December 2022 Newsletter
It’s December, summer is here and holidays are just around the corner. We take this opportunity to wish you and your family a happy festive season!
The big story on the global economic front continues to be inflation, and how high interest rates will go to tame it. November began with the US Federal Reserve hiking its federal funds target range by another 75 basis points to 3.75-4.00%. There are signs the tough approach is working, with the annual rate of inflation falling from 9.1% in June to 7.7% in October.
In Australia, the Reserve Bank lifted the cash rate another 25 basis points to a decade high of 2.85%. Inflation fell to 6.9% in the year to October, down from 7.3% in September, but remains high and economic signals are mixed. Reserve Bank governor Philip Lowe is keeping a close eye on consumer spending, where higher interest rates are having an impact. Retail trade fell 0.1% in October for the first time this year. And while the ANZ-Roy Morgan consumer sentiment index was up 5.6% to 83.1 points in the last three weeks of November, it remains 22.9 points below the same week last year. But rate hikes are not yet affecting the labour market, with unemployment falling to a 48-year low of 3.4% in October, while annual wages growth rose 1% to 3.13% in the September quarter, the fastest growth in a decade.
The Aussie dollar lifted 3c to around US67c over the month, crude oil prices fell 10% while iron ore lifted 0.5%. Shares remain skittish but positive overall. The ASX200 index rose more than 5% in November while the US S&P500 index was up more than 2%.
The ABRS have advised of an extension of 2 weeks for Directors to apply for their Director ID, with an extended due date of 14th December, 2022. Those who have yet to apply are advised to urgently do so or seek advice from your King and Whittle advisor.
All of us at King and Whittle wish you a safe and relaxing holiday season full of peace and happiness.
We thank you for your support in the past year and wish you a healthy, happy and successful year in 2023!
We are excited to be on this journey with you all.
Tax Alert December 2022
Tax compliance, higher fines in spotlight
Business taxes remained largely unchanged in the second Federal Budget of 2022, but employees working from home can expect less generous deduction rules for the 2022-23 financial year. Here’s some of the latest tax developments.
All quiet on the small business tax front
There were no significant tax changes affecting small business in the October 2022 Federal Budget, although there was a big focus on tax compliance.
The ATO will receive $685 million over four years to help it raise $2.1 billion from a crackdown on shadow economy activities. This may be of concern to some small and mid-size enterprises (SMEs), as the ATO believes the bulk of these activities occur among smaller business taxpayers. The Budget also included a $15.1 million boost for the existing small business debt helpline and programs focused on the financial and mental wellbeing of small business owners. Help with rising energy costs included $63 million to improve SME energy efficiency and energy use.
It’s unknown whether measures of the popular instant asset write-off and carry back of losses will be extended past 30 June 2023. We may need to wait for the May 2023 Budget for the answer.
STP Phase 2 deadline soon
With Single Touch Payroll (STP) Phase 2 reporting now well underway, small business employers need to remember their next reporting deadline is 1 January 2023.
Common STP reporting mistakes seen by the ATO this year include incorrect re-mapping of pay codes and not separately itemising bonuses, overtime and commissions; failure to correctly input existing year-to-date amounts; and incorrectly categorising allowances. The ATO has a range of factsheets and resources available to help employers get their STP reporting right.
Draft guidance on work from home deductions
Taxpayers working from home are likely to face significant rule changes when claiming tax deductions this financial year following release of the ATO’s draft guidance on the issue.
Under the new guidelines, employees will only be permitted to claim a deduction of 67 cents for every hour they genuinely work from home, instead of the 80 cents under the short-cut method available prior to 1 July 2022.
Asset depreciation on items used for work purposes will require a separate depreciation calculation. Employees will not require a separate home office or dedicated work area to claim the deduction, but normal substantiation rules apply.
Alternatively, employees working from home can claim a deduction for their expenses using the traditional actual cost method.
Increase in ATO penalty units
Taxpayers running afoul of the taxman will find themselves facing bigger bills this year after the Federal Budget included measures to increase the fines for regulatory penalty units. From 1 January 2023, fines will jump from $222 to $275 per penalty unit, a 19.3 per cent increase.
This is on top of regular indexation by the CPI, which is every three years, and this will remain in place, with the next one due to take effect on 1 July 2023.
Enhancing tax transparency
Large private business entities will face more scrutiny of their tax affairs after new legislation passed through Parliament to require greater transparency of the tax affairs of private companies.
The reform reduces the tax information reporting threshold for private corporate tax entities to companies with a total income of $100 million or more (previously $200 million or more). This lower threshold applies to reporting for 2022-23 and subsequent financial years.
The previous grandfathering of the exemption applying to certain large proprietary companies from the normal obligation to lodge their annual reports with ASIC was also removed.
Super for holiday season employees
Employers planning to hire staff on a short-term basis for the holiday season need to remember changes to the Superannuation Guarantee (SG) rules mean temporary staff may be eligible for super contributions.
From 1 July 2022, employers must make SG contributions at 10.5% for eligible employees regardless of how much they earn after removal of the $450 per month eligibility threshold.
For new employees who are offered choice of super fund but fail to choose, you must request their stapled super fund details from the ATO to meet your super obligations.
4 areas any robust data security policy should cover
No matter the size of your business, maintaining robust a data security policy is an important tool to help protect against theft or loss.
Businesses need to capture more data than ever, but as recent headlines show, it’s not always easy to securely store and maintain it.
Data loss or compromise can cost companies dearly: in fact, IBM research indicates the global average total cost of a data breach is around $4.35 million in 2022.
