Contractor

What is the Difference Between Employees and Contractors, and Why Does it Matter?

by Advice

There are key differences between employees and contractors, and as with most things, there’s pros & cons for both. Understanding the obligations for your choices in business is key to your success, so let’s get clear on the type of people you work with in your business.

The Critical Differences Between an Employee and an Independent Contractor.

An employee works in your business and performs their role as a representative of your business. An independent contractor will provide a service TO your business and performs work to further their own personal business.

An employee represents your business, where as a contractor represents themselves and is more self-interested.

There is More Flexibility with Contractors.

An independent contractor has more control to choose how, when and where their work is done, they represent themselves and often work for a fixed fee. A contractor has the ability to subcontract or delegate to others and is responsible for providing their own tools and equipment, as well as bearing the commercial risk for any costs arising out of injury or defect in their work.

Where there is risk there can be reward. The flexibility can be very appealing but obviously for business owners an employee is likely going to be more reliable in the long term.

For Superannuation, a Contractor Can, and Often is, Still Considered an Employee…

Often the choice to lean towards putting on contractors instead of employees is driven by the desire to avoid paying their superannuation. Unfortunately, that is a bit of a misguided notion.

Even if someone is labelled as an independent contractor, have their own ABN, and work infrequently for short periods, they can still be considered an employee for super purposes.

This is When You Still Need to Pay Your Contractor Superannuation.

You still need to pay your contractors superannuation in these circumstances:

  • if the worker works under a contract that is wholly or principally for their labour
  • if they are a sportsperson, artist or entertainer paid to perform, present, or participate in any music, play, dance, entertainment, sport, display or promotional activity, or similar activity
  • if the person is paid to provide services in connection with any performance, presentation or participation in these activities
  • if the person is paid to perform services related to the making of a film, tape, disc, television or radio broadcast.

If a person’s contract is mainly for labour, super will most likely need to be paid, so as an employer you would need to be negotiating rates of pay to contractors while taking this into account.

Workers Compensation Also Needs to be Considered When Looking at Contractors.

As an employer you need to provide workers compensation for workers and ‘deemed workers’, but not for contractors, sub-contractors and labour-hire workers. Important to note that some contractors are deemed workers for compensation and insurance purposes. Here is an online link that can be used to check what your workers would be classified as.

Payroll Tax

Payroll Tax only applies if the total wages, contractor payments and superannuation exceeds the annual threshold of $1.3 million. Generally, payments by employers that relate to work performed by contractors are liable for payroll tax unless an exemption applies. Any part of the payments which are for materials, tools or equipment are not liable for payroll tax.

Employees and Contractors Can Both be Very Complicated to Negotiate.

Each situation is unique and can vary from situation to situation. There is no easy way around the obligations of business ownership and sometimes a legal specialist can be a good idea if there is any doubt.

Bearing in mind, an accountant who specialises in working with business owners (*us*) can make it a whole lot easier.

It’s Important You Understand Your Obligations as an Employer.

Knowing the difference between employees and contractors is crucial to your decision-making in the hiring process. Jumping into a scenario in an attempt to cut corners without the right advice can lead to unwanted consequences.

We are Accountants for Growing Businesses in Brisbane and Beyond.

We work exclusively with business owners who are serious about growing their businesses.

Diving into the world of employees and contractors? Talk to a business accountant who can handle all of your business’s financial obligations.

3 Reasons You Should Have a Self Managed Super Fund

3 Reasons You Should Have a Self Managed Super Fund (SMSF) and 3 Reasons You Shouldn’t.

by Advice

When it comes to your money, goals and life situation, no two set of circumstances are the same. There’s always a lot to consider – you want to be sure you’re making the right choice.

*Remember the following information is general in nature, and doesn’t take your specific situation into account. Before diving into a Self Managed Super Fund, make sure you speak to a qualified Financial Advisor.

In terms of your superannuation, there’s a lot of future-focused thinking that comes into play. For a Self Managed Super Fund (or SMSF) there are pros and cons.

Here’s 3 reasons we think you should consider an SMSF for your super, and 3 reasons you should avoid it.

You’ll have greater control.

A traditional super fund will invest your money for you, they’ll likely do it in a very safe way in order to keep your money safe and your investment growing at a stable rate.

