NSW COVID-19 Support

Get the NSW COVID-19 support payments you need.

NSW Covid-19 Business Support

Times are tough. Lockdown starts to bite. The first couple of weeks were ok – we all thought it would be over quickly. But now things are really turning south. You need help – fast. The good news is that there is money to help you. Not much, but hopefully enough.

There are four support payments on the table. Business Grant – JobSaver – Micro-Business Grant – and – Disaster payment. 

Setting the scene

It is an either-or proposition. You have the Business Grant and JobSaver on one side if your business sales are over $75,000.

And then you have the Micro-Business Grant on the other side if your business sales are between $30,000 and $75,000.

The disaster payment is completely separate from all this and has nothing to do with your business. The disaster payment goes to you as an individual employee who lost work hours.

So if you are an employee of your company, then you might be able to double-dip. Your business might get the business grant and JobSaver while you as an employee might be able to qualify for the disaster payment.

If you are a sole trader, unfortunately, there is no double-dipping since it is all just you. So you go for either or.

NSW 2021 COVID-19 Business Grant

Covers the first three weeks of the lockdown from 26 June to 17 July 2021. It is a three-tiered payment of $7,500, $10,500 or $15,000 depending on whether your turnover dropped by 30%, 50% or 70%. Your annual turnover must be $75,000 or more. Applications close on 13 September 2021.

NSW 2021 COVID-19 JobSaver

Starts from week 4 of the lockdown, so from 18 July to the end whenever that will be. JobSaver pays at least $1,500 per week or 40% of your weekly payroll based on your March 2021 BAS if employing or $1,000 per week if non-employing. You must have had a 30% drop in sales and your annual sales must exceed $75,000. Applications close 18 October 2021.

NSW 2021 COVID-19 Micro-business Grant

Starts from week 1 to end of the lockdown and pays $1,500 per fortnight. You qualify if you had a 30% drop in sales and your annual sales must be between $30k to $75k. Applications close 18 October 2021.

Disaster Payments

Disaster payments have nothing to do with your business. They go to you as an individual employee. Payments started low but are now $450 and $750 if you lost less or more than 20 hours of work respectively. You apply through Centrelink.

Does that make sense? Please call me if you are not sure how to go from here.

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Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.

Carryforward of Concessional Contribution Caps

Carryforward of Concessional Contribution Caps

The carryforward of concessional contribution caps gives you time. It gives you time to decide.

Carryforward of Concessional Contribution Caps

It used to be a decision at the last minute. Do you top up or not?

If you don’t top up, you leave your concessional contributions at the superannuation guarantee (SG) that came with your wages.

If you do top up, you increase your concessional contributions to the relevant cap and claim a tax deduction for that top up. 

Whether you do or don’t used to be a last minute decision. It was a use it or lose it. But it no longer is. At least for five years it isn’t. You now have five years to decide.

Let’s start from the beginning.

Concessional Contribution Cap

You have a cap on concessional contributions each year. The cap is:

2018/19 – $25,000
2019/20 – $25,000
2020/21 – $25,000
2021/22 – $27,500
2022/23 – $27,500 (estimate)

This cap includes any superannuation (SG) guarantee you received. SG is the super your employer pays for you in line with your wage or salary. 

Tax Deduction

Concessional contributions are called concessional because somebody gets a tax deduction for these contributions. For SG your employer gets the tax deduction. For any top up you do.

Excess Contribution Tax

Nothing stops you from contributing more than these caps. But if you do (without a relevant rollforward), then you pay excess contribution tax.

Sometimes it makes sense to pay the additional excess contribution tax, but usually it doesn’t.

But you might not even have to, since there is the rollforward.

Rollforward

It used to be that if you didn’t use up a cap, you lost it. So if you didn’t make any concessional contributions in 2017, that unused cap was lost. But not anymore.

From 1 July 2018, you can rollforward any unused contribution caps for up to five years.

So in 2021/22 you could make a concessional contribution of $102,500 and claim a tax deduction for the full amount. Or if you wait another year until 2022/23, you could claim $130,000. Of course assuming you received no other concessional contributions in those years, so neither SG nor personal.

However, if you wait until 2023/24, then you lose the 2018/19 cap, since you are out of the 5 year period. 

