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Sometimes you might want to set up a structure where you will share in the spoils with everyone that deals with that structure. There is a specific type of structure for this and it is known as a Co-Operative.
A co-operative business structure (or co-op) is a legally incorporated business entity that is designed to serve the interests of its members. Co-operatives may be profit-sharing enterprises or not-for-profit organisations.
A cooperative business serves members by providing goods and services that may be unavailable or too costly to access as individuals. There are two types of cooperatives that businesses can be set up as.
Distributing cooperatives are able to distribute any annual profits to members of the cooperative. They are required to share the capital that they make, and members of this type of cooperative must own the minimum number of shares specified in the co-op’s rules.
Non-distributing cooperatives cannot share their profits with members of the cooperative. All profits must further the cooperative’s purpose, and the cooperative may or may not issue shares to the members. Members may be charged a subscription fee if there is no share capital
Some popular cooperatives business structures include:
- Consumer co-operatives, which buy and sell goods to members at competitive prices in a variety of sectors.
- Producer co-operatives, which may process, brand, market and distribute members’ goods and services, or supply goods and services needed by their members, or operate businesses that provide employment to members.
- Service co-operatives, which provide a variety of essential services to their members and communities.
- Financial co-operatives, including co-operative banks, credit unions, building societies and friendly societies, which then provide investment, loan and insurance services to their members.
The ATO is looking to make tax season a little bit easier this year, particularly in light of the unique but significant challenges that Australians have been facing over the last year, and are continuing to face. If you received a financial assistance payment, grant or scheme package during the 2020 financial year, you need to be aware of your taxable requirements. There are different tax treatments for different payments that you may have received.
Payments that were received from Jobkeeper as an employee will be automatically included in your income statement as either salary and wages, or as an allowance. Sole traders who have received a Jobkeeper payment on behalf of their business will need to include the payment as assessable income for the business.
All information will be included in your tax return (in the Government Payments & Allowances question) when ready. Lodging your return prior to the information being available will require you to add it yourself. Leaving out income will slow your return, so it is important to ensure that you have all of the information when lodging.
Stand Down Payments
If you were the recipient of a one-off or regular payment from your employer after being temporarily stood down due to COVID-19, these payments will be automatically included in your return as they are taxable.
COVID-19 Disaster Payment For People Affected By Restrictions
The Australian Government (through Services Australia) COVID-19 disaster payment for those who were affected by restrictions is a taxable payment. This must be included when lodging your tax return.
Tax Treatment Of Other Assistance Payments
The tax treatment of other assistance payments may vary according to what is required and how the income is assessed as. It is best to double-check on the ATO’s website directly to determine how different disaster payments may impact your return.
Early Access To Superannuation
If you received early access to your superannuation under the special arrangements resulting from COVID-19, you do not need to declare that amount in your tax return. Any eligible amounts withdrawn under this program are tax-free.
If you require assistance with determining what is taxable income and what is not, or you’re not sure what payments that you received may be applicable to the ATO’s different tax treatments, come speak with us. We’re here to help.
Family-run businesses form an essential part of the economy. Tradition, success and history along with their unique dynamic can create a thriving business that many may wish to see continue.
However, as with any business, the conversation about succession and how to continue the business into the future needs to be had.
With only 1 in 4 family-operated businesses considering their approach to succession formally, succession in a family business is one of the greatest viability risks to the actual business and needs to be addressed accordingly.
Every family and family-run business is unique, and every transfer or succession of a family business will also be executed differently. If you are thinking about what your family business’s plan is for succession, you may want to consider keeping these critical factors in mind:
- Where is your business going? What do you want for your family and business? What are your goals and your time frames for achieving those goals?
- Is the vision you have for your business shared by your family? It is important to consider this for the succession of your business, as a mutually shared vision will ensure that the business continues on the projected path even after the business has been passed onto the next generation.
- What obstacles and challenges will your family business face? You need to be able to understand the different perspectives and motivations of each individual that the succession impacts. Ongoing communication is vital to gaining this understanding, but an advisor can be employed to unbiasedly look at the situation independently and take the emotion out of a conversation.
