Records relating to approximately 75,000 individuals and entities who have received contract payments from employers or businesses will be electronically matched with certain sections of ATO data holdings to identify non-compliance with lodgement and reporting obligations under taxation law.

Called the Contractor Payments Data Matching Program, it will enable the ATO to:

• identify and address the compliance behaviour of contractors who may not be correctly meeting their taxation obligations
• be more strategic in its approach to determine appropriate educational and compliance strategies to encourage voluntary compliance for contractors.

This program also allows the Registrar to verify the integrity of the information held on the Australian Business Register.

From 1 July 2012 there has been an increase in the tax-free threshold from $6,000 to $18,200.

What this means is, if you are an Australian resident for tax purposes, the first $18,200 of your yearly income is not taxed.

Essentially, they are putting the ownership on you to collect more information about payments contractors receive to allow data cross matching for reviews and audits.

We are especially concerned for businesses with a large number of contractors – now you have a lot of extra people to monitor on the Tax Office’s behalf. The Tax Office is counting on these new regulations to bring contractors who have not been reporting their income correctly (if at all) into the tax system.

What this means for you is that you need to be absolutely certain that your contractors are compliant – and also be aware that in some cases the Tax Office could in fact deem some contractors to be employees. A major headache for you!

Where you need to be careful is if you have a contractor who is an individual operating under an ABN but works the majority of his/her time for you and only provides labor services (as opposed to providing both goods and labor) then the tax office will most likely view him/her as your employee instead of a contractor. Suddenly you become liable for the Superannuation Guarantee and Pay-As–You-Go Withholding Tax.

What payments must be reported?
Payments made under a contract, either in whole or in part, for the supply of building and construction services must now be reported. Payments that are made for either the supply of purely goods/materials (not services) or payments for employee salary and wages don’t need reporting.

Examples of the kinds of building and construction services that will be covered include:
* architectural work (including drafting and design)
* installation of hard-wired alarm systems (security, fire, smoke, etc.)
* asphalt and bitumen work
* gas plumbing
* demolition
* electrical work
* land clearing
* installation of hot water systems
* assembly, installation or erection of pre-fabricated houses
* bricklaying
* installation of septic tanks
* fencing
* building of room components (e.g. kitchens, bathroom components, laundry components, cupboards, etc.)

Who is reported on?
Any contractor or subcontractor who is engaged in the building and construction industry, who quotes their ABN to the purchaser and receives a payment for building and construction work.

Is anyone exempt?
The reporting will NOT generally apply to domestic building projects, it will be limited to business-to-business transactions only. However, where a domestic building project is undertaken by builders using any subcontractors, then they will need to report those payments.

Who needs to do the report?
Businesses, including sole traders or contractors wholly or principally engaged in the building and construction industry, will be required to report. Private individuals such as owner builders will NOT be required to report.

What’s it called?
The report will officially be known as a ‘Division 405 Report’. It will contain information that identifies the ‘supplier’ and the payments to the ‘supplier’ in the reporting period. Businesses will be required to report the actual payments made to each contractor. All payments must be reported, there is no minimum amount.

What information does the report need?
The report must include the following details:
* contractor’s name
* contractor’s ABN
* contractor’s address (if known)
* the total amount paid or credited to the contractor during the financial year
* whether any GST has been charged

It is important to note that even though you or the supplier may be registered on a cash basis for GST, all reporting for this new report must be done on an accruals basis.

How often do I need to report?
At this stage reports will need to be made once a year but this could change as there is provision in the regulations for the reports to be lodged quarterly. You will need to begin recording payments from 1 July 2012, with the first annual reports required on the 21 July 2013. A business failing to provide the report by the due date may be liable to pay a penalty of $2,200.

What do I need to do?
What you must do now is to consider whether your current systems are good enough to allow you to record this new information. What changes your business will have to make to be ready to start reporting by 1 July this year?

The last thing you need to do is race to catch up 12 months worth of contractor payments in July next year.

There are easy ways to avoid the pain. If you’re using Xero and Workflow Max we have a solution. Want to know more?

Prefer visuals?
This flow chart will give you an idea of how the changes will affect you.

The rules are changing again…

In the past a small business could claim a standard 15% depreciation on the purchase price for new motor vehicles in their first year and then a standard 30% depreciation for each following year.

Now in addition to this standard depreciation you will also be able to claim a $5000 deduction up front for new business motor vehicles bought after July 1 2012.

As you can see in the following example, it really makes sense to wait a couple of months.

The increased deductions for small business asset purchases don’t just stop with cars.

The other important change from July 1 2012 is that any new small business asset purchased for less than $6,500 will be allowed an immediate write-off. Previously you were only allowed $1000.

What this means to you is that any small plant and equipment purchases (under $6500) should be held off until July 1 2012 to take advantage of the changes.

Enjoy your shopping in July!

As a builder you measure twice cut once, why should your business financials be any different?

Whatever you measure you can control. And whatever you control you can improve.

Wouldn’t it be great to be able control your cash flow and not have to play catch up every time you have a good month?