So you have five years to decide, but at the end of the fifth year it is back to: Use it or lose it.

 

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Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.

Tax When You Expand Overseas

Tax When You Expand Overseas

What happens to your tax when you expand overseas?

Tax When You Expand Overseas

There are two things you need to look out for around tax when you expand overseas. And these are GST and income tax. 

GST

When you sell things overseas, these sales are usually GST-free in Australia.

However, the other country might charge GST on your products. And they charge this GST in one of three ways:

1 – If you sell via a platform like Shopify or Amazon, the platform will charge the overseas GST.

2 – If your product exceeds a certain value, the other country will hold your shipment until your customer pays the overseas GST. 

3 – And if total sales in that country exceed a certain threshold, your Australian or overseas company – depending on who makes the sales – is required to register for GST, charge overseas GST and lodge overseas GST returns. 

So that’s GST in a nutshell. Of course, the devil is in the detail, but this is roughly how it works in most countries.

Income Tax

In Australia you are taxed on your worldwide income, assuming you are a tax resident of Australia. 

But to what extent any overseas profit is taxed in Australia or overseas, depends on what you are doing overseas. So you face one of four scenarios.

1 – You have no presence in the other country – no staff, no stock, no office, no warehouse, no company or other entity, nothing. And so you pay no income tax over there. Everything is taxed in Australia.

2 – You have an entity over there that will pay that country’s tax just like anybody else. When you now distribute these profits back to your Australian entity, there is no further tax. So your business only pays tax once on these profits. 

3 – You have no entity over there but a presence – be it staff, inventory, wharehouse, office or something else. And so you have a so-called permanent establishment. And this permanent establishment lodges tax returns and pays tax over there just like a real entity. Any profits sent back to Australia come with a credit for any tax paid overseas, so your business only pays tax once.

4 – You have an entity over there but are able to argue that this entity is an Australian tax resident and has no permanent establishment in the other country. It used to be that you only need central management and control in Australia for this to work. But now you also need your core operations in Australia. And that makes scenario 4 beyond the point now and infeasible.

Double Taxation

Why would you even be interested in scenario 4 if it was still feasible? Because scenario 2 and 3 have one big drawback if you operate through an Australian company – double taxation.

When you distribute the overseas profits to you as the sole shareholder, there is no franking credit attached to the extent the Australian company didn’t pay Australian income tax.

The foreign income tax paid doesn’t give you franking credits. And so you pay tax again on the overseas profit at your marginal tax rates. If …..

Ways To Avoid Double Taxation

If there is an overseas profit. And if you actually distribute those overseas profits to the individual shareholder.

The Australian entity can on-charge any expenses it incurred for the overseas entity (plus margin) in form of management fees. That might already reduce the overseas profit to nil or at least significantly reduce it. But make sure you can justify these charges. The overseas tax collection agency might look at your transfer pricing.

And you don’t have to distribute the overseas profits anyway. If you want to keep some profits in the Australian entity to fund further expansion, you keep the overseas profits and pay the Australian profits out and hence no double taxation either.

Permanent Establishment

Whether you have a permanent establishment (‘PE’) in the other country is not always easy to tell. There is a lot of grey. But here are a few clear indicators.

Using a 3PL service doesn’t create a PE, but using your own warehouse does.

Having independent contractors doesn’t create a PE, but having dependent contractors or staff does.

Using a shared office from time to time while you travel doesn’t create a PE, but having a permanent office does.

The rest depends on the double tax agreement between Australia and the other country and a few other things.

Summary

So when you want to expand overseas, look at GST and income tax. And give me a call if you get stuck.

 

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Jobkeeper 2.1

How to Book a Company Car in Xero

Paying Employee Accommodation

 

Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.

How to Book a Company Car in Xero

How to book a company car in Xero? Here is how you do it.

Book a company car in Xero

To book a company car in Xero is complex – there are a lot of moving parts. You have the split between principal and interest. Then depreciation or the instant asset write off. GST. The car limit. FBT. And last but not least a potential Div 7A issue. That is a lot. But let’s go through it step by step.