A self managed super fund allows you to direct your money into the investments of your choosing – for example, you could put your money into property, shares, term deposits and a range of alternative options depending on your personal risk tolerance (some of us are more conservative than others). With the right knowledge or guidance behind you, this flexibility can be extremely beneficial and could really enhance the superannuation you build for your later years & retirement.

There’s a good amount of flexibility.

Bendy like a pretzel. There is a great amount of flexibility when it comes to choosing how your superannuation allocates your investments. If you choose to have a self managed super, you can move where your money is invested as you see fit.

An SMSF also provides more flexibility when it comes to estate planning, giving you more control over how and when your superannuation benefits are distributed to beneficiaries upon death. They can also be structured to provide tax effective pensions to surviving dependants, making it a valuable tool for family wealth preservation.

It can save you some hard-earned cash.

For individuals with significant superannuation balances (often over $200,000 to $300,000), an SMSF can be more cost-effective than other superannuation funds. While SMSFs have fixed administrative costs, these can be spread over a larger balance, potentially reducing the per-member cost compared to retail or industry funds.

It can be a tax efficient choice.

Don’t want to pay any more tax than you need to? Neither do we.

Concessional Tax Treatment: Like other superannuation funds, SMSFs benefit from a concessional tax rate. The earnings on investments are taxed at a rate of 15% in the accumulation phase and can be tax-free in the pension phase.

Capital Gains Tax (CGT) Discounts: SMSFs can benefit from capital gains tax discounts on assets held for over 12 months, with a tax rate of 10% applying to those long-term gains.

Pension Phase Tax Advantages: If the SMSF moves into the pension phase (after retirement), the earnings on assets supporting a pension can be tax-free.

…and then there’s the cons.

where there is an upside, there’s usually a downside.

It can be time-consuming.

Time is money. A traditional superannuation fund will work away in the background and is not something you need to worry about in an ongoing fashion.

Managing a Self-Managed Super Fund (SMSF) can take up more time because, as a trustee, are responsible for all compliance, regulatory, and administrative tasks. This includes ensuring the fund complies with Australian Tax Office (ATO) regulations, handling annual audits, preparing financial reports, lodging tax returns, and maintaining detailed records of all investment decisions. You also need to stay informed about changes in superannuation laws and update your investment strategy and operations accordingly, which requires continuous monitoring and research. These tasks can be complex and require significant attention to detail to avoid penalties.

Bearing in mind, an accountant who specialises in SMSF management (*us*) can do all of the above mentioned management for you, making it vastly less complicated.

There is more risk involved.

Having your superannuation in an SMSF carries significant compliance risks, as you are personally responsible for ensuring the fund adheres to regulations set by the ATO. If you fail to comply with these rules, such as contribution limits, investment restrictions, or reporting deadlines, it can result in penalties, fines, or even the disqualification of the fund. The risk of making errors is higher because SMSF trustees need to stay updated on changing superannuation and tax laws, making it a bit of a challenge for anyone unfamiliar with the legal requirements.

With the benefit of making your own investment choices, that also comes with its own set of risks, especially if you’ve chosen something a bit more volatile. Obviously with a high risk investment, the reward can be huge, but the chances of it going poorly are there and that can and will affect your retirement savings if it doesn’t perform as you’d hoped.

An SMSF can be costly to set up and manage.

When you’re re-inventing the superannuation wheel, so to speak, you don’t want to get lost in a web of self sabotage. If you want to have that self managed super fund done in the most effective and tax efficient way, you’ll need to pay a professional to help you – and unfortunately, accountants are not working for free (bummer, I know).

When engaging an accountant, you want to make sure you have the right kind of person in your corner so you don’t get ripped off. You need to trust them implicitly or there’s potential that you’ll feel like you’re getting lead down the garden path.

Having a Self Managed Superannuation Fund can be a fantastic choice, and we love partnering with driven and ambitious business owners, to package up their business needs along with their SMSF.

rental-property

Ensuring Tax Compliance for Your Rental Property

by Advice

Be prepared come tax time so you don’t fall on the side of the ATO’s auditing targets.

‍Perhaps you’ve heard the news about the Australian Taxation Office (ATO)  announcing its efforts to target landlords who are over-claiming tax deductions and failing to report income. According to data, it estimates, approximately 9 our out 10 of landlords are inaccurately reporting their net income from rental properties. This misreporting has resulted in a significant shortfall of around $1.3 billion, highlighting the discrepancy between the amount collected and the amount that should have been paid.

