au/what-we-do/services/family-dispute-resolution

HINTS

The Australian tax office provides a business viability tool to help determine if a business is still viable.  https://www.ato.gov.au/Calculators-and-tools/Business-viability-assessment-tool/

SUMMARY – a big decision for any small business owner

Closing a business is a big decision for any small business owner. Be sure that you are making the right decisions and not emotional ones. If your business is not going well, be careful in taking on additional debt.  Create a plan around closing your business and make sure you do the best for those who have supported you, like employees, customers and suppliers.  Don’t be afraid of asking for help. There are several free services to support you.

How to complete a BAS statement

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If you are reading this guide, you may have learned that you must do a BAS statement, and this guide will help you prepare and lodge your statement.

The business activity statement BAS is a form submitted to the Australian Taxation Office ATO by registered business entities to report their tax obligations, including GST, pay as you go withholding, pay as you go instalments, fringe benefits tax, wine equalisation tax and luxury car tax.
(Source Wikipedia)

WHY do I need to do a BAS statement?

If you are a small business that exceeds $75,000 turnover or provides taxi or ride-sharing services, you must register and charge for GST. You need to lodge a business activity statement.

Your Business Activity Statement will help you report and pay your:

  • goods and services tax (GST) – See our essential guide on GST.
  • pay as you go (PAYG) instalments – is a withholding tax that requires you to pay incremental amounts of your business income to the ATO. These payments accumulate towards your expected end of year income tax liability.
  • PAYG withholding tax – You withhold this tax on behalf of your employees. They will get credit at the end of the financial year as part of their personal income tax return.
  • other taxes including wine equalisation tax, fuel tax credits, and luxury car tax.

WHAT do I need to Complete a BAS statement?

The fields you need to complete in your BAS will depend on your business structure and whether you’re completing a quarterly or monthly report or a monthly BAS if turnover is above $20 million.

The ATO will automatically send you a Business Activity Statement when it is time for you to lodge.

When completing your BAS statement, the ATO states:

  • Enter whole dollar amounts – leave cents out and don’t round up to the next dollar
  • Enter each invoice once only
  • If you account for GST on a cash basis your expenses and sales must fall within the period you made or received payment
  • Only complete the fields that apply to you – if you have nothing to report, enter zero
  • If you’re doing your BAS manually, double-check your figures and calculations
  • You can always correct a mistake made on an earlier BAS

The ATO runs webinars on completing your activity statement, and bookings can be made here.

Visit the ATO website for help completing other fields in your BAS:

HOW do I lodge?

The due date for lodging and paying is displayed on your BAS. Lodge and pay on time to avoid any penalties.

BAS due by QuarterDue date
1. July, August, and September28 October
2. October, November, and December28 February
3. January, February, and March28 April
4. April, May, and June28 July

You can lodge:

You may pay your BAS with BPAY, credit, or debit card, and you will need to quote your Payment Reference Number (PRN) if doing online. If you are concerned about managing your business’s available cash, you can pay ahead, which will be credited against your next Quarterly BAS liability.

HINTS

  • Reconcile the BAS figures with your records
  • Check your purchases and sales are reported in the correct period
  • Only complete the sections that apply to you
  • Keep good records as part of your normal accounting practices
  • Ensure your sales reconcile with your bank statements (if reporting on a cash basis)
  • Keep all your tax invoices and GST records for 5 years
  • All claims must be in Australian dollars
  • You cannot make credit claims for invoices that do not include GST
  • Further GST and BAS tips can be found on the ATO website https://www.ato.gov.au/Business/Business-activity-statements-(BAS)/BAS-and-GST-tips/

SUMMARY – BAS is your report on tax to the ATO

Lodging a Business Activity Statement is required if you turnover more than $75,000. Your reporting method is to the Australian Tax office for GST collection, PAYG income tax collection, and business income tax instalments. If you use an Australian designed accounting package, your administration will be greatly reduced. Ensure you accrue and do not spend the money you owe quarterly to the tax office.

Record Keeping for small business

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Running a small business is about understanding what is going on and about meeting your obligations. You might have obligations to employees, suppliers, the taxman or more simply an obligation to yourself to understand if you are making any money or the ability to look up a past agreement.  This guide will look at why record keeping is important, what you need to keep records on, and how to keep good records.