Acquisition

Let’s use an example. On 14 April 2020 you bought a car for $80,000 – a so-called ‘luxury car’ – and the dealer invoice says the following:

NetGSTGross
Vehicle Price69,698.476,969.84776,668.32
Transfer Fee34.00034.00
LCT (Luxury Car Tax)342.680342.68
Stamp Duty2,955.0002,955.00
73,030.156,969.8580,000.00
Less Deposit(2,000.00)
Less Finance Liability(78,000.00)
Due0.00

You book this purchase in Xero in 9 simple steps.

Step 1 – Raise a Bill 

You start with raising a bill if the car is financed. If you pay for the car, you have a choice – bill or money spent.

DR Fixed Asset 1GST on Expenses69,698.47
DR Fixed Asset 1GST Free Expenses34.00
DR Fixed Asset 1GST Free Expenses342.68
DR Fixed Asset 1GST Free Expenses2,955.00
DR GSTSystem generated6,969.85
CR Car Finance LiabilitySystem generated – BAS Excluded(80,000)

So the car shows up in your balance sheet with $73,030.15.

Step 2 – Reconcile Loan Repayments 

Every time there is a loan repayment, you need to split the payment between principal and interest as listed in the finance documents.

DR Car Finance LiabilityBAS Excluded1,000
DR Interest ExpenseBAS Excluded1,00
CR BankSystem Generated(1,100)

If you paid for the car outright, then you can skip this step. There is no liability to repay.

Step 3 – Determine Car Limit Excess

If the purchase price of your car is below the car limit in the year of purchase, you can skip this step. If it isn’t, you claimed too much GST in Step 1. So now you adjust this.

The car limits for 2019/20 and 2020/21 are as follows (for all cars, whether fuel efficient or not):

YearNetGSTGross
2019/2052,346.365,234.6457,581.00
2020/2153,760.005,376.0059,136.oo

This is the maximum GST and depreciation you can claim. No need to pro rata for having bought the car sometime during the year. 

Step 4 – Adjust GST

So now you adjust the GST to these amounts. Here is the booking.

DR Fixed Asset 1BAS Excluded19,087.32
CR Fixed Asset 1GST on Expenses(17,352.11)
CR GSTSystem generated(1,735.21)

The GST of $1,735.21 you no longer claim increases the cost of the car from $73,030.15 to $74,765.36.

Step 5 – Instant Asset Write Off 

Thanks to the instant asset write off ($150,000 threshold until 30 June 2021), you can claim the car in one go. But you only get a tax deduction up to the car limit.

DR Instant Asset Write Off ExpenseBAS Excluded52,346.36
DR Non Deductible ExpensesBAS Excluded22,419.00
CR Accumulated Depreciation Asset 1BAS Excluded(74,765.36)

You can book the GST adjustment through a manual journal – as done above – or through the depreciation worksheet in Xero.

Step 6 – Determine FBT Days

In the year of purchase (or sale) you don’t hold the car for the full 365 days. Open the ATO day calculator here and calculate the days from the date of purchase to 31 March. The FBT year goes from 1 April to 31 March.

In this example you bought the car on 14 April 2020. So you calculate the FBT days from 14 April 2020 to 31 March 2021, which are 352 days.

Step 7 – Calculate FBT

Any company car takes you into FBT territory. FBT stands for Fringe Benefit Tax.

Providing you or any employee with a car constitutes a car benefit covered by Division 2 FBT Assessment Act, giving rise to FBT. 

To work out your FBT position, you choose between the statutory formula method and the operating cost method. The later requires a log book.

Which one is better depends on how much you REALLY use the car for business. If less than 80%, use the statutory formula method which works like this (base value excludes registration or stamp duty):

Taxable Value = Base Value (cost + delivery + GST) x 20% x Available Days/365 – Employee Contribution

Not relevant in the year of purchase or the subsequent 3 years, but once you owned the car for at least 4 years on 1 April, you can reduce the base value by 1/3 (33.33%).

NetGSTGross
Vehicle Price69,698.476,969.84776,668.32
Transfer Fee34.00034.00
TOTAL Base Value69,732.476,969.8576,702.32
x 20%15,340.46
x 352/365 days14,792.81

So you take 20% of the base value and then pro rata the amount. That is the employee contribution to reduce your FBT to nil.

