Changes to HECS-HELP Indexation has finally been made law! Here is how it affects you

Understanding the Recent Changes to HECS-HELP Indexation and How to Check Your Debt

The Australian government has recently enacted significant reforms to the Higher Education Loan Program (HELP), commonly known as HECS-HELP. These changes, legislated on November 26, 2024, aim to alleviate the financial burden on graduates by modifying how student loan indexation is calculated.

Key Changes to HECS-HELP Indexation:

  1. Revised Indexation Method:
    • Previously, HECS-HELP debts were indexed annually based on the Consumer Price Index (CPI), which reflects inflation rates.
    • Under the new legislation, starting from June 1, 2024, indexation will be determined by the lower of the CPI or the Wage Price Index (WPI). This ensures that debt growth aligns more closely with wage increases, preventing disproportionate debt escalation during periods of high inflation.
    • Indexation (interest) is only applied once per year, on the balance at 1st of June each year.
  2. Retrospective Application:
    • The revised indexation rates are applied retrospectively to the past two financial years:
      • 2022-23: Indexation reduced from 7.1% to 3.2%.
      • 2023-24: Indexation reduced from 4.7% to 4.0%.
    • These adjustments result in credits to individuals’ HELP accounts, effectively reducing their outstanding debt balances.

How to Check Your HELP Debt Balance

If you’re wondering how these changes affect your personal HELP debt, here’s a step-by-step guide to check your updated balance:

  1. Log in to MyGov:
    • Go to the MyGov website and log in to your account.
    • Ensure your MyGov account is linked to the Australian Taxation Office (ATO).
  2. Access Your HELP Debt Information:
    • Once logged in, click on the ATO section within MyGov.
    • Navigate to “Loan Accounts” or a similar section to view your HELP debt balance.
  3. Review Adjustments:
    • Check the breakdown of your debt, including any recent adjustments for reduced indexation rates. These should be reflected as credits applied to your balance.
  4. Contact the ATO for Clarifications:
    • If you believe the adjustments are incorrect or have further questions, you can contact the ATO directly via MyGov or by phone.
  5. Track Your Progress:
    • Regularly review your HELP debt statements, especially after indexation adjustments in June each year, to ensure your repayments are reducing your balance as expected.

Refunds for Fully Repaid Loans

If you have fully repaid your HELP debt after the 2023 indexation increase, you may be eligible for a refund for overpayments caused by the higher indexation rates. These refunds will be processed automatically by the ATO and paid to the bank account that ATO have on your Income Tax Account. You can check and update your bank account details on MyGov. However, if you have other outstanding tax debts, the refund may be applied to offset those liabilities.

Why These Changes Matter

These reforms are designed to provide relief for individuals burdened by growing student debt. By aligning indexation with wage growth rather than inflation, the government has taken a step to ensure HELP debt remains manageable for graduates.

How HECS-HELP Repayments Taken From Payroll Are Applied to Your Debt

For many individuals, HECS-HELP repayments are automatically deducted from their salary through their employer’s payroll system. Understanding how these repayments work and how they are applied to your debt can help you better manage your finances.

Key points:

  • HELP payments are deducted from your pay once you earn above a threshold AND you have marked your TFN Declaration
  • ATO collect those payments all year and only APPLY the payments to the debt when you lodge your tax return.

How HECS-HELP Repayments Work:

  1. Repayment Thresholds:
    • HECS-HELP repayments are only required once your annual taxable income exceeds the minimum repayment threshold, which is adjusted each financial year. For the 2024-25 financial year, the threshold is $51,550.
    • The repayment rate is progressive, meaning the percentage of your income directed towards your HELP debt increases as your income rises.
  2. Payroll Deductions:
    • Employers calculate and withhold HECS-HELP repayments along with your Pay-As-You-Go (PAYG) income tax.
    • The withheld amount is based on your estimated annual income, as declared on your Tax File Number (TFN) declaration form.
  3. ATO Processing:
    • The repayments deducted from your salary are sent to the Australian Taxation Office (ATO) along with your income tax payments.
    • The ATO applies these payments directly to your HELP debt balance once per year when you lodge your tax return.

