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2024/2025 Federal Budget: What’s in it for Small Business Owners?

The 2024/2025 Federal Budget may not be as comprehensive in terms of tax related matters as previous budgets, but it does bring- some encouraging news for small business owners.

One of the key announcements is the extension of the Instant Asset Write Off scheme. Small businesses will continue to benefit from this popular program, which allows for the immediate deduction of assets up to $20,000. This extension provides small businesses with an opportunity to invest in necessary equipment and assets to support their growth and productivity.

Instant Asset Write Off Extension

The Instant Asset Write-Off Scheme has been extended for the 2024/2025 financial year, providing small businesses with continued benefits.

Here are some key details about how the scheme will work:

Threshold Limit

This scheme allows businesses with an aggregated turnover of less than $10 million to immediately deduct the entire cost of eligible assets, up to $20,000. The best part is, this threshold applies to each individual item, so businesses can claim deductions for multiple eligible purchases.

Eligibility Period

To be eligible for the Instant Asset Write-Off, assets must be first used or installed ready for use in the business between July 1, 2024, and June 30, 2025. Assets valued at $20,000 or more can be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year after that.

Eligible Assets

The Instant Asset Write-Off applies to a wide range of assets, including vehicles, machinery and equipment, computers and laptops, office furniture and fittings, tools and machinery, technology hardware, solar panels, energy-efficient equipment, kitchen equipment, agricultural machinery and equipment, and manufacturing equipment.

Tax Compliance Crackdown

Another important announcement that may have flown under the radar is the funding for tax compliance. The Australian Taxation Office (ATO) has been given increased funding and resources to crack down on aged debts, tax avoidance, and unpaid superannuation. This signifies the government’s commitment to ensuring fair tax practices and compliance among businesses.

The government is continuing its focus on tax compliance and has allocated additional funding to the ATO to strengthen its ability to detect, prevent, and address fraud committed against the tax and superannuation systems. Some key initiatives include the extension of the Tax Avoidance Task force, Personal Income Tax Compliance Program, and Shadow Economy Compliance Program to further address tax avoidance.

Starting from July 1, 2024, the ATO will receive an additional $187 million to combat fraud and non-compliance. A new penalty will be introduced for multinational companies that try to avoid paying Australian royalty withholding tax.

The notification period for the ATO to inform business owners about the retention of a BAS refund for further investigation will be extended from 14 days to 30 days. However, the ATO will be required to pay interest on any legitimate refunds that are held beyond 14 days.

Superannuation Changes

Starting from July 1, the scheduled increase to the superannuation guarantee (SG) entitlement will be implemented. The minimum SG rate will be raised from 11% to 11.5%. It is imperative for all employers to ensure that they fulfil their SG obligations towards their employees.

Additionally, the government has committed to funding superannuation on the government-funded Paid Parental Leave (PPL), which will be administered by the ATO from July 1, 2025. This ensures that eligible employees receive their superannuation entitlements while on parental leave.

While this may not be a budget-related change, it’s important to highlight that the annual Concessional Contribution Cap will be increasing from July 2024. The current cap of $27,500 will be raised to $30,000. If you have a salary sacrifice arrangement and want to make the most of contributing to your superannuation each year, it’s advisable to update your arrangements as soon as possible.

Personal Tax Changes

The budget also includes some changes to personal tax rates. Notably, there will be a new cap to the HELP indexation rate, reducing interest charges on HELP debts from 1 June 2023. The stage 3 tax cuts, which were passed on 5 March 2024, will come into effect from July 1. This includes lower tax rates for income brackets, providing some relief for taxpayers.

Overall, the 2024/2025 Federal Budget has some good news for small business owners. However, experts believe that while there are a few measures in place to benefit businesses, the budget falls short in providing adequate support. The increase in costs has led to a decrease in consumer spending and demand, which has posed challenges for small and medium-sized businesses. It would have been great to see more proactive measures to support the SME sector.

If you would like to know more about how these new changes may affect you, reach out here.

Superannuation

Keeping Up with Super Obligations: What Employers Need to Know

Welcome to the world of superannuation, where understanding and complying with super obligations as a business owner is crucial.

Superannuation plays a vital role in Australia’s retirement savings system, ensuring that employees receive a certain amount of income in their retirement years. As an employer, it is your responsibility to understand and comply with superannuation obligations. To help with this, we have put together some key points to make it easier for you to keep up to date with your obligations

Understanding Super Obligations

Superannuation (or super) is a compulsory retirement savings system in Australia. To comply with super obligations, employers must make regular contributions to an authorised superannuation fund on behalf of their employees.

The compulsory superannuation rate is currently 11% of an employee’s ordinary time earnings. It will increase by 0.5% on 1 July in 2024 and 2025 until it reaches 12%. This rate may vary in the future as determined by the government.

It is essential for businesses to understand and comply with their super obligations to avoid penalties and ensure the financial well-being of their employees.