You think you’re finally getting ahead but you find after you have paid off the debts that build up in the slower months there’s nothing left.

Everyone else has had a cut, but what about you?

A Spotlight Report can help you take back control.

You get regular snapshots into the financial heart of your business. What this means for you is that you correct little problems before they become big headaches.

Our Spotlight Reports don’t just look at the past. We show you in easy to read visuals about the past and future performance of your business. This means you really understand the numbers and what they mean for your business.

We believe in using plain English and getting rid of the jargon.

You might think this is an expensive extra that your business can do without.

Yet what does it cost you not to know what’s really going on with your money?

Big businesses often employ their own financial controllers so they know what’s going on.

Having your accountant prepare your Spotlight Reports makes more sense and is by far the cheaper option. You end up with a team of people who have a wealth of industry experience helping businesses that are similar to yours.

We specialise in the building and construction industry, we know what to look for and our Spotlight Reports are specific to your needs.

Getting straight to the most relevant information so you can get the best out of your business is what we do.

Ask us your questions about Spotlight Reports on twitter at @helmaccounting and include the hashtag #askhelm.

The old Research and Development Tax Concession has taken its last breath. Springing up in its place is the new… Research and Development (R&D) Tax Incentive.

One of the biggest benefits these changes make for you is that some businesses will now be able to get quarterly cash payments for the refund (from 2014).

These changes will affect all research and development done in the new financial year for your company (beginning from 1 July 2011).

There are two main changes to the old legislation that make this possible.

Firstly, the flat rate deduction for all business has been replaced with what they call an offset.

Secondly, they now see companies in two groups; either your turnover is over 20 million (group one) or under 20 million (group two).

If you fall into group one, then according to the old legislation then you could claim a deduction of 125% on your R & D expenses. Now they will give you a 40% offset. To compare apple with apples, what this means to you is that you will effectively be getting a 133% deduction.

If you fall into group two, then it’s even better. Previously you got to claim a 125% deduction. Now you will get a 45% offset. This means that you will effectively be getting a 150% deduction.

It continues to get better for those businesses’ in group two if you are making a loss. Now you’ll be able to access those quarterly cash payments I talked about earlier.

You have 10 months after the end of the financial year to lodge your application for the R & D Tax Incentive. And you need to allow 28 days for your application to be processed.

Missing the deadline because you don’t know about the new changes would mean you miss out on a hefty tax saving for your business.

If you have a question about saving tax why not ask it via Twitter? Simply go to www.helmaccounting.com.au/ask-helm/ and follow the prompts

Maybe you should think again!

You will get much more money back in your Export Market Development Grant (EMDG) to bring your client to Australia instead.

When claiming your costs to travel overseas you are only able to claim $300 per day for your accommodation and meals.  No matter how much you have actually spent. If your hotel costs $1,000 a night you are only able to claim $300 per day.

When you bring the client to Australia 100% of the cost is claimable. No matter what the price. So if your guest’s hotel room costs you $1,000 a night this can be claimed in full.

Just be aware though, in both cases the actual entertainment of the client, such as a day at the cricket, is not claimable.

Make sure you get the most value out of your claimable expenses on your EMDG.

If you want to learn more sign up for our newsletter or contact Michael McAullay at Helm Accounting.

If your business has less than 20 employees then the new “Small Business Superannuation Clearing House” from the Tax Office is going to make your life a whole lot simpler.

Currently you have to pay all of your employees their superannuation individually. If you have 18 employees with different super funds you are sending 18 separate payments to these funds. The Clearing House will allow you to make one electronic payment to cover all your superannuation contributions.

It’s very simple. All you have to do is register each of your employees and their fund details.

Then each month or quarter you log onto the website and advise them how much each employee will be receiving.

You then send one payment to the Clearing House who distributes the money to the individual funds on your behalf.

The most important information about the Clearing House is of course that – IT’S FREE!!!

To register your business details with the Clearing House go to www.medicareaustralia.gov.au/super

The Facts for Engaging an Overseas Seller

When you’re applying for an Export Market Development Grant (EMDG) and looking to engage the services of an overseas consultant you really need to be aware of the wording of your contracts.

Austrade does not recognise payments made for commission on sales to the overseas representative. It will however allow payments for marketing.

When preparing your contract with the representative you should NOT include mention of payments being made as a commission of the sale. Payments made as a percentage of sales will also be deemed a Commission Payment and so Austrade will not recognise them either.

One way to avoid this costly mistake is to implement two separate contracts.

The first contract is to engage their services for the sale, and a second contract is for the payment of the monthly marketing retainer.

If you plan to pay your overseas representative 20% of the sales value as payment for their services, you will first need to determine the value of the sales and then pay them a monthly retainer for marketing services to the value of that 20%

For example, you estimate that your sales will be $600,000 per annum and so you plan to pay your rep $120,000, your monthly marketing retainer will therefore be $10,000. This will enable you to claim the expense in the Export Market Development Grant.

If you want to learn more sign up for our newsletter or contact Michael McAullay at Helm Accounting.