As a property owner and rental provider, it is crucial to be aware of your income tax reporting obligations and ensure compliance. Don’t fret, though. This article is here to help and remind you about your income tax reporting obligations as well as share some handy insights on ATO deductions.

What’s the situation and how can you prepare for it?

The ATO has advised that some landlords tend to leave out rental income or make mistakes when claiming property-related deductions and they want to tackle this issue head-on. This year they have pinpointed three main concerns related to landlord tax compliance. These include the misuse of investment loans for personal expenses, incorrectly categorising repair costs as capital works, and claiming expenses for personal use of the property.

Being on top of your tax game is simpler than it seems. Here are two things that you can do to help avoid issues:

  1. File Correct and Honest Tax Returns: It’s stating the obvious, but ensure you accurately report your rental income and claim deductions that you’re entitled to. Honesty is key when meeting your tax obligations.
  2. ‍Seek Professional Guidance: Don’t be afraid to reach out to a tax professional or accountant who specialises in property taxation (*us*). They can offer expert advice on which deductions you can claim and guide you through the ins and outs of rental property taxation.‍

What Can Landlords Claim?

By understanding what you can claim, you can maximise your deductions and minimise any risk of non-compliance. Here are a few things you may be able to claim:

Mortgage Interest: Ah, the sweet relief of claiming the interest you pay on your mortgage as a deduction. Just make sure you accurately apportion it if you use the property for personal purposes too.

Utilities, Insurance, and Operational Costs: If you foot the bill for these expenses, you can claim them as deductions. Just keep those receipts handy!

Property Maintenance and Repairs: Any costs incurred to keep your property in tip-top shape for tenants, such as fixing leaky pipes or giving the place a fresh coat of paint, can be claimed as deductions. That’s some good news for your wallet!

What can you do to prepare for an audit?

‍In light of the ATO’s scrutiny, it is essential for landlords to ensure that their tax returns accurately reflect their rental property income and expenses.

We don’t want you stressing over a potential audit, but it’s always wise to be prepared, just in case.

Stay organised and maintain detailed records of all income and expenses related to your rental property. This includes rental income, receipts, invoices, and documentation for all claimed deductions. A little extra effort now can save you headaches later.

If a discrepancy or error is detected during the lodgement of a tax return, the ATO temporarily halts the processing and contacts the taxpayer to request an explanation. In some cases, the ATO may conduct further investigations after the return has been processed and ask taxpayers to review and make any necessary amendments to their return.

Time to review your records system?

A property records system is a tool that allows you to keep track of all the details related to your rental property in one place. You have a couple of options.  It might be in the form of excel spreadsheets and folders on drive or cloud, or it might be a software packagehelps you maintain your records.  Either way we suggest your system covers the following areas:

  • Tenant and lease information/documentation
  • Property condition reports
  • Bond collection
  • Maintenance requests and work orders
  • Financial records such as rent payments and expenses
  • Reports and analytics

‍‍A property records system allows you to keep everything in one place and easily accessible, so you can always stay organised and on top of things.

By keeping a good system in place to manage things, understanding the deductions you can claim and seeking professional guidance when needed you’ll be well-prepared to navigate the ATO’s watchful eye. Remember, there’s no need to panic. With a little organisation and the help of Activ8, you can be prepared and stay ahead!

reserve-bank-Aus

Interest Rates – Has the RBA Stuffed It Up?

by Advice

The tide is turning against the RBA, with more and more economists starting to think they’ve got it badly wrong.

Headline inflation is back in the target range, underlying inflation is moving ever closer to target, and yet the Reserve Bank of Australia remains stone-faced, the monolith of Martin Place. The RBA says it can’t cut rates, not yet. Not with unemployment so low.

The idea is that if there is an economy-wide shortage of workers then it’s a zero-sum game. Businesses that lose workers to businesses paying higher wages will, in turn, bid up wages to fill their vacant positions. The result is rapidly rising wages. These higher wages eat into the profits of businesses, so businesses use their market power to put up their prices which causes inflation.

This is known as a wage-price spiral. Simply put, the RBA believes low unemployment leads to higher inflation.

The RBA reckons we need unemployment to rise to somewhere around 4.5 per cent from where it is now. That would mean tens of thousands more people looking for work. Not a pleasant prospect.

