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Small business owners: Understand the ATO’s single touch payroll requirements & how to prepare
The ATO’s Single Touch Payroll (STP) has been introduced to streamline the payroll, superannuation, and tax obligations of employees, making reporting more accurate and time efficient.
It should be viewed as an opportunity for your organisation to improve internal processes and bring about greater transparency in your business.
Here is a breakdown of Single Touch Payroll, what it means for you, and how you can best prepare your small business for it next year (if you have 19 employees or fewer) …
What is Single Touch Payroll?
The Budget Savings Bill was introduced in parliament on 31st August, 2016, and passed into law on 16th September of that year.
It means that each time you pay your employees, you will report the tax and super information automatically to the ATO from your STP-enabled payroll software.
You will not need to provide payroll summaries to employees as they can view their payment information using the ATO’s online services.
The ATO will pre-fill activity statement labels W1 and W2 with the information received.
Who does Single Touch Payroll apply to?
If you are an employer with a minimum of 20 employees as of 1st April 2018, this requirement applies to you now.
The number is based on a headcount of workers within your firm. If there are less than 20 employees, you can still report with STP on a voluntary basis but you are not obligated to do so.
When does it start?
As an employer with 20 employees or over (headcount as of April 2018), you should have begun transmitting employees’ data through Single Touch Payroll as of July 2018.
You should be reporting the salary or wages, pay as you go (PAYG), super, and withholding information of your employees to the ATO each time they get paid.
For employers with 19 or fewer employees, the STP starts on 1st July, 2019.
How can you prepare for Single Touch Payroll with the ATO?
1. Stay updated
Make sure your accountants provide the latest information on Single Touch Payroll, to make sure that you don't miss out on anything important.
2. Ask questions of your accountants
Ask questions and understand what will be expected of you with Single Touch Payroll. Your accountants should be able to explain everything - if not, you’re with the wrong accountants!
3. Undertake an STP-readiness review
Get a review of your manual and automated payroll processes to ensure that they can accommodate the current and future requirements of Single Touch Payroll. Importantly, validate your pay code configuration for compliance purposes.
Get the help you need with Single Touch Payroll
Your organisation needs a compliant reporting model that provides greater efficiency. You can achieve that through the business advisors at Ascent Accountants in Perth.
We can evaluate your current payroll solution to see if it is STP-ready and advise you on whether or not your IT and HR processes need to change.
We can also advise on how you will transmit your STP reporting to the ATO and receive files from them.
Additionally, we carry out tax planning to ensure that your Perth business pays the right amount of employment taxes and super.
Call us today on 08 6336 6200 and we’ll set up a time to review your payroll processes and get you ready for a smooth Single Touch Payroll experience.
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If you're considering upgrading your current home or downsizing, retaining your original property as an investment can be a strategic financial move. However, before you embark on this journey, it's crucial to understand the tax implications. Here’s a comprehensive guide to ensure you're well-prepared. Capital Gains Tax & main residence exemption. Typically, any profit or loss from selling your main residence is exempt from CGT. However, if you convert your property into a rental, the exemption rules change. Here's what you need to keep in mind: Initial investment property : If your property was first used as an investment and later became your main residence, you'll need to apportion any capital gains based on the time the property was used for each purpose. Main residence first : If you first lived in the property and then rented it out, the CGT calculation will involve determining the property's market value at the time you started renting it. You only pay CGT on the gains from that point onward. Non-residents : If you’re a non-resident when selling your property, you don't qualify for the main residence exemption. This is crucial for expatriates and those living abroad who maintain properties back home. Six-Year Rule Under the Six-Year Rule, you can treat your property as your main residence even after moving out. This allows you to keep the main residence exemption for up to six years if the property is rented. After six years, any gains during the rental period become fully taxable. However, you can only have one main residence at a time; if you buy another property to live in, you might lose your six-year exemption. Here are two important considerations: If you purchase a new residence, you might forfeit the exemption for the old property if it's rented. If the property remains vacant (and you don’t own another residence), the exemption period is indefinite. However, recent changes in vacant land costs may make leaving the property empty a costly choice. Taxable income & deductions Rental income is fully taxable, but you can offset it with a variety