Record keeping is the activity or occupation of keeping records or accounts.
Record keeping in financial terms is the process of recording transactions and events in a ledger or accounting system. Since the principles of accounting rely on accurate and thorough records, record keeping is the foundation accounting.

WHY should I care about record keeping?

Keeping good records is important for any small business. Whether that is to help manage your costs, whether it is for legal, regulatory or tax reasons, or simply to help manage and improve your business.  Collecting, storing, and effectively analysing your data is vital.

Without adequate records, it would be impossible to measure the health of your business and to keep track of your progress. It also helps avoid fines for doing the wrong thing and demonstrate your financial position if you need a bank loan.

Records must be kept by law for:
  • 5 years for Australian Tax Office purposes
  • 7 years for Human Resources time and wages records
  • 2 years after you have offset a capital loss against a capital gain (individuals & small business)

Keeping good records will make running your business easier and save you time in the long run.

WHAT should I keep records on?

The types of records you should consider keeping include:
  • Client Files
  • Contracts
  • HR required records for 7 years
    • employee details including pay, leave and work hours
    • reimbursements of work-related expenses
    • workers compensation insurance for each employee
    • pay as you go (PAYG) tax instalments
    • superannuation contributions
    • ending employment
  • HR records recommended:
    • resumes and job applications
    • contracts of employment
    • performance reviews
    • trade or registration certificates
  • Business records (for example, business registration, formal meeting minutes etc)
  • General business information (for example, job tracking, customer correspondence)
  • Accounting and tax for 5 years
  • Business expenses
  • Bank statements / credit card statements
  • Annual tax returns
  • Quarterly/Monthly tax filings
  • Payroll
  • Inventory
  • Sales
  • Revenue
  • Petty cash
  • Vehicle logs
  • Invoices
  • Cancelled cheques and cheque stubs
  • Purchase orders

HOW do I make record-keeping easy?

Under Australian law records must be:
  • readily accessible if required
  • must be unchanged and must be stored in a way that restricts the information from being changed or the record damaged (changes may be permitted for correcting an error)
  • in writing (electronic or paper)
  • legible
  • in English
  • explain all transactions
  • accurate and not misleading

A bookkeeper or your accountant can help with this process but this will not remove your need to still be involved in keeping accurate records.

Although you can keep records on paper it will be much easier if you do so electronically.  Refer to our essential guides on expense management, accounting software and payroll software to understand more. If you are concerned about outlaying funds for software you could set up a series of spreadsheets to help manage your accounts.

Other key documents like signed contracts, lease documents etc should be kept in a safe preferably fireproof storage. These documents can also be scanned and stored electronically ensuring you have back up copies.  Refer to our guide on Storage and sharing of files.

Electronic solutions and storage of records have the following advantages:
  • back up records in case of disaster
  • automated processing and provide ready-made reports
  • produces taxation and employment reporting requirements for government submission online
  • keep up with the latest tax rates, laws and rulings
  • save on physical storage space

HINTS

The Australian Tax office (ATO) provides a record-keeping evaluation tool which will help you evaluate how well you are keeping your business records. https://www.ato.gov.au/Calculators-and-tools/Host/?anchor=&anchor=RKET/#RKET/questions

The ATO provides an App for sole traders to help them record business income, expenses, and vehicle trips.  https://www.ato.gov.au/general/online-services/in-detail/mydeductions/mydeductions/

SUMMARY – keep records under Australian law

Record keeping is not just about keeping records for accounting.  Under Australian law, some taxation, superannuation and employment records must be kept for 5 or 7 years. 

Accurate and regimented record keeping will help you find the information you need, provide reporting and make running your business easier.  Modern accounting and payroll cloud-based solutions will not only streamline the process but also produce required government reporting for you.

Lack of record-keeping, false or misleading reporting can result in fines. Always ensure you have backup copies.

Mobile Phone Plan for small business

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I’m sure you have had a mobile phone plan for years and have a pretty good idea of how it all works.  In business, your phone becomes a critical tool that must be operational to keep the lights on. What are the differences between a personal plan and a business plan? This guide will help you understand what you should consider before signing up to a mobile phone plan for your business.

One thing for sure is plans change constantly. With around 30 companies offering mobile phone plans there is a lot of choice.  If you are a Sole Trader a personal plan may give you a better deal but if you have 10 phones in your business a business plan may be better.

WHY should I consider a Business Mobile Phone Plan?