However, the unemployment rate has tracked sideways at around 4.1% for the past 6 months and the inflation rate has been tracking downward during this period.  Wages growth is already falling and it’s wages growth that is really the feedback loop from low unemployment to high inflation.

 

 

It can also be argued that the RBA estimate of how low unemployment needs to be to set off a wage-price spiral is wrong.  The RBA Review released in 2023 pointed out the errors in this thinking pre-Covid.  The RBA is repeating its mistakes now.  Wage growth is falling, GDP per capita is 2.5% below the long-term trend – only being held at that level due to government spending on infrastructure,  and household consumption is back to 2018 levels.

Interest rates have sat at 4.35% now for more than a year as inflation has fallen.  As always, the rate rises took a few months to have their impact, but right now they are smashing the economy.   The next RBA Board meeting is not until mid-February.  Hopefully the data the RBA gets then opens the way to rate cuts earlier rather than later.

cash flow management

Cash Is King

by Advice

In these times of seemingly ever-increasing costs, improving cash flow is crucial for the financial health of a business. Here are some strategies to help you do that:

  1. Invoice Promptly: Send out invoices as soon as goods or services are delivered. Consider offering early payment incentives to encourage faster payments.
  2. Follow up on Payments: Establish a system for following up on overdue payments. This might involve sending reminders, making phone calls, or even offering payment plans.
  3. Manage Expenses: Analyse your expenses and cut any unnecessary costs. Look for opportunities to negotiate better terms with suppliers.
  4. Inventory Management: Avoid overstocking inventory, as it ties up cash. Use just-in-time inventory practices when possible.
  5. Tighten Credit Policies: Be cautious with extending credit to customers. Screen new customers for creditworthiness and set clear credit terms.
  6. Reduce Operating Costs: Evaluate your fixed and variable costs. Look for ways to reduce expenses without sacrificing quality or service.
  7. Increase Sales: Focus on marketing and sales efforts to boost revenue. Consider diversifying your product or service offerings to attract more customers.
  8. Improve Cash Reserves: Build up cash reserves during periods of strong cash flow to cushion against lean times.
  9. Negotiate with Suppliers: Negotiate favourable payment terms with suppliers. Extended payment terms can provide some breathing room.
  10. Consider Financing: Explore financing options such as business loans or lines of credit to cover short-term cash flow gaps.
  11. Monitor Cash Flow: Keep a close eye on your cash flow through regular financial reporting. This will help you spot issues early and take corrective action.
  12. Forecast Cash Flow: Create cash flow forecasts to anticipate future needs and plan accordingly.
  13. Streamline Operations: Look for ways to make your business processes more efficient, which can reduce costs and improve cash flow.
  14. Offer Discounts for Early Payment: Consider offering discounts to customers who pay their invoices early to incentivise prompt payments.
  15. Debt Management: Manage your existing debt wisely, ensuring that interest payments and principal repayments fit comfortably within your cash flow.

A list like this can be a bit overwhelming so just pick one or two to start off with.  Focus on those for the next month or so and see how you go.  Then pick another strategy and build from there.

Remember that improving cash flow often requires a combination of strategies tailored to your specific business needs and circumstances. It’s essential to regularly review your financial statements and adjust your approach as needed to maintain healthy cash flow.

A crucial part of the equation is having accurate and up-to-date financials.  None of these will work if you are flying in the dark.  That’s where we come in.  Activ8 can do the number crunching so you can focus on your business.  No more losing sleep over the books.  Give us a call on (07) 3367 3366.

SMSF

SMSFs Are On The Rise – But Why?

by Advice

Compulsory superannuation for employers was introduced in 1991.  Since then, the pool of funds in Super has been growing steadily bigger and of June 2022 there was $3.3 trillion invested in Super.

Of this pool, the Self Managed Super Fund sector makes up a significant portion.  As at June 2022, there were 601,432 SMSFs in Australia with a total of 1.1 million members. This represents less than 5% of the population, but they have $869 billion in assets, or about 26% of the total invested in Super.

We had seen inquiries about Self Managed Super drop over the past decade due to increased regulation and potential legal and investing complexities. However, there has been renewed interest in the last couple of years from an increasingly younger demographic.

This is highlighted by recent ATO data which shows about 44 per cent of savers starting an SMSF are aged under 45 years, with about one-third of new members aged between 35 and 45 years.  With the growth in their super balances, this younger cohort are starting to realise there is real money involved and they want to have greater control.

