GFA Accountants & Business Advisers

27/02/2025

Are you paying TOO MUCH TAX?

Tax planning before 30 June is essential!

29/08/2024

CGT main residence exemption concessions are very useful. Let's run through some of the main ones.

* The concession for changing houses. This applies if you buy a new home before you sell the old one. It allows you to treat both homes as your CGT-exempt home for a period of up to six months while you sell the old home. But there are important conditions that must be met in order to use it.

* The concession for moving into a house. This allows you to treat your new home as your main residence for the entire period you own it even though you may not have moved into it straight away. However, it is subject to important limits and restrictions – and generally requires you to move in “as soon as it is practicable” to do so.

* The absence concession. This is an extraordinarily useful concession that allows you to treat your home as your “CGT exempt main residence” even though you may not be living in it for a lengthy period. In the case that you rent it in your absence this period lasts for six years, and if your home is not rented it lasts indefinitely. However, it is likewise subject to important conditions before you can use it – including that the residence must have been your home on a bona-fide basis. (And the ATO does track such matters!)

* The building or renovation concession. This allows you to treat vacant land as your CGT exempt home for a period of up to four years where you build a new home on it and move in as soon as it is completed and live in it as your home for a period of at least three months. This concession can also be used where you leave your existing home to do major renovations – or even in a knock-down, re-build situation.

If you are considering buying or selling a home – or find yourself thinking that you may need to use any of these concessions – we can advise you on their applicability to your case and how you can use them most effectively.

20/06/2024

If you have had a rental or commercial property damaged by recent summer storms (or bushfires or floods) you may have received an insurance payout to cover the damage. You may be surprised to know that this payout is subject to capital gains tax (CGT) on the basis that it arises from your right to seek compensation (being a CGT asset itself). However, the tax law and the ATO will treat it concessionally depending on what exactly the payout is for and how it will be used.

For example, if the payout is for the “destruction or loss” of the whole or part of the property, the payout won’t be subject to CGT at that time – but only if it is used to acquire a replacement asset within the required time (generally two years). This is because a “concessional roll-over” applies in the circumstances. However, there may be an immediate CGT liability (and/or other CGT consequences) if only some (or more) than the amount of the payout is used in acquiring a replacement asset.

On the other hand, if a payout is received for merely some “permanent damage” to the property then a different CGT concession will apply – namely, there will be a reduction in the cost base of the property for CGT purposes by the extent of the compensation received (and whether or not the proceeds are used to repair or restore the damaged property).

So, if you find yourself in this situation, it is vital to see your tax professional to help assess what situation you fall into – and furthermore how the compensation is exactly treated in that case.

In the different case where you receive compensation for wrongful dismissal from work and/or for injury suffered at work, it is also vital to seek professional advice. This is because such compensation can potentially be treated in one of several ways:

* Firstly, it may be treated as assessable income to the extent it is a substitution for lost income – regardless of whether it is received in a lump sum form or not and however it is calculated.

* Secondly, it can be treated as being exempt from being assessable income (and CGT) where it is received for injury, the loss of physical capacity, illness, pain, suffering or where it is paid under anti-discrimination legislation.

However, determining which category of compensation such a payment falls into is not always easy – especially where it may be an out-of-court settlement payment which comprises both types of payments. While generally such payments will not be taxable, if they are an out-of-court settlement and the whole or part of the payment can be identified as comprising compensation for lost income (by whatever means, such as the initial pleadings), then that component can be assessable.

So, suffice to say your professional adviser is invaluable in this situation – and in particular before agreeing on the receipt of any such settlement payment.

If you or anyone you know needs help regarding the tax treatment of compensation payments, contact the team at GFA

13/06/2024

Six super strategies to consider before 30 June - Part 3

Tip 5 – Maximise non-concessional contributions

Another way to boost your superannuation is to make a NCC with some of your after-tax income or savings. The general NCC cap for 2023/24 is $110,000 and eligibility to utilise the cap depends on your TSB1.

Although NCCs don’t reduce your taxable income for the year, you can still benefit from the low tax rate of up to 15% that is paid on superannuation on investment earnings. This tax rate may be lower than what you might pay if you held the money in other investments outside superannuation.

Tip 6 – Receive the government co-contribution

If you’re a low or middle-income earner earning less than $58,445 in 2023/24 and at least 10% is from your job or a business, you may want to consider making a NCC to superannuation before 1 July 2024. If you do, the Government may make a ‘co-contribution’ of up to $500 into your superannuation account.

The maximum co-contribution is available if you contribute $1,000 and earn $43,445 pa or less. You may receive a lower amount if you contribute less than $1,000 and/or earn between $43,445 and $58,445 pa.

Like the superannuation spouse tax offset, the definition of total income for the purposes of the co-contribution includes assessable income, reportable fringe benefits and reportable employer superannuation contributions.

Need help?

You’ll need to meet certain eligibility conditions before benefitting from any of these strategies. Contact us before 30 June if you’re thinking about investing more in superannuation so we can help you decide which strategies are most appropriate to your circumstances.

