Unfortunately, many of us have tax bills and sometimes we simply cannot pay the Australian Taxation Office by the due date. Whether it be an unexpected tax assessment or unforeseen cash flow problems, there are options available.

The first and best advice I can give you is – firmly implant in your mind that in one way or another, you are going to pay this tax debt.

So, what options do you have?

Option 1 – Borrow money from the bank to pay the amount owing to the ATO

• This clears your ATO debt but creates another debt with the bank.
• In many cases this might be considered to be ‘robbing Peter to Pay Paul’
• If the bank charges a lower interest rate than the ATO (which is likely) and offers a longer repayment period, your cash flow may cope better and make the debt repayment more achievable.

Option 2 – Negotiate with the ATO and enter into a reasonable payment plan

• Firstly, you should identify why and how you managed to be in this position of owing tax.
• I won’t go into all the reasons why people owe tax, but what I will say, if you have been reckless, selfish, deceitful or intentionally created a tax debt the ATO will be less inclined to negotiate a payment plan.
• If there are legitimate reasons that you are unable to pay your tax debt and you have a history of meeting your tax obligations on-time the ATO are likely to be reasonable and agree on a repayment plan.
• The ATO want the debt repaid and they want you to continue meeting your ongoing obligations, so it’s in their best interests to assist with payment plans.
• The ATO may remove the interest obligations on the debt if you stick to the payment plan and continue to meet your ongoing tax obligations.
• Payment plans can vary depending on the amount payable and the circumstances. They can also be tailor made to coincide with your cash flow circumstances. The can be set for periods up to two years but not usually more than one year.

Option 3 – You can bury your head in the sand and hope that it will go away

• Sorry, it’s not going away.

Option 4 – You could go bankrupt

• However note that certain debt relating to employee PAYG withheld & employee superannuation will never be wiped from your slate.
• Other amounts payable to the ATO can be cleared if you go bankrupt.
• Going bankrupt has a whole lot of other implications that can be to your detriment, and should be your last option after you’ve considered everything else

The ATO website has further information about help with paying your tax.

Other related blogs:

What company debts can directors be personally liable for?

Author: Adrian Wardlaw
Email: adrian@faj.com.au

Welcome to a new tax year, and with all new years it is an opportune time to think about the future. And the future is Super. Superannuation are those savings designed to support us in our retirement, and we can make contributions to help our super balance grow. The main types of contributions to super are concessional and non-concessional.

Concessional Contributions

Concessional contributions are contributions into super for which a tax deduction has been claimed. This includes contributions by your employer as well as personal contributions.

• Employer contributions consist of the super guarantee (SG) your employer is required to pay on your wage, as well as amounts they pay under a salary sacrifice arrangement you may have. From 1 July 2022 the SG payable by your employer is 10.5% of your wage (or ordinary time earnings).
• Personal contributions are amounts you have paid into your super fund with the intention to claim a tax deduction in your personal tax return at the end of the financial year.

For 2022/2023 the annual cap on all concessional contributions made for you is $27,500. If you have more than one super fund all the concessional contributions made to all your funds are added together and counted towards your concessional contributions cap.

From 2019/2020 carried forward rules were introduced allowing you to make extra concessional contributions, above the annual cap, without paying additional tax. To be eligible your total super balance at 30 June of the previous financial year must be less than $500,000, and you must have unused concessional contributions from prior years.

Non-Concessional Contributions

Non-concessional contributions are contributions into super that are from your after-tax income, and are not taxed in your super fund. Non-concessional contributions can also include contributions made by your spouse into your super fund, transfers from foreign super funds and after-tax contributions from your employer.

For 2022/2023 the annual cap on all your non-concessional contributions is $110,000. As with concessional contributions if you have more than one super fund all the non-concessional contributions from all your super funds are added together and counted towards your cap.

If you exceed the annual non-concessional contributions cap you may be eligible to access future year caps. This is known as the bring-forward arrangement, and allows you to make extra non-concessional contributions without having to pay extra tax. Eligibility for accessing the bring-forward arrangement is dependent upon your age and your total super balance at 30 June of the previous financial year.

If your concessional and / or non-concessional contributions exceed the annual caps, and you are not eligible to access either the carried forward unused concessional contributions or the non-concessional contribution bring-forward arrangement you are liable for excess contributions charges and tax applied by the ATO.

If you have any questions about super contribution limits, including your eligibility for unused carried forward concessions and the non-concessional bring forward arrangement, then please do not hesitate to contact our us for assistance.

Other related blogs:

What is a withdrawal and re-contribution strategy?
Carry forward concessional contributions – what are the rules?

Author: Brigette Liddelow

Email: brigette@faj.com.au

Hands up who’s heard of the Small Business Hardship Grant program? No one? Well, that’s not surprising as the State Government doesn’t seem to be making a heap of noise about it. But it’s a really big deal. Here’s why.

The WA Government is providing grants of between $3,750 and $50,000 for businesses impacted by recent health and social measures. Applications close on 30 June 2022.

This is not just for the hospitality industry. Any business that can show a decrease in business turnover of at least 30% for a consecutive 14 day period across a specified period is eligible to apply.

The specified period is 1 January to 30 April 2022. So you’ll need to find 14 consecutive days during that period where turnover is 30% lower than the same period in the year prior – i.e. compared to the same 14 day period between 1 January and 30 April 2021.

The grant has two tiers, so a 40% reduction in turnover commands a bigger grant than a 30% reduction.

