July 2023 Newsletter

Welcome to our July newsletter and, with a new financial year underway, it might be a good opportunity to review some of the recent changes to business and investment rules to make sure you’re on the right track.

As the inflation rate begins to ease, with consumer inflation slowing to a 13 month low in May, many commentators expressed hope that further interest rate rises may be kept in check. That led to a slight improvement in investor outlook for stocks at the end of June The S&P/ASX 200 closed the month at about the same level as in May but, over the financial year, it’s risen more than 10%.

The CPI was up by 5.6% last month in the lowest increase since April 2022. Meanwhile the unemployment rate fell slightly to 3.6%, continuing the downward trend seen over the past 12 months. That’s led to an improvement in consumer sentiment and a 0.7% jump in retail sales in May, supported by a rise in spending on food and eating out as well as a boost in spending on discretionary goods.

The Australian dollar lost gains made during the month to close at just over US66 cents as traders speculated at the end of the month that the Reserve Bank may put a hold on interest rate rises and the US economy boomed.

King & Whittle Partners and Staff sent the 2023 EOFY off with a bang!
We so look forward to the exciting challenges and opportunities of what the New Financial Year will bring.

The King & Whittle family recently welcomed back our Client Services Manager Jennifer Rapson from maternity leave. Jennifer and her husband Leigh have two adorable boys. So wonderful to have back in the office, where her impact and enthusiasm with staff and clients has had an immediate positive effect. Our King & Whittle team all the more richer!

Settle in for a read of July's Newsletter. There is some really helpful resources for you.
Please do not hesitate to contact any of our trusted advisors at King & Whittle if you require anything further for your specific needs or some personalised attention.

Setting yourself up for success in the new financial year

The start of a new financial year is the perfect time to get your financial affairs in order. Whether it's tidying up your paperwork, assessing your portfolio or dealing with outstanding issues, there are plenty of practical actions you can take.

Here are some strategies for starting the new financial year on the right foot.

Tidy up your paperwork

Dealing with the paperwork is the task most of us love to hate. But taking a day to trawl through the ‘To Do’ pile and the growing mountain of filing could be a good investment in yourself. What’s more, you might identify some savings.

Set your budget

A lot can happen in a year, so it makes sense to review your budget to ensure it still works towards your goals in the new year. This will help you track your changing expenses and ensure you're not overspending. And if you haven’t got a working budget, now’s a great time to start. There are plenty of budgeting apps and tools available online that can help you get started.

Assess your portfolio

Another important step to take as you start the new financial year is to assess your investment portfolio.

Some important questions include:

Why did you start investing and have your circumstances changed? For example, you may have started investing to receive a better return than your term deposits but now that term deposits rates have increased and share markets are challenged, should you revisit that goal?
What is the investment performance? Is it in line with your expectation and the benchmark?
Should you consider diversifying into different asset classes?
Is dividend reinvestment the best option for you or should you take the dividend income into cash?
Is your risk appetite still the same, or should you be aggressive or more conservative?

Check your insurance

Now is a good time to examine your insurances closely and to consider whether they match your needs and risks. It is also a good reminder to take note of policy renewal dates so that you can shop around to make sure you get the best price.

Understand Federal Budget changes

Keeping up to date with the commentary about Federal Budget initiatives may be useful.

The measures aimed at easing the cost of living will provide a boost to some. They include energy bill relief for concession card holders and energy saving incentives. Meanwhile those with chronic health conditions will benefit from a number of changes announced in the budget.

The Budget also included support for families with cheaper childcare and a more flexible Paid Parental Leave scheme, and incentives for some types of new home building projects.

Review your superannuation

A review – at least annually - of your super account is vital to make sure that:

Your investments and risk strategy are still right for you
The fees are reasonable
Any insurance policies held in your super account are appropriate
Your employer contributions are being made
Your death benefit nomination is relevant
You don’t have multiple accounts incurring unnecessary fees

You might also consider a salary sacrifice strategy, where you ask your employer to make extra super contributions from your pre-tax salary. These additional contributions are taxed at 15 per cent within the super fund, plus an additional 15% if Division 293 tax applies to you (income over $250,000).

Meanwhile, it is not too late to top up your super balance for this financial year using either concessional contributions (from your pre-tax income) or non-concessional contributions (after-tax income). Don’t forget the caps on payments, which are $27,500 for concessional contributions and $110,000 for non-concessional.

It is a good idea to get some expert advice regarding your super contributions, we can assist with the best ways to manage your contributions.

So, set yourself up for a fresh start to the year with some simple strategies to help you achieve your financial goals.

How super contributions and withdrawals are taxed

How much tax you pay on your super contributions and withdrawals depends on:

your total super amount
your age
the type of contribution or withdrawal you make

If you inherit someone's super after they die, the person's super fund pays you a super death benefit. You may have to pay tax on some of this benefit.

Because everyone's situation is different, it's always best to get advice about tax matters. Contact the Australian Taxation Office (ATO) or us.

How super contributions are taxed

Money paid into your super account by your employer is taxed at 15%. So are salary-sacrificed contributions, also known as concessional contributions.

