Categories
Business Value Creation

Payroll Accuracy Matters: Avoiding Costly Mistakes

CURRENT SITUATION

Goal/Problem to Solve

1.  Nick (not his real name) is an NDIS support provider. He is operating his business as a medium-sized Company.

2.  Nick himself was responsible for overseeing payroll processes within the company.

3.  Due to the complexities of payroll management and increasing workload, Nick inadvertently made several errors in the payroll system such as the Misclassification of employees, award penalties rates, incorrect Superannuation contributions etc.

4.  Nick wants to streamline the payroll system to ensure accuracy, transparency, and compliance in payroll management.

Client Name

Nick

Supplier Name

NexZen Accounting

Here is our 7-Step Fulfilment System to answer the above question.

1.  1 THING YOU ARE GRATEFUL FOR IN YOUR CURRENT SITUATION 

What is one thing that you are grateful for in your current situation (While facing the Problems you are going to solve for yourself or your clients)

1.  Nick has the opportunity to provide meaningful employment that makes a positive difference in the lives of individuals with disabilities.

2.  ALIGN YOUR FULFILMENT VISION

1.  Purpose

1.  Achieve Financial Freedom & Fulfilment through NDIS Business 

2.  Goal

1.  An ideal payroll system to streamline payroll management, enhance compliance, and improve the overall employee experience within the organization.

3.  SUPPLIER’S (NEXZEN’S) WIN (1 REASON)

1.  To contribute towards achieving financial freedoms and fulfilled lives of startups and small business owners like Richard.

4.  CLIENT’S (NICK’S) WIN

1.  What 1 pain can be removed from your life by implementing the ideal solution? 

1.  A good payroll system reduces the risk of penalties, legal issues and employees turnover.

2.  What 1 gain can be achieved in your life by implementing the ideal solution?

1.  Streamlined processes and automation save time and effort, allowing business owners to focus on other strategic tasks and overall employee growth.

3.  KPIs 

1.  Accuracy Rate: The percentage of payroll transactions processed accurately without errors, discrepancies, or miscalculations.

2.  Timeliness of Payroll Processing: The average time taken to process payroll, including data entry, calculations, approvals, and distribution of paychecks or direct deposits.

3.  Compliance Rate: The extent to which the payroll system complies with relevant tax laws, labour regulations, industry awards, and superannuation requirements.

4.  Payroll Processing Costs: The total cost of payroll processing per employee, including software licensing fees, staff salaries, outsourcing costs, and other expenses.

5.  Employee Satisfaction: Employee feedback and surveys measuring satisfaction with payroll accuracy, timeliness, transparency, and responsiveness to queries or issues.

4.  Positive Impact

1.  A good payroll system ensures accurate calculations of wages, taxes, deductions, and benefits, minimizing errors and reducing the risk of underpayments, overpayments, or compliance issues.

5.  Negative Impact

1.  Without a good payroll system in place, organizations may struggle to stay compliant with tax laws, labour regulations, industry standards, and superannuation requirements, leading to penalties, fines, or legal consequences.

6.  Roadblocks

1.  Why is the problem not solved yet?

1.  Limited financial resources or manpower to invest in implementing a robust payroll system.

2.  What has been tried before (History)?

1.  Reference has been taken from the SCHADS Award to calculate minimum wages 

3.  Where is the client stuck?

1.  Unfamiliarity with payroll regulations or best practices

5.  CREATE & COMPARE IDEAS & SOLUTIONS

List out a minimum of three ideas that you can propose to the client as potential solutions for their problem

1.  Features and their applications

1.  Automate Calculations & Standardised Procedures

2.  Outsource Payroll Services to NexZen

3.  Hire an in-house payroll expert

2.  Why Option 2 (Outsource Payroll Services to NexZen) as a solution

1.  Nick chose to go with Option 2 due to the following reasons

1.  Outsourcing payroll is cost-effective compared to hiring and training in-house payroll staff. With outsourcing, he will only pay for the services he needs, eliminating expenses such as salaries, benefits, training, and overhead costs associated with maintaining an in-house payroll department. 

2.  Outsourcing payroll frees up time for him to focus on core business activities, such as strategic planning, sales, and customer service.

3.  Nick can scale his services according to his business needs, whether he has a few employees or hundreds. NexZen can easily accommodate changes in employee numbers, seasonal fluctuations, or growth without requiring additional resources or infrastructure at their end.

4.  Nick will get access to advanced payroll software and technology platforms that streamline processes, automate calculations, and provide real-time reporting and analytics. These tools improve efficiency, accuracy, and transparency in payroll management.

6.  DELIVER WITH EXCELLENCE

1.  High-level implementation roadmap

1.  Evaluate current payroll processes, resources, and needs.

2.  Determine the budget, timeline, and scope of services required. 

3.  Research potential payroll service providers, including local, national, and international options.

4.  Evaluate providers based on factors such as expertise, experience, reputation, services offered, technology capabilities, pricing, and customer reviews.

5.  Request proposals or quotes from shortlisted providers.

6.  Sign a contract with the selected provider.

7.  Work closely with the payroll service provider to set up accounts, configure software, and establish communication channels.

8.  Provide feedback to the provider and collaborate on continuous improvement initiatives.

9.  Review the contract with the payroll service provider periodically to ensure it remains aligned with business needs and objectives.

2.  Onboarding & Joint Accountabilities

1.  Client

1.  Provide requested information

2.  Pay the agreed Fee

2.  Supplier

1.  Deliver the agreed scope

2.  Complete the compliance requirements

3.  Payroll Helpdesk for Client and Employees

3.  Fees & Payment Terms

1.  The initial meeting is offered at no cost as a complimentary service.

7.  NEXT ACTION

1.  Book your complimentary meeting with our Business Structure & Taxation expert by clicking on the below link

1.  Book a Discovery call

2.  Give us a Call at 1300 347 678 

3.  Email us at hello@nexzenaccounting.com.au

DISCLAIMER

1.  This Document has been prepared for general information purposes only to permit you to learn more about business structures.

2.  The information presented is not legal advice, is not to be acted on as such, may not be current and is subject to further discussion depending upon the circumstances of the case.

Categories
Business Advisory

Starting Strong: The Ultimate Guide to Business Setup for Financial Success with Nexzen Accounting

Are you ready to transform your entrepreneurial vision into a thriving business? Setting up your business for success is the first step on the path to achieving your goals, and Nexzen Accounting is here to guide you every step of the way. In this comprehensive guide, we’ll explore the essential steps to launching your business and how partnering with Nexzen Accountants can supercharge your financial success.

Crafting Your Business Plan- A solid business plan serves as the blueprint for your venture, outlining your goals, target market, competitive analysis, and financial projections. At Nexzen Accounting, we understand the importance of strategic planning and can help you develop a comprehensive business plan that sets you up for success from day one.

Choosing the Right Legal Structure- Selecting the appropriate legal structure for your business is crucial for tax implications, liability protection, and operational flexibility. Whether you’re considering a sole proprietorship, partnership, corporation, or LLC, Nexzen Accounting can provide expert guidance to ensure you choose the right structure for your needs and goals.

Registering Your Business and Obtaining Licenses- Navigating the regulatory landscape can be daunting for new business owners, but Nexzen Accounting is here to simplify the process. We’ll assist you in registering your business, obtaining necessary licenses and permits, and ensuring compliance with local, state, and federal regulations every step of the way.