30/05/2024

Six super strategies to consider before 30 June - Part 2

Tip 3 – Spouse contribution splitting

You can split up to 85% of your 2022/23 CCs before 30 June 2024 to your spouse’s superannuation if your spouse is:

* Under preservation age, or
* Aged between their preservation age and 65 years, and not retired at the time of the split request.

This is an effective way of building superannuation for your spouse and can manage your TSB which can have several advantages, such as:

* Equalising your balances to maximise the amount you both have invested in tax-free retirement phase income streams, or
* Optimising both of your TSBs to access a higher NCC cap, etc.
Tip 4 – Superannuation spouse tax offset

If your spouse is not working or earns a low income, you may want to consider making a NCC into their superannuation account. This strategy could benefit you both by boosting your spouse’s superannuation account and allowing you to qualify for a tax offset of up to $540.

You may be able to get the full offset if you contribute $3,000 and your spouse earns $37,000 or less pa (including their assessable income, reportable fringe benefits and reportable employer superannuation contributions).

A lower tax offset may be available if you contribute less than $3,000, or your spouse earns between $37,000 and $40,000 pa.

24/05/2024

Six super strategies to consider before 30 June - Part 1

With the end of financial year fast approaching, now is a great time to boost your superannuation savings and potentially save on tax. Below are six superannuation strategies to consider before 30 June 2024.

Tip 1 – Use the carry forward concessional contribution rules

If you want to make up for lost time and make extra contributions to top up your superannuation, you may be able to use the carry forward concessional contribution (CC) rules (otherwise known as “catch-up concessional” rules) to make large CCs this year without exceeding your CC cap.

This strategy can allow you to carry forward any unused CC cap amounts that have accrued since 2018/19 for up to five financial years and use them to make CCs in excess of the general annual CC cap (currently $27,500 in 2023/24).

You can then make a CC using the unused carry forward amounts this financial year provided your total superannuation balance (TSB) on 30 June 2023 was below $500,000.

Tip 2 – Make a personal deductible contribution

Carry-forward contributions may also provide you with an opportunity to make higher amounts of personal deductible contributions in financial years where you may have a higher level of taxable income, for example, due to assessable capital gains.

But if you’re not eligible to use the carry forward rules to make a larger contribution, you can still boost your superannuation by making a personal deductible contribution up to the general CC cap.

It’s important to note that personal deductible contributions are only deductible if you meet all of the following conditions:

* You make the contribution to a complying superannuation fund
* You are at least age 18 when the contribution is made (unless you derived income from carrying on a business or from employment-related activities)
* You make the contribution within 28 days after the month in which you turn 75
* You notify your superannuation fund trustee in writing of your intention to claim the deduction
*The notice must be given by the earlier of:
- when you lodge your income tax return for the year the contributions were made, or
- the end of the financial year following the year the contributions were made
* The trustee of your superannuation fund must acknowledge receipt of the notice, and you cannot deduct more than the amount stated in the notice.

30/04/2024

ARE YOUR AFFAIRS IN ORDER? (PART 3)

Death

Proper estate planning is an essential part of modern business management. Making an appropriate and valid Will is the first step in estate planning. It is also important to consider your assets and how they are held.

As a starting point the questions you should consider are:

1. Is your land jointly held or as tenants in common? Is it owned by a family trust, a company or superannuation fund?

2. How are the assets of farming operations, such as machinery, plantain livestock held? Is there a family trust or company involved?

3. Are there enough non farming assets to be gifted to non-farming children? If not, is life insurance an option to provide for these children?

4. Is there an ability to adequately pay the debts that are outstanding if there is a death or, if those debts are to pass with certain assets, will those assets be viable?

5. Are there any tax implications that might occur? Generally, death doesn't trigger any tax to be paid, but it can impact significantly on the beneficiaries of the Will.

A well thought out Will is the best contribution you can make to creating a sensible and fair outcome. It may not be a perfect result, however no Will, or an out of date Will, can be a nightmare for surviving family members and business partners. Wills are documents that need to be revisited regularly and this is particularly so when life circumstances change.

Talk to us for guidance when developing or renewing your business and estate plan to ensure they reflect your goals bad wishes, both now and in the future.

11/04/2024

ARE YOUR AFFAIRS IN ORDER? (PART 2)

Illness and Incapacity

Every adult needs to consider making an Enduring Power of Attorney which enables financial decisions to be made during a temporary illness or permanent incapacity. Most people who suffer from a sudden illness, such as a stroke, have no warning symptoms and do not have time to prepare and Enduring Power of Attorney.

The best time to make an Enduring Power of Attorney is when you are fit and healthy. Your spouse as your attorney is usually a practical choice; however, if your spouse is unavailable or not suitable, then you can choose one or more to act as attorney.

Adult children, close friends or other family members with farming knowledge may be a sensible choice. They can act together or either one can sign documents. It is important to choose an option that best suits your circumstances and increases the likelihood that your interests and the interest of the business will continue to be served.

04/04/2024

ARE YOUR AFFAIRS IN ORDER? (PART 1)

Key Points

* Well-thought-out Wills are an essential part of modern business planning and management.

* Not having a Will or having an out-of-date Will can have severe, unintended consequences for the business and family members.