There are some exceptions to this rule:

If you earn $37,000 or less, the tax is paid back into your super account through the low-income super tax offset (LISTO).
If your income and super contributions combined are more than $250,000, you pay Division 293 tax, an extra 15%.

If you make contributions from your after-tax income — known as non-concessional contributions — you don't pay any contributions tax.

See tax on contributions on the ATO website for more information about how much tax you'll pay on super contributions.

To avoid paying extra tax on your super, make sure you give your super fund your Tax File Number.

How super investment earnings are taxed

Earnings on investments within your super fund are taxed at 15%. This includes interest and dividends less any tax deductions or credits.

How super withdrawals are taxed

The amount of tax you pay depends on whether you withdraw your super as:

a super income stream, or
a lump sum

Everyone's financial situation is unique, especially when it comes to tax. Make an informed decision. We recommend you speak to us to get financial advice before you decide to withdraw your super.

Super income stream

A super income stream is when you withdraw your money as small regular payments over a long period of time.

If you're aged 60 or over, this income is usually tax-free.

If you're under 60, you may pay tax on your super income stream.

Lump sum withdrawals

If you're aged 60 or over and withdraw a lump sum:

You don't pay any tax when you withdraw from a taxed super fund.
You may pay tax if you withdraw from an untaxed super fund, such as a public sector fund.

If you're under age 60 and withdraw a lump sum:

You don't pay tax if you withdraw up to the 'low rate threshold', currently $230,000.
If you withdraw an amount above the low rate threshold, you pay 17% tax (including the Medicare levy) or your marginal tax rate, whichever is lower.

If you have not yet reached your preservation age:

You pay 22% (including the Medicare levy) or your marginal tax rate, whichever is lower.

See the super lump sum tax table on the ATO website for more detailed information.

When someone dies

When someone dies, their super is usually paid to their beneficiary. This is called a super death benefit.

If you're a beneficiary, the amount of tax you pay on a death benefit depends on:

the tax-free and taxable components of the super
whether you're a dependent for tax purposes
whether you take the benefit as an income stream or a lump sum

See super death benefits on the ATO website for detailed information or contact us today.

Source:
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/how-super-works/tax-and-super
Important note: 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. Past performance is not a reliable guide to future returns.
Important
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Small businesses and SMSFs: keep an eye on the rules

As digital tools continually evolve, it is more important than ever to make sure you understand your tax obligations and comply with them. The Australian Taxation Office has been expanding and improving its data matching programs. Data matching compares data from a range of private and government organisations with the information you have provided to the ATO.

Today there are some 26 different data matching programs covering a wealth of transactions including various insurances (health, landlord, income protection); electoral rolls, bank accounts and credit cards, real estate, online sales platforms, international travel and crypto assets. So, if you leave out income from your tax return or inflate deductions, your chances of getting caught are much higher.

We take a look at some of the key areas to be mindful of when preparing your tax return this year.

Investment properties

The ATO says that, while 87 per cent of taxpayers who own rental properties use a registered tax agent to lodge their return, a review has found that nine in ten rental property owners are getting their returns wrong. It is crucial that you provide us the right information to prepare your return correctly because you are responsible for what you include in your tax return, even when using an agent.ⁱ

For example, the new landlord insurance data-matching program provides information about any insurance payouts that might have been made during the year. These must be reported as income.

Along with the new landlord insurance data matching program, a review of investment loan data will also get underway. We can guide you to ensure we are capturing all the relevant information to submit a complete tax return.

Side hustles

The ATO is also looking into the income earned from side hustles or the sharing economy.

It is now requiring platforms that provide taxi services and short-term accommodation, such as Uber and Airbnb, to report their data. All other electronic distribution platforms will have to begin reporting their data to the ATO from 1 July 2024.

The ATO says the data will give it a clear picture of the people earning income on the platforms and will be matched against their tax returns and activity statements.

Small business obligations

Businesses are also under growing ATO scrutiny using a combination of sophisticated data matching and a requirement for further reporting.

The Single Touch Payroll (STP) program, first introduced five years ago, underwent some major changes last year, known as STP phase 2. Now, all businesses are required to use STP each time they pay their employees to report salaries, amounts withheld and superannuation guarantee liability information.

The ATO recommends you discuss your current payroll processes with your tax or payroll provider to make sure you are complying with Phase 2 reporting. “If you don’t have a tax or BAS agent, consider engaging one,” the ATO says.ⁱⁱ

And, in a move to ensure employees receive their super on time, the Federal Government will introduce what it calls ‘payday super’.

From 1 July 2024, all employers will be required to pay the superannuation guarantee amount to their workers’ super funds on each payday rather than quarterly as is currently the case.

Self managed super funds

When it comes to self managed superannuation funds, tax and regulatory performance is generally strong, according to the ATO.

Nonetheless it is a massive sector providing more than 1.1 million people with their retirement income. With an estimated total asset value of $868 billion, it is not far behind the industry funds sector, which holds just over $1 trillion in assets.

