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Intellectual Property

Your Intellectual Property, known as "IP" is an important asset in today's knowledge economy that needs to be strategically managed.

 

Increasingly, Australian businesses are realising that intangible assets are often more valuable than their physical assets.

Protecting and managing your IP is important and is often the difference between success and failure in your market. 

So, what can be considered IP?

According to IP Australia, it is defined as your creative and intellectual output or in other words, "the property of your mind or proprietary knowledge.  Basically, the productive new ideas you create. It can be an invention, trade mark, design, brand, or the application of your idea."

In fact, your IP assets could be vital to the success of your business which means that any business owner should periodically review what might make up those assets and then take appropriate steps to secure ownership.

Cost of protecting IP

Any method to reduce the cost of IP needs to be balanced against the value of proper protection. There is a real danger that short-cutting protection measures will result in the IP not being properly protected. There are various other methods of protecting your IP but necessarily they do not rely upon the statutory methods of registration. For example, confidential information, unregistered trademarks and reliance upon fiduciary obligations, which invariably rely upon a court protecting the unregistered rights of the owner. However, these unregistered rights will always be subject to another party's registered rights.

If you are unable to justify the preliminary costs, then it's feasible that the IP has no immediate or future value to you and registration is unwarranted. This can be compared to taking out life insurance -- you hope you will never have to access life insurance but it's there to provide protection against unforeseen events. A similar attitude should be applied to the protection of your IP.

At Clarke McEwan we have access to resources that have been developed in consultation with IP Australia.  IP Australia is the Australian Government agency that administers intellectual property rights and legislation relating to patents, trade marks, designs and the like.

If you have concerns that you may have valuable IP that is not adequately protected under Australian Law, talk to us at  Clarke McEwan for more advice.

Employee or Contractor ? Getting it Right

It is crucial to understand the differences between employees and contractors because as an employer, you will be held responsible for getting it right.

 

Coping with the typical ebbs and flows of running a small business sometimes requires an extra pair of hands. 

This has seen independent contractor appointments become a frequent alternative to traditional Pay as You Go (PAYG) employment, particularly when specialist skills cannot be readily obtained by recruiting full- or part-time employees. 

However, it is important to not rush in and hire someone without taking account of the many factors that under the Independent Contractors Act 2006 and Fair Work Act 2009 differentiate an employee from a contractor. Any such arrangements are likely to be scrutinised by industry watchdog the Fair Work Ombudsman. 

CPA Australia points out that there are dangers in engaging an individual as a contractor without properly understanding relevant legislation. You may find the person is considered an employee at law, which involves a range of legal obligations – and liabilities – if you get it wrong. 

According to the Ombudsman, the Fair Work Act contains provisions to protect the rights and entitlements of independent contractors. 

Although its website explains the factors that may differentiate an employee from an independent contractor, there is no single indicator. 

"Each determination is based on the individual merits of the work arrangement in place," the information sheet states. "Courts always look at the totality of the relationship between the parties when determining the status of a person's employment."

Common indicators that may help to ascertain a person's employment status include the degree of control they have over work performed; whether hours are standard or set by the employer (as opposed to negotiation), expectations from work performed (i.e. ongoing or for a specific task); superannuation entitlements; provision of tools and equipment (by the employer or provider); method of payment (regular or on completion of a contract or project); and if paid leave is accrued. 

Don't rush in

It's not uncommon for businesses that fail to fully appreciate the key distinctions between the two working arrangements to find themselves in hot water – and the risk is particularly high for small accounting practices that need to deal with intense periods such as end of year tax reporting.

Smaller firms and solo operators often outsource work without properly recording the terms of engagement in writing. Should a dispute arise about whether a provider was a contractor or employee – or there is disagreement between the parties about the terms of the contract – it could ultimately lead to litigation. 

Therefore, it is imperative all terms of engagement are recorded in a written contract before the start of an arrangement, and that both parties sign it. Even if you have already engaged the person, it's not too late to enter into a written contract and acknowledge that it applies retrospectively.

Professional services firm KPMG released a report last year that cited a famous Federal Court of Australia remark; namely that contracting parties "cannot create something which has every feature of a rooster, but call it a duck and insist that everybody else recognise it as a duck."

The report, Engaging contractors: time to get your ducks in a row, explains that engaging independent contractors can have unforeseen employment law and tax consequences if the relationship has features similar to a PAYG arrangement. 

In cases where liability is proven, company directors will be held accountable, the report warns. 