Step 8 – Book Employee Contribution

You have a choice. You can lodge an FBT return and then pay the FBT. Or you recognise an employee contribution for the amount and voila: No FBT to pay and no FBT return to lodge. Most sole sharesholders do the later.

The employee contribution is subject to GST. In the example it would look like this.

DRShareholder LoanBAS Excluded14,792.81
CROther IncomeGST on Income(13,448.00)
CRGSTSystem Generated(1,344.81)

If you set amounts to ‘GST inclusive’ in Xero, you don’t need to calculate the GST. The software does it for you.

Step 9 – Div 7A

You just have one last potential problem to deal with if you booked the employee contribution in Step 8. And that is Div 7A. If the company has a receivable to the shareholder at year end, you have a Div 7A problem.

So create a Div 7A agreement or reduce the distributable suplus to nil.

Summary

And that’s it. This is how you book a company car in Xero. In future years, you still have to deal with loan repayments and FBT employee contributions, but the rest is done and dusted.

Does this make sense? Please give me a call if you get stuck.

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Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.

Car Tax Deduction

Your business needs a car, so it got one. The big question is tax. How do you claim your car tax deduction?

Car Tax Deduction

Working out your car tax deduction can be confusing. Here are 10 steps to get the highest tax deduction possible.

1 – Put Travel Aside

Everything that follows here is about car expenses (motor vehicle expenses to be precise), but not travel. The distinction between car and travel is important, because different rules apply. 

Motor vehicle expenses are fuel, oil, repairs, servicing, car wash, insurance, registration, interest and depreciation (or lease payments) and so on.

Travel expenses are road tolls, parking, car ferry or paying somebody for getting a lift and so on. If you incur these for a business trip, you get the full tax deduction.

So put travel expenses aside for now and focus on car expenses.

2 – Ownership

Whoever owns the car, gets the car tax deduction. 

If your employee owns the car, you get no tax deduction for the car itself. But you get a tax deduction for any car allowance you pay. Treat the allowance like any other wage payment. After that you are done. 

If you own the car, you get the tax deduction.

3 – Methods

Now it gets confusing. You need to choose a method to work things out. The problem is that there are four methods. Four!

Cents-per-km Method: You claim 72 cents for each business km – up to 5,000 km. That is your tax deduction.

Logbook Method: You log every trip over 12 weeks and work out your business percentage, which you then apply to your actual cost. That is your tax deduction. Your logbook is valid for 5 years.

Statutory Formula Method: You apply 20% to your car’s base value, possibly pro rata. That is your FBT taxable value.

Operating Cost Method: You keep a log book for 12 weeks and work out your private percentage, which you then apply to your actual cost. That is your FBT taxable value.

But not all of these four methods apply to you at once. 

4 – Tax Deduction

Which tax deduction is available to you depends on your business structure and type of motor vehicle.

Business Structure

If you are a sole trader or partnership, you can choose between the cents-per-km and the logbook method to determine your tax deduction.

If you are a company or trust, you get a full deduction for all motor vehicle expenses. Whatever you pay, you get to tax deduct. But….then FBT picks up any private portion of those costs. 

And to calculate this FBT value, you either use the statutory formula method or the operating cost method.

Type of Motor Vehicle

Everything we talk about here only applies to cars. Cars is anything designed to carry a load of less than one tonne and less than nine passengers.

Anything larger than this usually gets a full tax deduction and no FBT.

5 – Best Method

How do you work out which one will give you the highest tax deduction? The answer depends on your actual costs and private use.

Actual Costs

The cents-per-km and statutory formula methods don’t take your actual running costs into account. But the logbook and operating cost methods do.

So if your running costs are particularly high – high kms, fuel inefficiencies, a lot of repairs, expensive maintenance etc – then go for the logbook /operating cost method. If they are low, go for the cents per km / statutory formula.

The purchase price only matters if your car is below the car limit.

Private Use

The statutory formula method is the only method that ignores your actual private use and just assumes a fixed percentage. So if your private use is high – rule-of-thumb over 20% – go for the statutory formula method in a company or trust. If your private use is low, go for the other methods.

6 – Receipts

For the cents-per-km method you don’t need receipts. Just a reasonable explanation how you calculated your number of business kms.