Setting Up Financial Systems- Establishing robust financial systems is essential for managing cash flow, tracking expenses, and ensuring compliance with tax laws. With Nexzen Accounting, you’ll gain access to cutting-edge accounting software and expertise to streamline your financial processes and set you up for long-term success.

Building Your Team- As your business grows, assembling a talented and dedicated team becomes essential. Nexzen Accounting can help you navigate the hiring process, define roles and responsibilities, and develop a competitive compensation strategy to attract top talent and drive business growth.

Partnering with Nexzen Accounting for Success

At Nexzen Accounting, we’re more than just number crunchers—we’re strategic partners dedicated to helping you achieve your business goals. From business setup and financial planning to tax compliance and strategic consulting, we’re here to provide the guidance, expertise, and support you need to succeed.

Get Started Today!

Ready to take the first step toward financial success with Nexzen Accounting? Contact us today to schedule a consultation and learn more about how our services can help you achieve your business goals. With Nexzen Accounting by your side, the possibilities are endless. Let’s embark on this journey together and build a brighter future for your business!

Categories
Day to Day Accounting & Payroll

Planning Your Way to Financial Freedom: Expert Insights OR From Financial Planning to Freedom: Your Journey Starts Here

Financial planning is the process of setting and achieving specific financial goals through a structured approach to managing one’s finances.The benefits of financial planning are multifaceted. Firstly, it provides a clear sense of direction by helping individuals and businesses define their financial goals and create a roadmap to attain them. Moreover, it promotes better financial decision-making by enabling people to prioritise expenses, save for emergencies, and invest wisely. Financial planning also helps in reducing financial stress and anxiety by ensuring a sense of control over one’s financial future.

What Pain Does Financial Planning Remove from Our life? 

Financial Planning helps remove various pain points from our lives, including:

  1. Financial planning helps alleviate the stress of not knowing where your money is going or how you’ll meet your financial obligations.
  2. It provides a structured approach to manage and reduce debt, reducing the constant worry of mounting loans.
  3. Financial planning removes the uncertainty about your financial future by setting clear goals and strategies to achieve them.
  4. Financial planning helps build an emergency fund, easing concerns about unexpected expenses or emergencies disrupting financial stability.
What Opportunities does Financial Planning create in life? 

Financial Planning creates various opportunities in life, including:

  1. Financial planning provides opportunities to build wealth over time through strategic investments and savings.
  2. Financial planning can help secure the necessary capital and resources to pursue entrepreneurial ventures and business opportunities.
  3. Through estate planning and wealth preservation, financial planning allows for the creation of a lasting legacy for future generations.
  4. Financial planning creates opportunities for greater financial security, reducing the risk of unexpected financial setbacks and providing peace of mind for you and your family.
What are the KPIs to measure
  1. Financial
    1. Return on Investment
    2. Net worth
    3. Stock Portfolio Performance
    4. Retirement fund Adequacy
  2. Non Financial
    1. Financial Freedom
    2. Quality of Life
    3. Reduction in Fear of Financial Setbacks
    4. Sense of Control
What are the key areas of Financial Planning

Financial planning encompasses several key areas, each of which plays a crucial role in achieving overall financial well-being. These key areas of financial planning include:

  1. Budgeting and Cash Flow Management
  2. Savings and Emergency Fund
  3. Debt Management
  4. Investment Planning
  5. Retirement Planning
  6. Tax Planning
  7. Insurance and Risk Management
  8. Estate Planning
  9. Education Planning
  10. Charitable Giving
  11. Specialized Financial Planning
  12. Cash Flow and Debt Management for Businesses

What are the positive impacts of Financial Planning? 

Financial Planning can have many positive impacts on our life, including:

  1. Financial planning helps individuals and organisations build a safety net, ensuring they have resources to handle unexpected expenses and financial emergencies.
  2. Effective financial planning facilitates saving and investing, leading to wealth accumulation over time and the ability to achieve financial goals.
  3. Financial planning enables individuals and organisations to set and achieve specific financial objectives, such as homeownership, education funding, or retirement.
  4. A well-thought-out financial plan provides peace of mind by giving individuals and organisations a sense of control over their financial future and reducing financial stress and anxiety
What are the negative impacts of Not doing Financial Planning?

Not doing Financial Planning can have a number of negative impacts on our life, including:

  1. Without a plan, individuals may experience heightened financial stress and anxiety, as they lack clarity on managing their finances effectively.
  2. Without a strategy for debt management, individuals can easily accumulate high-interest debt, leading to a cycle of financial strain.
  3. Without financial planning, individuals may miss out on investment opportunities and potential tax savings, limiting their financial growth.
  4. Overall, not engaging in financial planning can result in a lack of financial security, leaving individuals and organisations exposed to financial risks and uncertainties.
Process of Hiring an efficient outsourcing Accounting Firm

The process of financial planning is as follows:

  1. Establish Financial Goals: Identify your short-term and long-term financial objectives. These could include saving for retirement, buying a home, paying off debt, funding education, or starting a business.
  2. Assess Current Financial Situation: Gather information about your current financial situation, including income, expenses, assets, liabilities, and investments. Analyse cash flow to understand how money comes in and goes out each month.
  3. Create a Budget: Develop a detailed budget that outlines your income and expenses. This helps you understand where your money is going and identify areas for potential savings.
  4. Emergency Fund: Ensure you have an emergency fund in place to cover  unexpected expenses or financial emergencies. Financial planning should include building and maintaining this fund.
  5. Debt Management: Evaluate your outstanding debts and create a strategy to pay them down. Prioritise high-interest debts while making minimum payments on others.
  6. Risk Assessment: Assess your risk tolerance and insurance coverage. Ensure that you have adequate health, life, disability, and property insurance to protect against unforeseen events.
  7. Investment Strategy: Determine your investment goals, risk tolerance, and time horizon. Develop an investment strategy and asset allocation plan that aligns with your objectives.
  8. Retirement Planning: Calculate how much you need to save for retirement to maintain your desired lifestyle. Consider retirement accounts like 401(k)s, IRAs, or pensions to fund your retirement goals.
  9. Tax Planning: Optimize your tax strategy by taking advantage of tax-efficient investment vehicles and deductions.
  10. Estate Planning: Establish or update your estate plan, including wills, trusts, and powers of attorney to ensure the smooth transfer of assets to your heirs.
  11. Implementation: Put your financial plan into action by opening accounts, making investments, and adjusting your budget accordingly.
  12. Regular Monitoring and Review: Periodically review your financial plan to track progress toward your goals.
  13. Professional Advice: Consider seeking guidance from a certified financial planner (CFP) or a financial advisor to help you develop and implement your financial plan.
  14. Adaptation and Flexibility: Be flexible and willing to adapt your financial plan as circumstances change, such as career advancements, family changes, or economic shifts.
Case Study

David (not real name) is a 40-year-old entrepreneur who owns a small but growing NDIS Support work business. His business has been profitable, but he recognizes the need for more comprehensive financial planning to ensure long-term success and achieve specific business and personal goals.