A well-chosen plan will not only save you money but ensure you have the services to help you facilitate your business when you need them. For example if you have 10 phones you can have them on one bill reducing your administration.  A business plan might allow you to share a data pool between your workers allowing you more flexibility.

WHAT you need to know about Mobile Phone Plans

In Australia there are 3 physical mobile phone networks owned by Telstra, Optus, and Vodafone. However there are many Mobile Virtual Network Operators (MVNOs) who resell the offerings of the physical networks. You should take the following into account:

  • Network Coverage – Australia is a big country and mobile phones will only work where the main population lives. Does the provider offer the coverage you need where you need it?
  • MVNO coverage – Some MVNOs may not have full access to the coverage from their network provider. If you are expecting the same coverage in a rural area you may be disappointed!
  • Price – Normally expressed as how much you pay per month.  Note some prepaid offers might be for a 28 day period which equates to 13 periods a year instead of 12. Thus a lower ‘monthly’ price may actually add up to a higher amount than you expect over a year.
  • Phone plans – Normally means a new phone comes with your plan with its costs built into your subscription fee.  There are different ways the network operators do this and may involve subsidies on their part or even a separate lease with conditions like returning the working phone at the end of the agreed period.
  • Handset choices – Allows choice of different model handsets as part of your Mobile Plan.  The more expensive the handset the more your subscription is likely to be. Be sure to read our essential guide on Mobile Phones.
  • Sim Only – A Sim is a small chip transferable between mobile phone handsets that has your phone number associated with it.  A Sim-only plan means you do not get a handset with your subscription.
  • Contract – Or no contract refers to your ability to change network providers.  If you have a contract for 3 years you are locked into your payments unless you pay an exit fee.  This is normally associated with a handset where they must recoup its cost.
  • Post Paid or Prepaid – As a small business we would expect you would have a postpaid account where you pay monthly as opposed to a prepaid or pay as you go account.
  • Data allowance – Accessing the internet from your phone is critical in the business world. Your allowance relates to how much data you have to use in your subscribed period. If you go over your allowance you will pay a high price for excess usage.
  • Talk and text allowance – Most plans have moved to unlimited but refer to the number of talk minutes and the number of text messages included in your subscription.
  • International call inclusions – If you have overseas suppliers an inclusion in your plan could be a big money saver.  Check how many minutes are included in your subscription and to what countries?
  • Roaming inclusions – If you travel overseas normally your plan will not allow you to make calls or use data using your Australian subscription allowance.  You can still make calls but it can be expensive. Check if there is any inclusion or special deals available.
  • 4G or 5G – This refers to the technology behind how your calls and data are sent and received. The key benefit is the bigger the number the faster the data will be.  Note this is not your allowance but rather how quickly you can download a large file.
  • Value add  – Some providers might offer music or video streaming services as an inclusion, for example, sports streaming.

HOW do I make a decision on a Personal vs Business Mobile Phone Plan

Now you understand the factors you need to consider you must decide between the vast range of available business and residential mobile phone plans.

Personal plan benefits:
  • A sole trader or a business with only a few staff may find a residential plan is cheaper
Business plan benefits:
  • Normally allow a single bill for all accounts making it easier to process and compare users
  • Data allowances may be able to share across all users
  • The provider might do you a volume discount
  • Customer service is normally better, for example, shorter queue times
  • Bundling discounts across other services like fixed internet
  • Special insurance plans to keep phones operational

HINTS

If you’re a sole trader, you can use a personal mobile plan and claim work-related mobile use as a tax deduction.

 If your business is registered as a company, trust, or partnership, you should check with your accountant or bookkeeper. In general the ATO expectation is you can only claim the proportion the phone has been used for business purposes.

 Many people carry two phones, one for personal use and one for business, which is a personal choice.  You may wish to keep your lives separate or just have one number for both.  Indeed many mobile phone handsets are capable of what is referred to as dual SIM.  This means one phone can hold two SIM’s meaning two phone numbers (two Mobile Phone Plans) so you could still have the flexibility of a personal number and a business number but only carry one handset.

SUMMARY – three reasons to choose

To summarise if we were to pick three factors in how you make your decision we would recommend you consider coverage, data inclusion, and value for money.

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ATO warns on ‘copy/pasting’ claims

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The Australian Taxation Office (ATO) is alerting taxpayers that its sights are set on work-related expenses like car and travel claims that are predicted to decrease in this year’s tax returns.