The SMSF sector’s importance and value to individuals brings it under close attention from the ATO, which is scaling up its compliance activities because it is seeing indicators of “heightened risk” that put retirement savings at risk or take unfair advantage of the favourable tax environment.ⁱⁱⁱ

In particular, the ATO is chasing down fraud and investment scams, illegal early access to super funds by members and failure to lodge annual SMSF returns.

With increasing ATO focus on taxpayers and businesses to comply with their obligations, we are here to guide you through the changing rules and regulations and answer any questions.

i https://www.ato.gov.au/Media-centre/Media-releases/ATO-expands-data-matching-to-ensure-fair-play/
ii https://www.ato.gov.au/Business/Single-Touch-Payroll/Expanding-Single-Touch-Payroll-(Phase-2)/Employer-STP-Phase-2-checklist/
iii https://www.ato.gov.au/Media-centre/Speeches/Other/SMSF-compliance---What-s-on-the-regulator-s-radar-/

New changes to home-based business expenses

If you operate some or all of your business from home, you may be able to claim the business-use portion of expenses you incur. For example:

occupancy expenses (such as mortgage interest or rent, council rates, land taxes and home insurance premiums)
running expenses (such as electricity, gas, phone, internet, stationery, cleaning and the decline in value of assets).

The temporary shortcut method ended on 30 June 2022, and the fixed-rate method has been revised.

For the 2022–23 income year, the revised fixed rate is 67 cents per hour. You no longer need to:

have a dedicated home office space
work out the business-use portion of phone, internet, gas and electricity separately.

You can also claim the decline in value of depreciating assets and equipment separately, including any repairs and maintenance costs.

If you want to use the revised fixed rate method, you need to keep a record of all hours worked from home for the entire income year (for example, on a timesheet, roster or in a diary).

If you haven’t kept a record of all hours worked from home, you can use a representative record of your hours from 1 July 2022 to 28 February 2023. You will need a record of the total number of your actual hours from 1 March to 30 June 2023.

Your business structure can also affect the method you can use and the expenses you can claim.

Remember, your tax professional or BAS agent can help you with your tax.

Source: ato.gov.au March 2023
Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/Business/Small-business-newsroom/General/New-changes-to-home-based-business-expenses/
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.
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information cont.

Does personal services income apply to you?

If over half the income you’ve received from a contract is a reward for your personal efforts or skills (rather than from the use of assets, the sale of goods, or from a business structure), then your income is classified as personal services income (PSI).

You can receive PSI in almost any industry, trade or profession. For example, as a financial professional, IT consultant, construction worker or medical practitioner.

PSI rules help keep a level playing field among individuals. They do this by preventing PSI from being diverted or split with other individuals or entities in an attempt to pay less tax.

If you earn PSI, it’s important to check whether these rules apply to you. If you're a personal services business (PSB) for a particular income year, then the PSI rules won’t apply for that year, although you’ll still need to report your PSI in your income tax return and keep certain records.

You can self-assess as a PSB if you either:

meet the results test for at least 75% of your PSI, or
meet one of the other PSB tests and less than 80% of your PSI is from the same entity and its associates.

The other PSB tests are the Unrelated clients test, the Employment test, and the Business premises test.

If you can't self-assess as a PSB, then the PSI rules will apply.

The PSI rules can affect the deductions you claim and how you report your PSI in your tax return.

Remember, registered tax agents and BAS agents can help you with your tax.

Source: ato.gov.au March 2023
Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/Business/Small-business-newsroom/Employers/Does-personal-services-income-apply-to-you-/.
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.
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Fixing BAS mistakes or making adjustments

Correcting a mistake made on an earlier BAS is different to making an adjustment.

An error or mistake relates to an amount that was incorrect at the time of lodgment.
An adjustment relates to a reported sale or purchase that was correct at the time of lodgment, but something occurred later that changed the amount of reported GST.

When to fix a mistake

Examples of mistakes include:

Clerical or transposition errors
Classifying a GST-free sale or purchase as taxable
Classifying a taxable sale or purchase as GST-free
Double counting some of your purchases.

How to fix a mistake

You can fix a mistake on your next BAS or revise the original BAS. Conditions apply depending on if it's a credit or debit error.

Many mistakes relating to GST and fuel tax credit can be corrected in your next BAS. If you can't correct your mistake in your next BAS, you need to lodge a revision.

When to make an adjustment

When you become aware of the need for an adjustment, you generally report it in the activity statement for your current reporting period.

Examples of when to make an adjustment:

If the price of a sale or purchase changes
If goods are returned and the sale is cancelled.

How to lodge your changes

You can do this by:

Businesses can use
- Online services for business
- Standard Business Reporting (SBR) enabled software
Sole traders can also use Online services for business, SBR or online services for individuals (you will need a myGov account linked to the ATO)
phoning the ATO on 13 28 66 to get a revision form.

Feel free to contact us if you need assistance making any amends to your BAS.

Source: ato.gov.au March 2021
Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/Business/Business-activity-statements-(BAS)/Fixing-BAS-mistakes-or-making-adjustments/.
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.
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.