He had outlined the following goals:

  1. Business Growth: David aims to expand his IT consulting firm by increasing the client base and offering additional services.
  2. Retirement Planning: He wants to create a retirement plan that provides for a comfortable retirement.
  3. Tax Efficiency: David seeks strategies to minimise his business and personal tax liabilities.
  4. Emergency Fund: Establish an emergency fund to protect the business during unexpected downturns.
  5. Debt Management: Manage and reduce business debt to improve financial stability.

David recognized the need of financial planning to achieve these goals. He followed the above mentioned process with the help of a professional Financial Planner. He was able to achieve the following results:

  1. David’s business expands successfully, increasing its client base and profitability. With a well-structured retirement plan, he starts saving for his retirement systematically, ensuring financial security in the future.
  2. Effective tax planning results in reduced tax liabilities for both his business and personal finances.
  3. The business’s emergency fund provides a financial safety net during a period of unexpected economic downturn, preventing major disruptions.
  4. David manages and significantly reduces business debt, improving the company’s financial stability and creditworthiness.

Through diligent financial planning, David achieved his business and personal financial goals, ensured the stability of his company, and secured a prosperous retirement. His commitment to financial planning helped him navigate the complexities of entrepreneurship and achieve long-term financial success.

Remember, this is just a general guide and each organisation is different, so it’s important to properly review your finances with a cost-benefit analysis before making any big decisions. Our NexZen tax experts can provide personalised advice and can help you find out what you can claim as a small business. Get in touch to book a discovery call

Until then, thanks for reading and if you liked this or you know someone who would also find this helpful please feel free to reply and share. See you next time. Can’t wait.

Categories
Day to Day Accounting & Payroll

The Power of Effective Record Keeping: Your Key to Organisational Success

Effective record keeping is of utmost importance as per the guidelines provided by the Australian Taxation Office (ATO). The ATO requires businesses to maintain accurate and complete records to meet their tax obligations and ensure compliance with Australian tax laws. By adhering to the record keeping guidelines set by the ATO, businesses can ensure accurate reporting, minimise errors, and meet their tax obligations.

What Pain Does having an effective record keeping system remove from Our life? 

Having an effective record keeping system helps remove various pain points from our lives, including:

  1. Relieves the stress of scrambling to find required documents during tax audits or assessments.
  2. Minimises the risk of non-compliance and associated penalties by maintaining accurate records.
  3. Streamlines the process of preparing and lodging tax returns, saving time and effort.
  4. Ensures easy retrieval of necessary information to support claims, deductions, and credits, simplifying interactions with the ATO.
What Opportunities does having an efficient record keeping system create in life? 

Having an efficient record keeping system creates various opportunities in life, including:

  1. Supports efficient and timely responses to government requests or audits, fostering a positive relationship with the ATO.
  2. Enables accurate identification and maximisation of eligible tax deductions, resulting in potential tax savings.
  3. Provides a clear financial overview, allowing for informed business decisions and strategic planning.
  4. Enhances credibility and transparency with financial institutions, facilitating access to loans and favourable terms.
What are the KPIs to measure
  1. Financial
    1. Tax audit Penalties
    2. Cash flow
    3. Cost Efficiency
  2. Non Financial
    1. Compliance Adherence
    2. Record Accessibility 
    3. User Satisfaction
What are the five rules of record keeping for small businesses?

The ATO helpfully provides a list of five rules for recordkeeping purposes. They are:

  1. Keep all tax and superannuation-related records. 
  2. Don’t alter the records. Storage methods must protect the records from damage.
  3. Keep your records for at least five years. 
  4. If the ATO requests records, one must provide the records immediately. 
  5. The records should be in English. If they are in another language, they should be easily convertible to English.
What are the positive impacts of having an efficient record keeping system in place? 

Having an efficient record keeping system can have many positive impacts on our life, including:

  1. Facilitates smooth tax compliance and reduces the risk of penalties.
  2. Enables accurate and timely preparation of tax returns, ensuring compliance with ATO requirements.
  3. Enhances transparency and credibility with the ATO, fostering positive relationships.
  4. Maximises eligible deductions and credits, leading to potential tax savings.
What are the negative impacts of Not having an efficient record keeping system? 

Not having an efficient record keeping system can have a number of negative impacts on our life, including:

  1. Increased risk of non-compliance with tax laws and regulations, leading to potential penalties and legal consequences.
  2. Difficulty in substantiating claims, deductions, or credits during tax audits, potentially resulting in additional tax liabilities.
  3. Inability to provide accurate and reliable financial information, hindering effective business decision-making and strategic planning.
  4. Strained relationships with the ATO, potentially leading to increased scrutiny and audits due to a lack of trust in the organisation’s record keeping practices.
High Level Roadmap
  1. Assess your record-keeping requirements and ensure compliance with the Australian Taxation Office (ATO) guidelines.
  2. Implement a structured filing system to organise and categorise your records accurately.
  3. Utilise digital tools and software to automate record keeping processes and enhance efficiency.
  4. Regularly review and update your record-keeping practices to align with changing ATO regulations.
  5. Train employees on proper record-keeping procedures to maintain consistency and accuracy throughout the organisation.
Case Study

Mr Clarke(not real name) is an NDIS support provider. He is operating his medium size business under a private limited company.

Before implementing a record-keeping system, the company faced several challenges, including disorganised documentation, inefficient retrieval of information, and non-compliance with regulatory requirements.

Recognizing the need for improvement, Mr Clarke embarked on a journey to establish a comprehensive record-keeping system by following the process mentioned above as High Level Roadmap. 

By undertaking a systematic approach and leveraging digital tools, Mr Clarke’s business was able to overcome challenges related to compliance, document management, and decision-making. The implementation of the record-keeping system not only ensured regulatory compliance but also enhanced operational efficiency and empowered Mr Clarke to make informed strategic decisions.

Remember, this is just a general guide and each organisation is different, so it’s important to properly review your finances with a cost-benefit analysis before making any big decisions. Our NexZen tax experts can provide personalised advice and can help you find out what you can claim as a small business. Get in touch to book a discovery call. 

Until then, thanks for reading and if you liked this or you know someone who would also find this helpful please feel free to reply and share. See you next time. Can’t wait.

Categories
Business Value Creation

Experience Financial Freedom: Unleash Your Business Potential with Outsourced Accounting Services

Outsourcing accounting is highly beneficial for businesses due to several reasons. Firstly, it brings specialised expertise and knowledge to the table, ensuring accurate financial records, compliance with regulations, and minimising errors. Secondly, outsourcing accounting allows businesses to save on overhead costs associated with hiring and training in-house accountants, providing significant cost savings. Additionally, it enables businesses to focus on their core competencies and strategic initiatives, while leaving the financial management to professionals.

What Pain Does Having an Outsourced Accounting Firm Remove from Our life? 

Having an an outsourcing accounting firm helps remove various pain points from our lives, including:

  1. Outsourced accounting firms remove the pain of hiring, training, and managing an in-house accounting team.
  2. They alleviate the stress of keeping up with ever-changing tax laws and regulations.
  3. Outsourced accounting firms handle time-consuming financial tasks, freeing up valuable time for business owners.
  4. They reduce the risk of errors and penalties by ensuring accurate and compliant financial reporting.
What Opportunities does having an outsourcing accounting firm create in life? 