How Repayments Are Applied to Your Debt:

  1. Annual Reconciliation:
    • At the end of the financial year, the ATO reviews your taxable income based on your lodged tax return. This ensures that the correct repayment amount has been withheld.
    • If too much was withheld, the ATO will refund the excess. If too little was withheld, you may need to make an additional repayment.
  2. Priority of Application:
    • Repayments are first applied to any outstanding debt from previous financial years, then to the current year’s indexed balance.
    • These repayments reduce the principal of your HELP debt, which in turn lowers the amount of indexation applied in the future.
  3. Indexed Debt Reduction:
    • Unlike voluntary repayments, compulsory payroll deductions are applied after annual indexation. This means indexation is first applied to the remaining balance as of June 1 each year, and your repayments reduce the adjusted total.

Tips for Managing Payroll Repayments:

  • Track Your Repayments:
    • Use your MyGov account to confirm that payroll deductions have been correctly applied to your HELP debt.
  • Plan Voluntary Repayments Strategically:
    • If you have extra funds, consider making voluntary repayments before June 1 to reduce the balance and minimize the impact of indexation. More info on the ATO website.
  • Communicate with Your Employer:
    • Ensure your employer has your correct TFN declaration form indicating that you have a HELP debt. Without this, your repayments may not be withheld, leading to a larger lump sum payable at tax time.

By understanding how payroll deductions are applied, you can stay on top of your HECS-HELP debt and take steps to pay it off efficiently. For specific advice about your situation, consider consulting a financial advisor or accountant.

 

What is E-Invoicing and Why Small Businesses Should Embrace It

Time to Revolutionize Your Invoicing Process

Small business owners are no strangers to juggling tasks. Invoicing is a crucial part of keeping your business running smoothly, but did you know there’s a faster, more secure way to handle it? E-invoicing is transforming how businesses manage their invoices, and it’s time for your business to benefit too.

What is E-Invoicing?

E-invoicing is the digital exchange of invoices between a supplier’s and a buyer’s accounting systems via a secure network. It eliminates manual entry, reduces errors, and speeds up payments. It’s fast, secure, and cost-effective!

Key Benefits of E-Invoicing

 

    1. ✅Save Time: No more printing, posting, or scanning invoices. E-invoices are sent directly from your system to your customer’s.

    1. ✅Reduce Errors: Forget manual data entry and the risk of typos—e-invoicing is automated and accurate.

    1. ✅Get Paid Faster: Businesses using e-invoicing report faster payments since invoices go straight to the buyer’s system.

    1. ✅Improve Security: E-invoicing reduces the risk of fraud and lost invoices by securely transmitting data.

    1. ✅Environmental Impact: Go green by reducing paper use and lowering your business’s carbon footprint.

    1. ✅Compliance Ready: Stay ahead by adopting an ATO-endorsed invoicing standard designed for Australian businesses.

Quick Steps to Set Up E-Invoicing in Xero

Getting started is easier than you think! Here’s how you can implement e-invoicing in Xero:

 

    1. Check Compatibility: Ensure your business partners use e-invoicing-ready software.

    1. Enable E-Invoicing: Go to Settings > Features > E-invoicing in your Xero account.

    1. Register Your ABN: Link your business ABN to the e-invoicing network through Xero.

    1. Create Your First E-Invoice: Simply choose “E-invoice” when creating an invoice in Xero.

    1. Send & Track Payments: Enjoy faster payments and seamless invoicing!

These steps should be similar in most Accounting software systems.

Why Invest the Time?

E-invoicing can streamline your operations and free up valuable time, allowing you to focus on growing your business. While the initial setup may take a little effort, the long-term savings in time and money make it worthwhile.

