New Tax Rates for Working Holiday Makers

dcd82542-cb91-4c9e-bb87-26f86769528aYou may recall the ‘Backpacker Tax’ being discussed in the news late last year.  Well, these changes came into effect on 1 January 2017 and they impact more than just backpackers.  Known as the ‘Working Holiday Maker Tax Rates’, these new tax rates will affect all employees who hold a 417 and 462 visa.

What You Need to do Next

If you employ a working holiday maker who is in Australia on a 417 or 462 visa, you:
  • Must register with the ATO before 31 January 2017, to withhold tax at the working holiday maker rate
  • Can visit border.gov.au/vevo to check if a worker has a 417 or 462 visa using the Visa Entitlement Verification Online service
  • Must withhold tax at 15% on income up to $37,000 and apply foreign resident tax rates on income over $37,000

Click here for the Working Holiday Maker Employer Registration

What Happens Next

The working holiday tax rates only apply to income earned from 1 January 2017.
If you currently employ holiday makers you will need to issue two payment summaries this year:

  • One for the period 31 December 2016
  • A second for any period to 30 June 2017

Get Ready for Super Reform

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The wide ranging superannuation reforms originally announced in the 2016-17 Federal Budget have passed Parliament.  As the majority of the reforms start from 1 July 2017, it’s important to consider how these might impact on you and whether you need to take any action before then. Here’s a few things that you need to know

Non-Concessional Contributions Capped

Once your super balance has reached $1.6m, from 1 July 2017 you will no longer be able to make non-concessional contributions to super.  This does not stop you from making non-concessional contributions in the current 2017 financial year.   If the balance of your superannuation pensions exceed $1.6m at 1 July 2017, the Tax Commissioner will direct your fund to reduce your retirement phase interests back to $1.6m and you will be subject to an excess transfer balance tax. Your overall super balance can be more than $1.6m but only $1.6m can be in a tax-free pension. Keeping the excess balance in super, albeit in accumulation phase, may still be worthwhile because of the low 15% tax rate.

Non-Concessional Contributions Reduced

Non-concessional contributions reduced to $100,000 per annum (from the current $180,000).  If you are under 65, you have until 30 June 2017 to use the current caps and contribute up to $540,000 this financial year. You can do this using the ‘bring forward’ rule that allows you to bring forward up to three years worth of non-concessional contributions in one year (and then make no or limited contributions for the next two years).   The advantage of using the bring forward rule now is that your three years worth of contributions utilise the current caps. If you contribute more than $180,000 this financial year but not the full $540,000, you still trigger the bring forward rule but any further contributions from 1 July 2017 are subject to the new $100,000 cap. Meanwhile, concessional contributions will be reduced to $25,000 per annum.

Impacts on High Income Earners

More high income earners to pay higher tax rate – High income earners with incomes of $300,000 or more pay 30% tax on super contributions they make, rather than the usual 15%. From 1 July 2017, this threshold will reduce to $250,000. Earnings on fund income no longer tax-free.  From 1 July 2017, the income from assets supporting transition to retirement income streams will no longer be exempt from tax but included in the fund’s assessable income. For example, if your super fund earns interest from a term deposit, that interest is currently tax-free in a transition to retirement pension. From 1 July, that interest will be included in the fund’s assessable income.

There are Some Positives in the Reforms

Claiming a tax deduction on super contributions – If you are under the age of 75, from 1 July 2017, you will be able to claim a tax deduction for personal superannuation contributions. Currently, you need to earn less than 10% of your income from salary or wages. This effectively allows all individuals, regardless of their employment circumstances, to make concessional superannuation contributions up to the concessional cap. Note that if you are over 65 you will need to meet the work test to make contributions to super.  ‘Carry forward’ unused super cap – Where your superannuation balance is less than $500,000, from 1 July 2018 you will be able to make additional (carry forward) concessional contributions if you have not fully utilised your concessional contributions cap in previous years.  With the delayed start date of this reform, the first year that the carry forward amount can be used is 2019-20.

Tips for a Generous & Tax Effective Christmas

alliance-accounting-business-solutions-christmas-tipsWith Christmas just around the corner, many companies are providing staff with gifts or celebrating the season with parties for their team.  It’s a great time to celebrate but there are some things you may want to keep in mind so your celebration doesn’t become a tax burden.

We’ve put together our Top Tips for a Generous and Tax Effective Christmas Season

1. Planning a Christmas Party?

Whilst getting your team together to reward and recognise their hard work during the year sounds like it should be a tax-deductible expense, unfortunately Christmas parties are regarded as “entertainment” and as such are not deductible. To make things worse, where the cost of the Christmas party is more than $300 per person, per benefit, this can result in the added burden of being subject to Fringe Benefits Tax (FBT).
Our Tip…

To avoid FBT, keep the cost of your party to less than $300 per person and per benefit, (separate ‘benefits’ include things like the gift, the party, taxi travel, etc.).

By keeping the cost under $300 per person, per benefit, you can avoid FBT, however it’s important to note that, unfortunately, the costs will still be regarded as entertainment and will not be tax-deductible.