Having an outsourcing accounting firm creates various opportunities in life, including:

  1. Having an outsourcing accounting firm creates the opportunity to focus on core business activities and strategic initiatives.
  2. It allows for access to specialised expertise and knowledge in financial management and compliance.
  3. Outsourcing accounting creates the opportunity for cost savings by avoiding overhead costs associated with hiring and training an in-house accounting team.
  4. It provides scalability and flexibility to accommodate business growth or seasonal fluctuations.
What are the KPIs to measure
  1. Financial
    1. Cost Efficiency
    2. Tax Saving
    3. Return on investment
  2. Non Financial
    1. Reduction in errors and Penalties
    2. Stability
    3. Expertise & knowledge
What are the key differences between an In-house accountant and an outsourcing Accounting firm?

The key differences between an in-house accountant and an outsourcing firm are as follows:

  1. An in-house accountant is an employee of the company, working within the organisation’s structure, whereas an outsourcing firm is an external service provider hired on a contractual basis.
  2. An in-house accountant is dedicated solely to the company’s accounting needs and may have limited expertise in specific areas, while an outsourcing firm brings a team of specialised professionals with diverse skill sets and industry knowledge.
  3. Employing an in-house accountant comes with costs such as salaries, benefits, training, and software expenses, while outsourcing firms offer cost-effective options, as their fees typically cover all necessary resources.
  4. In-house accountants may face limitations in handling sudden increases in workload or specialised tasks, whereas outsourcing firms provide scalability and flexibility to accommodate changing business needs or seasonal fluctuations.
What are the positive impacts of having an outsourcing accounting form in place? 

Having an outsourcing accounting firm can have many positive impacts on our life, including:

  1. Access to specialized expertise and industry knowledge in accounting and financial management.
  2. Cost savings through reduced overhead expenses and the elimination of hiring and training costs.
  3. Scalability and flexibility to adapt to changing business needs without the need for internal staffing adjustments.
  4. Improved efficiency and accuracy in financial processes and reporting.
What are the negative impacts of Not having an outsourcing accounting form in place?

Not having an outsourcing accounting firm can have a number of negative impacts on our life, including:

  1. Lack of specialised expertise and knowledge in accounting, potentially leading to errors and non-compliance with regulations.
  2. Increased costs associated with hiring and training an in-house accounting team.
  3. Limited scalability, making it challenging to handle fluctuations in workload or business growth.
  4. Inefficient financial processes and reporting, leading to potential delays and inaccuracies.
Process of Hiring an efficient outsourcing Accounting Firm
  1. Assess your accounting needs and determine the specific services required for your business.
  2. Research and shortlist potential outsourcing accounting firms based on reputation, expertise, and industry experience.
  3. Request detailed proposals from the shortlisted firms, considering factors such as services offered and pricing structure.
  4. Conduct interviews or meetings to evaluate the firms’ expertise, communication skills, and compatibility with your business.
  5. Finalise the contract, establish a transition plan, and maintain ongoing communication for a successful onboarding and collaboration experience.
Case Study

Mr Richardson(not real name) is an NDIS support provider. He is operating his medium size business under a private limited company.

With an in-house accountant, Mr Richardson faced limitations in terms of expertise and scalability. The accountant lacked in-depth knowledge of industry-specific tax regulations, hindering effective tax planning and compliance. Additionally, as the company grew, the workload became overwhelming for the in-house accountant, leading to delays and inefficiencies in financial reporting.

Recognizing the need for a change, Mr Richardson initiated a careful transition process to ensure a smooth shift to an outsourced accounting firm as per the process mentioned above in High Level Roadmap.   

Mr Richardson’s transition from an in-house accountant to an outsourced accounting firm proved to be a strategic decision that yielded substantial benefits. By leveraging specialised expertise, achieving cost savings, and improving scalability, the firm experienced streamlined financial operations, enhanced compliance, and gained the flexibility to support its growth trajectory. The successful transition allowed Mr Richardson to allocate resources efficiently and focus on its core competencies, ultimately positioning the company for sustained success in a highly competitive industry.

Remember, this is just a general guide and each organisation is different, so it’s important to properly review your finances with a cost-benefit analysis before making any big decisions. Our NexZen tax experts can provide personalised advice and can help you find out what you can claim as a small business. Get in touch to book a discovery call

Until then, thanks for reading and if you liked this or you know someone who would also find this helpful please feel free to reply and share. See you next time. Can’t wait. 

Categories
Business Value Creation

Important Update: Changes to National Minimum Wage, Award Minimum Wages, and Superannuation

Annual Wage Review 2022-23 by the Fair Work Commission. These changes affect the National Minimum Wage, award minimum wages, and superannuation rates.

1. National Minimum Wage Increase: Effective from 1st July 2023, the National Minimum Wage has been increased to $882.80 per week or $23.23 per hour. This increase aims to ensure fair remuneration for employees across various industries and to support economic growth.

2. Award Minimum Wages Increase: In addition to the National Minimum Wage, award minimum wages have also been raised by 5.75% as part of the Annual Wage Review. This increase is applicable from 1st July 2023 and aims to maintain equitable pay rates for employees covered by specific industry awards.

3. Superannuation (Super) Guarantee Rate Increase: Starting from 1st July 2023, the superannuation guarantee rate will rise from 10.5% to 11%. This means that employers are required to contribute a minimum of 11% of their employees’ ordinary time earnings to their superannuation fund, helping individuals secure their financial future.

This increase will apply from the first full pay period starting on or after 1 July 2023. This means if your weekly pay period starts on Monday, the new rates will apply from Monday, 3 July 2023.

As a part of payroll management for our clients, we will review your payroll system and make necessary changes and if you haven’t signed up with us for payroll, we encourage you to review your payroll systems and ensure that the necessary adjustments are made to comply with these changes. It is crucial to update your employees’ wages, salaries, and superannuation contributions to reflect the new rates.

As always, our team is here to assist you with any questions or concerns you may have regarding these changes. Please feel free to reach out to us, and we will be more than happy to provide guidance and support.

Thank you for your attention to this matter, and we appreciate your cooperation in ensuring compliance with the updated wage and superannuation regulations. You Can Connect us for more updates and guidance. 

Categories
Business Value Creation

Designing Your Financial Freedom: The Crucial Role of the Right Business Structure

Choosing the right structure for your business is a critical decision that can significantly impact its success and longevity. Whether you’re starting a new venture or considering restructuring an existing one, the structure you select will determine how your business operates, how it is taxed, and how it is legally protected.

What Pain Does having a right business structure remove from Our life?

Having a right  business structure helps remove various pain points from our lives, including:

 

  1.  Personal liability protection for your personal assets. 
  2.  Tax optimization and reduced tax burdens.
  3.  Simplified compliance with regulatory requirements.
  4.  Improved access to financing and investment opportunities
What Opportunities does having a right business structure create in life?

Having a right business structure creates various opportunities in life, including:

  1. Optimises tax position, minimising tax burdens and ensuring compliance.
  2. Facilitates partnerships and joint ventures with other businesses.
  3. Access to government grants and incentives specific to certain business    structures.
  4. Provides a solid foundation for succession planning and business continuity.
What are the KPIs to measure
  1. Financial
    1. Tax Saving
    2. Cash flow
    3. Revenue Growth
  2. Non Financial
    1. Perpetuity in business
    2. Ease of Business expansion
    3. Personal Assets protection
What are the different business structures available for small businesses

The common business structures available for small businesses in Australia include:

  1. Sole Proprietorship
  2. Partnership
  3. Company 
  4. Trust
  5. Incorporates Associations
  6. & more
What are the positive impacts of having a right business structure in place?

