The Final ATO Ruling Affecting Trust Distributions

The ATO has finalised the section 100A ruling, which provides guidelines and a compliance approach to trust distributions. In essence, the ATO is concerned that the adult beneficiary who’s been made entitled to a trust distribution does not enjoy the economic benefit. More importantly, section 100A also focuses on taxpayers that enter into an arrangement that is not considered ordinary family or commercial dealing but merely a scheme to seek a tax benefit.

The ATO’s compliance approach uses three colour zones to determine whether the arrangement is Low or High risk. There are White (Low), Green (Low) and Red (High) zones.

The ATO made many available examples of what arrangements would be considered low or high risk.

We will discuss how section 100A will impact our clients during tax planning and whether their existing arrangements are in the White, Green, or Red zone.

If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions.

From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax.

Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us.

How To Cut Energy Waste And Save Money

Small Business Energy Incentive is not too dissimilar to the small business skills boosts and investment boosts that we saw last year introduced by the previous government.

Basically, it’s allowing you an extra 20% tax deduction for any expenses that are related to the use of the word “electrification” and more efficient use of energy.

They are trying to make sure that any appliances that you have are a bit more efficient. The things like heating and cooling systems. And if you upgrade it to more efficient fridges, induction cooktops, installing batteries and heat pumps. Anything that makes the use of energy a bit more efficient, will be eligible for what we call a 20% extra deduction.

There is a limit of up to a hundred thousand in total expenditure. The way that this was announced was for restaurants, hair dresses, or we’ve got anything that had used the premises. If you have things that are using electricity right now and you can make it a bit more efficient, this is where you’ll be able to get an extra $20,000 extra deduction there.

From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax.

Your Last Chance To Carry Back Business Losses

This is the last year in which, if you have a loss in your company, you can carry that loss and apply it back to any prior years where you’ve made a profit.

There are limitations in how far back you can go, and there’s a process to that. If your company has gone through a loss this year, chat with your accountant and make sure that we get that tax offset. Essentially, you get a rebate on your tax bill for the prior years.

From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax.

Finding Balance Within the Allocation of Profits within professional firms Guidelines PC 2021/4

The industries that are affected by the Allocation of Professional Firm Profits Guidelines are the service-based businesses where you are selling knowledge or expertise. If you are using a trust or a company to run your service-based business, they want to attribute as much money as they can in the expert’s (owner’s) name.

Let’s say Ben Walker runs Inspire; the more profit that ends up in his personal name, he gets taxed at a higher rate, and the less risk the ATO deems on potentially breaking these guidelines.

The guidelines provide a self-assessment risk framework broken into three zones:

Green = low risk
Amber = moderate risk
Red = high risk

The higher the risk, the more resources the ATO will allocate to understand the existing arrangement and may request you to make the required adjustment. The ATO may proceed with an audit if the arrangements remain high risk.

It doesn’t mean 100% of your business’ profit needs to end up in your own name, but we need to find the balance that we see as fair where we sit within these rules.

From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax.

Don't Miss Out On These Tax Benefits

For small business owners,

The first thing that everyone’s been thinking of and waiting on is the temporary full expensing rules.

Just a quick reminder, for assets that were purchased in this financial year, this will be the last time where there is no limit on what you can claim as a tax depreciation not withstanding cards.

That was earmarked to end on the 30th of June and there’s no extension of that rule itself.

Where it does fall back on?

We have a temporary one-year increase to the instant asset write-off threshold, which is going to be $20,000. It’s going to be for one year, which is next financial year from 1st of July, 23 to 24. And that’s where any assets purchased below $20,000, you can write that off immediately.

If it’s above $20,000, we fall back to the old ways, in which you depreciate it at 15% for the first year, and then 30% the year after until the value of the asset is below $20,000. And we can write it off straight away.

From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax.

The New Tax Strategy For EV Buyers

The government is encouraging the uptake of electric vehicles with this new strategy. If you buy an electric vehicle before the end of this financial year (30 June 2023), you can claim it as a tax deduction in your business.

Previously, if your logbook had 50% business use, and 50% private use, you could only claim 50% of the car in your business.

But what’s happening with the electric vehicles, regardless of what that percentage use is, even if it’s 50% personal use and 50% is business use, you can claim 100% of it still. Since it is FBT exempt there are no tax consequences.

It’s beneficial for professional people who don’t travel much and usually have less of that logbook percentage and are able to claim really less of their cars anyway.

NOTE: This would have some impact on your reportable Fringe Benefits on your tax return which can change HECS payments and some other government benefits.

Watch the full webinar, Tax Planning in 2023 and learn the tax saving strategies business owners need to know before 30 June at https://youtu.be/dqE_6X7utjM

From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax.

Eligibility Criteria For Training Tax Deductions

Claim an additional 20% expenditure

Claim an additional 20% of expenditure that is incurred for the provision of external training courses to their employees.