For the logbook method you don’t need receipts for fuel and oil if you can show how you estimated those costs, but you need receipts for all other costs.

As a company or trust you need receipts for all motor vehicle expenses.

7 – Instant Asset Write Off

The instant asset write off rules give you a full tax deduction in the year of purchase (adjusted to your business % if a sole trader or parternship), as long as the purchase price is below the threshold.

This threshold is currently $150k until 30 June 2021. 

8 – Car Limit

You can only claim a car tax deduction and GST up to the car limit. The car limit for 2020/21 is $59,136 including GST, so $53,760 plus GST of $5,376.

For the cents-per-km method the car limit doesn’t affect you.

In all other cases it does. You can only claim depreciation (or the instant asset write-off) and GST up to the car limit, reduced by any private % for sole traders and partners. 

9 – Employee Contributions

This one only applies to companies and trusts. If the employee reimburses the company or trust for the taxable value they received, then the FBT is nil. If they don’t, then the company or trust has to lodge an FBT return and pay the FBT.

So most sole directors and shareholders of family companies pay the company the taxable value to avoid having to lodge an FBT return. There is usually no cash payment, but just a debit against shareholder loan.

10 – Div 7A

Booking the employee contribution against shareholder loan in Step 9 (as a company or trust) might give you a Div 7A problem, if you owe the company or trust at the end of the financial year.

If you (or anybody associated with you) owes the company or trust at year end, Div 7A wants to treat that debt as an unfranked dividend unless you have a Div 7A agreement.

So get a Div 7A agreement or reduce the distributable surplus to nil and voila: Your Div 7A problem is sorted. But for this one ask an accountant to help you.

Summary

So these are 10 steps to claim a deduction for your car. Just go through these step by step. And give me a call if you get stuck.

 

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Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.

 

paying employee accommodation

Paying Employee Accommodation

You want to expand into another state and so one of your managers moves to the new location. To sweeten the deal, you start paying employee accommodation. You pay their rent. Sounds straight forward, doesn’t it?

Paying Employee Accommodation

The problem is that the tax status of these rent payments might take a little time to sort out. Paying employee accommodation, you have five options.

Option 1

Your employee rents the house and you compensate them. Either by reimbursing them or increasing their salary or whatever you call this extra payment.

The bottom line is that your employee can’t tax deduct the rent since a private expense. But pays tax on the extra cash you pay them to cover the rent. You on the other hand get to tax deduct everything you pay.

Option 2

You rent the house and your employee pays nothing extra.

Now you are in FBT territory. FBT stands for Fringe Benefit Tax. The rent payment constitutes a housing benefit covered by Division 6 FBT Assessment Act. And so you pay FBT on it.

You get a tax deduction for the full rent as well as the FBT you pay on the rent. Your employee’s tax return is unaffected.

You calculate the FBT as: Taxable value (less employee contribution) x 1.8868 x 47%

So let’s say the annual rent is $10k – no GST since residential rent. In that case you would pay $8,867.96 FBT ($10k x 1.8868 x 0.47 = $8,867.96).

Option 3

You rent the house but your employee reimburses you for the rent. Your FBT is nil: ($10k less $10k) x 1.8868 x 0.47 = nil. Your employee’s tax return is unaffected apart from additional tax on any potential wage increase.

Option 4

This one often gives you the best outcome. You use the temporary accommodation exemption.

You rent the house without any employee contribution. But you keep the arrangement limited to 4 or 6 months while your employee actively looks for permanent accommodation. In that case no FBT to pay and you still get the full tax deduction.

This exemption is usually limited to 4 months but can be extended with an employee declaration to 6 months or even 12 months.

Option 5

This one only applies if your employee keeps their old place and starts living away from home. In that case some or all of the rent and food you cover while away is FBT free as a living-away-from-home allowance for up to 12 months.

Does this make sense? Just give me a call if you get stuck.

 

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Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.

Jobkeeper Payment Cycles

Jobkeeper Payment Cycles

Jobkeeper runs over 26 fortnights from 30 March 2020 to 28 March 2021. That is 26 Jobkeeper payment cycles. Here are the relevant dates.