Having a right business structure can have many positive impacts on our life, including:

  1. A proper business structure separates personal and business liabilities, safeguarding personal assets from business-related risks.
  2. The right structure limits personal liability, protecting business owners from being personally responsible for business debts or legal issues.
  3. An appropriate business structure can offer tax benefits, such as deductions, exemptions, or lower tax rates, optimising the business’s financial position.
  4. A well-structured business increases credibility, making it easier to secure financing, attract investors, or qualify for government grants or funding programs.
What are the negative impacts of Not having the right business structure?

Not having a right structure for business can have a number of negative impacts on our life, including:

  1. Without the right business structure, business owners can be personally liable for business debts and legal obligations, putting personal assets at risk.
  2. Inadequate structuring may result in missed tax deductions, limited access to tax incentives, or higher tax rates, leading to increased tax liabilities for the business.
  3. Not having the right structure may result in non-compliance with legal and regulatory requirements, leading to penalties, fines, or legal consequences.
  4.  Ineffective structuring can lead to confusion, inefficiencies, and conflicts within the business, hindering decision-making, coordination, and overall operational effectiveness. regulations, potentially resulting in penalties, audits, and legal issues.
High Level Roadmap
  1. Assess Your Business Needs and Goals
  2. Seek Professional Advice to understand the options available
  3. Evaluate Different Business Structures
  4. Consider Legal and Compliance Requirements:
  5. Assess Tax Implications
  6. Analyze Liability and Risk Factors
  7. Long-Term Planning and Flexibility
  8. Make an Informed Decision
  9. Seek Professional Assistance for Implementation
Case Study

Mr Richarson(not real name) is an NDIS support provider. He was earlier operating his business under sole trader & never truly dedicated his time or attention to choosing a business structure.

After a few years of high taxes and poor cash flow management that threatened his personal home, Mr Richardson decided it was time for action. 

He learned from his mistakes and wanted to grow his business while ensuring he was in full legal compliance. We advised him a Pty Ltd Company after careful consideration on the following points: 

  1. liability protection for the stakeholders
  2. A flat rate tax as opposed to marginal tax rate for sole traders
  3. Professional image and credibility of the business
  4. Separate legal entity, distinct from its shareholders.
  5. Business expansion & Succession Planning
  6. & More

Mr. Richardson experienced financial freedom for perhaps the first time. Though his business was always successful, taxes and other liabilities limited his personal income over the years. With his new structure, he saved money on taxes and had a plan for increasing his cash flow in the future. Perhaps more importantly, he increased the value of his business.

Remember, this is just a general guide and each organisation is different, so it’s important to properly review your finances with a cost-benefit analysis before making any big decisions. Our NexZen tax experts can provide personalised advice and can help you find out what you can claim as a small business. Get in touch to book a discovery call. 

Until then, thanks for reading and if you liked this or you know someone who would also find this helpful please feel free to reply and share. See you next time. Can’t wait.

Categories
Business Value Creation

Tax Planning: You Are One Step Away To Your Financial Freedom

Tax planning is not just about compliance; It is one step towards creating your financial freedom. With strategic tax planning, you can minimise your tax liabilities, maximise your savings, and create a solid foundation for long-term financial success.

What Pain Does Tax Planning Remove from Our life? 

Tax planning helps remove various pain points from our lives, including:

  1. Removes the pain of financial stress by minimising tax liabilities and maximising savings.
  2. Eliminates uncertainty by providing clarity and certainty regarding tax obligations.
  3. Alleviates compliance concerns, reducing the risk of penalties, audits, and legal issues.
  4. Manage cash flow effectively, avoiding cash flow challenges caused by large tax payments.
What Opportunities does Tax Planning create in life? 

Tax planning creates various opportunities in life, including:

  1. Allows individuals to minimise their tax liabilities, resulting in increased savings.
  2. Effective tax planning helps optimise cash flow by strategically timing income and expenses.
  3. Tax planning provides opportunities for individuals to allocate more funds towards investments.
  4. Provides access to valuable tax deductions, credits, and incentives.
What are the KPIs to measure
  1. Financial
    1. Tax Saving
    2. Cash flow
    3. Director Loan
    4. Tax Liability
    5. Dividends & Distributions
  2. Non Financial
    1. Certainty about tax obligations
    2. Resource Planning
    3. Peace of mind
What are the different methods of Tax Planning

There are various methods and strategies for tax planning. Here are a few different approaches:

  1. Income Allocation
  2. Timing of income and expenses
  3. Capital Gains & Losses management
  4. Tax Efficient spendings & investments
  5. Entity Structuring
  6. & more
What are the positive impacts of Tax Plannings? 

Tax Planning can have many positive impacts on our life, including:

  1. allows individuals and businesses to strategically minimise their tax liabilities, resulting in potential savings.
  2. improves cash flow by providing individuals and businesses with more disposable income. 
  3. Promotes financial stability by ensuring that individuals and businesses have a clear understanding of their tax obligations and can meet them in a timely manner.
  4. support business growth by optimising tax structures, taking advantage of tax incentives, and maximising deductions. 
What are the negative impacts of Not doing Tax Planning? 

Not doing Tax planning can have a number of negative impacts on our life, including:

  1. Failing to engage in tax planning can result in higher tax obligations, leading to a reduced ability to save, invest, or meet financial goals.
  2. Without tax planning, individuals and businesses may overlook valuable deductions, credits, and incentives, resulting in missed opportunities to reduce their taxable income and save on taxes.
  3. Not considering tax implications can lead to cash flow challenges, particularly if individuals or businesses are unprepared for large tax payments that could strain their financial resources.
  4. Lack of tax planning increases the risk of non-compliance with tax laws and regulations, potentially resulting in penalties, audits, and legal issues.
High Level Roadmap
  1. Gathering financial information
  2. Setting financial goals
  3. Analysing tax implications
  4. Identifying tax-saving opportunities
  5. Implementing tax strategies
Case Study

Ms Taylor is an NDIS support worker and owns a proprietary Limited company with 10 payroll staff members. Her estimated Tax payable for the year was $64k with a taxable income of $259k.

We implemented the following strategies in her Tax planning

  1. Paid Director fee to Ms Taylor and her spouse for $90k. 
  2. Paid $27,500 Superannuation to the directors.
  3. Paid Superannuation for the staff for the June Qtr in advance.
  4. Prepaid expenses such as rent, conference fees etc worth $20k for the business before 30 June.
  5. Bought a business Car for $50k to utilise the $150k temporary expense claim finishing on 30 June 2023.

The net result was a saving of approx $42k tax for the company 

Remember, this is just a general guide and each organisation is different, so it’s important to properly review your finances with a cost-benefit analysis before making any big decisions. Our NexZen tax experts can provide personalised advice and can help you find out what you can claim as a small business. Get in touch to book a discovery call. 

Until then, thanks for reading and if you liked this or you know someone who would also find this helpful please feel free to like and share. See you next time. Can’t wait.

