Group certificates
Most businesses would be aware group certificates, or payment summaries, must be handed out by July 14. But not many know about certain tax requirements that need to be stated on them.
“There is a common misconception that group certificates can be given with minimal information, but salary sacrifice and fringe benefits tax details must be included on the summaries,” Klasic says.
“Also, if you get things wrong, there is a penalty scheme the ATO can enforce and that fine could be as much as $2,200 per employee. If you put a wrong number on that group certificate, it could end up costing you and your business.”
Beware non-commercial loans
Following regulations relating to non-commercial loans is crucial or you could end up facing a significant tax problem that could put your business in jeopardy.
A non-commercial loan is made when a business provides funds to a shareholder or associate. The rules are clear – if you don’t make sure the required repayments are made before June 30, the loan could be classed as an unfranked dividend and your business slugged with a tax rate on the payments worth 46.5 cents in the dollar.
“If I have a loan of $100,” Craig says, “and I don’t pay it back, then it could be classed as an unfranked dividend. The long and the short of that is I’m hit with a 46.5c in the dollar charge, and no business wants that.”
MPR Group partner Marc Peskett also reminds businesses of the new requirement for shareholders and associates to pay market value “rental” costs for the private use of company assets, such as holiday homes, boats and other vehicles.
Be careful with non-commercial losses
If you are an individual, operating either as a sole trader or within a partnership, and have a net loss then you must adhere to the ATO’s non-commercial loss rules. These determine whether you can use a business loss to offset income from other sources.
However, Klasic says there are certain requirements that must be followed, including some changes from the 2009-10 year. This include a new exception for business losses solely caused by deductions claimed for the small business and general business tax break and a new Commissioner’s discretion for individuals who don’t meet the income requirement.
Most significant, however, is the introduction of a new requirement for higher-income earners. Individuals earning over $250,000 will only be able to deduct expenses from non-commercial business activities against the income only from those activities. The changes are designed to stop people from renting out holiday homes for a few weeks and then claiming a $30,000 deduction for related expenses.
PKF director Matthew Field says businesses need to “make sure all the steps are in place to ensure you’re carrying on the business in the right way, and are not using those losses inappropriately”.
Sell managed funds with a capital loss
PPM says business owners should consider selling off managed funds with a capital loss. If those new investors enter a fund, the pool of losses will be diluted, and as a result, the original investor will lose full tax benefits.
The company also says businesses should be careful about getting their timing right in entering a new managed fund. “Don’t put money into managed funds just prior to their annual distribution – you could get an immediate tax bill.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