- Create a plan to plot out the path of the business’s future, and the challenges that the business may face along the way as well as what it is currently facing.
- It’s important to remember that a family business does not have to be succeeded by a family (though it’s an outcome you may want). Always consider what the members of your family wish to do, and consider alternatives if none wish to take over the business.
A succession plan for a family business needs to be created to move forward and should detail all of the actions you intend to take (including the steps involved with both management and ownership succession).
It needs to be flexible, adaptable and ready to evolve, as businesses (as well as families), change over time. Your succession planning process should be transparent and understand and align with the goals you have set out for the business’s further development across the generations.
The most effective succession plans:
- Preserve and generate family wealth
- Minimise disharmony and disruption
- Minimise the impact of tax
- Encourage personal growth of family members
- Fund the retirement and family lifestyle
- Bring clarity to where the business and the family are heading.
There were a few changes to superannuation that were passed by the Senate recently.
You can now use the bring-forward rule to make three years’ worth of non-concessional contributions (where you don’t claim a tax deduction) up until the age of 67.
Last year the rules had changed to permit a person to make non-concessional contributions up to the age of 67 but the use of the bring forward rule had stayed at an age limit of 65 years old, as it required a full Bill to be passed by both Houses of Parliament.
This new age limit will apply to contributions made on or after the 1st July 2020. This is particularly good news for people that turned 67 during the year and utilised the three year bring forward rule in anticipation of the law being passed.
From the first quarter after receiving royal assent (most likely to occur from 1st July), Self Managed Superannuation Funds will be allowed to have up to six members. The limit is currently four members. For larger families, this will be of particular use and relevance, as the parents involved in the fund may wish to include more than two children (this could potentially be up to four children involved in this case).
Pauline Hanson’s One Nation Party also passed through an amendment into the changes that will remove a charge on excess concessional contributions. Concessional contributions are those where you or your employer can claim a tax deduction on a contribution.
If you or your employer currently contribute over the allowable caps (usually limited to $25,000 but moving to $27,500 on 1 July) to your super, you are charged an amount of around 3% of the excess you contributed and it is calculated from the 1st of July in the year that you made the contribution up until the day your assessment is due.
There are still other charges that will apply to exceeding contribution allowable caps, such as Shortfall Interest Charge and General Interest Charge. The biggest is usually the Excess Concessional Contributions Charge.
This change was never announced and was not part of government policy but made it through anyway. One Nation also tried to increase the maximum allowable tax-deductible contributions for persons aged over 67 years old, but that amendment did not go through.
Another change that had not been previously announced was that if you had an amount released from super under the Covid Relief package ($10,000 per year for two years) then you will not be able to claim a tax deduction for the same amount that you contribute back into super up until 2030.
For example, Peter took his $20,000 under the Covid Release package. Peter contributes $1,000 per month into his superannuation fund and usually claims a tax deduction for that amount.
The first $20,000 that Peter contributes after 1st July 2021 will not be able to be claimed as a tax deduction. This only applies to personal contributions, so if your employer contributes on your behalf this will not impact you.
Want more information about super contributions, but not sure where to start? Come speak with us – we can help you with any questions you may have about superannuation
More and more Australians bought local products during the past year and rallied behind smaller businesses, which buoyed many shops that may have otherwise struggled to stay afloat.
To create this kind of loyalty and support it’s crucial to develop and maintain a strong connection with your customers.
If you are a small business, this is a vital aspect of business management that you will want to have occurred to strengthen customer relationships.
Make The Customer Feel Special
Customers want to feel special – you can achieve this by approaching each customer as an individual rather than as a customer per se. Making the user interactions tailored to suit each customer’s specific needs/usage of your products will enhance the relevance and improve the authenticity of the interaction. Your customers will feel heard by your business and seen.
Let Your Customer Feel Heard
Always ensure that the customer feels heard – if the customer has a complaint, treat it the same way that you treat a good review, and respond accordingly. This builds trust with the customer and future customers that you will hear them out, and act the best you can to assist.
Reward Customer Loyalty & Strengthen Connections
Go above and beyond for your customers – if you’re a small business, you can use the closer connection you may have with your customers to your advantage and offer additional loyalty discounts, recommendations, and phenomenal customer support.