Even so, KPMG senior manager Paul Hum acknowledges that working out whether an individual is an employee or contractor is not necessarily straight-forward. 

"Unless there's a sudden significant change in the arrangement between engaging parties, it's extremely difficult to draw a line in the sand at a particular point in time," Hum says.

"Our advice to businesses typically centres on developing robust procedures and policies to identify and prevent risky arrangements upfront. If an individual is not identified upfront as being a risk, the risk should be reassessed each time the arrangement is extended or changed." 

The ramifications of inappropriately categorising an employee are similarly complex, he adds.

"Employers have to comply with a whole range of different obligations which don't apply to contractor arrangements. Excluding penalties and interest, this could be anywhere between 15 and 30 per cent of amounts already paid." 

In the event a contractor is deemed to have actually been an employee, such obligations include fringe benefits tax (FBT) and the superannuation guarantee charge (SGC) to the Australian Taxation Office (ATO), payroll tax to revenue offices, workers compensation to insurers or relevant authorities, back pay (if award conditions were not met), and leave entitlements, Hum explains.

What a sham

Also, be warned that the Fair Work Ombudsman interprets sham contracting arrangements as any attempt by an employer to deliberately disguise an employment relationship as an independent contracting arrangement – usually to avoid responsibility for employee entitlements.

Under the sham contracting provisions of the Fair Work Act, an employer cannot:

  • dismiss or threaten to dismiss an employee for the purpose of engaging them as an independent contractor; or
  • make a knowingly false statement to persuade or influence an employee to become an independent contractor.

Fair Work Inspectors can seek penalties for contraventions of sham contracting arrangements or coercing a party to enter into a reform opt-in agreement. The courts may also impose a maximum penalty of $51,000 per contravention. 

If you have any uncertainty as to whether your contractors are actually employees, contact us at Clarke McEwan.

 

Family trusts could be eligible for 'mind-boggling' tax cut

The Australian Tax Office has tweaked its view about whether companies linked to family trusts are eligible for tax relief, but industry veterans say the situation remains "utterly confused" and "mind-boggling".

A new statement on the ATO website says companies will be eligible for the lower 27.5 per cent rate afforded under the Enterprise Tax Plan even if their activities are "relatively passive".

The word "relatively" has been added since similar advice was provided in a footnote to a draft ruling earlier this year.

The footnote caused a stir among tax practitioners because it seemed to expand the range of businesses eligible for cuts to include companies holding passive investments, such as so-called bucket companies that receive income from discretionary trusts.

Revenue Minister Kelly O'Dwyer has been eager to quash the idea that wealthy families might be beneficiaries of the government's small business tax cuts, which were "not meant to apply to passive investment companies".

Tax Institute senior tax counsel Bob Deutsch said the ATO's latest statement did nothing to clear up confusion about eligibility.

"The position with all this is, in my view, utterly confused and will lead to countless errors being made by tax practitioners," he said.

"The bar appears to have been set relatively low in satisfying the requirement for carrying on a business in this context. Concrete examples would be required to give the community a better understanding of what is meant by 'relatively passive'."

Arnold Bloch Leibler tax practice chief Mark Leibler said it was obvious the tax cuts were only ever meant to apply to active trading businesses.

"I have never seen a standoff like this before between the Tax Office and Treasury and the responsible ministers," he said.

"I find this mind-boggling. What the government contemplated was people who are actually engaged in real, active business activities...not bucket companies sitting around and deriving passive income."

At present, companies with turnover of up to $25 million are eligible for the 27.5 per cent rate. The Coalition plan is for companies of all sizes to progressively qualify for the lower rate, which will then be dropped to 25 per cent.

Australian Council of Social Services senior adviser Peter Davidson said most people had the impression the tax cuts were going to businesses whose owners struggle on low incomes.

"The reality is that most of those businesses don't use companies or trusts," he said.

"Those that do are more likely to be professional such as doctors and lawyers than shopkeepers or personal trainers. And now the tax office has raised the prospect that wealthy people using bucket companies to warehouse their investment income could also benefit."

The ATO footnote said: "Generally where a company is established or maintained to make profit or gain for the shareholders it is likely to be carrying on business...this is so even if the company holds passive investments and its activities consist of receiving rents or returns on its investments and distributing them to shareholders."

Mr Davidson said the government would probably need to amend its legislation to prevent passive investors from taking advantage of the lower rate.

But the policy presented even bigger opportunities for tax planning by the wealthy and the only way to close the loopholes was to tax trusts at top marginal rates, he added.

