Accounting

02 Sep What Is A Virtual CFO And When Might Your Business Need One?

In the past decade, the landscape of digital technology and its impact on the way Australian businesses are operated and managed has changed dramatically. (more…)

12 Aug Why Should You Hire External Bookkeeping Services In Surry Hills?

Whether you’re a sole trader selling homemade artisan candles at the markets or you’re a business owner running a large art gallery; every business needs an effective, qualified bookkeeper.

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05 Aug The Biggest Mistakes People Make Lodging Their Tax Returns

Tax time is stressful, and it can be tempting to just quickly do up your tax lodgement yourself so you can get your tax return and start spending.

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21 Jul New laws target sharing economy platforms

In an attempt to reign in undeclared income, proposed new laws will require platform providers in the sharing economy to report all transactions through their platforms.

Traditional employment models have shifted in favour of more flexible options including contracting, self-employment and use of labour hire. Consumers are increasingly paying to ‘use’ rather than ‘own’ assets, creating new income opportunities for the owners of assets – like AirBNB. And, the Government believes they are missing out on tax revenues from these payments – income tax from income earned, GST on ride sharing (because the ATO considers all ride sharing a taxi service and as a result GST applies), and capital gains tax on the sale of property used to earn income, etc.

While data matching programs have targeted sharing platforms previously, the proposed laws provide a structured and consistent framework to recognise all revenue earned in Australia through these platforms.

The laws target electronic platforms capturing those that act as intermediaries between buyers and sellers, to more complex arrangements where the platform operator assumes much of the inherent risk in the transaction between the buyer and the seller, play a quality assurance role, and ensure a seamless experience for the buyer and seller. The laws do not rely on the platform processing payments and will reach to those who use third party payment providers.

If implemented, the laws will apply to ride sharing and accommodation services from 1 July 2022, and all other services from 1 July 2023.

07 Jul Why Should You Contact An Accountant In Sydney?

When people consider contacting an accountant in Sydney, they rarely look beyond having their tax returns filed. However, the accountants at The Pen have so much more to offer our clients that extend beyond the yearly tax visit. Here are just a handful of the services we offer at The Pen, so keep them in mind when booking your next financial consultation with us.

Business Bookkeeping In Sydney

If you’re running a small to medium business, doing your own bookkeeping is probably taking up a considerable chunk of your time. Why not leave it to the team at The Pen Bookkeeping Studio?

• More time for the rest of the business. When you allow us to take your bookkeeping off your hands, you’re suddenly left with plenty of spare time to focus on product development, marketing, and customer service.
• More cost-efficient and scalable. Hiring an in-house accountant can be expensive and unsustainable over the long-term. The Pen offers external, third-party bookkeeping in Sydney to help start-ups and smaller businesses minimise costs. We’re proud of our adaptability, so your tailored accounting strategy can grow with your business.
• Help with the complicated side of finances. If organising payroll, filing BAS statements and doing monthly, quarterly, and yearly financial reports really aren’t your thing, you’ll be relieved to know you don’t have to worry about them anymore. When you hire the serves of The Pen, we’ll take care of those aspects of your business you really can’t stand.

Grow Your Business’s Wealth

Sometimes all you need to grow your business and your wealth is some professional guidance and advice. The accountants at The Pen have decades of combined experience in providing such financial growth advice, so we can help you set achievable targets for your business.

• Financial management packages. After conducting a health check of your business, we can assess financial opportunities for you to improve your bottom line. We’ll assist you in developing budgets, forecasts, and cashflows so you can keep achieving your business goals.
• Advisory roles. We’re not just about numbers and taxes; we’re also a valuable business partner. We’re here to provide you with informed business and personal advice that will ultimately support your financial goals. Whether it’s discussing business plans or helping you find a mortgage broker, The Pen are here to help you.
• Virtual CFO. The Pen offers virtual CFO services at a fraction of the cost of a traditional CFO. Our virtual CFO services offer tools to help you control your finances and aim to help you better understand your financial direction.

Your Personal Income Tax

While we offer a vast range of financial services, The Pen also provides traditional tax return services for individuals, sole traders, and businesses. So, if the 1st of July rolls around and you find yourself in need of an accountant in Sydney, give the team at The Pen Tax Studio a call.

