From 1 July 2014, employers with

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1 ISSUE FAST TRACKING YOUR BUSINESS SUCCESS The Data and Payment Standard From 1 July 2014, employers with 20 or more employees will begin using the new Data and Payment Standard, also known as SuperStream, to make superannuation contributions to their employees. From 1 July 2015 small employers, with 19 or fewer employees, will also begin to make contributions using the new standard. The Data and Payment Standard is designed to improve the processing of everyday superannuation transactions. Businesses need to begin preparing as soon as possible and investigate the options available to them to meet the standard. There are over 800,000 Australian employers who are required to make super guarantee contributions on behalf of their employees. Some employers can find this a complex process because they often have to contribute to multiple superannuation funds, each with their own specifications for accepting the data and payments. The Data and Payment Standard will streamline the process for many employers when making contributions. It provides a simpler, consistent method of preparing contributions. In most cases, it will provide a single channel for interacting with multiple super funds. Employers will make super contributions electronically. The contribution data is sent electronically in message format to the fund and the contribution payment is sent electronically through the banking system. It will also reduce payment processing costs as the manual methods have been removed. Super funds and their members will also benefit from processing contributions faster and improved data quality. The ultimate goal is to lead to better retirement outcomes for all Australians including: reduced administration costs higher lifetime savings fewer lost accounts The data message and payment will be linked by a payment reference number which will enable reconciliation at the receiving fund. Most of the key components required for this change, including e-commerce infrastructure and software solutions, are currently being developed, trialled and implemented. Employers have options available to them for meeting this new standard. They can either use software that conforms to the standards, or a service provider who can meet the standard on their behalf. Their options may also include: upgrading the businesses payroll software using an outsourced payroll or other service provider using a commercial clearing house. Please note that in a recent announcement by the ATO, they have now extended the implementation of SuperStream by 12 months. PARTNERS Ivan Anzanello Fabio Cammarano Michael Hollowood Paul Kelly Darryl West SERVICES Tax Advice Superannuation Business Advisory Audit Succession Planning Business Valuations Estate Planning Wealth Creation CONTENTS Fine print in advertisements 2 Common mistakes at year-end 2 Refund policies in business 3 Common mistakes at year-end 3 Difficult conversations at work 4 Q&A with Mark Ducret lodgement changes 6 News & Events 6

2 Fine print in advertisements The High Court has reinforced the importance for businesses in taking care when advertising their products and services. In June 2012 the Australian Competition and Consumer Commission (ACCC) was successful in obtaining orders in the Federal Court penalising TPG for engaging in misleading and deceptive conduct in their advertisements by putting important information in the fine print. Businesses should consider implementing a four-step process for determining whether an advertisement is misleading: 1. Identify the dominant message or headline claim of the advertisement 2. Determine whether the dominant message, without any qualification, conveys a misleading impression 3. If it would be misleading, identify whether the advertisement also contains any qualification or condition which corrects the misleading impression given by the dominant message 4. Consider whether the qualification or condition is given sufficient prominence in the advertisement so that an ordinary and reasonable consumer would notice the qualification and be disabused of the misleading impression from the dominant message. The final step requires people to use their own common sense and judgement in determining whether the advertisement is misleading. When the High Court considers misleading conduct it takes into consideration a variety of factors, including: the extent to which the dominant message is misleading the nature of the product being advertised the nature of the target audience of the advertisement the medium in which the advertisement is placed Employer penalties for unpaid super contributions Employers who are not meeting their super obligations may lose the tax deduction they would normally receive for super contributions. They will also have to pay a superannuation guarantee charge to the ATO. From 1 July 2013 employers must be paying 9.25 per cent of each eligible employee s ordinary time earnings each quarter in super. From 1 July 2014 this will increase to 9.5 per cent. The date for the next quarterly cut-off for superannuation contributions is the 28 July, which applies to the period of 1 April to 30 June. If employers have not met their super obligations they will need to lodge a Superannuation guarantee charge statement with the ATO and also pay a superannuation guarantee charge. Also, their business may lose the tax deduction that they would normally receive for superannuation contributions. This is because like most late payments the super guarantee charge is not tax deductible. Employers will have to pay the super guarantee charge if: they do not pay enough super contributions to their employee. This is known as a super guarantee shortfall they do not pay super contributions by the quarterly cut-off date for payment they do not pay super to their employee s chosen super fund. This is called a choice liability. The super guarantee charge is made up of the super guarantee shortfall amounts, nominal interest at 10 per cent per annum, and an administration fee of $20 per employee, per quarter. 2