"A common tax avoidance structure combines a trust with a private company beneficiary," he said.

"In 2015, small private companies received $17 billion in distributions from trusts."

The tax cuts also have consequences for franking credits.

Once a company moves on to the 27.5 per cent rate, dividends will be franked at the lower rate even if tax was paid at 30 per cent.

According to tax advisers BDO, this means dividends paid to shareholders on the top marginal rate will end up being taxed at 51 per cent, with the government to pocket the other 2 per cent.

Mr Leibler said the government had overlooked another element that would ultimately prove detrimental to shareholders.

"Unfortunately, what the government has done through its legislation is to provide that while a company is categorised as carrying on a small business and is being taxed at 27.5 per cent, that company can only frank to 27.5 per cent," he said.

"And that applies not only to reserves previously taxed in the hands of the company at 27.5 per cent but also distributions of all or any of the company's reserves that have previously been taxed at 30 per cent."

 
 

5 Tips to get ahead in the new financial year

Proactive ways to get your new Financial Year strategy into shape

All around Australia, business owners and leadership teams are meeting with their accountants to plan for 30 June. But beyond tax planning and compliance, could those conversations add more value to your business?

Dean Love, Director of  an accounting and advisory firm says his clients often want to know what's next, rather than what has happened in the past.

"There's always a role for historic data, you can certainly learn from it. But you can't change it," he explains. "We also make it a priority to talk with our clients about the decisions they're making for the year ahead – and three years beyond that too."

He shares five ways to make sure you're proactively planning beyond your tax return.

1. There's more to end of year reporting than the P&L

Love says companies should pay more attention to their cash flow statements.

"This cuts through the accounting 'smoke and mirrors', because cash determines the health of your business. Whether you're accounting on an accrual or cash basis, you need to know where that cash has gone – and how that impacts your ability to fund your business plans or dividends."

Looking at a cash flow statement for the past 12 months can help you see patterns in spending, and also forecast the year ahead.

Also recommended is an aged debtors report to check whether working capital is tied up in receivables.

"We suggest clients push their '90 day plus' debtors to collect, as once you get beyond 90 days it can be quite risky and difficult. Often they're still doing business with those clients – not realising they're effectively financing that client's business. If you have an overdraft, those debtors are costing you in real terms."

For businesses with stock, an inventory aging report can help identify any obsolete or slow-moving products, which should be cleared pre-June 30 through promotions to make room for new inventory.

2. Benchmark your key performance metrics

What performance measures really matter to your business – and how do you compare with competitors and the industry average? It's an important question to ask at this time of year.

"Key performance indicators are not 'one size fits all', but most businesses – whether product or service – should be looking at their gross profit margin," suggests Love. "If it's positive, that's a good sign you are at least covering your overheads. If it is dropping off, it can be a warning sign and you need to look for the cause."

Then you can make an informed decision to correct it – before it starts to impact your cash flow.

Love says it's very easy to fall into the trap of working harder to generate sales, only to find you're focusing your energy on less profitable service lines. The additional investment in time or money may not prove worthwhile – or sustainable.

He also recommends looking at working capital ratio to check the liquidity of your business. "This is a forward-looking measure of how easily you can meet your debts over the next 12 months. If it's high, that may also be a red flag you're holding too much in inventory, or receivables."

 3. Take time out of the business before June 30

Even though it may feel even harder to take time out of the day-to-day operations at this time of year, it's essential to re-set your strategy before you discuss options with your accountant or financial adviser.

"If you only do one thing before June 30, do this," says Love. "It's an opportunity to get a helicopter view of your business, so you can focus on where you want it to go. If you're too close to the detail, you'll miss the bigger picture."

He suggests taking an afternoon with your leadership team to set your strategic plan and direction for the next financial year – and then discussing financial models with your accountant to understand the potential impact.

 4. The forward-thinking 3-way model

Love says developing a three-way financial model is a key part of their end of financial year discussions.

"This is how we tease out the forward thinking, and help clients plan for the year ahead. We can look at a certain scenario, and model the impact on the profit and loss, balance sheet and cash flow."

As an example, one of Love's clients was able to assess and plan for the impact of proposed development works on their trading activity. "It gave them a clear understanding of the consequences, and ensured everyone was on board."

Sometimes this model highlights assumptions that may need to be challenged, or lets you avoid a costly mistake – because the numbers simply don't stack up.

"If you've acquired a business, you can also use this to see what the next 12 months look like – and then hold management accountable to achieving their goals. It becomes a measuring stick for performance, and makes sure the business plan plays out from a financial perspective."