• Efficient and straightforward service. We aim to make our services as convenient as possible for our clients. You can lodge organise a consultation with us face-to-face, over the phone, or via email.
• We take care of everything. Payroll, GST and BAS, superannuation, and tax return lodgements; your accountant in Sydney will handle every aspect of your accounting and financial management for you.
• 100% tax compliant. We lodge your returns on time and ensure you are completely compliant with your personal and business tax returns. We work hard to maximise your returns, and all year round we’ll give you regular reminders of upcoming payments, lodgements, and appointments so you’re never caught out.

If You’re Looking For An Accountant In Sydney, Contact The Pen

The Pen are renowned for our financial advisory services, commitment to clients, and premium bookkeeping in Sydney. We’re proud to be the first choice accounting firm for Sydney creatives, and we’re dedicated to providing support, tax advice, and financial strategies to those brave enough to chase their dreams in the creative industries. If you’re after an accountant in Sydney who understands your passion, your drive, and your determination, look no further than The Pen. Contact us today to organise a consultation and find out what we can do for you.

07 Jul Why The Pen Are Your Go-To For A Creative Accountant In Surry Hills

If your business operates within the creative industries, you’ll want to seek out an accountant in Surry Hills that understands your field.

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02 Jul COVID-19 Relief packages

The Premier and Treasurer announced a special COVID-19 relief package for small businesses impacted by the latest lockdown.

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11 Jun What Changes on 1 July 2021?

We have summarised the key 1 July 2021 changes and their implications.

1.Super guarantee rate increase to 10%

On 1 July 2021, the Superannuation Guarantee (SG) rate will rise from 9.5% to 10% – the first rise since 2014. It will then steadily increase each year until it reaches 12% on 1 July 2025.

The 0.5% increase does not mean that everyone gets an automatic pay increase, this will depend on your employment agreement. If your employment agreement states you are paid on a ‘total remuneration’ basis (base plus SG and any other allowances), then your take home pay might be reduced by 0.5%. That is, a greater percentage of your total remuneration will be directed to your superannuation fund. For those paid a rate plus superannuation, then your take home pay will remain the same, but your superannuation fund will benefit from the increase. If you are used to annual increases, the 0.5% increase might simply be absorbed into your remuneration review.

Employers will need to ensure that they pay the correct SG amount in the new financial year to avoid the superannuation guarantee charge. Where employee salaries are paid at a point other than the first day of the month, ensure the calculations are correct across the month (i.e., for staff paid on the 15th of the month they are paid the correct SG rate for June and July in their pay and not just the June rate).

Superannuation salary packaging arrangements will also need to be reviewed – employers should ensure that the calculations are correct and the SG rate increase flows through.

Annual superannuation guarantee rate changes

2.New stapled superannuation employer obligations for new staff

Currently, when an employer hires a new staff member, the employee is provided with a Choice of Fund form to identify where they want their superannuation to be directed. If the employee does not identify a fund, the employer directs their superannuation into a default fund.

When someone has multiple funds, it often erodes their balance through unnecessary fees and often insurance. And, as at 30 June 2020, there was $13.8 billion of lost and unclaimed superannuation in accounts across Australia.

From 1 July 2021, where an employee does not identify a fund, legislation before Parliament will require the employer to link the employee to an existing superannuation fund. That is, an employee’s superannuation fund will become ‘stapled’ to them. An employer will not simply be able to set up a default fund, but instead will be required to request that the ATO identify the employee’s stapled fund. If the ATO confirms no other fund exists for the employee, contributions can be directed to the employer’s default fund or a fund specified under a workplace determination or an enterprise agreement (if the determination was made before 1 January 2021).

Legislation enabling this measure is currently before the Senate.

3.Indexation increases contribution caps and the transfer balance cap

Indexation ensures that the caps on superannuation that limit how much you can transfer into super and how much you hold in a tax-free retirement account, remain relevant by making pre-determined increases in line with inflation. To trigger indexation, the consumer price index (CPI) needed to reach 116.9. Australia reached 117.2 in December 2020 triggering increases to the contribution and transfer balance caps from 1 July 2021. The next increase will occur when a December quarter CPI reaches 123.75.

