End-of-year super strategies

With the end-of-financial year looming, there are some key strategies you can utilise to maximise your nest egg ahead of 30 June.

Maximise super contributions
Review your contribution types and amounts to ensure you have maximised (not exceeded) your contribution caps for the financial year. The non-concessional contributions cap for 2015/16 is $180,000 or $540,000 over three years for those under 65 at 1 July 2015. From 1 July 2017, a $500,000 lifetime non-concessional contributions cap is proposed to take effect. The concessional contributions cap is currently at $30,000 and $35,000 for those aged 49 or over at 30 June 2015. The lifetime CGT cap is $1,395,000.

Split contributions with your spouse
You can split up to 85 per cent of your 2015 concessional contributions with your spouse providing they are not over 65 years or have reached their preservation age and retired. If you split contributions they must be made before 30 June. This strategy will be increasingly important under the budget’s announcements to introduce a $1.6 million lifetime cap that can be held within the zero tax pension environment.

Make a spouse contribution
You can claim a tax offset of 18 per cent on super contributions of up to $540 per year where your spouse’s assessable income, total reportable fringe benefits amounts and reportable employer super contributions is less than $13,800. The tax offset for eligible spouse contributions cannot be claimed for super contributions that you made into your own fund, then split to your spouse.

Claiming mobile phone expenses

With tax time fast approaching, now is a good time to review those tax deductions that are often easily forgotten such as mobile phone expenses.

Mobile phone expenses can generally be claimed as a tax deduction provided they are used for work purposes, such as receiving or making work calls. When claiming expenses you will need to work out the percentage that reasonably relates to your work related use, not your entire phone bill.

The ATO requires you to substantiate these claims by keeping records for a 4-week representation period in each income year to claim a deduction of more than $50. Records may include diary entries, including electronic records and bills. The Tax Office also suggests including evidence that your employer expects you to work at home or make some work-related calls to demonstrate your entitlement to the deduction.

When apportioning the work use of your phone, you will need to use one of the following methods:

Incidental use
If you are not claiming a deduction of more than $50 in total and your work use is incidental, you may make a claim based on the following:

• $0.25 for work calls made from your landline

• $0.75 for works calls made from your mobile

• $0.10 for text messages sent from your mobile

Usage is itemised on your bills
For phone plans with an itemised bill, you need to determine your percentage of work use over a 4-week representative period which then can be applied to the full year. You can work out the percentage by the number of work calls made as a percentage of total calls, or the amount of time spent on work calls as a percentage of total calls, or the amount of data downloaded for work purposes as a percentage of your total downloads.

Usage is not itemised on your bills
If your plan is not itemised, you can determine your work use by keeping a record of all your calls over a 4-week representative period and then calculate your claim using a reasonable basis.

Bundled phone plans
Phone services are often bundled and can be used by other members in your household. If other members use the services, you need to take into account their use in your calculation. You will need to identify work use over a 4-week representative period which can be applied to the full year. A reasonable basis must be used to work out the work-related use such as:

• The number of work calls as a percentage of total calls

• The amount of time spent on work calls as a percentage of your total calls

• Any additional costs incurred as a result of your work-related use

Choosing the right office space

Choosing an office space for a business is a big decision; not only do owners have to consider what size space they require, but they also have to factor in things like the budget for rent and office proximity to public transport.

Remaining focused on the essentials is key to finding the perfect office space. Here are three factors to consider:

Travel and access for your workers
A top priority when finding an office space should be proximity to public transportation or roads and parking spaces that will allow your staff to commute to the office. Offices spaces that are too far away from access points makes it difficult for employees to get to work and may even reduce the size of a talent pool when you’re looking to make a new hire because of the difficulty to get to the office.

Time your purchase
Rent and purchase prices always increase and decrease in the real estate industry, so keep an eye on the market to find the prime opportunity to buy an office space. Make a plan based on real estate market fluctuations to sign a lease or mortgage agreement at the right time.

Plan for size
One of the most overlooked aspects of choosing office space is how much space you’ll need. Business owners should visit office spaces for rent or sale with a tape measure and a list of the office furniture that they’ll be using. It is key for owners to be thorough about the exact needs of their office space, rather than using a rough estimate.

LRBA deadline extended

The ATO has extended its 30 June 2016 deadline to 31 January 2017 for SMSF trustees to review limited recourse borrowing arrangements (LRBA) for non-arm’s length income.