The grant amount is also determined by the number of full-time employees a business had. A business with no employees can receive a grant of $3,750 or $5,000, a business with 20 or more full-time employees can receive either $37,500 or $50,000, and there’s a couple of levels in between.

There are some general conditions. Your business must have an annual turnover of at least $50,000, an Australia-wide payroll of less than $4 million and a valid and active ABN.

Not for Profit organisations are also eligible if they are a “commercial entity” – not well described but likely to mean the NFP must have a business operation component to its activities. If that is the case, it can include all income like grants and donations in its turnover reduction calculation.

A further quirk is that JobKeeper proceeds form part of the turnover calculation. This is likely to contribute to the turnover reduction for businesses and NFPs that received JobKeeper support in the March 2021 quarter.

There’s a similar rent relief grant available that’s worth a further $3,000 for businesses that operate from a leased premises. It’s based on a 30% turnover reduction, but over a 28 day period.

There is some evidence that needs to be uploaded with the application and there’s plenty more information available at the website of the Small Business Development Corporation. The SBDC have said clearly that businesses need to meet the criteria, but don’t need to provide a story as to why the reduction in turnover occurred.

You can follow the instructions on the SBDC website and lodge your own application, however there are some quirks and potential complexities in calculating the reduction in turnover. Please contact us as soon as possible if you require our assistance.

Author: Mark Douglas
Email: mark@faj.com.au

The latest inflation figures were shocking, but really just told us what we all know, that costs are going through the roof.

The Australian Bureau of Statistics recently released the March 2022 CPI figures. The headline was that inflation for the twelve months is at 5.1% across Australia, but in Western Australia it’s far worse at 7.6%. In bad news for households, the biggest increase was in non-discretionary goods like fuel, health, household and education. For the March quarter alone, WA prices rose 3.3%.

Consumer confidence immediately fell by 6% following the release.

Business owners are being hit on several fronts. Rising costs will challenge many small businesses. Add to this a serious skills shortage, supply issues, escalating interest rates and plummeting consumer confidence and you’ve just about got the perfect storm.

It can be difficult for small businesses to increase their prices to compensate because they often have intense competition from larger competitors.

Some factors are beyond the control of business owners but the challenge is to identify what can be contained, even if it initially seems small or insignificant.

The first thing to look for is unnecessary expenditure. Almost every business has something in this category, whether it’s a forgotten software trial subscription, some excessive entertainment costs or a work vehicle that’s more about form than substance. Locate these and eliminate them.

The next step is to eyeball essential expenses and find ways to shrink them. Are you getting the best interest rate or merchant charges from your bank? What about insurance, software, IT services, phones and maintenance contracts? The best way to approach this project is to take a deep dive into your general ledger and question every significant supplier relationship. If nothing else, service levels might suddenly improve as a result of the enquiry.

The third stage is to look for efficiency gains. Don’t blindly do what you’ve always done. Converting to electronic communications can save a small fortune in postage. Creating an on-line ordering system saves the disruption of taking phone calls and improves accuracy. What about putting solar panels on the roof to reduce power costs (or better still, talk your landlord into paying for it)?

Unless staff are excess to requirements, HR should be just about the last cost you trim. But if you have inefficient or under-performing staff, move them on and replace them with someone that wants to contribute.

Another cost that should not be cut is marketing, but review the effectiveness of your marketing spend to ensure you’re getting value for money.

This won’t be the last inflation shock or interest rate rise and the sooner you take action the better positioned you’ll be to manage the impact.

Related blog:

Why a small business should be using monthly budgeting
You need a business road map
Cash is king

Author: Mark Douglas
Email: mark@faj.com.au

It is important to distinguish between a travel allowance and a living away from home allowance (LAFHA) as they are taxed very differently.

A LAFHA is paid from an employer to an employee to cover the additional costs of temporarily living away from their normal residence to perform employment duties. The payment is tax free in the hands of the employee and should not be included as assessable income in the employee’s tax return. The employer will be subject to Fringe Benefits Tax on the LAFHA.

Any expenses incurred by the employee which have been covered by a LAFHA are not deductible as they are deemed to be private in nature and not incurred in the course of earning income.

Travel allowances are classed as assessable income for the employee and the costs associated with the travel are tax deductible. Such costs can include meals, accommodation, transport and incidental costs. To be classified as a travel expense the travel must make the employee stay away from home over night to perform employment duties. These costs are tax deductible as they have a sufficient close connection with employment duties.

The ATO has recently stated at if all the below are satisfied the allowance will be deemed a travel allowance:

The Employer:

• Provides an allowance to an employee or pays or reimburses accommodation and food and drink expenses for the employee.
• Does not provide the reimbursement or payment as part of a salary-packaging arrangement and the employee is not given the option to elect to receive additional remuneration.
• Includes the travel allowance on the employee’s payment summary or income statement and withholds tax (if applicable).
• Obtains and retains the relevant documentation to substantiate the fact that all of these circumstances are met.

The Employee:

• Is away from their normal residence for work purposes;
• Does not work on a fly-in fly-out or drive-in drive-out basis;
• Is away for a short-term period being no more than 21 days at a time continuously and an overall aggregate period of fewer than 90 days in the same work location in an FBT year;
• Must return to their normal residence when their period away ends

Other related blogs:

Claiming travel expenses using the substantiation method
Employee travel expenses and deductibility

Author: Rhys Frewin
Email: rhys@faj.com.au