of deductions. These include immediate deductions and spread deductions. Immediate deductions : Interest on property loans, advertising costs for tenants, repairs and maintenance (after the property is rented), rates and taxes, body corporate fees, managing agent fees, and insurance premiums. Spread deductions : Borrowing costs, depreciating assets, and capital works (building costs) are spread over time. Note that repairs and improvements made before renting the property are not immediately deductible. They might qualify as depreciation, or they could form part of the capital costs, reducing the overall taxable capital gains later on. Depreciation, capital works, and the 2017 depreciation deduction change. Depreciation and capital works deductions offer substantial benefits. A qualified quantity surveyor can prepare a detailed depreciation report to outline the deductions available. However, there have been changes in depreciation rules for previously used residential properties. As of July 1, 2017, Investors can no longer claim depreciation on second-hand assets (e.g., appliances or furniture) purchased with the property. Instead, these assets are factored into the overall capital gain or loss when selling the property. Important considerations before renting out your home Renting out your home involves a number of strategic, and even emotional, decisions. Here are a few key points to keep in mind. Market timing : Consider whether it's the right time to rent out your property based on the rental market and property values. Talking with a trusted real estate agent ( Ascent Property Co ) can provide powerful insights and peace of mind here. Property management : Decide if you'll manage the property yourself or hire a professional agent ( Ascent Property Co ). Legal compliance : Understand your obligations as a landlord under local tenancy laws. If you choose to hire a professional property manager, they’ll assist here. Insurance coverage : It vital to secure adequate insurance coverage that includes landlord-specific protections. Tax planning : Every investment property is unique, and strategic tax planning will ensure you're maximising deductions and minimising future liabilities. The level of equity in your old house also needs to be reviewed to determine whether it’s more tax effective to rent out or sell. Ready to turn your home into a lucrative investment? Retaining your original property as a rental requires expert advice. Every property is unique, and tailored tax planning can ensure you're maximising your investment. Contact us to understand your potential financial gains and minimise any risks involved, and reach out to Ascent Property Co for tailored guidance and support on selling or leasing your property.
Australia's superannuation contribution caps are set to increase for the first time in three years, giving individuals a significant opportunity to boost their retirement savings. Effective from July 1, 2024, the concessional contribution cap will rise from $27,500 to $30,000, while the non-concessional contribution cap will increase from $110,000 to $120,000. In this article, we’ll explore what this change means for you and your future financial security. Understanding concessional vs. non-concessional contributions. Concessional contributions These are typically made through salary sacrifice arrangements or by employers as part of the Superannuation Guarantee. They are taxed at a concessional rate, making them an attractive option for individuals looking to minimise their tax liabilities while growing their retirement savings. Non-concessional contributions Made with after-tax money, non-concessional contributions do not provide immediate tax deductions. However, they allow you to maximise your retirement savings within superannuation's tax-friendly environment. Two key benefits of the changes. Turbocharge tour retirement savings: Non-concessional contributions enable you to bring up to three years' worth of contributions into a single financial year. This "bring forward" rule allows you to contribute a lump sum to your superannuation, perfect for those who receive large payouts from asset sales or inheritances. New limits: Under the new rules, you can contribute up to $360,000 from July 1, up from the previous $330,000 limit if you fully utilise the bring-forward provision. Something to keep in mind… Balance limitations still exist. If you have more than $1.9 million in superannuation, non-concessional contributions will be off-limits. Additionally, restrictions apply to the bring-forward rule if you have a super balance exceeding $1.68 million ($1.66 million next year). Maximising Your Contributions For those aiming to make the most of these increased caps, consider making a $110,000 contribution before June 30 and then adding a further $360,000 from July 1. This approach allows you to maximise your retirement savings potential within the concessional framework. Please note, you may need to review any salary sacrifice arrangements in place so that you can take advantage of the new $30,000 cap. If you need support doing any of this, just ask us . The key takeaway. These changes present a strategic opportunity to strengthen your retirement savings plan. By understanding the new caps and how they apply to your financial situation, you can make informed decisions that will help you enjoy a more comfortable retirement. To ensure your contributions align with your long-term goals and the current regulatory framework, contact us !
