Issue 130 - August 2019

Keeping your business in the family when you decide it's time to retire is a common choice for many owners.

When planning to hand your business over to your children or any other family member, there are precautions you should take to ensure that the business model is protected in a way that you wish. Family members who have shown an interest within the business need to undergo the proper training and education for the position. This process may take years and should not be considered only a few weeks before you retire.

Choose the right successor 

When changing ownership of any business to a family member, think about who will be the best fit for the business. While it may be an appealing option to set up your children financially, ensure that they have the necessary skills and commitment to effectively take over the business. One strategy to help choose an appropriate successor is by having meetings to discuss various aspects of the changeover. Planning out what will be discussed in each meeting when you decide you are going to change ownership will help to create a seamless transition. 

Have a succession plan 

Having a well-defined plan in place will be of assistance when changing ownership of your business. A succession or exit plan will outline who will take on the business once you leave, and the manner in which the transition will take place. A formal succession plan can help to guide your business through a smooth transfer of ownership. This will allow you to teach your successor the ways of the business and your processes for doing various tasks. This also helps to teach and maintain the order in which the business has always operated, making the change easier for customers and employees. After the transition has taken place, your successor can then choose to make any changes to the business model that they think could improve the business. They can do this with an appreciation and understanding of how and why things have been done a certain way in the past. 

A major part of the succession plan involves managing the financial and legal issues that arise with the changeover of a business.  Good advisors can help in these areas.

Define your role going forward 

A common mistake many business owners make when handing the business over is thinking they are still in charge, which is not the case. 

Overstepping the boundaries and trying to be over-involved after you no longer own the business can cause conflict between yourself and your successor. You need to respect the new person you have appointed as an owner and let them run the business on their own. There may be an option for you to be a silent partner or advisor, so you can be there as a soundboard and offer advice should they need it, but anything more can become overbearing. Make sure you prepare yourself for what no longer owning the business will mean, such as how you are going to fill your time that was previously spent working.

Businesses in certain industries are required to annually report their payments to contractors via their Taxable Payment Annual Report (TPAR).

The TPAR for the 2019 financial year is due to be lodged with the ATO by 28th August 2019. It is the first year that businesses providing cleaning and courier services must report payments made to contractors from 1 July 2018 to 30 June 2019, along with businesses in the building and construction industry.

Details required for the TPAR for each contractor can generally be found on their invoices including their Australian Business Number (ABN), their name and address and the gross amount you paid to them for the financial year (including any GST).

Many accounting software packages such as MYOB, Xero & Quickbooks provide users with the ability to produce the TPAR itself or helpful reports to fill out the ATO's standard form.

If you have any questions, please contact us for further discussion.

There is an exemption from Fringe Benefits Tax (FBT) for taxi travel expenses paid on behalf of an employee where the trip begins or ends at the employee's place of work. In addition, taxi travel by an employee is an exempt benefit, where the travel is both:

• a result of sickness of, or injury to, the employee

• the whole or a part of the journey directly between any of the following:

• the employee's place of work

• the employee's place of residence

• any other place that is necessary, or appropriate, for the employee to go as a result of the sickness  or injury

There has previously been some debate as to whether ride-sharing services such as Uber are included in this exemption. The ATO have recently confirmed their views that ride-sharing operators are excluded from the definition of a taxi for FBT purposes. The exemption is specifically limited to travel in a vehicle licensed by the relevant state or territory to operate as a taxi. 

Please note that where the travel would be ordinarily deductible, such as travel between two places of work, then the benefit will still be exempt.

If you are providing benefits to your employees by way of paying for or reimbursing ride-sharing expenses and would like further information, please speak to your Brentnalls SA team member.

An important change to the tax deductibility of payments to your employees has come into effect from 1 July 2019. If you have not met your PAYG Withholding and Reporting obligations in relation to an amount paid to a worker, then that payment will no longer be tax deductible.

Payments That Must Comply

The following payments can only be claimed as a tax deduction if they comply with the PAYG Withholding and Reporting Obligations:

• salary, wages, commissions, bonuses or allowances to an employee

• directors' fees

• payments under a labour hire arrangement, and

• payments for a supply of services (except from supplies of goods and real property) where the contractor has not provided their ABN.

PAYG Withholding and Reporting Obligations

To ensure your payments are still tax deductible, you must:

• withhold the appropriate amount of PAYG Withholding Tax from that payment; and

• report that amount to the ATO (via your Activity Statement).

The good news is that if you are currently complying with your PAYG Withholding requirements, then these changes will not affect you.  

Audits aren't just a matter of assumptions of problems, they are deliberate random compliance checking activities of government authorities. The Australian Taxation Office (ATO) and other Government agencies are becoming increasingly financially resourced and sophisticated through data matching in reviewing the compliance of businesses and individuals.

Even when you have prepared and lodged everything 100% correctly, you may still find yourself subject to an audit which can put onerous obligations on you to provide documentation and respond to detailed questions in order to satisfy the audit requirements.

In a proactive effort to combat the risk of these rising costs, we provide our 'Audit Shield' Tax Audit Insurance service. This insurance provides for the payment of our professional fees incurred to respond on your behalf, to an audit, enquiry, investigation, review or examination (audit activity) instigated by the ATO or other Australian Government revenue agencies.