 5. Set up a sound governance structure

Love believes businesses of any size can benefit from a structured advisory model – and this is a good time of year to establish that framework.

"If you're still in a start-up phase, you may just need access to a business mentor to provide guidance on an as-needs basis. But as you grow, it's a good idea to appoint a panel of advisers, who can add value in areas beyond your core business expertise – such as financial services, HR, marketing or legal advice."

Clarke McEwan can assist to put together your advisory team through our network of contacts  and then once all this is in place, your business will be set for a more proactive approach to the financial year ahead. And while it's obviously important to ensure reports are in place for the tax office, and make sure you're being as tax effective as possible, it's also worth taking the time to get more strategic value from your data.

The benefits of running your own super fund

There's been a lot of talk about the upcoming super changes, whether you can make non-concessional contributions, moving super between pension and retirement phases, and resetting the CGT cost base of the fund's investments.

While there is a lot happening, things haven't changed to any great degree for anyone thinking of starting a self-managed superannuation fund (SMSF). 

The basic considerations for having an SMSF remain the same as they have for many years. In other words, 'the more things change, the more things stay the same'. 

At Clarke McEwan we can advise you on the best way to structure your SMSF so as to gain maximum benefit from the opportunities.

Reasons for having an SMSF

The main reason for having an SMSF is the greater control the trustees/members have over their retirement destiny. Other reasons include:

  • Investment choice: Trustees decide the fund's investment strategy to suit the investment and superannuation needs of the fund's members. The investment choice can include direct shares, managed funds, real estate, cash and term deposits. There are some investments which are unique to SMSFs;
  • Cost: The cost of setting up and running an SMSF may vary depending on the circumstances. It is possible for the costs of running the fund to be lower than fees you may pay on other funds;
  • Transparency: Monitoring and controlling the fund's transactions is directly done by the trustees/members, which provides greater visibility of the fund's investments and their performance at any time;
  • Tax control: It is possible for an SMSF to provide greater control over the tax payable by the fund. This mainly relates to the timing of the purchase and sale of investments which may optimise the tax position of the fund;
  • Estate planning: Having an SMSF provides the flexibility to plan who receives the member's death benefits, when they receive it and how they receive it, such as a pension or lump sum; and
  • Pooling of investments: Family members may be able to pool their superannuation in the one SMSF, which may invest in certain assets for the benefit of the family business. This may include business property and some direct and indirect investments in family business entities.

SMSFs are continuing to attract a younger demographic. Of the funds established in the December 2016 quarter, 43% of new trustees were under the age of 45. This proportion has increased steadily year by year. This demographic is after greater control of the member's retirement savings and innovative admin solutions with real time access, as they are more tech savvy than older generations.

 Here are some advantages of using an SMSF:

  •  Holding business premises in the SMSF: Many small business owners have their business premises owned by the SMSF. This provides tax effective strategies as the premises can be leased to the member's business and may receive a tax deduction for the rent paid on the property. The fund would be taxed at 15% on the net rent received. In some cases, the SMSF may wish to enter into a limited recourse borrowing arrangement, where the fund borrowing to have a property purchase is held in trust on behalf of the fund. You may need to obtain advice on how this could advantage the fund. Assets held by the SMSF are protected from bankruptcy, as creditors are unable to access a member's superannuation benefit if they are facing bankruptcy;
  •  Ability to buy or sell the fund's investments quickly: Trustees/members of an SMSF can quickly change their investments, or the asset allocation of the fund, within the limitations of the fund's investment strategy. This allows the fund to gain optimum access to tax benefits, as well as investment opportunities as soon as they arise;
  • Ways of investing differently: SMSFs can hold direct property, unlisted shares, artworks and other exotic or boutique investments;
  • Manage or eliminate CGT: Capital gains on investments held to support pensions are generally tax free because there is no CGT payable;
  • Buy assets that members could not otherwise afford: An SMSF allows up to four people, usually family members, to pool superannuation assets to purchase assets which may be unaffordable if purchased by members individually; and
  • Flexible payment of death benefits: Benefits from superannuation are not subject to the same payment restrictions as if they are paid from a person's estate. There is no requirement to wait until probate has been granted.