Ready to take the next step?
👉 Learn more about e-invoicing from the ATO

Exciting News! We Have Moved

We are thrilled to share some exciting news with you!

We have just moved to a new location within SUTHERLAND. This relocation was just a stone’s throw away from our former office, precisely 620 metres. We believe this move will allow us to serve you even better while maintaining the same high standards and personalised service you have come to expect.

What you Need To Know

New Address:
Our new office is located in Endeavour House at:
Suite 302, Level 3, 3-5 Stapleton Ave, SUTHERLAND NSW 2232.
Find Us on GOOGLE MAPS

Contact Details: Rest assured, our phone numbers, email addresses, and all other contact details remained the same. You can continue to reach us in the same way you always have.

Staff and Services: Our dedicated team moved with us, so you will see the same friendly faces. Our services remained unchanged, ensuring continuity in the quality and care you receive. 

Why We Moved: This move was a strategic decision to enhance our ability to serve you. We are now in the same building as some of our trusted referral partners such as Lawyers and Financial Planners. This will give you the option to have a one stop shop for most of your professional services needs. Our new office space enables us to provide you, and our staff, with a more comfortable environment. We were committed to making this transition as smooth as possible for you and our team.

Visit Us!

We would love for you to visit our new office. Make your next appointment face to face so that you can check out the new space. Your support and loyalty are greatly appreciated, and we look forward to continuing our relationship in our new office.

Thank you for your understanding and support during this exciting time. Should you have any questions or concerns, please did not hesitate to get in touch with us.

Book an Appointment

 

hamper

Are Client Gifts Tax Deductible? We Break It Down For You

As a small business owner, showing appreciation to your clients through gifts is a great way to strengthen relationships and enhance customer loyalty. However, it’s important to understand the Australian tax implications of client gifts to ensure you claim the appropriate deductions and stay compliant with the Australian Taxation Office (ATO).

PH insurance money

Understanding the Private Health Insurance Rebate and Means Testing in Australia

PH insurance money

Many Australians enjoy the benefits of the Private Health Insurance Rebate, which helps reduce the cost of their health insurance premiums. However, a common issue arises when people find themselves having to repay some or all of this rebate when they lodge their tax returns. This situation can be confusing and frustrating, but it is a result of how the rebate is means-tested against your income.

What is the Private Health Insurance Rebate?

The Private Health Insurance Rebate is a government initiative designed to make private health insurance more affordable. It is a percentage of your premium that the government pays, and the rate depends on your age and income. The rebate can be claimed in two ways:

 

    1. As a reduction in your premium throughout the year. Most health funds default you to the highest rebate of 24.6%, as this minimises the monthly premium. (Rebate NOW – Pay back later)

    1. As a refundable tax offset when you lodge your tax return. (Pay full premium now – Claim rebate at EOFY)

Means Testing and Income Thresholds

The rebate amount you are entitled to is means-tested, which means it depends on your income for surcharge purposes and your marital or defacto status at 30 June. The government sets specific income thresholds to determine the rebate percentage:

2024-2025 Income Thresholds:

Family status Base Tier Tier 1 Tier 2 Tier 3
Single $97,000 or less $97,001 – $113,000 $113,001 – $151,000 $151,001 or more
Family $194,000 or less $194,001 – $226,000 $226,001 – $302,000 $302,001 or more
Note: The family income threshold is increased by $1,500 for each Medicare levy surcharge dependent child after the first child

2023-2024 Income Thresholds:

Family status Base Tier Tier 1 Tier 2 Tier 3
Single $97,000 or less $97,001 – $113,000 $113,001 – $151,000 $151,001 or more
Family $194,000 or less $194,001 – $226,000 $226,001 – $302,000 $302,001 or more
Note: The family income threshold is increased by $1,500 for each Medicare levy surcharge dependent child after the first child

Links to current ATO data are below

ATO – Income Thresholds for Private Health Rebate

ATO – Spouse | Defacto Status Guide

The Challenge of Repaying the Rebate

Many people opt to receive the rebate as a reduction in their monthly premium payments. However, if your income exceeds the threshold you anticipated at the start of the year, you will have to repay the excess rebate when you lodge your tax return. This repayment happens because the rebate you received was higher than what you were entitled to based on your final annual income.

