Category: Bookkeeping

November 24, 2021 Accounts, BAS, Bookkeeping

Single Touch Payroll Phase 2 Starts in 2022

All employers have to report payments made to employees and closely held payees to the ATO using Single Touch Payroll reporting from July 2021.

Single Touch Payroll (STP) Phase 2 was initially planned for 1 July 2021 to align with the mandatory reporting for all employers, but it has been postponed to 1 January 2022. The ATO will allow employers until 31 March 2022 to start reporting if they don’t have an STP reporting solution in place yet. Some payroll software providers already have deferrals in place to allow a longer time for the transition to Phase 2 reporting.

The planned STP expansion has been extended because of COVID-19 impacts on business and accounting and payroll software providers.

STP Phase 2 will require additional information to be reported with each STP pay event.

Accounting and payroll software products will be upgraded to include broader reporting parameters and categories in line with the ATO requirements for Phase 2.

The Phase 2 expansion will allow employers to report information to multiple government agencies in the STP report. Standardised categorisation of income components will make it easier for employees to interact with Services Australia.

The changes will also include detailed income types, lump-sum payments, itemised allowances, child support and the ability to lodge tax file number declarations from within STP reporting. Employment separation certificates upon the termination of employment will no longer be needed, as Phase 2 reporting will include the reason an employee ceased employment.

If you’d like to review your payroll software and systems before STP Phase 2 starts, talk to us today.

Otherwise, there is nothing you need to change right now – we’ll keep you updated when the implementation is closer.

November 10, 2021 Accounts, Bookkeeping

How to Claim for Working from Home Expenses

Working from home is becoming the norm for many businesses, either due to lockdowns or greater employee flexibility. It’s important to think about the deductible expenses that you may be able to claim when working from home and make sure you include them in your tax return.

There are three ways of calculating your working from home expenses.

ATO Shortcut Method for Working from Home Expenses

For part of the 2020 financial year and all of the 2021 and 2022 financial years, there is a shortcut calculation for people who have had to work from home due to COVID-19 temporarily. This allows for a flat rate of 80 cents per hour for employed working time. The shortcut simplifies the calculation but doesn’t allow for any additional expense claims.

To use the shortcut method, you must keep a record of actual hours worked from home. The hours should align with timesheet records submitted to an employer. You don’t need to keep records of actual expenses for things like power or the internet.

To continue to claim deductions for working from home expenses in future financial years, you will need to use one of the established ATO methods of either fixed rate or actual costs.

ATO Home Office Fixed Rate Method

To use the fixed rate, you must have a dedicated work area or separate room used as an office and incur extra costs due to working from home. You will also need records of other expenses not covered by the fixed rate and the number of hours spent working for the whole financial year.

The fixed rate is 52 cents per working hour and includes running expenses for the decline in value of office furniture, electricity and gas, and cleaning. You can claim on top of the fixed rate for other work-related costs such as telephone, internet and office equipment.

You must keep records of hours worked and work-related expenses and a diary to show work usage for the internet and assets. You’ll also need to work out the percentage of floor space for your office against the entire dwelling.

ATO Home Office Actual Cost Method

To use the actual cost method, you must incur extra costs as a result of working from home and have records to prove work-related use of expenses and assets. As with the other methods, you’ll need to record the number of hours worked from home. You’ll also need bills showing actual amounts paid for expenses.

ATO Home Office Online Calculator

Use the ATO home office expenses calculator to check the allowable deductions. The online calculator allows you to choose either the fixed cost or the actual cost method. Once you have the deduction amount from the calculator, enter this on your tax return or give it to us to include. Keep the printout of the calculator result and remember to keep documents for all expenses.

Talk to us to make sure you’re claiming all the allowable working from home deductions to maximise your tax return.

November 4, 2021 Accounts, Bookkeeping, Planning, Software

Do You Have Direct Debits and Online Payments Set Up for Your Business?

Do you have direct debits and online payments set up for your business? Making it easy for your customers to pay you is vital to business success. Getting direct debits and alternative payment methods linked to your business is so easy these days there’s no excuse not to give your customers multiple ways of making payment.

Many service-based businesses choose direct debit arrangements with their clients to avoid late payment. If you’re often chasing overdue payments, consider implementing direct debit arrangements to reduce your administration time.

If you’re already using online accounting software, check the add-on solutions and choose one that integrates with your accounts. This means that the payment platform information feeds directly into your accounting software to be easily matched to customer transactions.