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Articles

Salary Sacrifice Guide for Employers

Salary sacrifice is a confusing term and sometimes a confusing arrangement. If you’re wondering how to navigate a salary sacrifice agreement as an employer, you’re in luck. This guide helps walk you through the ins and outs of salary sacrifice, including a simple definition, how to set up a salary sacrifice agreement, and the pros and cons of salary packaging.

What is a salary sacrifice?

A salary sacrifice agreement allows an employer and employee to negotiate a salary package (aka total remuneration package). In this agreement, the employee agrees to “sacrifice” their future salary or wages, and the employer agrees to other benefits of similar value instead. It’s really more of a trade or exchange rather than a “sacrifice.”

A salary sacrifice agreement is also commonly referred to as “salary packaging” or “total remuneration packaging”, which are perhaps more accurate terms. These arrangements aim to find a salary and benefits package that benefits both the employer and employee in terms of financial remuneration and tax benefits. Employers also use salary sacrifice arrangements as incentives for new and existing employees. There are tax implications and expenses to consider, though, which we’ll cover in more detail throughout this guide.

Which benefits can you exchange in a salary sacrifice?

The employer ultimately decides which benefits to offer in a salary sacrifice agreement, though the final arrangement requires both parties to agree. The ATO doesn’t restrict the benefits you exchange. When you’re setting up salary sacrifice agreements, there are three financial considerations: the cost of the benefits, the administrative expenses, and your tax obligations.

  • Fringe benefits: Fringe benefits include payments outside of standard salary and wages. Fringe benefits are generally for private use and unrelated to work. For example, if you allow an employee to use a company vehicle for their own private purposes, that is a fringe benefit. Other examples include reimbursement for expenses like tuition or childcare, gym memberships, and entertainment (e.g. concert tickets). Employers are required to pay Fringe Benefits Tax (FBT). It’s important to consider this expense when you’re negotiating a salary sacrifice arrangement.
  • Exempt benefits: Exempt benefits aren’t subject to FBT. Only work-related items are considered exempt benefits. The following items are allowed for exemption, and the item must primarily be used for work-related purposes: portable electronic devices, computer software, protective clothing, briefcases, and tools of trade. If the employee uses more than one item for a “substantially identical function” within an FBT year, only one of the items is exempt. The only exceptions are for replacement items and specific work-related portable electronic devices for small businesses (those earning less than $50 million per year).
  • Superannuation: Superannuation is one of the most popular benefits in a salary sacrifice agreement. The ATO states that employer contributions aren’t fringe benefits as long as they’re made on behalf of the employee and are paid to a complying super fund. However, if the contributions are made on behalf of another person (e.g. the employee’s spouse), or you pay them to a non-complying super fund, the ATO considers them fringe benefits. In that case, you’ll need to pay FBT.

Is there a limit on salary sacrifices?

However, their reduced salary or wages must at least equal minimum wage. If the salary sacrifice includes superannuation contributions, those contributions are subject to a cap because they’re considered concessional contributions. This cap applies to all super fund concessional contributions made for one employee throughout the year.

How to Set Up a Salary Sacrifice Agreement

Like most agreements, you should create a written contract for your salary sacrifice agreement. A verbal contract may also be legally binding, but these agreements are much more difficult to prove and possibly open for dispute.

You should agree on terms and sign the contract (both you and the employee) before work commences. The ATO doesn’t allow employees to sacrifice any salary or wages, leave entitlements, bonuses, or commissions that have already accrued. You may renegotiate the terms of the salary sacrifice agreement at any time during the person’s employment. If your contract is renewable, you should renegotiate the terms before each renewal starts.

Tax Implications of Salary Sacrifice Arrangements

There are specific tax guidelines related to salary sacrifice arrangements. Here are the details as outlined by the ATO:

  • The employee pays income tax on their reduced salary or wages.
  • The employer pays applicable fringe benefits tax (FBT) on any fringe benefits exchanged for salary. There are two exceptions here:
  1. Exempt benefits (listed above) aren’t considered fringe benefits.
  2. If an employee could claim an income tax deduction for an item, the employer isn’t required to pay FBT on that item under the “otherwise deductible” rule.

There are two notes to mention about superannuation contributions.

If the employer makes super contributions as part of a salary sacrifice agreement, those contributions are considered employer contributions (not employee contributions) as long as they are made on behalf of the employee (not their spouse or another person) and are paid to a complying fund. These contributions will be taxed in the super fund because they’re considered concessional contributions.

Per the ATO, as of 1 January 2020, these contributions don’t:

  • Reduce the ordinary time earnings that the employer is required to calculate their employee’s super entitlement on.
  • Count towards the amount of super guarantee contributions that the employer is required to make in order for them to avoid the super guarantee charge.

Note: If a salary sacrifice arrangement doesn’t meet ATO requirements, the benefits are considered taxable income.

Other Salary Sacrifice Guidelines

The ATO outlines other requirements and procedures for salary sacrifice, including:

  1.  The employee must permanently forego the sacrificed salary for the entire period outlined in your arrangement.
  2.  If you, as the employer, don’t provide a fringe benefit outlined in the agreement, you must cash out that benefit by the end of the agreed period. This payment is considered normal taxable income.
  3.  If the employer makes payments to a third party from your earned salary, these are not part of an effective salary sacrifice arrangement. These payments must be after-tax. Common examples include payments for health insurance premiums or loan repayments.

Pros and Cons of Salary Sacrifice Agreements

There are many pros and cons for employers to consider in regards to salary sacrifice agreements.

Pros:

  • Salary packaging is an excellent incentive for new and existing employees. If you need to attract talent, salary sacrifice agreements are a great way to do so—as long as you understand the financial implications, too.
  • Many employees effectively earn more money with a salary sacrifice agreement; if done well, the employer won’t experience any additional cost.
  • Employers may save money on payroll taxes, workers compensation, and superannuation guarantee charges.

Cons:

  • Salary packaging is a complex task and requires a great deal of time and effort to negotiate and communicate.
  • If and when an employee leaves the organisation, it can be challenging to reconcile the outstanding wages or benefits owed under a salary sacrifice agreement.
  • Record keeping is more complicated than usual.
  • FBT requires additional time and expense.

Should you offer salary sacrifice arrangements?

There’s a lot to consider with salary sacrifice arrangements. While employers sometimes save a bit of money by packaging salaries, employees experience the greatest benefits. Most employees save money on taxes and take home more money overall with these agreements. Because salary sacrifice agreements offer so many financial benefits for employees, an employer who offers these agreements is much more appealing. The greatest challenge, of course, is setting up a salary sacrifice arrangement and keeping accurate records for tax purposes. If you need help, nexZen is here. We can work together to find a salary sacrifice arrangement that benefits both you and your employees. Book a discovery call now to get started.

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Business Value Creation Day to Day Accounting & Payroll

Casual vs Part-Time Employee: What’s the Difference?

While both workers are technically working on a part-time basis, there are some distinct differences in casual vs part-time employees. From contracts to salary to hours, there are important differences to know about these two groups of employees. Read on to find out what the differences really are between casual employees and part-time employees to help determine which employee is best for your company.

What is a Casual Employee?

A casual employee is an employee who is called to work when needed. They may or may not have a contract. If they have a contract, it will clearly state that the working hours may be sporadic and may not be consistent from one week to the next. This type of on-call employee does not receive company benefits and is paid by hours or days contributed. They may have their hours set up in advance but they may also be informed of their hours on a weekly basis. Some weeks, they may have no hours at all.

