Autumn 2022 Newsletter

Get on the front foot – make sure you’re prepared and compliant

While it can be easy for us to get caught up in the day to day running of our business, failing to adequately prepare for the future or ensure you’re compliant can create significantly more work and headaches down the road.

In this edition of the newsletter, we look at budgeting as a way to make your business more resilient and primed for growth, as well updates and new legislation from the ATO, to ensure you’re aware of your responsibilities and remain compliant.

We also cover new draft advice from the ATO relating to trust distributions for family trusts, which will be relevant to many of our clients.

If you have any questions about the information included or how it applies to your business, we’d love to hear from you.

Stay well and all the best,
Vargiu Accountants

Making Your Business More Resilient
Businesses across all industries are facing a myriad of challenges, including aftereffects of the pandemic, rising costs and inflation, and a competitive labour market.

While it can be difficult to plan for many of these specific challenges, businesses can be proactive in identifying and understanding the factors that impact their bottom line and plan accordingly through budgeting.

A budget or costing report provides businesses with a clear overview of the state of the business, including where money is being spent as well as a plan of how to respond should conditions change. For example, a budget can tell you what the cost of labour is compared to the income being generated. What is your margin? Are your rates covering the cost of materials and overheads?

All of this information can help business owners to assess their approach and make adjustments to be in a stronger and more profitable position. It also allows you to identify where you have flexibility and room to move should you need to adjust your strategy.

In addition to making your business more resilient, budgeting helps you to plan for and achieve your goals.

It’s been encouraging to see more of our clients requesting budgets and costing reports. If this is something you’d like to explore, please get in touch. We would love to assist you.

Changes to Single Touch Payroll

Single Touch Payroll (STP) is an Australian Government initiative designed to reduce employers’ reporting commitments to government agencies. With STP, employers report employees’ payroll information to the ATO each time they pay them through STP-enabled software.

In the 2019-20 budget, it was announced that the ATO would expand the data collected through STP, known as STP Phase 2. Additional details captured in this phase include:

• TFN declarations
• Termination reason
• Employment basis
• Income stream
• Salary sacrifice
• Lump Sum E Payments

This will result in:

• TFN declarations no longer need to be sent to the ATO
• No need for employee separation certificates
• Separation of type of income e.g. salary, labour hire, working visa, etc.
• Gross payments made to employees will be able to be individualised into details such as allowances, bonuses, directors’ fees, overtime, etc.
• No longer need to provide Lump Sum E letters

The ATO’s mandated start date for businesses to use STP Phase 2 reporting was on 1 January 2022, however Xero has been granted a deferral to 31 December 2022 and MYOB has been granted a deferral to 1 January 2023.

If you are a Xero or MYOB client, click on the relevant links above to find out how to prepare for these deadlines. And for more information on STP Phase 2, visit the ATO’s website here.

Completing Director’s ID

It has become a new requirement for directors to apply for a Director ID – a number that is unique to each director, regardless of how many companies they are a director of. This policy is enforced by new legislation aimed at reducing the incidence of fraud.

It is the responsibility of each director to apply for their own ID, and the date you become a director determines the day by which your application is due:

Date you were/are appointed Date you must apply by
On or before 31 October 2021 30 November 2022
Between 1 November 2021 and 4 April 2022 Within 28 days of appointment
From 5 April 2022 Before appointed director

To apply for a Director ID, set up a MyGovID account through the MyGovID website or app. You will need to provide two identity documents e.g. a driver’s license and Medicare number. You’ll then able to log into the ABRS website to complete your application. Simply search for, “Apply for your director ID” within the ABRS website.

When you apply for your Director ID, you will need at least two of the following documents:

• Bank account details
• ATO Notice of Assessment
• Super account details
• A dividend statement
• A Centrelink payment summary
• A PAYG payment summary

Once you have your Director ID, you will need to pass it on to a record holder of any companies which you are the director of. This record holder can be a company secretary, another director, a contact person, or an authorized agent of the company. We also recommend that you share it with your accountant to be kept on record.

Changes to Trust Distributions

The ATO has released draft advice relating to trust entitlements arising out of reimbursement agreements.
The main change brought about by the new tax draft - TR 2022/D1 Income Tax- is the elimination of arrangements where family members who have low tax rates are being distributed to, however do not receive the money themselves.

The new tax guidance draft was designed to target trust distributions from family trusts to lower-taxed family members, where repayments and reimbursement are made by the beneficiary back to the trust or to another family member. The new tax draft would limit circular distributions, where a trust distributes to a company which it owns.

The enforcement of anti-avoidance measures means trustees of family trusts are required to detail distributions to beneficiaries, including adult children, to ensure they comply with rules about ordinary family dealings.

The advice is still in draft mode, however it is anticipated that the changes will be actioned in the 2023 financial year. If you would like to discuss whether the new measures apply to you, please contact a member of our team.