Make it Easy

You probably already have bank transfer information set up, but adding several other methods such as PayPal, debit cards and credit cards allows customers to choose the method most convenient for them at the time. Many customers appreciate the automation and simplicity of direct debits. Make sure your payment terms and conditions are clear on your website and invoices and don’t forget to include all your chosen payment methods for customers.

Worried About Costly Fees?

You have the option to choose whether you will absorb the cost of the payment gateway processing fees or whether you will add the cost to your invoice and charge the clients extra. Your accounting software will then allocate the funds accordingly to invoice payment and fees received.

Better Transaction Recording

When you integrate direct debits and online payment methods with your accounting system, you dramatically reduce errors in recording customer payments – which means less time spent on your accounts.

Not Sure Where to Start?

If you’d like to make it easier for customers to pay you, talk to us about which solutions are best for your business. We can discuss which platforms have the best and most secure integrations with the accounting software you use. We’ll help streamline your payment systems.

October 29, 2021 Accounts, Bookkeeping, Planning

Understanding the Basics of Capital Gains Tax

A capital gain (or loss) occurs when an asset is sold. The difference between the purchase price and the sale price is the gain or loss. Capital gains tax (CGT) applies to money you have made from selling an eligible asset.

Capital gains tax events occur when an asset is sold or other triggers arise, such as the loss, theft or destruction of an asset or creating contractual or other rights to an asset.

Not all assets are subject to CGT. Common exemptions include the main residence or family home, granny flats, cars and motorcycles, personal use assets such as boats, furniture, household items or loans to family and friends. Many types of lump sum payments are also not subject to CGT, and business sales may also be exempt depending on the circumstances.

Most property is subject to CGT including land, commercial premises, rental properties, holiday houses and hobby farms. CGT also applies to shares, investments, cryptocurrency, many collectables, foreign currency and intangible assets.

Visit the ATO for a list of CGT assets and exemptions here.

There are special rules for some specific situations, for example, inheriting assets, relationship breakdown, foreign residents, insurance or compensation payments.

How is the Tax Calculated?

Tax is calculated on the net gain of an asset sale. Tax is payable on the difference between the purchase price and sale price, less any discount allowed.

The type of CGT event affects how and when capital gains tax is calculated. For example, if an asset is destroyed in an accident, the CGT event occurs when the insurance payout is received.

Good record keeping is key to working out capital gains tax accurately. Make sure you keep all documents related to asset purchases, including contracts, expenses valuations and disposal.

CGT is calculated at the time of completing your individual, business or self-managed super fund tax return and is included in the income tax assessment.

Talk to us to ensure you’re claiming all you’re entitled to and not paying more tax than you should. We’ll make sure you’re receiving any exemptions, discounts or small business concessions allowed.

September 9, 2021 BAS, Bookkeeping, Planning

What is Personal Services Income?

Personal services income (“PSI”) is income received as payment for individual personal efforts and skills. It applies to many contractors who provide services as their means of earning an income. PSI rules can apply to individual sole traders and other types of business entities, but not employees. If PSI rules apply, the entity is called a personal services entity (PSE).

The PSI rules ensure the income is attributed to the individual who performed the services and not apportioned across other entities.

There are several tests to work out if your income is PSI or if you are instead conducting a personal services business (PSB), which means the PSI rules don’t apply. If a personal services entity qualifies as a PSB, the ordinary tax rules apply for that financial year.

At least one of these four tests must be satisfied for an entity to be classified as a PSB.

  • Results test: the individual must be paid to produce a result, is required to supply their own equipment and tools to produce that result and is liable for the cost of rectifying defects in the work.
  • Unrelated clients test: the sole trader or entity must be engaged by unrelated clients and services must be advertised to the public.
  • Employment test: in general, a sole trader or other entity must engage one or more entities to perform at least 20% of the sole trader’s principal work. Entities other than individuals must not be associated with the sole trader.
  • Business premises test: the entity must maintain and use business premises to conduct personal services. The business premises must be exclusively used by the PSE and physically separate from private premises and customers.

If more than 80% of income in a financial year is derived from one customer, the PSE must satisfy the results test to be classified as a PSB.

If none of the four tests are met, the income is classified as personal services income, and the PSI taxation rules apply. PSI rules restrict the type of allowable tax deductions made in relation to personal services income-earning activities.

If you’d like to know more about PSI, talk to us to see if the services you provide meet the tests for conducting a personal services business. We’ll make sure you are claiming the maximum allowable deductions and being taxed correctly.

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