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Part 7 Penalty: Directors Are Personally Liable When Facing Super Guarantee Stuff-Ups (Part 1)

Author: Harry Hoang CPA

ATO’s increased focus on unpaid superannuation contributions

There are often myths and misunderstanding surrounding the Super Guarantee (SG) Obligations within our SME and Not-For-Profit communities. Not-for-profit volunteer directors would often expose themselves to a large extent of liability risks if their management do not comply with the superannuation law.

Part 7 Penalty dictates that directors will be personally liable for an amount equal to any unpaid superannuation guarantee contributions. This article will explain the implications of Part 7 Penalty on unpaid super and the consequences of failing to meet your SG obligations as directors.  

A few months ago, one of my clients expressed a concern regarding the SG. Being self-employed with only an employee made my client unaware of the SG obligations. I offered my professional advice. However, business owners should not assume that your SG obligations are always administered by accountants, unless your accountants are given permission to look after our payroll.

If you manage your company payroll, it is your responsibility to fulfil the SG obligations. Simple fact yet often overlooked by busy directors and business owners!

The importance of superannuation never receives enough attention from SMEs. I strongly believe that it is as critical as paying staff salaries. The ATO’s increased focus on unpaid superannuation contributions is a wake-up call for businesses to change.

Consequences of failing to meet your super obligations

Let’s say you missed two quarters of your super payments, which was equivalent to $10,000. The unpaid super amount now becomes non-tax deductible regardless of its super expense coding in your books. The business has lost a tax deduction of $2,750 (27.5 percent) for FY 20/21. There are interest rates which are to be applied on your unpaid super, according to the ATO website. Another 7 percent interest cost will be incurred on your expense, adding on top of the 27.5 percent tax loss.

There will also be an admin fee of $20 per employee per quarter. If you have 10 employees, 2 quarters of unpaid super will cost another $400. That is 4 percent to be incurred.

Last but not least, due to the implementation of Single Touch Payroll, the ATO will now be more aware than ever of when a business is failing to meet its superannuation obligations. Part 7 Penalty which could go as far as 200 percent on the unpaid amount. It would become another non-deductible $20,000 to penalise the misconduct. The initial $10,000 unpaid super now turns to $33,850 which is 240 percent more than what you should have paid in the first place.

Despite the ATO’s enhanced capacity to monitor late or unpaid superannuation, it remains important to keep an eye on your own contributions. If you have unpaid superannuation contributions, you should consider seeking professional advice.

Given the ATO’s crackdown on businesses that don’t pay superannuation, it is now more important than ever to obtain professional advice on the available strategies and options you have.

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Simpler BAS and implications on businesses

Business Activity Statements (BAS) reporting has often been a time consuming and complex process for many small and medium enterprises (SMEs) since goods and service tax (GST) was introduced in 2010. The Australian Taxation Office (ATO) is introducing Simpler BAS for SMEs to reduce the reporting burden. If your annual turnover is less than $10 million, you will report GST on Simpler BAS (unless you report GST by installment).

SMEs who use Simpler BAS will be required to report for the following fields only;

  1. G1 Total sales
  2. 1A GST on sales
  3. 1B GST on purchases

In other words, SMEs are no longer required to report the following fields;

  1. G2 Export sales
  2. G3 GST free sales
  3. G10 Capital purchases
  4. G11 Non-capital purchases

This means that businesses will need only three GST codes instead of seven when reporting BAS. This will not only save time for business owner, accountant & bookkeeper but also reduce room for error….less is more!

However, please be aware that Simpler BAS only affects the GST field, that is, other BAS fields such as PAYG instalment, PAYG withholding and luxury car tax remain unchanged.  Also this does not change the frequency of BAS submissions.

Although this change will reduce the time to complete the BAS and simplifies recording GST information, the change will not significantly change the amount of work performed to get all GST number right! Please do not sacrifice the time that you spend on GST reconciliations as it mean creating more room for mistake. GST still has to be recorded in the correct manner as the underlying GST law has not changed, at Tailored Accounts, we are actually spending the time saving on report to build more layer of GST reconciliation to ensure that our quality assurance is maintained.

While the change is likely to only provide a small reduction in the reporting burden, this certainly has some effects on the setup & function of your accounting department. Not all the accounting software fully supports this change or will require some adjustments or variations. If you need any support in regards to Simpler BAS, please contact Tailored Accounts.

Read more...

Simpler BAS and implications on businesses

Business Activity Statements (BAS) reporting has often been a time consuming and complex process for many small and medium enterprises (SMEs) since goods and service tax (GST) was introduced in 2010. The Australian Taxation Office (ATO) is introducing Simpler BAS for SMEs to reduce the reporting burden. If your annual turnover is less than $10 million, you will report GST on Simpler BAS (unless you report GST by installment).

SMEs who use Simpler BAS will be required to report for the following fields only;

  1. G1 Total sales
  2. 1A GST on sales
  3. 1B GST on purchases

In other words, SMEs are no longer required to report the following fields;

  1. G2 Export sales
  2. G3 GST free sales
  3. G10 Capital purchases
  4. G11 Non-capital purchases

This means that businesses will need only three GST codes instead of seven when reporting BAS. This will not only save time for business owner, accountant & bookkeeper but also reduce room for error….less is more!