Jobkeeper Payment Cycles

The first round of Jobkeeper covers two quarters: June and September 2020. Its modified extension covers two more quarters: December 2020 and March 2021.

Jobkeeper 1.0

Jobkeeper 1.0 started on 30 March 2020 and ran over 13 fortnightly payment cycles to 27 September 2020, paying $1,500 per fortnight per eligible employee.

1 – 30 March to 12 April 2020

2 – 13 April to 26 April 2020

3 – 27 April to 10 May 2020

4 – 11 May to 24 May 2020

5 – 25 May to 7 June 2020

6 – 8 June to 21 June 2020

7 – 22 June to 5 July 2020

8 – 6 July to 19 July 2020

9 – 20 July to 2 August 2020

10 – 3 August to 16 August 2020

11 – 17 August to 30 August 2020

12 – 31 August to 13 September 2020

13 – 14 September to 27 September 2020

So all up you should have received 13 payments of $1,500 per employee, so all up $19,500 per eligible employee.

Jobkeeper 2.0

Jobkeeper 2.0 started on 28 September 2020 and runs until 28 March 2021, but rates change. To be eligible as an employer from 28 September onwards you must have had an actual turnover drop of at least 30% in the relevant quarter. So no more projected turnovers. It is all based on actual turnovers now.

December Quarter

From 28 September 2020 to 3 January 2021 Jobkeeper has dropped to $1,200 per fortnight per eligible full-time employee and $750 per part-time employee.

14 – 28 September 2020 to 11 October 2020

15 – 12 October 2020 to 25 October 2020

16 – 26 October 2020 to 8 November 2020

17 – 9 November 2020 to 22 November 2020

18 – 23 November 2020 to 6 December 2020

19 – 7 December 2020 to 20 December 2020

20 – 21 December 2020 to 3 January 2021

March Quarter

From 4 January to 28 March 2021 Jobkeeper drops down to $1,000 and $650 per full-time and part-time employee respectively.

21 – 4 January to 17 January 2021

22 – 18 January to 31 January 2021

23 – 1 February to 14 February 2021

24 – 15 February to 28 February 2021

25 – 1 March to 14 March 2021

26 – 15 March to 28 March 2021

So these are the 26 Jobkeeper payment cycles.

 

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Jobkeeper 2.1

Take Cash Out Of Company

COVID-19 Help for Business

 

Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.

How To Take Cash Out of Your Company

Take Cash Out Of Your Company

How to take cash out of your company without getting hit with a massive tax bill?

How To Take Cash Out of Your Company

Being a sole trader or partnership, one thing is really simple: taking cash out. No strings attached. Your business bank account is all yours. As a company, it it isn’t. 

Sole Trader and Partnership

As a sole trader or partnership, your business and you are one. Your business is not a separate legal entity, but part of you. So your business cash is your cash. 

How much you take doesn’t affect your tax position. You already paid tax on the business profits at your marginal tax rate.

Company

But all this changes in a company. Now you and your business are no longer one, but two. You are a legal entity. And your company is another. The company’s cash is no longer your cash.

So how do you take money out of your company? There are 5 ways and just those 5 – there is no other way.

1 – Wages

The company pays you a wage. Any PAYG withholding you receive back as a tax offset when you do your individual tax return.

Wages are included in your assessable income. So you pay tax on any wages you receive.

2 – Dividends

The company declares and pays you a dividend, hopefully with franking credits attached. Franking credits give you a refundable tax offset and hence are like cash. They are a refund of the tax the company already paid.

Dividends are included in your assessable income. So you pay tax on any dividends you receive, but with a tax offset for any franking credits.

3 – Shareholder Loan

You just take money out of the company and book it against shareholder or director loan. Or you pay private expenses from your company’s bank account. Nobody says that you can’t do that. You can.

But the crux is that unless you pay this back by the time your tax return is due, this loan will be treated as a dividend. So it gets included in your taxable income and you pay tax on it. Unless….you make it a Div 7A loan.

4 – Div 7A Loan

This is a common way to take money out of a company – for up to 7 or 15 years – without it hitting your individual tax return as income. You need a formal loan agreement and minimum yearly repayments of interest and principal.