The Tax Office issued the Practical Compliance Guide 2016/5 in April to provide guidance for SMSF trustees to ensure LRBA arrangements are on terms that are consistent with an arm’s length dealing. The extension follows several individual requests to the ATO for further time, highlighting the need for additional ATO guidance.

SMSF trustees with a LRBA that is not maintained at arm’s length by 31 January 2017 will be subject to the top marginal tax rate as income will be treated as non-arm’s length income (NALI). The ATO is set to provide further practical guidance to assist SMSF trustees to make decisions about whether the NALI rules apply to their arrangements.  

The ATO will not select an SMSF for an income tax review purely because it has an LRBA for 2014-15 income years and prior, provided that:

• the SMSF trustee ensures that any LRBAs that their fund is on terms consistent with an arm’s length dealing, or is alternatively brought to an end by 31 January 2017; and

• payments of principal and interest for the year ended 30 June 2016 must be made under LRBA terms consistent with an arm’s length dealing by 31 January 2017.

ATO targets rental property owners

The Tax Office is focusing on rental property owners this tax time and is encouraging rental owners to understand their obligations and check their claims are right before lodging their tax returns.

The ATO will be paying close attention to excessive interest expense claims and incorrect apportionment of rental income and expenses between owners.

The Tax Office will also be targeting holiday homes that are not genuinely available for rent and incorrect claims for newly purchased rental properties.

To avoid incorrect property claims, rental property owners need to ensure all rental income is included when claiming deductions and that property was genuinely available for rent when the expense was incurred.

Rental owners must make sure they apportion any deductions to take any private use into account and keep records for the claims made. The ATO’s use of sophisticated technology and data matching has amplified the Tax Office’s ability to identify incorrect rental property claims.

Embracing complaining customers

When confronted by a customer with a complaint, all businesses really want to do is make them go away. However, this is a step in the wrong direction. The complainer isn’t just a troublemaker; they are a person who can help you understand how to improve your company. Therefore, it’s in your best interest to deal with them, not just get rid of them.

Most unhappy customers don’t complain; they just go away. Instead of letting you know why they’re unhappy, they’re just not going to come back and they may even warn other customers away.

Whereas most complainers have legitimate concerns, often indicating systematic problems in your business. Maybe your product actually isn’t performing properly or your employees aren’t providing the quality of service a customer should expect.

It’s easy to dismiss complainers. After all, sooner or later, every business will have some customers who are just impossible to please. No matter what you do, they’re never going to be happy. Often, these customers have misunderstood the nature of your products or services and want you to change completely to accommodate them. That’s not realistic.  

Even unrealistic complainers need to be listened to and acknowledged. In fact, unhappy customers can be turned into life-long loyal customers if you recognise their complaints for what they really are: a chance to improve your business. To do this, business owners need to:

Listen: Train yourself and your staff to not get defensive when someone complains, but to start actively listening, ask questions. You can’t solve a problem unless you take the time to understand it.    

Apologise: Your customer has had a bad experience. You are sorry, even if you don’t think you’re entirely to blame. Some of the most powerful words in a businessperson’s language are “I’m sorry.”

Learn: One complaining customer likely represents the feelings of dozens of customers who don’t complain. Explore whether this one complaint is emblematic of bigger problems.

Respond: Genuinely try to address the issues a complaining customer raises. First, do what you can to solve the specific individual’s’ situation. Next, look at whether you need to make changes to how you run your company or make your product to reduce the likelihood of other unhappy customers.

Empower: You’re not always going to be the person an unhappy person turns to. Give front-line sales and service people the authority to solve problems.  Don’t make customers jump through hoops to get satisfaction.  Empower employees to solve problems themselves.

Making your office space more productive

It is incredible the impact that the physical characteristics of an office can have upon workplace productivity. Elements such as colour schemes and office layout, which may seem inconsequential, can have tremendous effects on productivity. Here are three things to consider when redecorating your office space:

Lighting: Natural light has a positive effect on people’s mood and tends to improve their work. Obviously letting in more natural light is not an option for most businesses, but what you can do is rearrange your office to maximise your employees’ exposure to natural light.

Colour: While there has been some of contradictory research into the psychological effects of colour, one thing that people seem to agree on is the stimulating effect of bright and saturated colours. Whenever possible, choose vivid colours for office supplies and furniture.