Compulsory super contributions of at least 11 per cent are contributing to sizeable balances after about a decade of work and increasing awareness of retirement wealth and investing compared to earlier generations.

This group is growing much richer than earlier generations as they become middle-aged, particularly for couples who pool their investment savings.  They are looking to use a self-managed superannuation fund for their retirement savings while adding to a separate portfolio of assets outside of super when investment opportunities arise.

We think SMSFs are great investment vehicles with their significant tax advantages.  There are strict rules in place for running them and they are not for everyone.

Here are some pros and cons:

PROS

  • Better flexibility and control with an SMSF
  • Reduced costs for larger SMSF funds
  • Greater access to investment options
  • The tax benefits of SMSFs
  • You can share a SMSF fund with family members
  • Flexible estate planning

CONS

  • Duties & responsibilities of being a trustee
  • Can be time consuming
  • Financial & legal risk in SMSF decision making
  • SMSFs aren’t eligible for government compensation schemes
  • Additional expenses in low value funds
  • Living overseas can affect your SMSF

If you like to know more about SMSFs and what they can offer, give us a call.  We cannot advise on whether they are right or wrong for your personal situation, but we can give you the low down so you can make an informed decision.

Super-death-tax

Super Problems After Death

by Advice

It’s vital to think about what happens to your super when you die.  Few Australians realise the government will come for their superannuation savings when they die. The recently bereaved find themselves holding a massive surprise bill to the government because their parents or partners didn’t know they needed to plan for death to avoid tax.

The first thing to realise is that Superannuation is treated differently in law from the rest of a person’s assets, and you need to think about it separately.

Contrary to popular belief, your Will does not determine who is to receive your superannuation in the event you were to pass away.

Unless you provide your superfund with a binding death benefit nomination, the trustee of your super fund will decide who receives your super in the event of your death, which will be based on your relationships and eligible superannuation dependents at the time of your death.

A binding death benefit nomination for your Superannuation dictates to the Trustee who you would like your super to be paid to if you pass away.   The binding nature of this type of nomination leaves your super fund with no discretion. That is, they must pay your remaining super balance exactly as stated in your nomination.

A couple of things to watch out for:

  1. Make sure you sign a binding, as opposed to non-binding nomination, because that way the fund trustees will have to comply with it.
  2. Think about signing a non-lapsing binding nomination as it will last until you change it. The lapsing variety expires after three years. 

Who Can My Super Be Paid to?

If you die, your superannuation can only be paid to a limited number of people. These types of people are defined as dependants under superannuation legislation.

Specifically, a superannuation dependant includes:

  • Your spouse or de facto spouse
  • Your child of any age
  • A person who was in an interdependency relationship with you at the time of your death

An interdependency relationship is defined as a close personal relationship between two people who live together, where one or both of you provide financial, domestic or personal support to the other.

If you do not have any superannuation dependants, or would like your superannuation to be paid to someone who is not a superannuation dependant, you will need to nominate for your super to be paid to your Legal Personal Representative / Estate. This way, your superannuation is then combined with all of your personal assets and distributed in accordance with your Will. 

Super death payments and tax

Super money left directly to dependents via a nomination or a decision by trustees is not taxed.

Dependents, according to the Australian Taxation Office, include children under 18, current and ex spouses and de factos, and others you have been financially supporting.

Children under 25 who are students or dependents are also not taxed on super death payments.

Grandchildren are not considered dependents unless there is some special circumstance like disability.

As a generalisation, for anyone who is not a dependent (this includes adult children), the ATO will take 15 per cent of the payout plus the Medicare levy, effectively making it 17 per cent.

There are extra complications here.

There are taxable and tax-free components to superannuation. Taxable components relate to concessional super contributions entering the fund.  That means any money put in the fund through super guarantee payments made by your boss, salary sacrifice or personal concessional taxable contributions that were only taxed at 15 per cent on the way in.

Those taxable contributions and the earnings on those contributions will be taxed at 17 per cent when paid to a non-dependent.

If the deceased was a public sector employee, then potentially the contributions could be taxed at 32%.

What avoids the tax?

Non-taxable contributions include any payments you made to your fund that did not have a tax deduction attached. These include non-concessional one-off payments including downsizer contributions made on the sale of the family home.

These are not taxed on the way out of super because the ATO considers you must have paid tax on the money before you put it in.