Eligibility

Small Business
Employee is in Australia
Course is provided by a registered provider in Australia

Make sure that not only does your entity qualify but also that the money you’re spending it on.

Suppose your bookkeeping has been done for this financial year, and you’ve reconciled the training clearly. In that case, you should talk with your accountant to ensure they have been accurately recorded and accounted for.

* This measure will apply to expenditure incurred in the period commencing from 7:30 pm AEDT 29 March 2022 until 30 June 2024. Please note: These measures are not yet law.

From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax.

Business Structure Tax Rates

You can use a business structure for doing anything like investing in shares, separating your assets out of your personal name. Also, you can even run a businesses out of companies and trusts. We use that a lot with our clients here at Inspire when we are structuring their businesses where we incorporate companies and trusts into their family group. This is where we take into consideration the business structures tax rates.

A reason to incorporate trusts or companies is because of the investment in cryptocurrency. One of the big reasons why you might want to do that is because of the alarming tax rate where individuals pay up to 47% tax, depending on their income.

The business structure tax rates:

Company

Companies are taxed at two different rates, depending on what the company does.

30% Tax Rate– If it’s a purely investment company. It doesn’t run a business, a business of trading cryptocurrencies, or a business of mining cryptocurrencies. 30% tax rate is a passive investment, and not an active trading.
25% Tax Rate– is for small business concessions. You need to have most of the company’s income to access this lower 25% tax rate. You can see 25% is almost half of the highest marginal tax rate of an individual.

We are not saying, “Everyone, just set up a company if you’re trading,” but that is something that we might consider if we were to advise you on what structure to use for your investments.

Trust

A trust doesn’t necessarily not pay tax, but a trust gives its profit to other individuals or companies or other entities in the family group, and they pay the tax on the trust’s behalf. We do have clients who invest through trusts and they have to distribute at the end of each year the profits. The people who receive that pay the tax.

SMSFs (Self Managed Super Fund)

There are two rates of taxes for SMSFs.

15% Tax Rate– is what we call the Accumulation Phase where you’re growing your balance in super throughout your lifetime. Majority of Australians are in the accumulation phase, and they’ll be paying 15% tax on the profit that they make in their SMSF.
0% Tax Rate– is for the Pension Phase. When you’re drawing on your super at a certain age or older, and you’ve met the conditions of release for super, then you have the option for your super to be taxed at 0%.

Asset Protection

At Inspire, we work with a lot of business clients and so asset protection is key with what we do. Basically, we want to make sure that the business is not in their own name as a sole trader. If the entities are set up right, we get some form of protection.

Got a burning question you want to get off your chest? Book a complimentary 20-minute strategy chat with an Inspire Accountants.

Family Business Distribution Rules Explained

Rules explained:

If you’re distributing to a family member, the money should directly go to them, and they should be the one utilising that money for their economic benefit.

If you’re a family business and you distribute funds to your spouse, that’s generally acceptable. For example, if you transfer the money to a joint account and spend all the income together, it’s considered permissible.

If you’re a parent and your children are living with you and you provide financial support by giving them money directly, you can distribute that money through your business instead.

If the idea of the whole distribution was just to reduce your tax, then that’s going to be a no. You have to be very careful about what the reason is, and what sort of arrangement you have with your children as well.

From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax.

Get 20% Extra Tax Deduction
On Tech Expenses

Get 20% extra tax deduction on tech expenses with the Small Business Investment Technology Boost

You can claim extra 20% on expenses that support digital operations and digitising operations, such as:

Digital Enabling Items – e.g. cost to set up a digital payment system, any subscriptions that help digitisation etc
Digital Media and Marketing – Audio and Visual content that can be created, accessed, stored or viewed on digital devices
E-commerce – Supporting digitally ordered or platform-enabled online transactions.

The concept here is that you can claim an additional 20% as a tax deduction. For example, if you have spent $100,000 (which is currently the limit), you will be able to claim a deduction on $120,000, allowing you to claim 20% on the increased amount of $120,000.

From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax.

The Final ATO Ruling Affecting Trust Distributions

How To Cut Energy Waste And Save Money

Your Last Chance To Carry Back Business Losses

Finding Balance Within the Allocation of Profits within professional firms Guidelines PC 2021/4

Don't Miss Out On These Tax Benefits

For small business owners,

The New Tax Strategy For EV Buyers​

Eligibility Criteria For Training Tax Deductions​

Claim an additional 20% expenditure

Business Structure Tax Rates

The business structure tax rates:

Company

Trust

SMSFs (Self Managed Super Fund)

Asset Protection

Family Business Distribution Rules Explained

Rules explained:

Get 20% Extra Tax Deduction On Tech Expenses

Get 20% extra tax deduction on tech expenses with the Small Business Investment Technology Boost

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The New Tax Strategy For EV Buyers

Eligibility Criteria For Training Tax Deductions

Get 20% Extra Tax Deduction
On Tech Expenses