3 Refund policies in business Businesses have specific obligations under Australian Consumer Law (ACL) when it relates to refunds, returns, guarantees and warranties. It is important that a business s refund policy comply with ACL. All businesses have a legal responsibility to consumers. In relation to the sale of goods, these include guarantees that the goods: are of acceptable quality are fit for any disclosed and/or advertised purpose will match any description under which they are sold will have spare parts available for a reasonable time. Refund obligations can be placed into two categories; minor and major faults. According to ACL, a major failure is when a product or service fails to meet a consumer guarantee, whereas a minor fault occurs when a problem can be fixed easily and in a reasonable time. The remedy a business is obligated to provide will depend on whether the fault was major or minor. When there is a major failure within a product or service, the consumer can choose to give the product back, or cancel the service and receive a refund. When a business receives a refund, the first step they should take is to find out, preferably in writing, what the reason is for a refund request. This is valuable information that can be used to improve the business products and services. To prevent issues with refunds businesses should ensure that the refund and return policy is easily accessible by customers. If some goods are unable to be refunded, such as swimwear or perishable products, this must be clearly outlined in the refund policy. It is important that customers be able to access and understand the policy before making a purchase. Here are some basic tips when constructing a refund policy: it is illegal to put up a no refund sign in store or online if the product has a major failure the business must give a refund, replacement or compensation if a product has a minor failure the business must offer to repair, replace or refund it is the businesses choice whether to provide a refund if the customer changes their mind. Common mistakes at year-end Businesses should be aware of their responsibilities at the year-end. Businesses that are unorganised, or make mistakes in their tax return, can lose out on significant tax savings, as well as find themselves liable for penalties. Below are some common mistakes that small businesses often make at year-end: Paying superannuation A job that is often forgotten by employers is superannuation contributions. Super is payable 28 days after the end of the quarter. However, it is important to remember, that to claim a deduction for the super contribution the employer must have made the contribution before June 30. Not paying super by the due date will also lead to a penalty imposed by the ATO. Lodging group certificates A common mistake made by business owners is issuing group certificates late and incorrectly reporting the figures. Employers are required to issue their payment summaries to their employees by July 14 and to the ATO by August

4 Difficult conversations at work Avoiding difficult conversations in the workplace can increase the potential for legal claims, and reduce the employer s ability to successfully defend these claims. It is understandable why employers often avoid having difficult conversations with their employees as it can be an awkward and time consuming process. An employer may need to have a difficult conversation with an employee in a variety of situations, such as: giving ongoing performance feedback and performance reviews disciplining for poor performance or inappropriate behaviour giving notice of termination of employment. To ensure that difficult conversations are not avoided employers should take steps to make sure that their supervisors and managers are educated about the importance of honest and timely communication with their staff. It is also important that supervisors and managers have the necessary skills to carry out difficult conversations in an appropriate manner. Employers should also ensure that they keep detailed written records on conversations that take place with employees so that there is evidence of the communication. The following are some potential legal risks that can arise from avoiding difficult conversations in the workplace: Anti-bullying claims New anti-bullying laws came into power on 1 January 2014 which have given workers experiencing bullying a new sphere of protection. Raising underperformance or misconduct issues with employees at an early stage can help to reduce the chances of accusations of workplace bullying. Unfair dismissal claims A key element of procedural fairness is warning an employee about their unsatisfactory workplace performance and giving them a genuine opportunity to respond. Skipping this step may be found to be unfair by the Fair Work Commission. Also, in the case of a genuine redundancy, an employer must be able to show that they have met any obligations they had under a modern award or enterprise agreement. Adverse action claims Having a conversation with an employee about their underperformance or misconduct can help the employee understand the reasons for decisions that may adversely affect them. This will reduce the risk that employees are likely to suspect and argue that the decision was made for a prohibited reason, such as on a discriminatory ground. ATO benchmarking Small business benchmarks are financial ratios that have been developed by the ATO to help compare the performance of similar businesses in an industry. Benchmarks allow the ATO to identify businesses that may be avoiding their tax obligations. Businesses should take a look at their financials and review their management accounts before June 30. They should be focusing on any unusual large amounts that have been reported as this could be an indicator of an accounting error, or a more serious problem. 4