4.Concessional and non-concessional contribution caps

From 1 July 2021, the superannuation contribution caps will increase enabling you to contribute more to your superannuation fund (assuming you have not already reached your transfer balance cap).

The concessional contribution cap will increase from $25,000 to $27,500. Concessional contributions are contributions made into your super fund before tax such as superannuation guarantee or salary packaging.

The non-concessional cap will increase from $100,000 to $110,000. Non-concessional contributions are after tax contributions made into your super fund.

The bring forward rule enables those under the age of 65 to contribute three years’ worth of non-concessional contributions to your super in one year. From 1 July 2021, you will be able to contribute up to $330,000 in one year. Total superannuation balance rules will continue to apply. However, if you have utilised the bring forward rule in 2018-19 or 2019-20, then your contribution cap will not increase until the three years period has passed.

5.Transfer balance cap – why you will have a personal cap

The transfer balance cap (TBC), as the name suggests, limits how much money you can transfer into a tax-free retirement account. From 1 July 2021, the general TBC will increase from $1.6m to $1.7m but not everyone will benefit from the increase.

From 1 July 2021, there will not be a single cap that applies to everyone. Instead, every individual will have their own personal TBC of between $1.6 and $1.7 million, depending on their circumstances.

If your superannuation is in accumulation phase before 1 July 2021, that is, you have not started taking an income stream (pension), then your cap will be the fully indexed amount of $1.7m.

However, if you have started taking an income stream – you have retired or are transitioning to retirement – then your indexed TBC will be calculated proportionately based on the highest ever balance of your account between 1 July 2017 and 30 June 2021. The closer your account is to the $1.6m cap, the less impact indexation will have. For anyone who reached the $1.6m cap at any time between 1 July 2017 and 30 June 2021, indexation will not apply and your cap will continue to be $1.6m. For example, if you are transitioning to retirement and drawing a pension, and your highest ever balance in your retirement account was $1.2m, then indexation only applies to $400,000 (the $1.6m cap less your highest very balance). In this case, your new personal TBC will be $1,625,000 after indexation.

The Australian Taxation Office (ATO) will calculate your personal TBC based on the information lodged with them (this will be available from your myGov account linked to the ATO). If your superannuation is in retirement phase, it will be very important to ensure that your Transfer Balance Account compliance obligations are up to date. For Self-Managed Superannuation Funds (SMSFs), it is essential that you let us know about any changes that impact on your transfer balance account, for example if a member of your fund retires.

The total super balance caps to utilise the spouse contribution offset and the government co-contribution will also be lifted to $1.7m in line with indexation.

6.Minimum superannuation drawdown rates

The Government has announced an extension of the temporary reduction in superannuation minimum drawdown rates for a further year until 30 June 2022.

7.Single touch payroll reporting

Single touch payroll will apply to most businesses from 1 July 2021, this will include small businesses (those with 19 or fewer staff) and businesses with closely held employees (e.g., directors of family companies, salary and wages for family employees of businesses). No further extensions will be granted.

For employers with closely held employees, there are some concessions on how reporting is managed with the option to report one of three ways: reporting actual payments in real time, reporting actual payments quarterly or reporting a reasonable estimate quarterly. These concessions allow a level of flexibility in relation to determining and making payments to closely-held payees. However, if your business is impacted, it will be important to plan throughout the year to prevent problems occurring at year end.

11 Jun Am I Taxed On An Insurance Payout?

Australia has had its fair share of disasters over the last few years – drought, bushfires and floods – that have ramped up the volume of insurance claims. Most people would assume that if and when they need to claim on their insurance, the insurance payout covers the damage and is not income assessed for tax purposes – but this is not always the case.

Insurance payouts for damaged or destroyed personal items are generally not taxed. For example, any insurance payout you receive for your family home won’t necessarily be taxed. But, the rules are different if you have used your home to produce an income, for example, you have used part of your home as a home business or you have rented out part of your home.

The rules are also different if the item is a personal asset costing more than $10,000 or if the asset is a collectible that cost more than $500. Where the insurance proceeds exceed the original cost of the asset, that is, the asset appreciated in value, then capital gains tax might apply.

And, if the asset damaged is related to a business or an income producing asset like a rental property, the rules are also different.