In WA, many families with mortgages and young children are facing increasing cost-of-living pressures. As parents, we try to protect our children from the stress of financial challenges. However, a new, more inclusive approach might be called for. Have you ever considered involving your children in your family’s budget planning? While it’s essential not to overburden kids with financial stress, sharing the reality of managing a household budget — in a safe and age-appropriate way — can empower them with valuable skills for the future. Let’s explore it a little more. Involving your kids in the family budget Like many parents, you may be used to responding to your children's requests with "that’s too expensive”, or “we can’t afford that right now”. Financial Advisor Dawn Thomas recently decided to take this conversation further with her 13-year-old son. Together, they did a cashflow course and constructed a new family budget. Through this process, Dawn’s teen learned to differentiate between fixed expenses (loan repayments, insurances, etc.), savings contributions, and discretionary spending (fun money!). He quickly grasped that reducing fixed costs would create more room for discretionary spending, helping make decisions based on importance and priorities. Set your kids up for success! Here are the benefits of involving them. Understand the value of money : Children gain a foundational, practical appreciation for the effort required to earn money and the importance of managing it responsibly. Build financial literacy development : Kids learn fundamental concepts like saving, spending, and investing, which helps prepare them for financial independence and lead to better financial habits in adulthood. Build decision-making & problem-solving skills : Help kids understand trade-offs and prioritisation when allocating limited resources. They learn to identify problems, assess available options, and make decisions to balance a budget. Foster teamwork & communication : Discussing financial goals and challenges together enhances family communication and teaches kids to work collaboratively. Set financial goals: Involvement in budgeting encourages them to set and strive toward achievable financial goals, reinforcing discipline, ownership, and patience. Balancing financial transparency We’re not saying parents should start allocating major budgeting tasks to children, but keeping them completely in the dark can leave them unprepared for managing money in the future. Here are four strategies that worked for many families: Learn together: Take a cashflow course or read a book about money management together. The Glen James Spending Plan and Moneysmart offer free resources to get started with budgeting and expense tracking. Reframe financial choices: Being honest about priorities builds trust, even if it may not be what your children want to hear. Instead of saying "We can't afford that," reframe it to "We're choosing to save for XYZ". This language shift helps children see budgeting as an intentional decision rather than a restriction. Contextualise bills: When adding bills to your budget, explain what each one is for, giving kids a clearer picture of what it takes to run a household. Share the knowledge: Have older kids explain the budget to their younger siblings. This reinforces their understanding and ensures the whole family is on the same page. Do your kids a favour. There’s no denying that being open with your kids about finances will benefit them in managing their money. By involving them in the process, you'll create a supportive environment where they can learn valuable budgeting skills while understanding your family’s financial journey (within reason). If you’re looking for support in this area, we can put you in touch with an excellent, reputable Perth Financial Advisor. Get in touch to get started.
We’re already halfway through May, which means time is running out when it comes to money-saving tax initiatives.