5 Q & A with Financial Planner, Mark Ducret Background How will the Centrelink deeming rules affect my Age Pension? In April 2013 the Labor Government made a number of changes to Superannuation. Some of these changes have been reversed by the current Government; however one that has not been reversed and has received little attention are the rule changes to Social Security Income Tests for those on a Superannuation Pension. These rules will change on 1 January Currently For those over 65 there are two tests that are applied for the Age Pension; an Income Test and an Assets Test. There is no change to the Assets Test as the whole superannuation balance is fully assessable. There is though, a change to the Income Test. An Income Test is used to determine your eligibility for the Age Pension and generally involves assessing the level of income you receive each year against income thresholds. Change The current formula to working out the Age Pension will no longer be used as of 1 January From this date pension incomes will be deemed. Deemed income is when you assume a rate of return that isn t necessarily exact to what you earned on the investment. This means in relation to the Income Test that the income counted for one s financial assets may not actually be accurate to the income earned on those investments which in turn affects the income amount. The table below displays the new deeming rates that will be applied to pension incomes. Threshold Single Up to $46, % Over $46, % Couple (Combined) Up to $77, % Who will these changes affect? Over $77, % Deeming Rate Most people who take out the minimum pension will be worst off by the new system because the calculated assessable income will be less than the deemed amount. However, if you are taking out more than the minimum pension (roughly 10% of the balance or more) you will be better off. The old system took into consideration life expectancy which reduced as you grew older whereas the new system ignores age and simply deems on your original balance. The following graph helps you calculate the effect of the new deeming rules of your personal situation. The green line displays the deemed amount accessible to pensioners. The blue line represents the deductable percentage. Referring to the graph, if you are 68 years old and take out 10% of your pension balance, the deductible per cent (blue line) is 6.2%. This means your assessable amount is then equal to 3.8% (10% - 6.2%). As it is greater than 3.4% (roughly the new deeming rate) you will be benefited by the changes. If you take out less than 10% of your pension your deductable percent will fall under the deemed amount and you will be worst off. The red dashed line displays the current minimum pension; you will not benefit from taking out the minimum pension. The change in rules only applies to people who take out a superannuation pension after the 1 January For those currently on a pension, the old rules will still apply unless a new superannuation pension is taken out. Reversionary pensions will also generally not experience any changes. Those on a Transition to Retirement (TTR) strategy prior to 1 January 2015 and qualify for an income support payment will not be affected. However, the changes will apply to those that are on a TTR that qualify for an income support payment after 1 January Any changes to existing income streams will be deemed a new income stream and will fall under the new deeming rules. For more information on Age Care and the undergoing changes to the system please contact our financial planner Mark Ducret on or financialplanning@collinsco.com.au Effect of new deeming rules Age 65 taking out 8% of pension. Assessable would now be 2.6% of balance (8% 5.4%) (blue line) This is less than 3.4% (green line) you will be worst off 14.0% 12.0% 10.0% 8.0% 6.0% Deductable % Min Pension Deeming 4.0% 2.0% 0.0%

6 News & Events Western Region Business Club On Tuesday 18th March 2014 at Whitten Oval, a number of Western Suburb business owners came together for the Collins & Co Western Region Business Club networking event. Jenny Sadler, the owner of 8 McDonald s Restaurants in the Western Suburbs was guest speaker for the night. Jenny discussed her many years working for one of the world s best known brands and gave insight as to why McDonald s is such a huge success. If you would like to attend future Western Region Business Club events or require any further information, please call or partner@collinsco.com.au 2014 lodgement changes From 1 April 2014 taxpayers will be required to provide their financial institution account (FIA) details when lodging fringe benefit tax returns. From 1 July 2014 taxpayers will be doing the same for tax return lodgements, even if the details have been provided before. These requirements were first put in place for individual tax return lodgements and took effect on 1 July Providing FIA details will allow the ATO to issue any resulting refund by electronic funds transfer to the FIA that is nominated. Electronic funds transfer is the fastest and most secure way for taxpayers to receive their refund. It is convenient for both the ATO and the taxpayer and it ensures the refund is paid directly into a nominated bank, credit union or building society account. Alternatively, taxpayers can speak with their tax agent about using their trust account, if they operate one. It is important that taxpayers ensure their FIA details are correct when lodging as this will help to prevent delays in receiving their refund, and also ensures that their money does not go into the wrong account. If you would prefer to receive the Collins Xpress newsletter via please contact If you do not wish to receive these newsletters anymore, or want to add someone else to the list please partner@collinsco.com.au The material contained in this publication is intended to provide a general summary only and should not be relied on as a substitute for professional advice. Collins & Co 127 Paisley Street, Footscray VIC 3011 T F Liability limited by a scheme approved under Professional Standards Legislation.

