Another financial year is about to finish!

As a business owner, there are many obligations that you need to consider and action over the next few weeks. We have outlined some of these below to assist you.

1.  Key 2012 Year End Reminders

Date

Action Required

Before 30 June 2012

  • Ensure your employee superannuation payments have cleared your bank account to ensure a tax deduction for the 2012 year. Any contributions made between 1 July 2012 and 28 July 2012 will count towards your Superannuation Guarantee requirement but will not be tax deductible until the 2013 financial year.
  • [IF A COMPANY IS USED] Review shareholder loan accounts and make minimum loan repayments.
  • [IF A DISCRETIONARY TRUST IS USED] Ensure that a Trust Distribution Resolution for each Trust is signed by 30 June 2012.
  • Review 2012 LAST MINUTE strategies to reduce your tax prior to 30 June 2012.

1 July 2012

New personal tax rates apply for employees. Flood levy ceases. Ensure your payroll tax tables are updated.

14 July 2012 or before

Provide 2012 PAYG Payment Summaries to all employees/workers.

28 July 2012

Quarterly Superannuation contributions due for employees (for the period 1 April 2012 to 30 June 2012).  THIS IS A KEY DEADLINE!

(NB: If you fail to meet your requirements by 28 July 2012, you must complete a Superannuation Guarantee Charge Statement and forward it to the ATO together with underpaid superannuation plus administration fees and interest by 14 August 2012. Superannuation Guarantee Charge payments are NOT tax deductible.)

31 July 2012

Send TFN report to ATO (to report Tax File Number’s received for beneficiaries of closely held trusts during the quarter ended 30 June 2012).

14 August 2012 or before

Lodge your 2012 Annual PAYG Payment Summary Statement with the ATO. This completed annual report together with an ATO original of all Payment Summaries issued to employees should be sent to the ATO.

(If you only employ related parties, e.g. family members, and satisfy other criteria, then this due date may be extended to the due date of lodging your business income tax return.  Please contact us to check if this applies to your business for 2012.)

2012 Payment Summaries must show the grossed-up taxable value of Fringe Benefits provided to employees during the FBT year. This applies to benefits provided to employees from 1 April 2011 to 31 March 2012 with a taxable value over $2,000 (excluding meal entertainment and car parking).

2.  NEW 2013 Tax Rates – Have You Updated Your Payroll Tax Tables?

The new 2012/13 tax rates begin on 1 July 2012. Also, the flood levy will no longer apply from 1 July 2012.

The personal tax rates for the 2013 financial year are as follows (excluding Medicare Levy):

Taxable Income

Marginal Tax Rate

0 – $18,200

0

$18,201 – $37,000

19%

$37,001 – $80,000

32.5%

$80,001 – $180,000

37%

$180,000 +

45%

All payments made from 1 July 2012 to employees and other workers must reflect the new personal tax withholding amounts.

Action Step: Review and update your tax withholding calculations for your employees.  If you use a computerised payroll system, update your payroll tax tables.

Note: If you use the XERO online accounting and payroll system, you do not need to update the payroll tax tables, since XERO will automatically do this for you on 1 July 2012. Another great reason for using XERO!

3.  Deadline for 2012 PAYG Payment Summaries

You need to provide your 2012 PAYG Payment Summaries to your employees and other workers by 14 July 2012.

Action Step: If you have any doubt about how to correctly complete your 2012 PAYG Payment Summaries, please contact us for assistance BEFORE you prepare them.

4.  NEW – Accelerated Tax Deductions for Plant, Equipment and Motor Vehicles

From 1 July 2012, Small Business Entities (businesses with annual turnover under $2 million) will be able to claim much larger depreciation deductions for the purchase of plant, equipment and motor vehicles. For assets first used or installed from 1 July 2012, the following new rules apply:

  • An immediate tax deduction for any depreciating assets that cost less than $6,500 (exclusive of GST).
  • An immediate tax deduction for the first $5,000 for any motor vehicle used for business purposes. This applies to both new and second hand vehicles.
  • The removal of the “long-life” pool. This means that from 1 July 2012 all depreciating assets that do not qualify for an immediate deduction will be depreciated at 15% in the year of purchase with a 30% deduction being claimed in future years.

 Action Step:  Contact us immediately if you are considering buying any assets in the near future so we can advise you if you are better off purchasing the assets before 30 June 2012 or waiting until after 1 July 2012.