Consequences of Late Super Payments

Late payment of super  – even by one day – can have significant consequences. Not only  will you lose your tax deduction for the late payment, but you may also face penalties and additional obligations.

The penalties for late super payments include the requirement to lodge a Superannuation Guarantee Charge (SGC) statement with the Australian Taxation Office (ATO). The ATO can levy interest and administrative penalties of up to 200% of the late payment. Importantly, none of these penalties are tax deductible.

To avoid these penalties, it’s crucial that each employee’s super fund receives its contribution by the 28th day after the end of the quarter (if you are required to pay quarterly). It is advisable not to leave the payments until the last day, as processing times may cause delays. We recommend payments be made by the 18th day of the processing month.

Important Dates for Super Payments

To help you plan your payments, here is an outline of the key dates:

Quarter 1: July – 30 September

– Contribution to be received by Superfund: 28th October

– Recommended payments processed by: 18th October

Quarter 2 : 1 October – 31 December

– Contribution to be received by Superfund: 28th January

– Recommended payments processed by: 18th January

Quarter 3: 1 January – 30 March

– Contribution to be received by Superfund: 28th April

– Recommended payments processed by: 18th April

Quarter 4: 1 April – 30 June

– Contribution to be received by Superfund: 28th July

– Recommended payments processed by: 18th July

More info can be found here.

Super Obligations for Employers

If you have a business and pay employees, it is essential to be aware of your super obligations. This includes not only employees but also working directors, shareholders, and related parties. Additionally, if you hire subcontractors, there may be additional super obligations to fulfill.

To meet these obligations, it is necessary to report through SuperStream. Introduced in 2016, SuperStream is a system designed to ensure the accurate and timely processing of super payments. Compliance with SuperStream, along with Single Touch Payroll (STP), is crucial for avoiding penalties and ensuring that you meet your super obligations.

Consequences of Non-Compliance

If you are audited and found to be non-compliant with your super obligations, the ATO may scrutinise your entire super payment history, potentially going back several years. They may disallow additional tax deductions and impose penalties.

Being late or non-compliant with super payments once or twice can have painful consequences. However, consistent non-compliance can have severe and even fatal consequences for a business.

Company Directors can be personally liable for employees’ unpaid super. If super payments are late and an SGC statement is not lodged by the due date, the directors will be held liable. The only way for the director to avoid liability and further action is to ensure the debt is paid.

In 2018, legislation was amended to give the ATO the option to pursue criminal charges for breaches of employer superannuation guarantee obligations in specific circumstances. This means that directors or individual employers could potentially face jail time for non-compliance.

Our Role as Tax Agents

As tax agents, we are bound by the Tax Practitioners’ Board Code of Conduct. We have a responsibility to take reasonable care in applying taxation laws correctly and ensuring the accuracy of the documents we prepare and lodge on behalf of our clients.

Due to recent audit activity by the ATO and the Tax Practitioners’ Board, we are required to be diligent in detecting non-compliance with super obligations when preparing clients’ tax returns. Just as we cannot knowingly claim a tax deduction for non-deductible expenses, claiming a deduction for late super payments is prohibited.

At Scope Accounting, we prioritise the financial well-being of our clients by providing assistance and guidance in meeting their super obligations. Not only does this help avoid penalties, but it also upholds our commitment to maintaining professional integrity.

Contact us now, and let’s work together to make sure everything is in order!

Tax Planning

Tax Planning is Crucial – Why You Should Make it a Priority

Tax planning can help you avoid disaster.  Poor tax planning can lead to cash flow problems and insolvency, so it can be a crucial factor in business survival and therefore in business success.  (You can’t succeed if you don’t survive.)

As a business owner, there are countless tasks and responsibilities that demand your attention. From managing operations to acquiring customers, it’s easy to overlook certain aspects of running a business. One area that often gets neglected in the early years is tax planning. However, understanding and implementing effective tax planning strategies can have a significant impact on the success and longevity of your business. In this blog post, we will explore the importance of tax planning in  a business and why it should be a priority for every entrepreneur – and particularly in the first years of business life.

Maximising Tax Deductions

Amongst many other benefits, tax planning allows you to identify and take advantage of various deductions and allowances that can help reduce your tax liability. By carefully analysing your business expenses, you can determine which expenses are tax-deductible and ensure that you are not paying more tax than necessary. This includes deductions for business-related travel, equipment purchases, advertising expenses, and many other costs associated with running your business. Additionally, tax planning helps you leverage available bonus deductions and concessions, such as those for research and development activities and the small business technology investment boost.  By maximising deductions and credits, you can minimise your tax bill and keep more money in your business.

Avoiding Costly Mistakes and Penalties

Tax laws and regulations are complex and ever-changing. Failing to comply with these laws can result in costly mistakes and penalties for your business. By engaging in tax planning early on, you can stay informed about the latest tax regulations and ensure that your business is in full compliance. This includes understanding your tax obligations (especially those relating to superannuation guarantee and Fringe benefits),  lodgement deadlines, and any specific reporting requirements. By avoiding mistakes and penalties, you can save your business from unnecessary financial burdens and legal complications.