 There are some things that trustees/members of SMSFs may need to pay attention to. These include:

  • Time involved: Some trustees may like to spend a lot of time reviewing their SMSF. This needs to be taken into account in working out the total effort required in operating the fund;
  • Knowledge of trustees: SMSF trustees need to make sure they know the superannuation rules and they update themselves of any changes to determine the impact on the operation of the SMSF;
  • Investment Risk: Taking greater risk or lacking investment diversity may impact on the returns of the SMSF, or may not provide enough cash flow to allow benefits to be paid to members when required; and
  • Costs: Before establishing an SMSF, a comparison of costs should be made. If the SMSF is small, it may turn out to be more expensive than other types of funds.

The decision to have an SMSF requires a number of considerations, some of which may seem to be in conflict. However, there are many benefits of having an SMSF, which include control and flexibility over investment decisions, including timing investments to take advantage of taxation and estate planning.  #financialplanning #SMSF #superannuationrules #pensions

Contact Clarke McEwan today.

Super Changes Myth Busting Video

Finance expert Peter Switzer debunks common myths and misconceptions on the super changes.

This content is provided courtesy of the Australian Taxation Office.

Watch video  

 

Super pensions: Reviewing the merits of keeping a TRIP

Gone are the days when all Australians work to a certain age, and then the next day, they retire from the workforce. The end of work and the beginning of retirement is more fluid in recent times, and the rules that apply to accessing superannuation benefits reflect this blurring of what retirement means.

 In 2005, a special type of super pension was introduced, known as a transition-to-retirement pension. By starting a transition-to-retirement pension (what we call a 'TRIP'), you don't have to retire to withdraw your super benefits. You can work part-time or full-time or even casually, and withdraw a portion of your super benefits each year.

Until 30 June 2017, the major selling point in starting a TRIP is that you can access the tax advantages associated with super pensions while you're still working. Tax advantages include tax-exempt earnings on assets financing the pension (this exemption will be removed from 1 July 2017); and tax-free pension income for over 60s (which continues beyond 30 June 2017). If you start a TRIP when you're under the age of 60, then you can take advantage of the 15% pension offset on assessable pension income, and this 15% pension offset will remain in place beyond 30 June 2017.

15% pension tax offset remains in place

According to an ATO spokesperson: "From 1 July 2017, the earnings from assets supporting a transition to retirement income stream (TRIS)[TRIP] will no longer be subject to an earnings tax exemption, i.e. will no longer be exempt current pension income. The change is only in relation to the tax treatment at the super fund level – there has been no change to the tax treatment of a TRIS benefit paid to an individual member. Therefore there are no changes to the way tax offsets operate for the individual receiving the TRIS payment. A TRIS [TRIP] will continue to meet the definition of a superannuation income stream in the Income Tax Assessment Act 1997 (ITAA), however it will not be a superannuation income stream in the retirement phase under the new section 307-80(3)(a) of the ITAA."

Important: At the risk of repeating this key change to the TRIP rules, note that from 1 July 2017, the government is removing the tax exemption on earnings from assets financing a TRIP, that is, a TRIP will not be considered a superannuation income stream in the retirement phase (although minimum pension payments must still be withdrawn each year).

Depending on the strategies an individual chooses to use, it is possible to reduce the amount of income tax that a person pays while boosting the super benefit. For example, one of the more popular TRIP strategies is to salary sacrifice into your super fund up to your concessional (before-tax) contributions cap, and replace that income with tax-free (if over 60), or concessionally taxed pension payments (if under 60).

Until 30 June 2017, the right combination of salary and super will depend on your salary level, your age, your tax position, the size of your super benefit and your income needs.

Note that from 1 July 2017, the tax-effectiveness of such a strategy has been lessened due to the cut in the concessional contributions cap from $35,000 to $25,000, and the removal of tax-exempt earnings on TRIP assets.

Before I take a TRIP, what's the catch?

If you're considering starting a TRIP, note that you must have reached your preservation age – anyone born before 1 July 1960 has a preservation age of 55, and anyone born after 30 June 1960, has a preservation age of at least 56 years, and anyone born after 30 June 1961 has a preservation age of at least 57 years. If you were born after 30 June 1964, your preservation age is 60 years.

A TRIP is like any other account-based pension (although from 1 July 2017, a TRIP will no longer be considered a superannuation income stream), except for two important requirements:

  • You can withdraw no more than 10% of your TRIP's account balance each year as pension income, and
  • In nearly all circumstances, you cannot withdraw lump sums from your TRIP until you retire, or until you satisfy another condition of release, such as reaching the age of 65. The one exception to the non-commutable rule (not being able to convert to a lump sum) is when the fund member has unrestricted non-preserved benefits in the TRIP account. You may have this type of benefit if you were a fund member before July 1999. If so, this category of benefits are not preserved and can be accessed as a lump sum without breaking the TRIP rules (until 30 June 2017). If you do withdraw these benefits as a lump sum, the lump sum counts towards the minimum pension payment amount required to be paid each year, but does not count towards the 10% maximum payment limit. Note that treatment of a lump sum as pension payment is only possible until 30 June 2017.