This can include audit activity in relation to income tax, GST, Workers Compensation Insurance, Payroll Tax, Land Tax, Fringe Benefits Tax and most other taxes levied by Government agencies.

Taking out insurance is not an expression of concern, but a tool to mitigate risk. Many of our clients have joined this policy, and they will receive renewal notices in the coming months. We will also be sending correspondence to clients who have not yet participated, should they wish to take up the cover this year. Please note that this is an optional 'opt-in' policy. There is no compulsion to participate and if you do not wish to take up the offer, you do not need to take any action. 

We do not receive any payment, via commission, service fee, admin fee, or any other manner, as a result of this arrangement.

The game of Football (Aussie Rules) is a much-loved game here in Adelaide. Whether you follow AFL and/or SANFL, it's fair to say for the most part we are  passionate about it.

We are very proud that we have here at Brentnalls SA two accountants who have shown amazing ability to play at SANFL level. Meet Matthew Merrett (Crows) and Jonty Scharenberg (Glenelg). We asked them a few questions about the game and their aspirations moving forward.

When did you start playing football?

Matthew – Started when I was about 5, with Auskick back in Penola.

Jonty – I started playing football when I was 7 years old through Auskick.

Why football?

Matthew – It was the only sport on offer in Winter, and all my friends were playing so that's what we did.

Jonty – I started playing football because my older brothers played, and I followed in their footsteps.

What is it about football that you enjoy the most?

Matthew – It's a circuit breaker for me, especially from work and CA study. Keeps me relatively fit and healthy and is a brilliant way to keep social and spend time with my mates.

Jonty – I enjoy being part of a team all striving towards the same goal.

Who do you support in the AFL?

Matthew – Adelaide Crows

Jonty – I don't really have a specific team I follow in the AFL; I enjoy watching most games and just hope it is a close game!

Do you hope to play in the AFL?

Matthew – I've always enjoyed the challenge of playing at the highest level I can, and SANFL challenges me a lot! No real desires to go any further, I'm too busy with work and study.

Jonty – Playing in the AFL would be amazing and hopefully I can experience it one day.

You may have noticed the way you receive your payment summary (group certificate) has changed.

Many employers are now required to report wages, tax and super information direct to the ATO on a weekly, fortnightly or monthly basis.  Eventually all employers will be reporting this way.

If an employer is currently reporting direct to the ATO, they will not need to give you a payment summary. You will receive an end-of-year income statement through myGov. Your employer will let you know if they will not be providing you with a payment summary this year. 

If an employer does not currently report direct to the ATO, they will still be required to provide you with a payment summary at the end of the financial year. 

For majority of people, your payment summary information will be available at the end of the financial year through their myGov account and will be called an "income statement".

It is important to wait until your employer finalises your income statement to make it "tax ready" before you (or your agent) lodge your tax return. If you lodge your return when it is not tax ready, you may need to lodge an amendment if you employer makes any changes. In some cases, additional tax and interest may be payable. 

From 1 July, the ATO will send a message to your myGov inbox advising your income statement is tax ready so you (or your agent) can lodge your return. 

Most employers have until 31 July 2019 to check their employee's income statement and finalise it for the financial year. 

Please speak to your Brentnalls SA team member if you have any questions regarding the above. 

Congratulations to our client Dr Wendy Cheung on the opening of her new paediatric dental practice Adelaide Children's Dentistry at 165 Unley Road, Unley. The new practice opened its doors and saw its first patient on 18th June 2019. We wish Wendy and her team all the best with their new practice.

We congratulate Emily Raven and Rachel Mead from My Kingdom for a Horse for recently winning Best Breakfast Restaurant and Best Café Dining-City at the Restaurant & Catering Awards. 

We welcome Belinda Robb who has joined us as a senior accountant. We also welcome Jessica Everes and Vanessa Coppola who have joined us as junior accountants. 

We farewell Aman Syed and Rhys Jones and wish them all the best with their futures. 

We congratulate Antonella Tripodi on reaching 10 years with the firm and thank her for her contribution over the years. 

We would like to congratulate Nadine Hill and her fellow Grange Golf Club partners for recently winning the SA Pennant Competition-Pike Cup.

We recently held a morning tea to help raise funds for SIDS & Kids SA. We are pleased to announce that we raised over $380.00 towards this great cause.

I started working at Brentnalls SA two years ago as a Junior accountant whilst studying part time at the University of South Australia. Since then I have graduated and have moved into the position of an Intermediate accountant. So far I have loved working at Brentnalls SA. It has been a great learning experience with plenty of opportunities. It has a great culture and everyone is willing to help out. When I'm not in the office, I enjoy all things sport. Currently I am playing football for Scotch Old Collegians, and in the summer season will play netball for Glengowrie. I also enjoy spending time with my family and friends, whether at Port games or at a winery down south. I have been fortunate growing up in a family who loves to travel, so when time permits will take any opportunity to go out and explore. In a few months time I will be travelling to New Zealand and the Cook Islands.

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The information provided in this newsletter does not constitute advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you contact Brentnalls SA before making any decision to discuss your particular requirements or circumstances. Brentnalls is not a partnership or a joint venture. Instead, the business of Brentnalls SA is independently owned and operated and it is an independent member of the Brentnalls Affiliation of Accounting Firms. Individual member firms do not accept responsibility or liability for the actions or inactions of any other individual member firm.