Overall, around 8.5 million Australians claimed nearly $19.4 billion in work-related expenses in their 2020 tax returns.

Assistant Commissioner Tim Loh noted that COVID-19 has changed up people’s work habits, so we expect their work-related expenses will reflect this. 

“We know many people started working from home during COVID-19, so a jump in these claims is expected,” Mr Loh said.

“But, if you are working at home, we would not expect to see claims for travelling between worksites, laundering uniforms or business trips.”

Last year, the value of car and travel expenses decreased by nearly 5.5%. However, there was a slight increase of around 2.6% in clothing expenses. With uniform and laundry claims significantly lower, this increase was driven by frontline workers’ first-time need for things like hand sanitiser and face masks.

“While it’s good to see most people have been doing the right thing, our data analytics will be on the lookout for unusually high claims this tax time. Particularly where someone’s deductions are much higher than others with a similar job and income.”      

“We will also look closely at anyone with significant working from home expenses, that maintains or increases their claims for things like car, travel or clothing expenses.”

“You can’t simply copy and paste previous year’s claims without evidence.”

“But we know some of these unusual claims may be legitimate. So, if you explain your claim with evidence, you have nothing to fear.”

“We also want to reassure the community that we will be sympathetic to legitimate mistakes where good faith efforts have been made. However, where we spot people deliberately claiming things they’re not entitled to, we will take firm action,” Mr Loh said.

During 2020, the ATO had to shift focus on getting stimulus benefits out the door as quickly as possible to support so many businesses in need.

In 2021, we will be continuing to balance our role in supporting taxpayers through this very challenging time, while recommencing our focus on addressing overclaiming of work-related expenses.

How COVID-19 has changed work-related expenses

Working from home expenses

The temporary shortcut method for working from home expenses is available for the full 2020-21 financial year. This allows an all-inclusive rate of 80 cents per hour for every hour people work from home, rather than needing to separately calculate costs for specific expenses.

All you need to do is multiply the hours worked at home by 80 cents, keeping a record such as a timesheet, roster or diary entry that shows the hours your worked.

Remember – the shortcut method is temporary. If you want to claim part of an expense over $300 (such as a desk or computer) in future years, you need to keep your receipt.

Personal protective equipment (PPE) 

If your specific duties require physical contact or close proximity to customers or clients, or your job involves cleaning premises, you may be able to claim items such as gloves, face masks, sanitiser, or anti-bacterial spray.

This includes industries like healthcare, cleaning, aviation, hair and beauty, retail and hospitality.

To claim your PPE, you’ll need to have purchased the item for use at work, paid for it yourself, and not been reimbursed. You also need a record to support your claim – a receipt is best.

Clothing and laundry, self-education, car and travel expenses

In 2020, we saw a decrease in the value of work-related expenses for cars, travel, non-PPE clothing and self-education as a result of the introduction of travel restrictions and limits on the number of people who could gather in groups. We expect this trend to continue in the 2021 tax returns.

If an employee is working from home due to COVID-19, but needs to travel to their regular office sometimes, they cannot claim the cost of travel from home to work as these are still private expenses.

Case study – overclaiming work-related expenses

A Canberra administrative worker fraudulently received nearly $7,000 in refunds after claiming work-related car, travel, clothing and self-education expenses he wasn’t entitled to. He had his fraudulent claims knocked back in 2014, after he couldn’t provide any receipts, instructing us to “just process the return”. He tried it on again in his 2015 and 2016 returns, this time providing a fake letter from his employer.

Given the brazen and repetitive nature of the fraud, the taxpayer was prosecuted and now has a criminal record. He was also fined $1,800.

Additional information

To help people find out what they can and can’t claim, we’ve created nearly 40 occupation and industry guides. This year we’ve added three new guides for gaming attendants, community support workers and recruitment consultants. Visit ato.gov.au/occupations

To work out claims for items over $300, the ATO has created a depreciation tool as well as a ‘how to’ video: ato.gov.au/DepreciationTool

See Small Business Answers guide to tax returns here.

Are you eligible for the Instant Asset Write Off?

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UPDATE: The Australian Tax office has announced that for assets you start to hold, and first use (or have installed ready for use) for a taxable purpose from 7.30 pm (AEDT) on 6 October 2020 to 30 June 2023, the instant asset write-off threshold does not apply. You can immediately deduct the business portion of the asset’s cost under temporary full expensing.

