Personal superannuation contributions overview

Adding your own contributions to your super fund is a simple and effective way to boost your superannuation.

Personal super contributions are amounts an individual contributes to their super fund from their after-tax income. These contributions are in addition to any compulsory super contributions an individual’s employer makes on their behalf and do not include super contributions made through a salary-sacrifice arrangement.

Personal contributions are non-concessional (after-tax) contributions that count towards a person’s non-concessional contributions cap unless they have claimed a tax deduction for them.

While employees generally can’t claim a tax deduction for personal super contributions, they may be eligible for a super co-contribution.

Those who are under the age of 65 can make personal after-tax contributions to their super fund if they’re not working. Those who are 65 years of age or over can only make personal after-tax super contributions if they aren’t yet 75 years of age and have been gainfully employed for at least 40 hours over 30 consecutive days during the financial year.

Some people may be eligible to claim a tax deduction for contributions made to their super if they are not an employee. This includes people who get their income from:

• a personal business (self-employed)

• investments (including interest, dividends, rent and capital gains)

• government pensions or allowances

• super

• partnership or trust distributions

• a foreign source

Changes announced to ATO withholding amounts

Following an announcement in July, the Australian Government recently increased the 32.5 per cent tax threshold from $37,001 – $80,000 to $37,001 – $87,000.

The new PAYG withholding rates will apply to individual taxpayers who earn more than $80,000 from 1 October 2016.

The Australian Tax Office provides a range of tables to assist employers work out how much to withhold from payments they make to their employees. Since the latest edition of the new tax tables is now available, employers should use these new tax tables for payments made from 1 October 2016.

The Tax Office also provides a tax withheld calculator employers can use to calculate the correct amount of tax to withhold. The tax withheld calculator applies to payments made in the 2016-17 income year and provides the correct rates for the 2016–17 income year.

Updated tax tables do not include any catch-up component for the portion of the year which has already passed. Individuals who are affected will receive the full benefit of the tax changes upon an assessment of their income tax return for the 2016-17 income year.

Employers do not need to make any other adjustments or refunds as the ATO will refund any over-payment of tax when employees lodge their 2016–17 income tax return.

Growing your business

It can be difficult for small businesses to grow their customer base beyond the realms of the local community. Generating new business, however, is fundamental to business success, no matter how challenging it may seem.

Here are three ideas small businesses can do to help keep their local customer base strong, while at the same time, spread the word about their business to larger communities:

Get on social media
To ensure your business is found online, set up a business profile on Facebook, LinkedIn or even Twitter. Social media can be a powerful tool to promote your small business to more customers, gain followers and increase your network by connecting to other businesses online.

Nurture existing customers
Most experienced business owners know for a fact that it is far more cost-effective to retain old customers than gain new ones. So make sure you continue to keep your current customer base happy. Always go the extra mile so customers will remember your business for its friendly service and therefore become more likely to refer other people to visit you.

Focus on a single service or product
Try tweaking one of your products or services to appeal to a new area or group of customers and focus on spreading the word on that one product/service. It can be easy to get carried away with the idea of being able to offer current and new customers as much as you can, but always remember that it is better to attract customers with one great product, than offer five or six average products/services.

SMSF investment in a private company or business

Self-managed super funds (SMSFs) are allowed to invest a private company or business provided the business is operated for the sole purpose of providing retirement benefits for fund members and it is allowed under the trust deed.

SMSF trustees must take into account the sole purpose test when determining whether purchasing a private company or business is appropriate. The sole purpose test means your fund needs to be maintained for the sole purpose of providing retirement benefits to your members or to their dependants if a member dies before retirement.

Under the sole purpose test, the SMSF is eligible for concessional tax treatment. However, trustees who contravene the sole purpose test (i.e. provide a pre-retirement benefit to someone) could lose the fund’s concessional tax status and trustees could face severe civil and criminal penalties.

When trustees are considering investing in an entity that carries on a business, they must ensure their SMSF complies with their investment strategy, arm’s length transactions and the rules surrounding related parties.

SMSF trustees must ensure they do not cross the line between investing in a business and using their SMSF to run a business. Some indicators that the SMSF has crossed the line include those where:

• the trustee employs a family member

• the ‘business’ is an activity commonly carried out as a hobby or pastime

• the business carried on by the fund has links to associated trading entities

• there are indications the fund’s business assets are available for the private use and benefit of the trustee or related parties.

SMSF’s looking to invest in a private company or business must ensure their SMSF trust deed permits the investment; the SMSF has a written and up-to-date investment strategy and investments are made in line with the strategy.

Trustees must also ensure investments are made and maintained on an arm’s length basis; assets are not acquired from related parties (unless they are an exception) and the transaction does not breach the in-house asset limit.

Home-based work expenses

The Australian Tax Office allows Australians who work at or from their home to claim a deduction for the additional expenses they incur from running their business.

Generally speaking, the deductible expenses that can be claimed are divided into two categories; occupancy expenses and running expenses.

Occupancy expenses: relate to ‘the place of business’, i.e. where part of an individual’s home is used solely for income producing activities. Examples of occupancy expenses include:

• mortgage interest

• rental costs

• insurance

• security

To be eligible to claim a deduction for an occupancy expense, the area of the home used for business activities must have the ‘character of a place of business’. The ATO has stated that the following shows an area of a home is ‘a place of business’ where:

• the area is clearly identifiable as a place of business

• the area is not suitable for private or domestic use

• the area is used exclusively for carrying on a business

• the area is used regularly for visiting customers

Running expenses: are costs that relate to the use of facilities in the home to run the business, such as:

• the cost of electricity and gas to heat, cool or light up a room

• business phone costs

• the decline in value of plant and equipment, such as chairs, bookcases and computers

• the decline in value of furniture and furnishings, such as curtains and carpets

• the cost of repairs to furniture and furnishings

• cleaning costs

Individuals can only claim a tax deduction for the amount of running expenses’ usage from the business, not general household expenses.