1. Business premises, trading stock and depreciating assets

For businesses that have had trading stock damaged or destroyed, any insurance payout is taxable. For example, the payouts on claims coming through from the enforced lockdowns for spoiled perishable stock would need to be included in the business’s tax return. This is because the insurance premiums would have been claimed by the business as an expense. It is just a question of how the insurance is taxed.

If your business premises are damaged and the insurance covers repairs, then the amount you receive is generally taxed as income if you can claim a deduction for the repair costs. Where the premises are damaged or destroyed, then we’ll need to work with you to identify if you have made a taxable gain or loss.

When it comes to depreciating assets like machinery, then it starts getting more complex. In general, if the insurance payout exceeds the written down value, then the payout is included in the business’s assessable income, and if less, you can claim a deduction for the difference. However, there are also special rules for work cars, small businesses, and where a replacement item is purchased.

2. Rental properties

A rental property is an income producing asset and, in most cases, the cost of insurance policies relating to the property would have been claimed as an expense. For example, if you receive a payout for your rental property as a result of a disaster, generally, you will need to include at least part of this amount as income in your tax return. This could include insurance payouts for loss of rental income, repairs,replacements of destroyed assets, or money received from a relief fund.

The treatment of the insurance proceeds depends on what the payout is for, how the insurance is used, and whether the rental property was vacant or in use.

A recent case before the Administrative Appeals Tribunal (AAT) shows how tricky this area of the tax rules can be. In this case, the taxpayer initially received insurance proceeds of $24,000 for lost rental income after their property sustained storm and flood damage. The taxpayer had declared this amount as income.  All good so far.

Then, the taxpayer received an additional $250,000 from the insurer with the payment described as “in consideration of the taxpayer releasing the insurer from all liability past, present and future under the insurance policy”. The taxpayer did not believe this money was for him to repair his property so did not claim it in his tax return. But, he did claim a deduction for repair costs totalling $130,000 in two income years.

The ATO subsequently audited the taxpayer and issued an assessment for the full $250,000. The AAT agreed with the ATO even though the taxpayer had only claimed $130,000 in repairs. It’s possible this case will go to appeal but it serves as a warning that any lump sum payouts need to be very carefully assessed and dealt with.

If you have been impacted by a disaster and are uncertain of how any insurance proceeds will be taxed, please talk to us and we can work with you to help you understand your position.

11 Jun Work From Home Expenses Under Scrutiny & the Perils of Browsing Facebook

If you worked from home during lockdown and spent money on work related items that were not reimbursed by your business, you might be able to claim some of these expenses as a deduction – but not everything you purchase can be claimed.

The ATO has stated that it is looking very closely at work related deductions that are being claimed. If you are claiming your expenses, there are three methods you can use:

• An 80 cents per hour short-cut method (you will need to have evidence of hours worked like a timesheet or diary)

• The 52 cents per hour method (which excludes phone, internet, or the decline in value of equipment which are all claimed separately), or

• The actual expenses method.

The ATO has highlighted four ineligible expenses that are being claimed:

• Personal expenses such as coffee, tea and toilet paper

• Expenses related to a child’s education, such as online learning courses or laptops

• Claiming large expenses up-front (instead of claiming depreciation for assets), and

• Occupancy expenses such as rent, mortgage interest, property insurance, and land taxes and rates, that cannot generally be claimed by employees working from home.

A recent case before the AAT shows how determined the ATO is to crackdown on work related deductions being claimed where there is not a satisfactory nexus between the expense being claimed and the taxpayer’s work. In this case, the taxpayer had claimed car and clothing expenses, and home internet and mobile phone costs. The ATO conceded the car costs but on a reduced deduction. When it came to clothing expenses the ATO conceded that a deduction could be claimed for gloves and a beanie on the basis that the taxpayer worked in cold conditions and that these were protective clothing needed for the job. However, the AAT refused to allow a deduction for the cost of a pair of socks on the basis that they were not protective in nature in their own right – yes, it really does get this detailed.

The taxpayer had also claimed 100% of his home internet expenses but the ATO reviewed this claim and reduced the deductible amount to $50 – a record of the family’s home internet usage demonstrated the internet was used to browse Facebook amongst other non-work related sites.

One of the other issues to come out of this case was the importance of record keeping. If you are going to claim work related expenses, then ensure you have the records to prove your claim.