7 End of Financial Year 2013/14 is approaching Last minute ways to minimise your tax 1 Write-off bad debts. To be a bad debt, you need to have brought the income to account as assessable income, and given up all attempts to recover the debt. It needs to be written off your debtors ledger by 30 June. If you don t maintain a debtors ledger, a director s minute confirming the write-off is a good idea. 2 Trading Stock. Write off any stock that is damaged or obsolete. Complete a stock take (if you are not using the simplified trading stock rules) and remember that stock can be valued at the lower of cost, replacement, or net realisable value. You can use different methods for different stock items. 3 Review your asset register and scrap any obsolete plant. Check to see if obsolete plant and equipment is sitting on your depreciation schedule. Rather than depreciating a small amount each year, if the plant has become obsolete, scrap it and write it off before 30 June. Small Business Entities can choose to pool their assets and claim one deduction for each pool. This means you only have to do one calculation for the pool rather than for each asset. 4 Repairs, consumables (office stationery etc.), trade gifts or donations. To claim a deduction for the 2013/2014 financial year, consider paying for any required repairs, replenishing consumable supplies, trade gifts or donations before 30 June. 7 Capital gains and losses. Neutralise the tax effect of any capital gains you have made during the year by realising any capital losses. These need to be genuine transactions to be effective for tax purposes. It may be possible to contribute assets with unrealised losses to superannuation in order to do this. 8 Directors fees and bonuses. Declare them before 30 June and providing the company is absolutely committed to them, you are entitled to the deduction even if they have not been paid. Again, a director s minute is a good idea. The directors and employees only need to declare this income in the year of receipt, although they need to be formally notified of their entitlements by 30 June. 9 Management fees. Where management fees are charged between related entities, make sure that the charges have been raised by 30 June. Where management charges are made, make sure they are commercially reasonable and documentation is in place to support the transactions. If any transactions are undertaken with international related parties then the transfer pricing rules need to be considered and the ATO s documentation expectations will be much greater. This is an area under increased scrutiny. 5 Pay June quarter employee super contributions if you want to claim a tax deduction in the current year. The next quarterly superannuation guarantee payment is due on 28 July However, some employers choose to make the payment early to bring forward the tax deduction instead of waiting another 12 months. 6 Superannuation. Don t forget yourself. Superannuation can be a great way to get tax relief and still build your personal wealth. Your personal or company sponsored contributions need to be received by the fund before 30 June to be deductible.

8 Following is a list of items that will be useful in the preparation of your year end income tax return. This list is not exclusive and additional information may be required on a case by case basis. Minimising the cost of end of year compliance Having your paperwork organised always makes life much easier. Preparing your end of year documents and information prior to coming to see us will save you time and money. This is a general list of what to have ready when we next meet with you. Accounts data file (MYOB, Quickbooks, access to Xero) Debtors & creditors reconciliation Stock take if applicable (or if your business is a Small Business Entity, use the simplified trading stock rules mentioned above) 30 June bank statements on all relevant loan documents Documents on new assets bought or sold, including the date you entered the contract and the date the asset was first used or installed ready for use Payroll reconciliation Superannuation reconciliation Bank statements on operating accounts Cash book (if applicable) 30 June statements on any investment or operating accounts And, if we are preparing your individual income tax return: PAYG Payment Summary Tax statements of managed investment funds Interest income from banks and building societies Dividend statements for dividends received For share sales or purchases, the purchase and sale contract notes For real estate sales or purchases, the solicitor s correspondence for the purchase and sale Rental property statements from real estate agent and details of other expenditure incurred Work related expenses Travel expenses Donations to charities Health insurance and rebate entitlement Family Tax Benefits received Medical Expenses (if you claimed the rebate last year and expenses over $2,120 after rebates) IAS statements or details of PAYG Instalments paid Collins & Co 127 Paisley Street, Footscray VIC 3011 T F Liability limited by a scheme approved under Professional Standards Legislation. Tax Advice Superannuation Business Advisory Audit Succession Planning Business Valuations Estate Planning Wealth Creation