How to prepare for a quick hire

With usual recruitment cycles taking up to two months, business owners may panic when faced with the need for a quick replacement.

Fortunately, there are some ways to prepare for a speedy recruitment process:

Look internally
External hiring can be lengthy, between interviews, background checks and competency tests, an external hire can take months. Consider notifying and encouraging suitable internal employees of the available position before posting the job advertisement externally. Internal hiring reduces time spent as the employee’s information is already in the system and they are familiar with the company culture.

Formulate an action plan
An action plan can help ensure a stress-free emergency recruitment. Consider drafting and updating job descriptions all year round so they are immediately ready for use. Training documents, business processes and login details should all be stored in a central document which is easy to access.

It is also a good idea to collect resumes all year-round. Use your business’ website and LinkedIn page to inform potential candidates you are always accepting applications.

Screen candidates before interviewing
Don’t feel obligated to interview everyone – only interview candidates that stand out on paper. Interviewing is the most time-consuming part of recruitment, so be selective when deciding suitable candidates to reduce your recruitment time.

Managing customer complaints

Customer complaints are an inevitable part of running a business. Managing customer complaints helps to retain existing customers and improve overall customer service.

It is crucial to deal with complaints in an appropriate manner as poorly handled complaints can see customers withdraw their business and encourage others to do so too. Here are four tips to deal with complaints effectively:

Actively listen
When approaching the customer, apologise for the matter and don’t blame others. Be sure to thank the customer for raising the complaint and listen intently, asking questions and summarising what they have said.

Focus on solutions
Discuss different options for fixing the issue with the customer. Be sure to clarify what they are seeking, i.e. a replacement or refund. Negotiate a solution that meets both parties needs.

Follow-up
It is good practice to follow up with the customer within a week to make sure they are satisfied with the outcome and the way the complaint was handled. Encourage customers to provide feedback so you are aware of any problems.

Assign someone to handle complaints
Assigning one staff member to manage complaints ensures the complaint-handling process is thorough and consistent. It also ensures the staff member has adequate customer service training and skills to manage customer complaint behaviour. Make sure there is at least one other person who you can refer complaints to when the assigned staff member can’t resolve them or is not there.

Increased focus on SMSF compliance

The Australian Tax Office (ATO) is taking a more serious approach to SMSF non-compliance over the coming year.

The Tax Office has found that more than an acceptable number of SMSF trustees are lacking transparency and are operating of the system, i.e. not lodging SMSF annual tax returns and/or not undergoing an annual independent audit.

Compliance issues, such as regulatory contraventions reported through auditor contravention reports are a growing problem. The 2015 income year saw 22,000 auditor contravention reports reported for 8,200 funds.

The ATO is urging trustees to engage with the Tax Office by self-correcting and rectifying compliance issues through the early engagement and voluntary disclosure service and/or from targeted mail outs.

The Tax Office’s approach will focus on more intensive compliance activities and enforcement outcomes, especially for those trustees who:

• Are deliberately not complying with their obligations

• Are not willing to engage with the ATO, and

• Are adopting aggressive income tax positions, such as dividend stripping arrangements.

ATO reminds small businesses about SuperStream deadline

The Australian Tax Office (ATO) is reminding small businesses to transition to SuperStream by 28 October 2016.

SuperStream is the new mandatory way employers must make super contributions on behalf of their employees. It involves employers sending all super payments and employee information electronically in a standard format.

Those employers that are still paying their super by cheque must move to the electronic solution to make super contributions.

Small business employers have been given extra compliance flexibility from 30 June 2016 to 28 October 2016. This means the ATO will not be taking compliance action against small businesses until 28 October 2016.

With just one quarterly payment date left until the deadline, the ATO is urging small business employers to set up SuperStream now.

To become SuperStream compliant, businesses must first choose an option that suits their business, such as a payroll system that meets the SuperStream standard, a messaging portal, a super clearing house or their super fund’s online system.

Once an option is selected, businesses may need to collect new information from their employees and update records, and then they will be ready to start using SuperStream.

Finding your online target audience

Successful online marketing begins with knowing how to find your target audience. Determining your online target audience, the type of information they value and knowing where they spend most of their time can help businesses focus their marketing initiatives more effectively.

Defining a target audience can also help businesses create not only good content but the right content. Here are some tactics that can help find an online target audience:

Create reader personas
Creating reader personas can help identify the motivations and curiosities of readers, and therefore establish what they want to read online. A good reader persona covers the basic details of who, what, when, where and why. However, specific details are still necessary. Where possible, include characteristics like gender; personality; family life; job title and function; income and needs.

Conduct user surveys
User surveys are a great tool to help maintain an understanding of what customers are thinking and what they want. Businesses can translate survey feedback into a deeper understanding of their target audience. To make a user survey as useful as possible, include specific that are short and easy to answer.

Monitor your social accounts
Knowing which social networks your readers, customers and followers share content the most can reveal what they like and want to hear about. Finding this kind of information can be as simple as monitoring a business’s social accounts and making notes of who is interacting with the content.

Talk to your social followers
Businesses can learn a lot by being an active member on social media. Make the effort to respond to comments and messages you receive, as every interaction with an audience member is an opportunity to learn more about them. Find relevant Facebook and LinkedIn groups to participate in and occasionally create posts asking what your audience is interested in.