If your super is made up of concessional and non-concessional payments your fund will have a record of how much of your balance is in both categories so look at your annual statement for details.

Earnings in the fund are allocated to concessional and non-concessional payments, according to the ratio of both balance types.

Re-contribution strategy

If you are approaching retirement, you can look at a withdrawal and re-contribution strategy.  The fund member withdraws the maximum yearly amount and immediately deposits it again as a contribution. By consistently withdrawing funds from both components and re-depositing them, retirees can slowly alter the ratio of their super fund and leave less of a tax obligation for any nominated beneficiary.

I know all this can be very confusing, so don’t hesitate to reach out to us if you wish to know more.

Family-leave

Paid Family & Domestic Violence Leave From August 1

by Advice

Paid family and domestic violence leave (FDVL) kicked off for large employers on February 1. Now it’s time for small businesses to get on board.

Ten days’ paid family and domestic violence is a significant new entitlement for employees.

The obligation to provide paid family and domestic violence leave applies:

  • from 1 February 2023, for employees of businesses that are not small businesses (i.e. on 1 February 2023, the business employed 15 or more employees); and
  • from 1 August 2023, for employees of small businesses (i.e. on 1 February 2023, the business employed fewer than 15 employees).

What is Family and Domestic Violence leave?

Paid family or domestic violence leave will be available in the event that the employee needs to do something to deal with the impact of the family and domestic violence and it is impractical for them to do it outside their ordinary hours of work.

For example, making arrangements for their safety or the safety of a family member (including relocation), attending urgent court hearings, or accessing police services.

Family and domestic violence – What is it?

A family or domestic violence incident is defined as violent, threatening, or abusive behaviour directed at an employee by a former or current intimate partner, a household member, or a close relative in an effort to coerce or control them.

A close relative of an employee is considered the following:

  • Spouse or former spouse
  • Current or former de facto partner
  • Child
  • Parent/s
  • Grandparent
  • Grandchild
  • Sibling
  • Family members of an employee’s current or former partner, including siblings, children, parents, and grandparents
  • Individuals who are related to the employee according to Aboriginal or Torres Strait Islander kinship rules.

The following types of behaviour are examples of family and domestic violence:

  • Financial abuse
  • Stalking
  • Emotional abuse
  • Sexual assault
  • Physical violence
  • Controlling behaviour

When does Family and Domestic Violence Leave apply?

Employees (including part-time and casual employees) can take this paid leave if they need to do something to deal with the impact of family and domestic violence. For example:

  • Making arrangements for their safety or the safety of a close relative (including relocation)
  • Attending court hearings
  • Accessing police services
  • Attending counselling sessions, medical appointments, financial consultations, or legal consultations.

Who is entitled to Paid Family and Domestic Violence Leave?

Employees covered by the Fair Work System, including full-time, part-time, and casual employees, are entitled to ten days of paid leave for domestic and family violence. For every 12 months of employment, employees will receive ten days paid for family and domestic violence; the entitlement is provided up-front at the start of each 12-month period. The leave does not accumulate like annual leave.

Employees who started employment on or after 1 February 2023 are entitled to the full 10 days from their starting day.

How is pay calculated for Family and Domestic Violence Leave?

The type of employment determines the amount of pay for paid family and domestic violence leave.

Both part-time and full-time employees are entitled to receive full pay for the hours they would have worked if they did not need to take family or domestic violence leave.

Casual employees are paid their full pay rate for the hours they were scheduled to work if they need to take leave due to family or domestic violence.

Family and Domestic Violence Leave pay slip data and record keeping

The employer must ensure that any information regarding paid family and domestic violence leave balances or leave taken is not included in payslips. This safety measure aims to reduce any risk for employees that need to use their family and domestic violence leave.

Employers must keep a record of all employees’ leave balances and leave taken for Family and Domestic Violence.

What are the employee’s obligations when taking Paid Family and Domestic Violence Leave?

As soon as practicably possible, the employee should notify their employer they are taking family and domestic violence leave and how long they expect to be away from work. The notification can be after the employee has taken the leave.

Employers may request evidence that shows the leave taken was to deal with the impact of family or domestic violence and that it was not feasible to manage this outside of working hours. Evidence can be documentation issued by the police, a court of law, family support services or a statutory declaration.

The employer can only use the information provided to determine whether the employee is entitled to family and domestic violence leave.