2. Christmas Gifts for Staff?

Certain gifts are not regarded as ‘entertainment;’ are tax deductible and are not subject to FBT, (where they are less than $300 each). These include Christmas hampers, bottles of wine or other alcohol, gift vouchers, perfume, flowers, pen sets, etc.  NB: If any of these items exceed the $300 limit, they will be subject to FBT.

Other gifts, such as tickets to movies, sporting events, theatres, restaurant meals, holidays, airline tickets, tickets to theme parks, etc., are regarded as entertainment.  As such, where these are less than $300 each, they will not be deductible. Where they are greater than $300 each, they are subject to FBT.

Our Tip…

To avoid FBT, keep the cost of your gifts to less than $300 each and ensure they are not provided regularly throughout the year; i.e: monthly gym memberships or multiple gift vouchers amounting to more than $300 can be regarded as one gift and may push the value over $300.

To avoid FBT and obtain a tax deduction, choose items that are not regarded as entertainment, as outlined above, (Christmas hampers, bottles of wine or other alcohol, gift vouchers, perfume, flowers, pen sets, etc.).

Gifts of cash from the business are treated as salary and wages and are subject to PAYG withholding and superannuation contribution rules.

3. What About Your Customers?

The most effective way of sharing the Christmas joy with customers is not necessarily the most tax effective. If, for example, you take your client out to a nice dinner or entertain them in any way, the costs unfortunately will not be tax deductible.  This is because such costs are regarded as ‘entertainment’, regardless of whether there is an expectation of generating goodwill and increased business sales.  Restaurants, a show, golf, and corporate race days all fall into the ‘entertainment’ category.
Our Tip…
If you send your customers a gift, the gift is tax deductible, as long as there is an expectation that the business will benefit (and assuming the gift is not considered entertainment, as listed above).
Remember, our team are here to help you. If you need assistance ensuring you’re looking after your staff without looking after the Tax Man, simply contact us and we’ll help you and your team have a merry Christmas.

Love to Ride

The Alliance AABS team are riding their way through November as part of the Love to Ride Gold Coast Challenge. One of our Accountants, Cameron is leading the office charge, clocking up the kms over the weekend, at his local park.

So far, over 145 organisations have ridden over 600,000kms. There’s still time to get on your bike! check out www.lovetoride.net to register.

cameron-at-alliance-accounting

Small Business Digital Grants Program

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Are you a small business, producing digital technology or services?

The Queensland State Government’s Small Business Digital Grants Program is matching funding up to $10,000 to eligible businesses for the purchase of hardware, software and services (such as digital coaching).

The business must show that the digital technology or service purchased and adopted will enhance the digital capabilities of their business and help them to be more competitive and employ more staff.

The digital technology or service must fall under one of five identified priority areas:
∙digital marketing and social media
∙digital content (web pages, mobile apps, media etc.)
∙receiving payments or selling online
∙specialised digital technology or software (business specific)
∙digital planning and advice/training.

To be eligible the business must:
∙have fewer than 20 employees at the time of applying for the grant
∙have an Australian Business Number (ABN) and be registered for GST
∙have Queensland headquarters or significant Queensland-based operations
∙declare if any owners or directors of the business are an undischarged bankrupt or insolvent.

Round 1 opens on today and closes 9 December 2016. Further rounds will open in March and June 2017.

Contact us now for more information. Email: admin@allianceabs.com.au

See our Facebook Page for more

Melbourne Cup Day Lunch

the-alliance-team matt-umair-chris kim-fran-mark-alana-bailey-financial jon-cameron fiona-young-bailey-financial-kim-davis cameron-matt-umairThe Alliance Team enjoyed a great Melbourne Cup Day lunch.  We hope you backed a winner.

 

 

 

 

Are Your Employees Impacted by Tax Cuts?

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Yesterday, 20th October 2016, new tax laws received Royal Assent resulting in a change to the individual tax rates. The 32.5% tax threshold has now been increased from $37,001 – $80,000 to $37,001 – $87,000. The changes will impact individuals earning over $80,000 and will take effect from 1 July 2016. Whilst the new rates apply from 1 July 2016, employers are required to adopt the new tax tables for payments made from 1 October 2016. Employers do not need to make any other adjustments or refunds. The ATO will refund any over-payment of tax when your employees (and payees) lodge their 2016-17 income tax return.

Below is the updated individual tax rates that apply to Australian resident individuals, from 1 July 2016:

Taxable Income Tax on this Income
0 – $18,200 Nil
$18,201 – $37,000 19c for each $1 over $18,200
$37,001 – $87,000 $3,572 plus 32.5c for each $1 over $37,000
$87,001 – $180,000 $19,822 plus 37c for each $1 over $87,000
$180,001 and over $54,232 plus 45c for each $1 over $180,000

The above rates do not include the:

  • Medicare levy of 2%
  • Temporary Budget Repair Levy; this levy is payable at a rate of 2% for taxable incomes over $180,000.

Be aware, the new threshold will also apply to foreign residents.

Remember, our team are here to help you. If you need assistance with applying the new tax rates simply contact us and we’ll get you on the right track.