* Business and estate plans should be revised regularly to ensure they reflect your goals and wishes both now and in the future.

Death and taxes are often quoted as the only two certainties in life. However, many people proceed under the expectation that they will be around in their old age to guide outcomes in their desired direction and underestimate the potential negative consequences of unexpected events.

Moden farming business involve significant capital investments in land and other assets, and the associated debt levels are often substantial.

It is essential that farm business partners include in their business's strategic plan what should happen if they become chronically ill, incapacitated or deceased.

Having these affairs in order can alleviate stress at a time when emotions are stretched and can avoid unintended consequences negatively impacting your business and the surviving family members.

Call now to connect with business.

22/03/2024

Your farm business annual tax return is a legal requirement. However, the problem with a tax return is that they are completed using the ATO guidelines and rules and therefore do not provide a very good set of accounts which are needed to more effectively manage the business and work out your real profit.

A tax return gives you a rear view or historic view of your business. That doesn’t help you to plan for the future. To do that you’re going to need accurate and current financial reports and
develop good farm budgets.

However, as we must have tax returns, we might as well understand what they are telling us about your business. Unfortunately, this is not very much.

HERE IS WHAT THEY WILL TELL YOU:

• Cost of your assets
• How much tax to pay
• Total debt
• Losses carried forward

HERE IS WHAT THEY DON’T TELL YOU:

• They don’t show market value of assets, so it is not possible to determine farm net wealth.
• They don’t show financial performance for a farm season. In many cases, especially for broad acre farmers, they will have a combination of information for multiple seasons presented in one report. For example, income from two or three growing seasons and the expenses for the next season are all combined.
• They don’t show the profitability for each enterprise in the farm, for example profitability from crop, wool production or livestock.
• They don’t show actual cash movements.
• They don’t allow for meaningful comparisons with previous years due to tax adjustments that either accelerate expenditure or defer
income.

A tax return at the very best only tells you how much tax you have to pay.

So, if you are paying a lot of money to prepare your annual financial statements or balance sheets, then that is an expensive way to simply work out how much tax you have to pay.

WE KNOW THERE IS A BETTER WAY…

Give us a call and we will show you how to get more from your accounting spend.

Call now to connect with business.

15/03/2024

Bookkeeping

Business owners have to do a lot of juggling. While running and growing your own business or the family business, sometimes you need to decide what is most important. Otherwise you can drop the ball.

More and more business owners are enjoying the benefits of outsourcing bookkeeping so they can focus on the things that matter the most. Just because you can do your own bookkeeping- doesn’t mean it’s the best use of your time. Why not make your business life easier?

Our bookkeeping division – Azure Bookkeeping, can do as much or as little as you need:

* Data entry
* Payroll
* Super payments
* Debtors management
* BAS
* Creditor payments

Did you know much of this can be done for around $50 per week for an average sized small business?

Contact us today to get started!

08/03/2024

Whether you’ve received bad advice or paid for advice you didn’t receive at all, our supervisory and regulatory bodies have sought not only to improve the system so it won’t happen again, but also to ensure that if you are on the receiving end of such bad behaviour, you could be entitled to receive financial restitution.

If you’ve recently received a compensation payment, you might be wondering whether you need to pay tax on it.

The answer is – it depends!

It depends on how your investment was held and the type of compensation you received.

For example, if you’ve disposed of the investment and previously reported a capital gain in your income tax return, your compensation payment increases the capital gain (you may be able to claim the 50% discount too if you held the investment for more than 12 months). You may need to amend your income tax return to include this additional capital gain.

If you haven’t yet disposed of the investment, and you hold it as a capital investment, then the compensation payment reduces its cost for when you do dispose of it in the future (make sure keep details of the compensation payment with your tax records to provide to us later).

Where your compensation payment includes an amount that is a refund or reimbursement of adviser fees, and these fees were previously claimed as a tax deduction by you, then the amount you received as a refund or reimbursement will generally be taxable to you in the income year you receive it. Similarly, any part of the payment that represents interest should also be included in your tax return in the year you receive it.

If you’ve received an amount of compensation and not sure whether it is taxable, or if you need to amend a prior year tax return for a payment you received, please reach out to us.

It depends on how your investment was held and the type of compensation you received.

For example, if you’ve disposed of the investment and previously reported a capital gain in your income tax return, your compensation payment increases the capital gain (you may be able to claim the 50% discount too if you held the investment for more than 12 months). You may need to amend your income tax return to include this additional capital gain.

If you haven’t yet disposed of the investment, and you hold it as a capital investment, then the compensation payment reduces its cost for when you do dispose of it in the future (make sure keep details of the compensation payment with your tax records to provide to us later).

Where your compensation payment includes an amount that is a refund or reimbursement of adviser fees, and these fees were previously claimed a tax deduction by you, then the amount you received as a refund or reimbursement will generally be taxable to you in the income year you receive it. Similarly, any part of the payment that represents interest should also be included in your tax return in the year you receive it.

If you’ve received an amount of compensation and not sure whether it is taxable, or if you need to amend a prior year tax return for a payment you received, please contact the team at GFA.