Follow Up With Your Customers
Follow up with customers (new and current) to ascertain reception of products and services, spearhead a proactive approach to appraisals and determine if a poor customer experience has been had. Following up allows customers to feel acknowledged while also granting you access to potential data that you may not have received otherwise.
Connect Via Social Media
Ensuring that you remain actively involved on your social media for your business with your customers should increase interaction. With many looking to online platforms to browse products, leave reviews and share favourite products via social media, it makes sense to turn your social media platform into a way to make your brand shine. Actively engaging with customers, responding to comments and questions, and directing your brand’s narrative are great ways to use social media to strengthen your connection.
Your Existing Customers Should Come First
Prioritise the customers you already have over the accrual of potential customers. If you’ve already got an established customer base, one of the best ways to maintain it is to keep them happy. You don’t want to risk losing them during the growth of your business due to less attention and more subpar customer service. The best way to maintain customer loyalty is to ensure that you can meet their needs, follow up with their requests (to the best of your ability) and satisfy their customer service needs.
Ethical investing is gaining traction, with more and more investors selecting where their money will go based on their personal principles. This style of socially conscious investment holds companies accountable for their negative impacts and is driving many investors to select their investments dependent on their mutual shared values.
Ethical investing can align with moral, social, political, religious and environmental values, and takes them into account prior to making investment decisions. The primary objective of ethical investments is to create a positive impact by investing in companies that take environmental, social governance (ESG) and ethical issues into consideration and make an effort to address or prevent the business from contributing to the issues.
Rather than only receive a financial return on their investment, investors also receive a social conscious return that has an overall impact on them and the planet.
There are two ways that ethical investing can be done.
An investor chooses to invest in industries/sectors/companies whose values align with their own values. As an example, they may look towards companies who are environmentally and socially conscious, who treat their workers fairly, have high governance standards and carry out environmentally sustainable practices.
This is when an investor avoids industries whose values directly differ from their value – those involved in fossil fuels, gambling, military ammunition and tobacco are automatically crossed out from ethical investors’ choices. Treatment of workers can also determine to an ethical investor whether or not a company is worth investing in.
Ethical investing, while praiseworthy, needs to consider the soundness of their investments as well as their values. To examine whether the investment is sound and has the potential to reap significant returns, a review of a company’s history and finances is necessary. It is also important to confirm the firm’s commitment to its declared ethical practices and measures.
The inexpensive and profitable side hustle is under the ATO’s watchful eye when it comes to declaring income this tax season. With many gig economy workers often earning their income as independent contractors, the ATO warns that a failure to report all income from all of the work that they carry out could land them with severe penalties.
The ATO is expected to employ advanced data-matching from platforms that play host to large proportions of Australia’s gig economy to ensure that tax is declared and paid on the income from workers of the gig economy. Those workers may include Uber workers, Doordash, Lyft, Airbnb and many more similar side hustle income earners.
There is a silver lining for gig workers this tax time. Many gig economy workers may find themselves more eligible for tax deductions – but are warned against claiming more than they are allowed to.
Gig workers are eligible to claim deductions for most costs incurred while earning their income (such as travel or vehicle expenses, financing and marketing). These deductions, however, can only be claimed for the work-related proportion of the claim. You won’t be able to claim the whole amount for the deduction if the claim is made because you picked up an Uber fare on the way back from your Grandma’s for example, it will only be deductible from when you picked up your passenger.
Those who prepare their deductions based on a representative period are also warned to prepare an additional record for this period, as the pandemic has induced numerous tax challenges for many gig economy workers involved in declining and rising fields of the economy.
Workers who fail to declare cash income from the gig economy may incur penalties in the form of interest on their tax bills or potential criminal charges. It is vital that you ensure your tax return is correctly lodged and all income is declared if you are a gig economy worker of any kind. If you need assistance regarding your tax return lodgment process, you can always contact us for advice.