So, should you get the REBATE monthly or Pay 100% of your premium monthly, then sort out the rebate at EOFY?

For example, if you expected to earn $90,000 (Income Tier 1) but ended up earning $100,000 (Income Tier 2), the rebate percentage you received during the year will be higher than what you were entitled to. The difference will need to be repaid.

Repayment of Rebate

This happens within your tax return calculation at the end of the year. Tax software looks at what rebate you did receive and compares this to what you should have paid. Your tax estimate clears this difference as a payable if you underpaid or a refund if you overpaid.

Managing the Rebate: Two Approaches

 

    1. TAKE REBATE NOW – REPAY AT EOFY: Take the rebate each month and know that you may need to repay some or all of it at EOFY. This makes your monthly private health premiums cheaper, delaying any repayment of the rebate until you lodge your tax return. Often, this can put individuals into a tax payable position at EOFY, which can come as a surprise. We generally recommend this approach, as you hold any excess even though it may result in a tax bill at EOFY.

    1. ASK YOUR HEALTH FUND TO REDUCE YOUR REBATE: Alternatively, you can choose to pay more each month without the rebate and claim the correct amount at the end of the financial year (EOFY). This approach ensures you don’t have to repay any excess rebate but means higher upfront costs throughout the year.

Practical Tips

 

    • Update Your Income Estimate: If you experience a change in income, update your estimate with your health insurer to adjust the rebate accordingly. This is hard work and not many do this.

    • Consider Tax Planning: Speak with us to estimate your exposure to the rebate and determine if there are any actions you can take to reduce or minimize the rebate payable. This can help you set aside the necessary funds if you anticipate a higher income.

Final Thoughts

Repaying the Private Health Insurance Rebate can be frustrating, but understanding how the means testing works can help you manage it more effectively. Whether you choose to receive the rebate throughout the year or claim it at the EOFY, staying informed and planning ahead will help you avoid unexpected repayments.

If you have any questions or need assistance with your private health insurance rebate, feel free to contact our office. We’re here to help you navigate this aspect of your financial planning

Car FBT

FBT Essentials for Busy Small Businesses: What You Need to Know Before March 31st

Car FBT
Car FBT

Attention small business owners!

The Fringe Benefits Tax (FBT) year ends on March 31st, 2024. This guide will answer your essential FBT questions and help you stay compliant.

Do I Need to Register for FBT?

You likely need to register if you provide any employees (including directors) with:

 

    • Motor Vehicles

    • car parking

    • Entertainment (food and drinks)

    • Employee discounts or loans

    • Reimbursement for private expenses

Should I Lodge an FBT Return Even if I Don’t Owe Tax?

YES! We highly recommend lodging a return, even if you don’t owe FBT. This limits the ATO’s audit window to 3 years. Otherwise, they can audit any past year.

Key Actions by March 31st, 2024:

 

    • Gather odometer readings: Get your employees to photograph their car odometers and email them to you. This helps determine if the “operating cost” method reduces your FBT liability.

    • Manage private car use: Carefully monitor home-to-work commutes and personal use of business vehicles. The ATO is actively checking for unreported benefits.

    • Review meal entertainment: Prepare a record of meal entertainment expenses, including:

       

        • Total cost (including GST)

        • Number of employees and their names

        • Number of employee associates and their names (clients’ names not required)

        • Nature of the event (dinner, lunch, etc.)

What’s Exempt from FBT?

Items like:

 

    • Electric Vehicles – conditions apply – read our updated blog

    • Mobile phones

    • Laptops

    • Tablets

    • Tools of the trade

    • Minor and infrequent benefits (under $300)

Reducing Your FBT Liability:

 

    • Consider offering cash salary instead of some fringe benefits.