Managing Cash Flow Effectively

Cash flow is the lifeblood of any business, especially in the early years. Tax planning plays a crucial role in managing your cash flow effectively. By understanding your tax obligations and planning accordingly, you can ensure that you have sufficient funds available to fulfill your tax obligations when they become due. This prevents any cash flow crunches and allows you to allocate your resources strategically. By planning for your tax liabilities in advance, you can avoid scrambling for funds at the last minute and maintain a healthy financial position for your business.

Because of the way new businesses are assessed for tax obligations, many small businesses struggle to pay the initial year tax bill, plus tax instalments in their second year – essentially resulting in double tax in their second year of operation.  Planning ahead can avoid this problem.

Strategic Business Decision Making

Tax planning goes beyond just reducing your tax liability. It can also inform your strategic business decision-making process. By analysing the tax implications of different business strategies, you can make more informed choices that align with your long-term goals. For example, understanding the tax consequences of expanding into a new market or hiring additional employees can help you evaluate the financial feasibility and potential benefits of these decisions. Tax planning provides valuable insights into the financial impact of your business decisions and allows you to make proactive choices that support your overall growth and profitability.

Building a Strong Financial Foundation

Tax planning is an essential component of building a strong financial foundation for your business. By proactively managing your tax obligations, you can ensure that your business remains financially stable and resilient. Effective tax planning allows you to forecast your tax liabilities, set aside funds for future tax payments, and maintain accurate financial records. This not only helps you comply with tax laws but also provides a clear picture of your business’s financial health. By establishing good tax planning habits from the start, you can lay a solid foundation for your business’s long-term success.

In conclusion, tax planning is a critical aspect of running a successful business, particularly in the first years. By maximising deductions and credits, avoiding costly mistakes, managing cash flow effectively, making strategic business decisions, and building a strong financial foundation, you can ensure that your business remains financially healthy and poised for growth. Don’t overlook the importance of tax planning – consult with a tax professional or accountant to develop a tailored tax strategy that aligns with your business goals.

Ready to take action in your business journey? Click here for more information on how we can help you succeed.

Bookkeeping

Bad Bookkeeping vs Good Bookkeeping

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As an accountant or a financial adviser, you tend to see a lot of different clients, doing many things differently. Some of those clients are well organised, and unfortunately, some of them are in a real mess. In certain instances, bad bookkeeping is a major contributing factor to this mess.

The question then arises on what’s the point of bookkeeping anyway? There are several reasons why you need to keep your books straight and the main reasons are:

  • To run your business properly and stay in the black
  • To meet your obligations – to your creditors, to your staff, to the tax office, and your shareholders (ie: you the business owner).
  • Those should be the goals of your accounting systems and processes.

If your bookkeeping system is not helping meet those goals, then you’re wasting your time and money. You should be getting useful information out of your accounting system regularly. Key points being:

Useful

Information

Regularly

A few things to remember:
There is no point in keeping information which does not help you meet your goals. The aim is to work smarter to ensure that your records are easy to use in the future.

Spending a lot of time and effort on something does not make it valuable.

Just because you’ve always done something a certain way and it covers the basics it doesn’t justify continuing to do it the same way. You would be surprised how a new method could save you on time, money and create a seamless process for you.

It’s easy to narrow down what the best bookkeeping solution for you, and the criteria is one which helps you meet your goals, saves you time, and doesn’t cost a fortune.

We know the strains of running a business can be strenuous if one of your major time-consuming tasks is you are staying up late doing your books yourself, your priorities are wrong.

By now you are probably asking yourself, what are a few warning signs that my bookkeeping process may not be serving my needs?

  • Well, are you looking at your reports and not understanding your accounts? That is one of the most important warning signs.
  • In your balance sheet, your super, GST and other liabilities don’t match reality, and the numbers are just not adding up.
  • You have to contact your bank to find out how much cash you have.
  • You can’t speak to your bookkeeper as and when you need to.
  • Your end of year tax and accounting bills are coming out higher than they need to be, it’s probably because your books are disorganised.
  • You’ve been doing things the same way for years, and there are no new ideas on the table.

Good bookkeeping alone isn’t enough to create a great business. However, it does ensure you are compliant with the law always, it is easier to keep track of books, conduct audits and have instant reporting.  Despite of all these benefits, you still need to find profitable customers and deliver your product or service.

Remember bad bookkeeping can be enough to create a bad business or even send it broke.

What advice do we have for you? Step one is to get the right information in the right way. Good bookkeeping is essential.

Step two is to use the information to make the right decisions. That’s up to you (but your adviser can help).

If you want to know more about good bookkeeping, contact Scope Accounting today.