Many years ago Julia Gillard’s government announced increases in the Superannuation Guarantee rate from 9% at the time, up to 12%. The impact of the Global Financial Crisis has led subsequent governments to continually postpone these increases. So far, Australia has only received two increases, back in 2013 and 2014, when the superannuation rate went up to 9.5% over two years. It has remained at 9.5% since 2014.
Now it is time for the next increase. This will happen on 1 July 2021 when the rate of superannuation that you have to pay for most of your employees will be 10% of their salary or wage instead of the current 9.5%.
For most employers that are using payroll software, this change will happen automatically. You should however confirm with your software provider (either directly or through someone like us) that this will happen to ensure that you remain compliant without needing further action.
For most employees, this will mean an extra 0.5% added to their current salary plus super. But where an employee is on a contract where their salary is superannuation inclusive it could be that they will receive a corresponding reduction in their salary to offset the extra superannuation. Employers and employees will need to have a discussion about this so that everyone knows the situation they will be in for the new financial year.
The proposed increase to 12% is still scheduled to happen in 0.5% increments each financial year until the 2025-26 year when the Superannuation Guarantee rate will peak at 12%. The rates applicable to each financial year are proposed to be:
1 July 2021 to 30 June 2022 10%
1 July 2022 to 30 June 2023 10.5%
1 July 2023 to 30 June 2024 11%
1 July 2024 to 30 June 2025 11.5%
1 July 2025 onwards 12%
It is also possible that the government will delay the increases as it has done in the past, but you will be kept informed regarding that information.
If something unexpected or untoward happens to you or your loved ones, life insurance is financial protection that you don’t want to skimp on. It’s crucial to find the right insurance to suit your needs, as the cost of life insurance can become a costly amount in your budget.
Different life insurance products are designed to protect you and your loved ones from various events that can occur. Some of the products that may be covered under life insurance (depending on the provider) include:
- Life Cover pays out a lump sum if you die.
- Total and permanent disability (TPD) insurance pays a lump sum to help you with rehabilitation and living costs.
- Trauma insurance covers you if you’re diagnosed with a major illness.
- Income protection insurance pays some of your income if you can’t work due to illness or injury.
Before making a purchase, you should read the life insurance provider’s product disclosure statement (which legally must be provided to you before purchase). Check the product disclosure statement for:
- What’s covered and excluded under the policy
- What information you will need to give to an insurer
- Information on premiums and how they change over time
- Waiting periods before you make a claim
- How to make a claim
- How to make a complaint about the claims process or decision
As it is a significant financial decision, shop around before making the final decision to ensure that you are getting the product that best suits your needs.
You should also check whether or not you already have life insurance through your super to make sure that you are not paying for your insurance twice. If you’re not sure about whether or not your super provider already covers your life insurance, it’s best to speak with them directly to be certain.
It is also important to know that only licensed financial advisers can give you advice about what life insurance you should hold.
The ATO’s Tax, Super + You competition is a fun and engaging way for Australian high school students to learn about tax and super, unleash their creativity and potentially win some great prizes.
Working as a part of a team or individually, students are invited to write, make or film an entry for their topic:
* Junior (Year 7–9) are asked to highlight the value of tax or super (or both) in the community
* Senior (Year 10–12) must discuss your first job and what you need to know about tax and super.
Shortlisted entries in 2019 included raps, songs, animations, video skits and even a board game. If you’re a high school student interested in competing this year or are the parent of one, this resource is a great way to see how people have gotten involved previously (and that you can draw inspiration from as well).
The competition opened on 24 May, but entries will be accepted until 13 August. The winners will be decided by a judging panel, including guest judge Effie Zahos who is one of Australia’s leading personal finance commentators. The public can also vote for their favourite entry in the People’s Choice Awards.
Tax Office Assistant Commissioner Sally Bektas said she was thrilled to be back on the judging panel.
“Our Tax, Super + You competition has really shown that building financial literacy can be fun and bring out the best in students. I’m so excited to see the entries for 2021,” Sally said.
You can watch Sally explain how to get involved on ATOtv.
Winners of the 2021 Tax, Super + You competition will be announced in September.
Looking for more information about the 2021 Tax, Super + You competition? Visit www.taxsuperandyou.gov.au/competition to find out more details.