And with high-profile breaches occurring regularly, posing a threat to both individuals and organisations, the onus is on everyone to make sure the principles of data protection are understood and communicated clearly.
For businesses, the stakes are high, so the best thing to do is act now to incorporate security processes into a business-as-usual approach to data protection – and that includes the creation, review or updating of your data security policy.
If you’re in the process of reviewing or writing a new data security policy, here are four key areas that should be covered if you’re to maintain vigilance against data theft, loss or leaks.
1. Advise on the proper use of devices
Provide direction on where and how your staff should keep their devices and tell them that if a company device is lost or stolen, you need to know immediately.
Keeping devices up-to-date with the latest software is also a core aspect of data protection your employees need to know about.
The Australian Cyber Security Centre recommends turning on automatic updates for operating systems, to regularly check for software updates when automatic updates aren’t available, and install software updates as soon as they arrive.
2. Create best practices for password security
Enable multi-factor authentication to make sure only legitimate people have access to your business data.
If you don’t have multi-factor authentication enabled, you may want to encourage employees to use passphrases (a longer, sentence-like string of words) instead of a short word.
Passwords can be very easy to guess, whereas a passphrase can be anything, making them highly secure while still being easy enough for the individual to remember.
Using a secure password manager may also be a good solution for your employees to stay on top of all their accounts.
3. Educate employees about phishing and other scams
Using an anti-spam filter limits the number of phishing emails that your employees may receive on their work accounts, but they still need to be alert to scams and business email compromise attacks.
Train your team to question the unusual, such as payment or personal information requests over email.
In these instances, employees should seek verification face-to-face or via another channel, because a cybercriminal may have infiltrated someone’s email and be impersonating them.
4. Don’t forget employee offboarding processes and policies
When staff leave your employment, they should return all their company devices and equipment.
In addition, it’s equally important to remove leavers as a user from company systems, so they’re not able to continue to access your business data and intellectual property for personal gain or the benefit of their new employer.
Act now to protect sensitive business data
Daily practices and constant rigor are crucial for reducing data security risks in all businesses.
It’s important not to leave matters to chance, but to put a proactive plan in place that incorporates data security, storage, back-up and recovery.
The final but perhaps most important element is your team. Whatever their role in your business, train your staff to do what they can to prevent data loss or leaks.
Source: MYOB October 2022
Reproduced with the permission of MYOB. This article by Peter Wolski was originally published at https://www.myob.com/au/blog/data-security-policy/
Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.
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Buying shares for kids: a gift that keeps on giving
Many parents and grandparents worry about how to help the children in their lives achieve financial independence. But the value of long-term investment can seem like a dry and complicated idea for kids to get their heads around.
In fact, many young people would like to know more about money, according to a Young People and Money survey by the Australian Securities and Investments Commission MoneySmart website. The survey found more than half of the 15-21-year-olds surveyed were interested in learning how to invest, different types of investments and possible risks and returns. What’s more, almost all those young people with at least one investment were interested enough to regularly check performance.
One way to introduce investment to children may be to begin a share portfolio on their behalf. The child can follow the progress of the companies they are investing in, understand how the market can fluctuate over the short- and long-term, as well as learn to deal with some of the paperwork required, such as filing tax returns.
How to begin
Setting up a share portfolio doesn’t need to be onerous. It’s possible to start with a minimum investment of around $500, using one of the online share trading platforms. Then you could consider topping it up every year or so with a further investment.
Deciding on which shares to buy comes down to the amount you have available to invest and perhaps your child’s interests.
If the initial investment is relatively small, an exchange traded fund (ETF) may be a useful way of accessing the hundreds of companies, bonds, commodity or theme the fund invests in, providing a more diversified portfolio.
ETFs are available in Australian and international shares; different sectors of the share market, such as mining; precious metals and commodities, such as gold; foreign and crypto currencies; and fixed interest investments, such as bonds. You can also invest in themes such as sustainability or market sectors such as video games that may appeal to young people.
Alternatively, buying shares in one company that your child strongly identifies with – like a popular pizza delivery firm, a surf brand or a toy manufacturer – may help keep them interested and excited about market movements.
Should you buy in your name or theirs
Since children cannot own shares in their own right, you may consider buying in your name with a plan to transfer the portfolio to the child when they turn 18. But be aware that you will pay capital gains tax (CGT) on any profits made and the investments will be assessable in your annual income tax return.
On the other hand, you could buy the shares in trust for the child. While you are considered the legal owner the child is the beneficial owner. That way, when the child turns 18, you can transfer the shares to their name without paying CGT. Your online trading platform will have easy steps to follow to set up an account in trust for a minor.
There is also some annual tax paperwork to consider.
You can apply for a tax file number (TFN) for the child and quote that when buying the shares. If you don't quote a TFN, pay as you go tax will be withheld at 47 per cent from the unfranked amount of the dividend income. Be aware that if the shares earn more than $416 in a year, you will need to lodge a tax return for the child.
Taking it slowly
If you are not quite ready to invest cash but are keen to help your children to understand share investment, you could consider playing it safe by playing a sharemarket game, run by the ASX.
Participants invest $50,000 in virtual cash in the S&P/ASX200, a range of ETFs and a selection of companies. You can take part as an individual or a group and there is a chance to win prizes.
Another option, for children able to work independently, is the federal government money managed website. This is pitched at teens and provides a thorough grounding in savings and investment principles.
Call us if you would like to discuss how best to establish a share portfolio for your child, grandchild or a special young person in your life.