This means for Small Business with a turnover of less than $50 million; you can immediately deduct the business portion of that asset for both a new and 2nd hand asset you have purchased until June 2023 (extended in 2021 Budget). Note that there are rules around passenger vehicles which in the 20/21 financial year have a limit of $59,136 unless a commercial vehicle with a carrying capacity of more than 1 ton or more than 9 seats.

We do recommend you keep good records and more information an record keeping can be found here.

This is welcome news for SMEs who have, to quote Queen Elizabeth from her 1992 address, endured an ‘annus horribilis’; firstly with the catastrophic bushfires in January then debilitating COVID for the most part of the year.

Under the new Instant Asset Write-Off scheme, businesses can now claim an immediate deduction of up to $150,000 for the purchase of new or second hand goods.  With this new arrangement, SMEs will pay less tax in 2019-20 helping business cash flow and withstand and recover from the economic impact of the Coronavirus.

For businesses with a turnover of under $10 million have access to a tax-free payment of up to $25,000 to help boost cash flow.  The threshold applies on a per asset basis, so eligible businesses can immediately write‑off multiple assets.

One business that has witnessed the momentum of the stimulus first-hand is Pickles.  As Australia’s leading marketplace for transport, construction, mining, aviation, vehicles, and salvage assets, Pickles has been inundated with enquiries and has been working with its SME vendors and buyers on how they can take advantage of the increased Instant Asset Write Off.

“Buying heavy equipment and machinery is a significant expense for any business, and with 2020 bringing more challenges than normal, the Government’s $150K Tax Break couldn’t have been a better reward for surviving the year,” says Pickles Director, Industrial, Bruce Connors.

Aside from the obvious advantage that buying used heavy equipment and machinery allows for a cheaper outlay, it also helps with resale value if and when a business does look to move on from its equipment. 

Connors adds: “The increased Instant Asset Write Off has allowed our customers to set themselves up for a strong 2021 while giving them a much-needed cash injection now.  We have seen a sales spike in earthmoving, haulage, forklifts, and general vehicles.”

Key benefits to SMEs

  1. The instant asset write-off has been supercharged – threshold increased to $150,000 for businesses with an annual turnover less than $500 million.
  • Accelerated depreciation scheme to support business investment – deduct an additional 50 per cent of the asset cost in the year of purchase.
  • A cashflow boost will be provided to small and medium-sized businesses.

To check your eligibility for the increased Instant Asset Write Off go to ato.gov.au.

Small businesses in dispute with ATO get a fairer go

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The Australian Small Business and Family Enterprise Ombudsman Bruce Billson says small businesses in dispute with the ATO will get a fairer go, under new rules proposed by the Australian Government.

Mr Billson welcomed the pre-Budget announcement, giving the Administrative Appeals Tribunal (AAT) greater powers to pause or change debt recovery actions applying to a small business in dispute with the ATO.

“Small businesses disputing an ATO debt in the AAT will get a fairer go by stopping the ATO from relentlessly pushing on with debt recovery actions against a small business, while the case is being heard,” Mr Billson says.

“I commend the Government which has acted quickly to implement a key recommendation in our recently released report: A tax system that works for small business which will allow small businesses to pause ATO debt recovery actions until their case is resolved by the AAT.

“Currently, small businesses are only able to pause or modify ATO debt recovery actions through the court system. This can be prohibitively expensive and time consuming for a small business.

“Under the proposed changes, small businesses can save thousands of dollars in legal fees, not to mention up to two months waiting for a ruling.

“In line with the recommendations in our report, the AAT will be able to pause or modify any ATO debt recovery actions, such as garnishee notices, interest charges and other penalties until the dispute is resolved by the AAT.

“It means that rather than spending time and money fighting in court, small business owners can get on with what they do best – running and growing their business.

“These proposed changes follow the ATO’s decision to turn its small business independent review service into a permanent offering.

“ASBFEO’s tax concierge service and ongoing advocacy work has led to substantial tax administration improvements for SMEs, with leadership from ATO Deputy Commissioner Small Business Deborah Jenkins and government support.

“Collectively, these changes align with ASBFEO’s vision of a tax system that works for the small business sector, so businesses can achieve greater productivity, return to profitability and grow employment.”

The new powers for the AAT will be available following Royal Assent of the legislation. 2

Small businesses engaged in a tax dispute are encouraged to contact ASBFEO for assistance on 1300 650 460 or email info@asbfeo.gov.au  .