A casual employee is ideal for a business that doesn’t have steady work in a particular area, or for a company with busy seasons. During the busy season, you may need to call on your casual employees for help but you don’t need them all year round.

What is a Part-Time Employee?

A part-time employee does not work as many hours as a full-time employee but their hours are pre-determined and regular. This means they are at work every week during their allotted times and their schedule doesn’t change based on the workload. A part-time employee may be entitled to some employee benefits, including paid vacation days. They also have a contract stipulating their working hours and the nature of their contribution to the company. Contracts are usually updated and renegotiated annually.

A part-time employee is essential to a business that doesn’t need another full-time employee but still has a steady enough stream of work that needs to be taken on each week. A part-time employee may also be a smooth and simple segue to a new position. If your company is just expanding into a new department, you may want to schedule part-time employees on a trial basis before you expand to full-time staff.

Is There a Pay Difference?

There is a payroll difference in casual vs part-time employees. Casual employees sometimes get a higher hourly wage compared to part-time workers. This is to compensate for the unstable workflow and encourage workers to stay on board. Hiring casual workers may offer your company more flexibility but it also costs a little more. If costs are a concern for your startup business, then a part-time worker may be more suitable for you. If your think the work will only be temporary, it may be cheaper to pay a higher wage and eliminate benefits, but if you think the intermittent work may be spread out over a long period, then a part-time worker may be more beneficial to you.

There is also the cost of benefits for employers to consider. While a part-time employee may cost less per hour than a casual employee, they also cost the company in benefits. You should consider this when trying to calculate which type of employee is more economical for your business.

Who is Entitled to Benefits?

There are also differences in benefits for casual vs part-time employees. A casual employee is not entitled to health or retirement benefits. They also do not receive annual leave or paid sick days. If a casual employee falls ill one day, you don’t need to compensate them. If your company policy offers some sick days, it will require a medical note to provide sick pay. A part-time employee may be entitled to some benefits, but this can vary based on the contract. Some contracts do not offer any paid leave while others may. This is at the discretion of the employer and must be accepted by the employee upon signing the contract. Paid sick leave usually allows employees two sick days per year without proof. If a part-time employee exceeds the number of allotted sick days, their employer may ask them to provide a medical note to justify their absence.

Can They Quit Without Giving Notice?

A casual employee can quit without offering notice. This means you could find yourself short-staffed if you don’t have an enormous pool of casual workers to choose from. Part-time employees sign a contract that usually states the employee must provide the standard two-week notice period before leaving their job. Nothing can absolutely force someone to follow the two-week notice period. However, a contract usually means if the employee does not follow this rule, they may not receive all the benefits or wages they would have received if they had provided two weeks’ notice.

Should I Hire a Casual Employee or a Part-Time Employee?

This is a tough question to answer. It depends on your business and sometimes it depends on the employee as well. If your business has a steady stream of income, then you can afford to hire a part-time employee. It is beneficial to you because it means your employees will remain more stable and more reliable. It’s sometimes worth it to invest more in your employees to build a stable team if your business can afford the expenditure.

The second thing to consider is your pool of candidates. If unemployment rates are very high, you will have an easier time securing casual workers. If unemployment is low and there is less demand for jobs, then you may have a smaller pool of candidates to choose from and will need to offer whatever employees you can find the terms that work best for them. There are pros and cons to both types of employees but the most important factor is finding an employee who is hardworking and can get the job done well.

This is a loser that most people are probably pretty happy about — the government is extending a task force that targets tax avoidance by multinationals, large public and private groups, trusts and wealthy individuals.

It is giving the Australian Tax Office (ATO) more than $600 million over the next three years to keep the scrutiny on those groups.

The budget forecasts the extension of the task force will make the government $2.1 billion in revenue from tax over the next four years.

In bad news for people’s pay packets, real wages are not forecast to grow until later this year at the earliest thanks to higher-than-expected inflation.

At the end of last year, Treasury predicted the inflation rate would be 2.75 per cent. The reality has ended up being around 4.25 per cent.

The budget is predicting wages will only be just higher than inflation in the next couple of years, meaning cost of living pressures are unlikely to ease any time soon.

Despite current price hikes, the budget is forecasting inflation will taper off and wages will grow faster by the middle of the decade.

Buried under the wildly exciting headline of Commonwealth’s Deregulation Agenda, is the $19.9 million spend by the Australian Bureau of Statistics to develop a new reporting application to enable businesses to submit surveys on business indicators directly through their accounting software. Excellent. Real time reporting utilising verified data on the state of Australian business. Guarantee of Origin scheme, and the development of a Biodiversity Stewardship Trading Platform to support farmers to undertake biodiversity activities ahead of the introduction of a voluntary biodiversity stewardship market.

Another $148.6m is for the development of community microgrids and just over $50m to develop gas infrastructure projects.

An additional $652.6m has been set aside to extend the ATO’s Tax Avoidance Taskforce by 2 years to 30 June 2025.
In that time, the taskforce is expected to increase receipts by $2.1bn and increase payments by $652.6m.

Just prior to the Federal Budget, the Government announced the extension of the:

  • Boosting Apprenticeship Commencements wage subsidy, and
  • Completing Apprenticeship Commencement wage subsidy.

    Any employer (or Group Training Organisation) who takes on an apprentice or trainee up until 30 June 2022 can gain access to:
  • 50% of the eligible Australian Apprentice’s wages in the first year, capped at a maximum payment value of $7,000 per quarter per Australian Apprentice,
  • 10% of the eligible Australian Apprentice’s wages in the second year, capped at a maximum payment value of $1,500 per quarter per Australian Apprentice, and
  • 5% of the eligible Australian Apprentice’s wages in the third year, capped at a maximum payment value of $750 per quarter per Australian Apprentice.

From

7:30pm AEDT, 29 March 2022 until 30 June 2024

The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses on external training courses provided to employees. The deduction will be available to small business with an aggregated annual turnover of less than $50 million. External training courses will need to be provided to employees in Australia or online, and delivered by entities registered in Australia.
Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees.
We assume there will need to be a nexus between the employee’s employment and the training program undertaken for the boost, although we are waiting on further details of this initiative to be released. 
The boost for eligible expenditure incurred by 30 June 2022 will be claimed in the tax return for the following income year (that is, the 2023 tax return). The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2024, will be included in the income year in which the expenditure is incurred.

From

1 July 2021

As previously announced, workrelated COVID19 test expenses incurred by individuals will be made tax deductible. 
Changes will also be made to ensure that FBT will not be payable by employers if they provide fringe benefits relating to COVID19 testing to their employees for workrelated purposes.
The changes for deductions will be effective from 1 July 2021, with the FBT changes to apply from 1 April 2021.
At this stage it is not entirely clear whether the deduction rules will cover expenses incurred where the employee is able to work from home. The initial media release indicates that the measure will cover situations where the individual has the option of working remotely, while the Budget only refers to costs of taking a COVID-19 test to attend a place of work but doesn’t specifically refer to employees who can work from home.

From

1 July 2022

Back in the 2019-20 Budget, the Government announced that Australian Business Number (ABN) holders would be stripped of their ABNs if they failed to lodge their income tax return. In addition, ABN holders would be required to annually confirm the accuracy of their details on the Australian Business Register.