However, please be aware that Simpler BAS only affects the GST field, that is, other BAS fields such as PAYG instalment, PAYG withholding and luxury car tax remain unchanged.  Also this does not change the frequency of BAS submissions.

Although this change will reduce the time to complete the BAS and simplifies recording GST information, the change will not significantly change the amount of work performed to get all GST number right! Please do not sacrifice the time that you spend on GST reconciliations as it mean creating more room for mistake. GST still has to be recorded in the correct manner as the underlying GST law has not changed, at Tailored Accounts, we are actually spending the time saving on report to build more layer of GST reconciliation to ensure that our quality assurance is maintained.

While the change is likely to only provide a small reduction in the reporting burden, this certainly has some effects on the setup & function of your accounting department. Not all the accounting software fully supports this change or will require some adjustments or variations. If you need any support in regards to Simpler BAS, please contact Tailored Accounts.

Read more...

Opportunities for SMEs

The Business Research and Innovation Initiative (BRII) is offering grants to help SMEs develop solutions that could help to solve public sector challenges. This is the opportunity for you to be the consultant of these government departments

Image result for SMEs

  1. On the spot technology for measuring pyrethroid surface residue, Department of Agriculture and Water Resources (DAWR).
  2. Tracking the effect and value of information products, Australian Transaction Reports and Analysis Centre (AUSTRAC).
  3. Digitally enabled community engagement in policy and programme design, Department of Industry, Innovation and Science and the Department of Social Services.
  4. Improve transparency and reliability of water market information, Department of Agriculture and Water Resources (DAWR).
  5. Sharing of information nationally to ensure child safety, Department of Social Services.

Visit BRII website here today and start applying for the grants. Application deadline is 30 November. 

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Tailored Accounts - A Xero Expert

Xero is beautiful online accounting software for small business. With Xero, business owners will have real time online financial updates anywhere, anytime on your Mac, PC, table or mobile. Tailored Accounts is proud to be a Xero expert. We are Xero Gold Partner, Certified Advisor and recently become the sole Xero Cloud Integrator in Canberra.

Xero Authorised Integrator in Canberra

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Imagine a future empowered by the cloud business ecosystem

By Gary Wang*

It is a great time for small businesses here in Australia. With further tax deduction from the federal budget and booming cloud business solutions, small business owners can better align with and achieve their entrepreneurial goals. In this article, I would like to share a few useful cloud business applications and services for small businesses and discuss how business owners can best benefit from using them.

Cloud business eco system

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Ten Characteristics of the Ideal Bookkeeping Customer

Since starting out in 2009, my staff and I have dealt with a wide range of customers from different industries and it got me thinking about what makes a customer great or ideal. Among our pool of customers, there are some who we thoroughly enjoy working with, and I’m confident to say that we’ll be working partners for the long-term.

bookkeeping for business clients

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Essential Tasks at End of Financial Year (EOFY)

End of the financial year is an important and busy time for small business owners, completing bookkeeping, tax returns and begin planning for the new financial year. Putting the hard work in each financial year can help you get your business organised and work smarter in the year ahead.

 End of financial year 2016

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5 end of financial year tips for small businesses

If you are a small business, it is highly likely that you need to do everything to manage your business, from administration, marketing to bookkeeping. It is running well and you believe you are able to manage it until the end of financial year approaches. One client shared with us that EOFY used to be her nightmare and she was always lost with massive paperwork. 

End of financial year bookkeeping tips 

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ACCERTO - Web-based Accounting Solution for Bookkeepers

Accerto is a newly-launched web-based accounting software specifically developed for bookkeepers, accountants, and small and medium-sized businesses (SMBs). With low pricing plans ranging from AU$15/month to AU$29/month, Accerto provides an effective way to check electronic payments by controlling your business’ electronic transactions, giving you a peace of mind. The software automatically verifies each payment once it is received, hence it is also a real-time fraud prevention and payment error detection tool.  

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Five Bookkeeping Tips for Business Owners

Entrepreneurs keep a lot of the financial details of their business in their heads. Doing so has its advantages: No new software to learn, no danger of a system crash that loses all your data, and you can tweak your budget as often as you need without sitting down at a desk.

bookkeeping tips for small and medium business

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Seven Great Apps For Small Businesses

Reprinted from Forbes

By David Prosser

Want to run your business on the move, any time and anywhere? If so, an increasing number of apps aimed specifically at small businesses aim to make your life easier – and the lives of your staff. But while smartphones and apps could, in theory, boost output and save time, relatively few small businesses are making use of them, new research suggests.

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4 Smart Financial Moves For Businesses

By Brian Hamilton

Reprinted from INC

If you’re bootstrapping or working on a budget, the expertise of a CFO may not be a luxury you can afford. Even if you’ve successfully scaled your business, knowing a few core financial principles is essential as you continue to grow. Below are four pieces of financial knowledge that, even if you know nothing else, can help you keep a pulse on your company’s financial health and make better, more informed business decisions.

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