Important: From 1 July 2017, TRIPs will no longer be eligible for the tax exemption on pension asset earnings (15% earnings tax will apply), although pension benefit payments on or after the age of 60 will continue to be tax-free, and minimum payments must continue to be withdrawn from the TRIP.

Note: If an individual runs a self-managed super fund (SMSF) and chooses to salary sacrifice while taking a TRIP, then the SMSF trustees must either segregate the fund's assets, or obtain an actuarial certificate. If a fund does not segregate pension assets from assets representing accumulation phase, then the SMSF trustees must then obtain an actuarial certificate each year to identify the tax-exempt income derived from pension assets.

What happens to my TRIP from 1 July 2017?

If you currently have a TRIP, then you will need to review your circumstances before 1 July 2017, to determine the impact of your TRIP no longer being considered a superannuation income stream in the retirement phase. The most significant implication is losing the tax exemption on the fund earnings from assets financing the TRIP. Moving assets back to accumulation phase, may also mean that assets previously exempt from capital gains tax, will now become assessable.

Capital Gains Tax relief in your Fund

For SMSF trustees in particular, if a pension asset becomes an asset in accumulation phase, then a line will need to be drawn on the value at the time of transfer to ensure previously tax-exempt capital gains are not taxed in the future.

If you are seeking to make changes prior to the end of the financial year, contact us to discuss your options.

#superannuation   #earlyretirement   #TRIPS    #TTR

 

Keeping your details up to date

With the day-to-day demands of running a business it can be easy to overlook small things like the accuracy of your company and business records, but it's important. 

Directors have a responsibility under the Corporations Act to advise the Australian Securities & Investments Commission of certain changes within a set time-frame.

By keeping your details up to date, not only are you doing the right thing as a responsible business owner, you also stand a better chance of hearing about government activities that could directly benefit your business.

Your ABN details are also used by government agencies to plan for future community and infrastructure developments that you need to know about that may benefit your business.

If you need assistance to update your ABN  or company details within 28 days of change, including your address, email, phone numbers, entity type, or any other details contact us now.

ASIC Fee Indexation

ASIC will be increasing some fees based on the Consumer Price Index (CPI) from 1 July 2017.

 

Fee from 1 July 2017

Late payment penalties

Annual review fee for a proprietary company *

$254

Late payment fee applies if not paid within 2 months after review date

Annual review fee for a special purpose company *

$48

Late payment fee applies if not paid within 2 months after review date

Late payment fee for up to 1 month late

 

$78

Late payment fee for more than 1 month late

           

$316

*For further information and advice about fees contact us .

 

Simpler BAS is coming your way

Good news for small business owners is that from 1 July 2017 the ATO is reducing the amount of information needed for the business activity statement (BAS) to simplify your GST reporting.

From 1 July 2017, Simpler BAS will be the default GST reporting method for small businesses with a GST turnover of less than $10 million. Simpler BAS is a partnership between the ATO, software developers, tax professionals and small business associations.

Eligible businesses will only need to report their (1) Total sales (2) GST on sales and (3) GST on purchases.

This will not change the reporting cycle, record keeping requirements, or how you report other taxes on the BAS.

Simpler BAS will make it easier to classify transactions and lodge activity statements and reduce the time small business owners need to spend on paperwork and form-filling without  making changes that would impact the final GST amount. 

Simpler BAS will not affect how other taxes are reported such as your PAYG income tax instalments or PAYG tax withheld, or how often you submit your BAS.

You still need to keep records, such as invoices, as proof of any claims you make in your BAS and income tax return lodgements.

What's next?

The ATO will be automatically transitioning eligible small business' GST reporting methods to Simpler BAS from 1 July 2017. To help the transition, the ATO will email Clarke McEwan to advise whether clients are affected and how they can benefit from Simpler BAS.

Small business owners can choose whether to change their GST bookkeeping software settings to reduce the number of GST tax classification codes.

Before making any adjustments please talk to us at Clarke McEwan about whether reduced or detailed GST tax code settings are best for your business.


Contact Clarke McEwan