But a Div 7A loan is only a temporary solution. In the end you have to pay it all back. And then your money is back in the company – looking for a new way out.

5 – Capital Distribution

Amounts sitting in your capital profits reserve, for example pre-CGT capital gains, are distributed as capital upon liquidation of your company.

Capital distributions receive generous tax concessions (50% CGT discount, small business CGT concessions), so you pay a lot less tax than if you had received this money as wages or dividends.

So that’s all you have. Those 5 ways. Does all this make sense? Just give me a call, if you get stuck.

 

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Jobkeeper 2.1

Help is Coming

COVID-19 Help for Business

 

Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.

Jobkeeper 2.0

Jobkeeper 2.1

The original Jobkeeper started on 30 March 2020 and will end on 27 September 2020. After that it will be Jobkeeper 2.1.

Jobkeeper 2.1

All is not lost. Jobkeeper 2.1 is coming, starting on 28 September 2020. But it will be harder to qualify for this one, since there are five changes.

1 – Split Between Full-Time and Part-Time

For Jobkeeper 1.0 all employees were treated the same. All received $1,500 per fortnight. 

This is changing for Jobkeeper 2.1. It will now distinguish between full-time and part-time employees.

Anybody who worked 20 hours or more per week in February 2020 counts as full-time. Everybody else is part-time.

So when you apply for the next round, you indicate which employees are full-time and which are part-time.

2 – Drop of Fortnightly Rate

During Jobkeeper 1.0 the fortnightly rate was $1,500 per eligible employee.

For full-time employees on Jobkeeper 2.1 this decreases to $1,200 for October to December 2020 and then to $1,000 from January to March 2021. For part-time employees Jobkeeper drops from $1,500 to $750 and then $650 per fortnight.

3 – Actual Past Turnover

The turnover test for Jobkeeper 1.0 was based on your projected turnover. You just gave it the best estimate you could. And if you got it wrong, that was ok. 

For Jobkeeper 2.1 there is no more guess work. Just actual numbers of what happened so far. After 27 September it no longer matters what you project. All depends on your actual quarterly turnover in the September 2020 quarter.

If the September 2020 quarter (and the December 202 quarter later on) had a drop of least 30%, you continue to qualify. 

4 – Continuous Test

For Jobkeeper 1.0 you just had to pass the turnover test once. It was like a door – once you got in, you were in.

For Jobkeeper 2.1 this changes to a continuous test per quarter. For each quarter, you have to show that the past 1 (later 2) quarters had suffered at least a 30% drop in turnover.

5 – New Employees

Everything we spoke about so far made things tougher for you. But this one is actually good news. This one means more money for you.

You can add any employees who were working for you as of 1 July to the Jobkeeper scheme and you can do this from 3 August 2020, so for the tail end of the first round of Jobkeeper.

For Jobkeeper 1.0 you could only offer Jobkeeper to employees who had been employees as of 12 March 2o20. So this date will change to 1 July for Jobkeeper from 3 August onwares.

———

So these are the five changes that come with Jobkeeper 2.1.

And just in case you are wondering, Jobkeeper 2.0 was announced on 21 July 2020 with further changes on 7 August, making it Jobkeeper 2.1.

Does all this make sense? Just give me a call if you get stuck.

 

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Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.

Tax on Cash Flow Boost and JobKeeper

Tax on Cash Flow Boost and JobKeeper

Do you need to pay any tax on the Cash Flow Boost and Jobkeeper payments your business receives?

Tax on Cash Flow Boost and JobKeeper

The short answer is No and Yes.

Cash Flow Boost

The cash flow boost is NANE. You include it in your tax return but under non-assessable non-exempt income. So you declare it but you don’t pay tax on it.

JobKeeper

The JobKeeper payment is assessable income for you as employer. But it is also a normal wage expense when you pass the payment on to your employees. So it basically just comes in and goes out, offsetting each other.

For your employees the JobKeeper payment is assessable income. And so you need to do PAYG withholding on these payments. You can’t withhold any admin fees or other charges on their payment, but you must withhold tax as required. 

ATO

The ATO knows exactly how much they paid you and so best to get this right. Otherwise they might start wondering what else you are not telling them.

Please call me if you get stuck. 

 

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Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.