Key takeaways:

The Paid Family and Domestic Violence Leave legislation key points:

  • On 1 February 2023, the new paid family and domestic violence leave is available to employees for businesses with at least 15 employees or over.
  • The start date for paid family and domestic violence leave for employers with less than 15 employees is 1 August 2023.
  • Over 12 months, full-time, part-time, and casual employees can take up to 10 days of paid family and domestic violence leave.
  • The leave is pro-rated for part-time or casual employees.
  • No matter how many hours employees work per week, they are entitled to 10 days of family and domestic violence leave.
  • Employees who started employment on or after 1 February 2023 are entitled to the full 10 days from their starting day.
  • The paid family and domestic violence leave renewal is on the employee’s start date anniversary, not on the 1 February every year.
  • The 10-day entitlement does not accumulate year after year, like annual leave.
  • An employee’s pay slip must not contain any information regarding paid family and domestic violence leave as of 1 February 2023.

For more information on paid family and domestic violence leave, visit fairwork.gov.au.

work from home deductions

Working-from-home Deduction Changes

by Advice

The ATO has made some changes to how you can claim work-from-home expenses.

The ATO has scrapped the ‘shortcut method’ for claiming work-from-home expenses. This method allowed taxpayers to claim 80 cents per hour worked from home and was an all-inclusive rate so no other work-from-home related expenses could be claimed on top.

You still have the option of claiming on an hourly basis – but it is much less generous than previously.

There are two methods available to claim work-from-home expenses: (1) Fixed Rate Method, and (2) Actual Cost Method.

Fixed Rate Method

The ATO has updated the fixed rate method from 52 cents to 67 cents per hour. However, the new fixed rate now covers all ongoing expenses such as phone bills, internet and utility expenses while working from home.

The only additional expenses that can be claimed on top of the hourly rate are new equipment, office furniture and cleaning (if you have a dedicated home office).

The changes don’t stop there, the ATO has also introduced stronger record-keeping for at-home expenses. From 1 July 2022 to 28 February 2023 taxpayers can provide a four-week diary representing their hours worked from home. From March 2023 onwards, the ATO will require each hour worked from home to be recorded.

Actual Cost Method

The Actual Cost Method remains unchanged and allows you to claim a deduction for the actual expenses you incur. This method takes all of the at-home expenses and then proportions them for their work-related use. These include internet, phone, electricity, computer consumables, stationery, and cleaning (if you have a dedicated home office). A detailed diary is not required – a 4-week period that represents your work use can be used. You will need to keep copies of invoices and bills.

Which rate will be best for you will depend on your individual circumstances. Generally, we find that in most cases the actual cost method gives a greater deduction. When preparing your return, we will do an analysis to ensure you get the best deduction possible.

Please reach out to Activ8 for more information on what’s required to claim home office expenses and your eligibility to maximise your return.

A8-Group-1

Introduction Of Deduction For Skills Training & Technology Costs

by Advice

120% deduction for skills training & technology costs

This was originally announced in 2022 budget by the Morrison Government. It has been adopted by the current Government and on the 21st June 2023, the legislation to allow these measures was finally passed.

Technology Investment Boost

The Technology Investment Boost is a 120% tax deduction for expenditure incurred on business expenses and depreciating assets that support digital adoption, such as portable payment devices, cyber security systems, or subscriptions to cloud-based services. 

The boost is capped at $100,000 per income year with a maximum deduction of $20,000. 

The $20,000 bonus deduction is not paid to the business in cash but is used to offset against the assessable income. If the company is in a loss position, then the bonus deduction would increase the tax loss. The cash value to the business of the bonus deduction will depend on whether it generates a taxable profit or loss during the relevant year and the rate of tax that applies. 

Skills and Training Boost

The Skills and Training boost is a 120% tax deduction for expenditure incurred on external training courses provided to employees. This incentive will not apply to sole traders and independent contractors. 

External training courses will need to be provided to employees in Australia or online and delivered by training organisations registered in Australia. 

The training must be necessarily incurred in carrying on a business for the purpose of gaining or producing income. That is, there needs to be a nexus between the training provided and how the business produces its income. 

Note that the additional deduction relating to the 2021/22 financial year is to be claimed in the 2023 tax returns.  

If you require further information on any of these measures, please do not hesitate to contact our office on (07) 3367 3366.