5.  NEW – Building and Construction Industry Reporting

From 1 July 2012, new tax reporting rules apply for businesses in the building and construction industry. Businesses will have to lodge an annual report with the ATO setting out details of payments made to contractors. This will assist the ATO to reduce the “cash economy” by ensuring tax is paid on all income including “cash” payments.

From 1 July 2012, you will need to record the following details of all payments made to contractors from 1 July 2012 for building and construction services:

  • The ABN of the contractor
  • The name and address of the contractor
  • The gross amount paid for the financial year, including GST
  • The total GST included in the gross amount paid

 If you use computerised accounting software, your system should be able to track this information for you.

Action Step:  Ensure that you record all these contractor details from 1 July 2012.

6.  NEW – Living away from home allowance changes

The Government has recently released information about proposed changes to the Living Away from Home Allowance (LAFHA) tax rules. Here is a summary of the main points:

  • From 1 July 2012, cash LAFHA’s will no longer be taxed to employers under the FBT system. Instead, LAFHA’s will need to be included in the taxable income of each employee and will be taxed at their marginal tax rates. Non-cash LAFHA benefits (such as reimbursement of actual expenses) will still be taxed under the FBT system by employers.
  • As LAFHA’s will be included in the taxable income of employees, the new rules will allow employees to claim a tax deduction for reasonable accommodation and additional food expenses incurred while living away from home if certain conditions are met. The main condition is that the employee must have a usual place of residence in Australia that is maintained for their personal use and enjoyment while they are living and working in another location. It cannot be rented out or sub-let while they are away.
  • Certain transitional arrangements apply to employees who had LAFHA arrangements in place before 7:30pm AEST on 8 May 2012.

Action Step: If you are providing LAFHA benefits, then please contact us immediately for assistance in planning for these new changes.

7.  Payroll Tax

Payroll tax applies to all entities that have an Australian payroll that exceeds state-based limits.

You should note that in addition to normal salaries and wages, the following items are generally also included in payroll expenses if payroll tax applies:

  • fringe benefits based on the grossed-up taxable value of fringe benefits;
  • all employer contributions to superannuation on behalf of employees; and
  • some contractor or sub-contractor fees.

Action Step: The Annual Return/Reconciliation for payroll tax must be lodged by 21 July 2012 with your State Revenue Office.

8.  WorkCover/WorkSafe

Your WorkCover/WorkSafe insurer sends an annual reconciliation to all registered employers at the end of the financial year.

In completing your annual reconciliation, you will need to include the following items in addition to normal salaries and wages:

  • fringe benefits based on the taxable value of fringe benefits (do not gross-up);
  • all employer contributions to superannuation on behalf of employees; and
  • some contractor or sub-contractor fees.

For more detailed information about what items to include in the reconciliation statement, please contact our office.

Once the reconciliation is received and processed by your WorkCover/WorkSafe insurer, you will be issued with a final assessment or a refund depending on the instalments you have paid during the year.

Action Step: Complete and lodge the Annual Reconciliation with your State Revenue Office by the due date.

9.  Goods and Services Tax (GST)

A reconciliation of GST should be performed as at 30 June 2012 to determine if there has been an under or over-payment of GST in the 2012 tax year. If a discrepancy has arisen, then it is possible to amend a subsequent Business Activity Statement (BAS) to rectify the error, however there are limits imposed on adjustments that can be made in this way.

Income declared on your BAS should be reconciled to income declared on your income tax returns.

Also, please note that you are required by law to substantiate all Input Tax Credit claims with a complying Tax Invoice, and you need to retain these documents for a minimum of 5 years.

Action Step: Complete the annual GST reconciliations, and check that you have all required tax invoices and other supporting documents.

10.  ATO Audit Activity

Please note that the ATO and State Revenue Office are constantly increasing their audit activities. In particular, there has been an increase in audit activity for PAYG Withholding, Payroll Tax, WorkCover, GST, Division 7A loan accounts from companies, and Trust distributions from Discretionary Trusts.

We are able to offer a review of your records and record-keeping procedures if you are concerned about your ability to satisfy an audit.

Action Step: Please contact our office if you would like to request this service.

Don’t forget, the Leader Accountancy Team are available all throughout the year to assist you with any accounting, taxation, and financial planning requirements. We’re here to help you!

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