As property investment continues to be a lucrative venture for many Australians, understanding the intricacies of Capital Gains Tax (CGT) is crucial. Whether you're a seasoned investor or new to the real estate market, navigating CGT can significantly impact your investment outcomes. An overview of CTG. Calculating your capital gain. Capital gains tax is payable when you sell a property at a profit. The ATO provides three methods to calculate your capital gain, allowing you to select the one that minimises your tax liability. The discount method: Ideal for resident individuals who have held an asset for more than 12 months, this method offers a 50% discount on your capital gain, significantly reducing your taxable amount. The indexation method: This method adjusts the cost base of your asset according to the consumer price index (CPI), effectively accounting for inflation. It's applicable only to assets acquired before 21 September 1999 and held for at least 12 months. The "other" method: When assets are held for less than 12 months, the other method comes into play, calculating the capital gain by simply subtracting the cost base from the capital proceeds. Understanding these options and selecting the most beneficial one can lead to considerable tax savings. Timing is everything. The timing of a CGT event, such as the sale of a property, is critical. It's the date you enter the contract, not the settlement date, that determines the income year in which you must report your capital gain or loss. This timing affects your tax liability and planning. Inherited property (special rules apply). Inheriting property comes with its own set of CGT considerations. The ATO provides guidelines for calculating the cost base of inherited property, which can differ from other assets. Understanding these rules is essential for accurate tax reporting and planning. Apportioning gain or loss. If you co-own an investment property, any capital gain or loss must be divided according to your ownership share. This apportionment ensures that each owner is taxed fairly based on their investment in the property. Navigating CGT as a foreign resident. Foreign residents for tax purposes face specific CGT considerations when selling residential property in Australia. The ATO's rules in this area can significantly impact your tax obligations, so it’s important to familiarise yourself with these regulations. By consulting resources like the ATO's guide on foreign residents and main residence exemptions, you can navigate these complexities with greater confidence and clarity. Exemptions. If your property has been used to earn income and qualifies for a CGT exemption or rollover, remember to make the appropriate election in your tax return. This is crucial for taking advantage of any tax reliefs or exemptions available to you. The main residence exemption. Your primary home is generally exempt from CGT — as long as it truly serves as your main residence. You can extend this exemption for up to six years if you rent out your home, or indefinitely if it's not used to generate income. However, this exemption cannot apply to more than one property at the same time, with certain exceptions during transitional periods, such as moving homes. Income-producing use (partial exemptions & rules). Using part of your main residence to generate income, such as renting out a room, can affect your eligibility for the full main residence exemption. If you acquired the property after 20 September 1985 and meet specific criteria, including the interest deductibility test, you might only qualify for a partial exemption. Moreover, if your property began generating income after 20 August 1996, you need to know its market value at that time to accurately calculate any capital gain. The importance of diligent record-keeping. Effective CGT management hinges on the maintenance of comprehensive records. These include, but are not limited to: Contracts of purchase and sale. Receipts for stamp duty. Records of major renovations. Any other costs associated with acquiring, holding, and disposing of the property. Such records must be kept for at least five years after the sale of the property or the year in which you declare a capital gain. For capital losses, the records should be retained for an additional two years after they have been offset against a capital gain. This disciplined approach not only facilitates accurate CGT calculations but also ensures compliance with ATO requirements. Real-world CGT scenarios. To illustrate how these principles apply in practice, let’s examine three snapshot case studies. 1. Main residence for part of the ownership period. Consider Vrinda, who bought a house for $350,000 and lived in it until she moved and began renting it out. When she sold the property, she used its market value at the time it started generating income as part of her cost base, leading to a capital gain. Opting for the discount method, she was able to halve her taxable gain, showcasing how understanding CGT rules can lead to significant tax savings. 2. Renting Out Part of Your Home Thomas's situation, where he rented out part of his main residence, highlights another aspect of CGT. By calculating the proportion of his home used to generate income, Thomas was able to determine the taxable portion of his capital gain accurately. This example underscores the need to understand partial exemptions and the impact of income-generating use on CGT obligations. 3. Sale of a Rental Property Brett's experience with renovating and selling a rental property illustrates the complexities of determining the cost base and the final capital gain. By carefully accounting for renovations and other costs, Brett was able to accurately calculate his CGT obligation, choosing the discount method for the most favorable outcome. Brett’s scenario emphasises the significance of detailed record-keeping and strategic planning in managing CGT liabilities. Call in the experts. Understanding the intricacies of Capital Gains Tax helps property investors maximise returns and minimise tax liabilities. By choosing the right method, keeping detailed records and applying CGT calculations effectively, investors can navigate the complexities of property investment with greater ease and efficiency. We’re here to help with that as well. Ascent Accounting can provide invaluable personalised advice, assistance, and insights for your situation. To get started, contact us today .