Plant life: A few nice plants around the office will help to brighten the mood and increase concentration. A small pot plant on each desk can be a great way to show employees your appreciation.

Splitting super with your spouse

Since change is an inevitable part of Australia’s superannuation system, trustees and taxpayers should always be aware of and on the lookout for tax-saving strategies to prevent the consequences of unforeseen super changes.

One such strategy, which is not only straightforward but also highly-effective, is splitting superannuation with your spouse.

Splitting super with your spouse involves one partner (usually the older and higher earner) instructing their super fund once a year to transfer 85 per cent of their concessional (before-tax) contributions made that year to their partner’s super account. The receiving spouse must be between 55 and 65 years of age if not retired or under 55 years old if retired. The partner splitting their contributions can be of any age. Non-concessional contributions (after-tax) cannot be transferred.

The spouse-splitting strategy can be extremely useful and can create many advantages.  For example, it can enable a couple to maximise the amount that could be withdrawn tax-free if either of them ceased working between their preservation age and 60.

It can also help a couple to withdraw more from their accounts. Individuals aged between 55 and 60 can only withdraw the first $185,000 of the taxable component tax-free, therefore, having two large funds means a couple could withdraw $370,000 tax-free between them.

If a couple found it to be appropriate, the older contributing spouse could also work until they were 75 to continue the spouse-splitting strategy if the younger spouse passed the work test. This would keep the older spouse in a lower marginal tax bracket, who would then be able to fund some household expenses through tax-free withdrawals from the receiving spouse’s super.

Another potential benefit in moving one spouse’s superannuation to their partner’s account is that it provides protection against future changes that may restrict lump sum withdrawals or create a tax on higher balances. Two separate superannuation accounts also offer more flexibility than keeping the majority of superannuation savings in the name of just one partner.

New rules for properties worth $2 million or more

From 1 July 2016, those who purchase a residential or commercial property in Australia that is worth more than $2 million must withhold 10 per cent of the price.

Buyers are then required to remit this amount to the Tax Office unless they obtain a tax clearance certificate from the property vendor.

The new rule is designed to put a stop to foreign property owners who sell Australian homes without paying capital gains tax by transferring some of the responsibility to home purchasers.

Most property transactions will not be affected by the change; only 2.26 per cent of homes in Australia are estimated to be affected.

Clearance certificate forms are available on the ATO website and are valid for 12 months from issue. While no fee applies for clearance certificate applications, penalties and interest may apply when vendors make false declarations to the ATO or if a purchaser fails to withhold and remit the 10 per cent of the purchase price.

All Australians sellers of $2 million-plus properties will be classified as overseas investors unless they obtain a special tax clearance that confirms the 10 per cent withholding amount does not need to be withheld from the transaction.

The vendor must provide a clearance certificate to the purchaser by the settlement. Otherwise, the buyer must withhold 10 per cent of the sales price and pay this to the ATO.

Making customers click

A great call to action (CTA) can increase customer engagement and boost a business’s website conversion rates. It can convince customers to engage in a particular action, such as visiting a business’s website, or motivate them to make a purchase after viewing a business’s services or products.

Call to actions can be used anywhere to promote a business’s products and services, such as on their website, blog, newsletters or social networks. They work well when they clearly trigger an emotional reaction, tell someone to make a purchase, create an urgency to purchase immediately, and provide incentives that are impossible to refuse.

Below are three important CTA features to consider when trying to make customers ‘click’:

Choosing the right colour
There is no particular colour that will guarantee client conversions, so firms should pick one that promotes a certain feeling in clients. Some colours to consider include:

• Orange: Encourages immediate action

• Blue: Builds trust and security

• Red: Increases energy and a sense of urgency

• Green: Promotes growth and relaxation

• Yellow: Gets attention and creates low-level anxiety

Writing clickable copy
The point of a call to action is to make someone want to take action right away, so write something that people are guaranteed to click. Try writing in first person, use active verbs, be specific and keep the message short.

Finding the best size
Your CTA button shape is very important. Rectangular buttons are the most common, but businesses should try out other shapes and sizes to see if they will complement the overall design better. Even though bigger is usually better, the CTA button should stand out but not be so obnoxious that it ruins the design of the page it is on.