Instant write-off for assets over $30,000

From 2nd April 2019, the instant asset write-off threshold increased to $30,000 (prior to this, it was $25,000).

This means that if your business purchases an asset that costs less than $30,000 (net of GST), you can claim an immediate deduction for it, instead of depreciating the asset over it’s useful life.

With the end of financial year approaching, now is a good time to have a think about whether your business needs new assets or replacement of old assets. Consider if the timing is right - look at your business profit - is it higher than expected? If you have extraordinary profit this year, it might be a good idea to utilise this tax concession in order to save your business some tax this year.

More information about the instant asset write-off can be found here.

Closely-Held Entities & Available Cash

Closely-held entities are businesses that only pay salaries to associates of the business. Examples of associates include the directors and shareholders (of a company) and their relatives. If your business is a closely-held entity, your reporting requirements for STP and PAYG is slightly different to businesses with arms-length employees (or “external employees”).

Reporting Requirements

Firstly, you are not required to report to ATO using STP until 1st July 2020.

You also do not have to submit PAYG Payment Summaries or PAYG Payment Summary Annual statements to ATO by the regular due dates. They can be submitted up until the due date of your business tax return.

You also have flexibility with regard to salaries and income distribution. It is important to plan ahead with your accountant to make sure you are distributing business profit in the most tax effective way, whether that is by way of wages, dividends or trust distributions.

Available Funds

A lot of our clients who run their own business through a company want to know what they can do with the money in the bank.

The answer will largely depend on 2 things:

  1. Does the company owe you any money?

  2. Was there any profit reported in the company, and did the company pay tax?

If the company owes the associates money, then they can withdraw this money at any time without any tax consequences. Examples of how a company may come to owe the associate director money, is when the director pays for business expenses out of their personal funds (e.g. from a personal credit card), or where a personal asset has been transferred to the company, but the company did not transfer cash to the associate director in exchange for the asset (e.g. when a car is transferred into the company name).

Transfer of this kind are treated as loan repayments (from the company to the director). You can also think of them as reimbursements.

If financial statements have already been prepared, have a look at the Notes to the Financial Statements, under Liabilities, and look for “Loans - Unsecured”. Assuming there have not been any withdrawals from the company account since the last reporting date, you can assume that this figure is accurate, and you can withdraw this amount from the bank if the funds are available.

It is important to note that any withdrawals made from the company must be made with the company’s solvency position in mind. Directors should not clear out the bank balance if the company has outstanding current debts, e.g. to ATO or Superannuation.

If profit was reported and tax was paid, then there are franked dividends available to distribute from the company to shareholders. These dividends can be paid at any time, but a resolution must be passed during a directors’ meeting and this must be recorded in writing. Click here for a sample document you can use to pass a resolution to pay Franked dividends.

Before making a decision to pay dividends, please send me an email to discuss this strategy so we can determine whether this is the most tax effective way of accessing your company funds.

If neither of the above applies to your business, then you can take money out as wages (please note, superannuation obligations and workers’ compensation will apply). You will need to withhold the correct amount of tax before paying yourself a wage. To work out the tax, you can use ATO’s online calculator or you can use payroll software to help you produce payslips with the correct amount of withholding tax and superannuation obligation.

If none of the above options meet your requirements (for example, you need to withdraw a large amount of cash), you can borrow funds from the company. Please note, special rules will apply to this arrangement under Division 7A of the ITAA 1936. Please contact us for more information to make sure you are meeting your obligations.

Division 293 Tax (updated)

Division 293 Tax (updated)

The Division 293 Tax is not widely discussed. In fact, most taxpayers do not even realise it exists. 

The tax only affects high income earners with an adjusted taxable income of $300,000 or more, and who have taxable contributions made to their superfunds (e.g. employer superannuation guarantee contributions, salary sacrificing into superannuation etc).

Single Touch Payroll

Single Touch Payroll (STP) will be mandatory for all employers from 1st July 2019 (previously it was only applicable to businesses with 20 or more employees). If your business is a closely-held entity, then you do not need to start using STP until 1st July 2020.

If your business is not a closely-held entity, you need to be ready (more info about Closely-held entities here). It is a good idea to get it set up now so that you are compliant by 1st July. However, ATO has confirmed that they will be lenient toward small businesses during the initial transition to STP.

This extension of the legislation to include small businesses could be very daunting for employers who are not already using an online payroll solution. Our clients can be assured that we will help them through the set up process if they require guidance.

What is Single Touch Payroll?

When you use a payroll management software (either online or using an installed program that can send data to ATO electronically), you are able to communicate data to ATO every time you process a payslip for an employee. This eliminates the need to report wages on a Quarterly basis in the BAS or to send ATO payment summaries and annual PAYG statements. While the set up and transition can cause smaller employers some confusion and anxiety, using this system on a regular basis is incredibly simple and efficient.

Does your business need to use it?

From what we have read on ATO’s guidelines and press releases, ALL (non-exempt) employers will need to use STP from 1st July 2019, even if they are considered “micro employers” with 4 or less employees.

If you are a micro-employer, you can report to ATO quarterly (same as BAS cycle). You would therefore be submitting quarterly payslips through STP software instead of a more regular cycle such as weekly or fortnightly. However, Micro-employers can still choose to report on a more frequent pay cycle if they wish.

How to get set up:

The first step is to have a cloud-based payroll management system.

Some software providers have developed a low cost cloud based software for micro-employers who only need to be STP compliant but do not want any other cloud-based software for their business. Our recommended provider is Xero ($10 per month), which we can assist our clients to set up. If you want to shop around, the ATO has listed these providers as well.

Once you have set up your account online, you will need to register an Auskey for your business. This is a relatively simple process. If your business is a company, you will need one of the directors to register (have your TFN at hand).

After you have registered your Auskey, you can go to ATO’s Access Manager and log in using your Auskey.

  1. Click on the link from the left-hand menu titled “My Hosted SBR Software Services”.

  2. Find your software provider from the list (or search by name or ABN) and select

  3. Add your software ID# (this can be found when you are logged in to your payroll software during the STP set up).

  4. You will need to confirm and save.

  5. Go to your software provider website, log in and go to STP set up

  6. Make a declaration that you have “advised ATO” about your SBR Service Provider and follow the steps to complete the set up (the steps will be different for each software provider, but it should all be fairly straight forward).

Now you are ready to report your wages and super to ATO using STP.

To view ATO’s step by step guide for adding Software Services on access manager, please click here.

Can SJB set this all up for your business?

Yes, we can certainly help you. We can also set up the software package for you, using your banking details for the subscription. If you opt to use Xero and are switching from MYOB or Reckon and want to get your whole business set up on this platform, there are financial rebates you can receive as a client of SJB. Please contact us for more information about this and to discuss our set up fees.

If you need help with STP set up, please get in touch with us ASAP, as we will not be able to provide this service between 1st July and 31st December 2019 (due to “Tax Time”).

2018-2019 Office Closure

It is that time of the year again - the most wonderful time of the year - when we close down our office for the Xmas and New Year break. Our office will be closed from Monday 24th December 2018 and will re-open on Monday 21st January 2019.

During this time, we will still have a small group of admin staff collecting mail and processing payments. Please do not call the office during this time.

Joel and the rest of the team wish all our clients a very happy holiday season, Merry Christmas, Happy Hanukkah and have a fun and safe New Year.

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New Financial Year 2018

It's the start of the new financial year, and there are numerous changes to taxation, superannuation, centrelink pensions and benefits and various business matters that may affect you.

Our July 2017 newsletter is out, and we hope to publish more throughout the year. You can download the newsletter here.