Managing taxes can be daunting, especially when juggling business and investment income. Today’s guide aims to demystify the PAYG instalment system, helping you navigate through its nuances to ensure a healthy financial stance for your business or investment ventures. Introduction to PAYG instalments. PAYG instalments are a tax system designed for individuals, businesses, and investors to manage their income tax obligations by making regular payments throughout the year. This proactive approach to tax management helps in avoiding large lump sum payments at the end of the financial year, assisting in better cash flow management and financial planning. Almost everyone uses PAYG! A note on entry thresholds & requirements. The ATO determines your requirement to pay PAYG instalments based on the information in your latest tax return, focusing on your gross business and investment income. Various thresholds apply, depending on whether you are an individual, trust, company, or super fund, with specific criteria such as instalment income, tax payable on the latest assessment, and estimated notional tax. How PAYG instalments work in three clear steps. Enter the system: Upon meeting the criteria, the ATO will notify you of your automatic entry into the system through various communication channels, including myGov, online services for business, or traditional mail, based on your registered preferences. Entry into the system can also be upon request (via MyGov for individuals or the ATO for businesses) if you anticipate crossing the income threshold. It’s important that your myGov for the PAYG instalments to pay each quarter. Make instalment payments: Payments are typically made quarterly and are calculated based on your business or investment income, aiding in spreading out your tax liabilities over the year. Payments must be made by July 28, October 28, January 28 and April 28 each year. Be reconciled: The instalments paid are adjusted against your total tax liability when you file your annual tax return at the end of the financial year, potentially leaving you with minimal or no additional tax to pay. The difference between PAYG instalments & PAYG withholding. PAYG instalments and PAYG withholding are different components of Australia's tax system, designed to manage tax obligations in different contexts. However, they’re often confused for one another. Understanding the differences between PAYG instalments and PAYG withholding is crucial for businesses and individuals to ensure compliance and optimal tax management. Application. PAYG instalments apply to taxpayers with business or investment income, whereas PAYG Withholding applies to payments made to employees and certain contractors. Purpose. Instalments help manage expected tax liability on non-withheld income, while withholding ensures tax on wages and similar payments is collected throughout the year. Control. Taxpayers have some control over their PAYG Instalment amounts (e.g., they can vary instalments if their income changes), but they do not control the amount withheld under PAYG Withholding; this is determined by tax tables and legislated rates. Real world examples. Case study 1: Rob — Individual investor with rental income. Rob owns three investment properties and anticipates that the rental income from these properties will amount to $55,000 for the financial year. Besides rental income, he doesn’t have any other sources of income. However, he incurs expenses related to the maintenance of these properties, including repairs, real estate fees, and gardening. These total $5,500 . Managing his tax obligations efficiently, Rob decides to utilise PAYG. He uses the PAYG instalments calculator available for individuals to estimate his tax liability: After entering his total investment income of $55,000 and deducting his allowable expenses, Rob's taxable income comes down to $49,500 . The calculator estimates that Rob's tax for the financial year on his investment income would be $7,544 . As such, Rob voluntarily enters the PAYG instalment system to manage this liability. By dividing the estimated annual tax by four, Rob calculates his quarterly instalments to be $1,886 each. This allows Rob to plan ahead for his tax payments, ensuring that he doesn't face a large tax bill unexpectedly and can manage his cash flow more effectively throughout the year. Case study 2: Danielle — sole trader business income. Danielle operates her business as a sole trader and estimates her business income will be $100,000 for the upcoming financial year. Danielle is also entitled to allowable business tax deductions amounting to $10,000 , which she plans to claim. To prepare for her tax obligations, Danielle uses the PAYG instalments calculator for individuals. She inputs her estimated business income and deductions, resulting in an adjusted taxable income of $90,000 . Based on these figures, the calculator estimates her PAYG instalment amount to be $20,437 for the year. To manage cash flow and ensure she has enough funds to cover her tax obligations, Danielle divides the annual instalment amount by 52 weeks, setting aside $393.02 each week. In doing so, she comfortably accumulates the necessary funds for her quarterly tax instalments. When Danielle receives her quarterly business activity statement (BAS), she’s well-prepared to meet her PAYG instalment payment. Upon lodging her annual tax return, the PAYG instalments she has paid throughout the year significantly reduce her final tax liability, leaving her with little to no additional tax to pay. The key takeaway. Utilising the PAYG system is the easiest way to avoid a huge tax bill at the end of the year. Whether you’re an individual or a business, Ascent Accountants is committed to guiding you through the intricacies of this instalment system so you can navigate your tax obligations confidently. Remember, accurate planning and regular payments can significantly ease your tax burdens, providing peace of mind and financial stability. To get started with PAYG, contact us !