This measure has been deferred for 12 months, which means that the tax return lodgement obligation is due to commence from 1 July 2022 with the annual confirmation of ABN details to commence from 1 July 2023.

As announced prior to the Budget, the Government will commit $6.6 million for the development of IT infrastructure that will enable the ATO to share Single Touch Payroll (STP) data with State and Territory Revenue Offices on an ongoing basis. 

The funding will be deployed following further consideration of which states and territories are able and willing to make investments in their own systems and administrative processes to pre-fill payroll tax returns with STP data in order to reduce compliance costs for businesses.

The measure that enables payments from certain state and territory COVID-19 business support programs to be treated as non-assessable non-exempt (NANE) income has already been extended until 30 June 2022. 
The Government has announced that the following state and territory grant programs have been made eligible for this treatment since the 2021-22 MYEFO, although it is not clear whether the relevant legislative instruments have been issued as yet:

  • New South Wales Accommodation Support Grant 
  • New South Wales Commercial Landlord Hardship Grant 
  • New South Wales Performing Arts Relaunch Package 
  • New South Wales Festival Relaunch Package 
  • New South Wales 2022 Small Business Support Program 
  • Queensland 2021 COVID 19 Business Support Grant 
  • South Australia COVID 19 Tourism and Hospitality Support Grant 
  • South Australia COVID 19 Business Hardship Grant.

    This builds on the list of existing grants paid by New South Wales and Victoria that can already qualify for NANE income treatment. 

From

1 January 2024

As announced prior to the Budget, businesses will be able to report Taxable Payments Reporting System data via their accounting software on the same lodgment cycle as their activity statements.
The measure is expected to reduce the costs of complying with the system and increase transparency.

From

1 January 2024

As announced prior to the Budget, companies will be able to choose to have their pay as you go (PAYG) instalments calculated using current financial performance, extracted from business accounting software, with some tax adjustments. 
The move is intended to ensure that instalment liabilities are aligned to the businesses cashflow. In addition, the digitisation of PAYG instalments will improve transparency and provide more accurate data on performance. 

From

2022-23 income year

Normally, GST and PAYG instalment amounts are adjusted using a GDP adjustment or uplift. For the 2022-23 income year, the Government is setting this uplift factor at 2% instead of the 10% that would have applied. 

The 2% uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods for instalments for the 2022-23 income year and are due after the amending legislation comes into effect:

  • Up to $10 million annual aggregated turnover for GST instalments and 
  • $50 million annual aggregated turnover for PAYG instalments 
From 7:30pm AEDT, 29 March 2022 until 30 June 2023
The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud based services. The technology boost will be available to small business with an aggregated annual turnover of less than $50 million.An annual expenditure cap of $100,000 will apply to the boost. The boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year. The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2023 will be included in the income year in which the expenditure is incurred. That is, the additional deduction available under this measure is expected to be claimed in the 2023 tax return.  

The temporary 50% reduction in superannuation minimum drawdown requirements for account-based pensions and similar products has been extended to 30 June 2023. 


Minimum superannuation drawdown rates 2019-2023

Age 

Default minimum drawdown rates (%) 

Reduced rates by 50% for the 2019-20 to 2022-23 income years (%) 

Under 65 

65-74 

2.5 

75-79 

80-84 

3.5 

85-89 

4.5 

90-94 

11 

5.5 

95 or more 

14 

 

From

1 July 2024


Trust and beneficiary income reporting and processing will be digitalised with all trusts being provided with the option of lodging income tax returns electronically.

While this measure will reduce compliance costs, it will also increase transparency and provide the ATO with a greater insight into where anomalies are occurring.

From

1 July 2021

The Medicare levy low income thresholds for seniors and pensioners, families and singles will increase from 1 July 2021.

 

2020-21 

2021-22 

Singles 

$23,226 

$23,365

Family threshold 

$39,167 

$39,402

Single seniors and pensioners 

$36,705 

$36,925

Family threshold for seniors and pensioners 

$51,094 

$51,401

 
For each dependent child or student, the family income thresholds increase by a further $3,619 instead of the previous amount of $3,597. 

The Home Guarantee Scheme guarantees part of an eligible buyer’s home loan, enabling people to buy a home with a smaller deposit and without the need for lenders mortgage insurance. The Government has extended two existing guarantees and introduced a new regional scheme.

Just prior to the Budget, the Government announced:

  • First Home Guarantee – from 1 July 2022, an increase from 10,000 to 35,000 guarantees to support eligible first homebuyers to purchase a new or existing home. 
  • Single parent Family Home Guarantee – 5,000 guarantees each year from 1 July 2022 to 30 June 2025. The family home guarantee supports eligible single parents with children to buy their first home or to re-enter the housing market with a deposit of as little as 2%.
  • Introduction of a Regional Home Guarantee. This guarantee will support eligible citizens and permanent residents who have not owed a home for 5 years (including non-first home buyers) to purchase or construct a new home in regional areas with a minimum 5% deposit areas (subject to the passage of enabling legislation).

From

April 2022

A one-off $250 ‘cost of living payment’ will be provided to Australian resident recipients of the following payments and concession card holders:

  • Age Pension 
  • Disability Support Pension 
  • Parenting Payment 
  • Carer Payment 
  • Carer Allowance (if not in receipt of a primary income support payment) 
  • Jobseeker Payment 
  • Youth Allowance 
  • Austudy and Abstudy Living Allowance 
  • Double Orphan Pension 
  • Special Benefit 
  • Farm Household Allowance 
  • Pensioner Concession Card (PCC) holders 
  • Commonwealth Seniors Health Card holders 
  • Eligible Veterans’ Affairs payment recipients and Veteran Gold card holders.

    The payments are exempt from taxation and will not count as income support for the purposes of any income support payment. An individual can only receive one payment.

From

1 July 2021 to 30 June 2022

The low and middle income tax offset (LMITO) currently provides a reduction in tax of up to $1,080 for individuals with a taxable income of up to $126,000.

The tax offset is triggered when a taxpayer lodges their 2021-22 tax return.

For the 2021-22, the LMITO will be increased by $420 which means that the proposed new rates for individuals are as follows:

 

Taxable income 

Offset 

$37,000 or less 

$675

Between $37,001 and $48,000 

$675 plus 7.5 cents for every dollar above $37,000, up to a maximum of $1,500

Between $48,001 and $90,000 

$1,500

Between $90,001 and $126,000 

$1,500 minus 3 cents for every dollar of the amount above $90,000 

From12.01am 30 March 2022

There are a few jokes going around social media about the price of fuel.

As widely predicted, the Government will temporarily reduce the excise and excise-equivalent customs duty rate that applies to petrol and diesel by 50% for 6 months from Budget night. That is, the current 44.2 cents per litre excise rate will reduce to 22.1 cents per litre from Budget night. However, the measure is subject to the passage of the enabling legislation so don’t expect to see a change right away. 

 The reduction extends to all other fuel and petroleum based products except aviation fuels.

At the conclusion of the 6 months on 28 September 2022, the excise and excise-equivalent customs duty rates revert to previous rates including any indexation that would have applied during the 6 month period. 

The Australian Competition and Consumer Commission (ACCC) will monitor the price behaviour of retailers to ensure that the lower excise rate is passed on to consumers.

The measure comes at a cost of $5.6bn.

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