    • Provide benefits employees could claim as tax deductions if they paid for them – eg mobile phone or laptop

    • Allow Novated Leases – so that the FBT issue is dealt with on staff pay slips. Pre and post tax deductions.

    • Look for FBT-exempt benefits.

    • Use employee contributions (be aware of tax implications).

Get Free FBT Factsheets:

We offer several free factsheets on various FBT topics. Contact us to request them below.

Next Steps:

Don’t ignore this issue. ATO had been asleep on this issue for many years but now have the will and the data to pin down any businesses who are not correctly reporting their obligations.

We can help you meet your FBT obligations and reduce your tax liability. Contact us today with any questions!

Remember: This blog post is for informational purposes only and should not be considered tax advice. Always consult with a qualified tax professional for personalized guidance.

Request FBT Factsheets

How to start a business in Australia

Starting a business in Australia has never been easier. While it can be a bit daunting, with a some help from an Accountant, it can also be incredibly rewarding. If you’re thinking about starting your own business, there some critical steps you need to cover off first.

Step 1: Do your research

Before you do anything else, it’s important to do your research and make sure that starting or buying a business is right for you. There are a lot of factors to consider, such as your skills, experience, and finances. You should also research the industry you’re interested in and the competition you’ll be facing.

We advise doing some research around your proposed business name, web address, social media tags etc to ensure you can run with the name that you desire.

Due Diligence – This is a specific process that you use when buying a business. We provide this service to clients to give them an independent analysis of the business that they are looking to buying. We fact check the information given by the selling party and give our opinion on the price that you should pay.

Book a meeting with us to discuss the business you are looking to buy.

Step 2: Develop a Business Plan

Remember the old military adage – The 5 Ps: Proper Planning Prevents Poor Performance

A Business Plan is a roadmap for your business. You can’t just wing it and hope for the best. Your Business Plan should include information about:

  • your product or service; why will people or businesses buy from you?
  • market analysis; who are your competitors and what is the future of your market?
  • marketing strategy; how will you get the word out?
  • SWOT analysis – Strengths | Weaknesses | Opportunities | Threats;
  • finance – how are you going to fund the startup or purchase of this business?
  • Team – what people and skills will you require now and into the future?
  • cash flow forecast – banks love these to be detailed. Use your Accountant for this;
  • milestones – what will the business look like in 1,2 5 10 years?

Most banks and investors want to see a sound Business Plan before they are willing to risk their funds with your business.

Xero have a couple of Business Plan templates that you can download and use.

Cash Flow forecasts are a great way to test your ideas. What sales do you need to break even? What sales do you need to pay yourself a decent wage? Speak to us to develop a cash flow forecast for your idea.

Business plans also allow you to confirm the viability of your business case, and improve your ideas, on paper before risking your cash. Running your plan by some trusted advisors and experienced business people can also highly improve your likelihood of success.

You may do the work on your Business Plan and realise that it is not currently viable. This is great as you have only invested a bit of your time. You may stop here and revisit this or keep adjusting your plan.

If your plan is looking good, and you have reviewed it with your Accountant and trusted advisors, it is time to look at putting your plans into action.

Step 3: Meet with your Accountant

Book a meeting with us. We deal with small businesses every day and have a wealth of experience with businesses that have been through the full lifecycle your business will go through. We can fill any gaps in your knowledge and potentially save you costly mistakes.

We can quote up a package to assist you with setting up your business structure, Accounting software and an ongoing plan to ensure you meet all of your tax and accounting obligations.

Setting your business up correctly from the beginning ensures that you have the highest chance of success as you build up your business.

Book a Start My Business Session TODAY!

Step 4: Choose a business structure

The next step is to choose a business structure. There are three main types of business structures in Australia. You need to consider the full life cycle of your business to choose what is right for you.

Cost, complexity of management and tax implications are all important considerations. Take some time to speak with us to get expert advice up front. This will save you any regrets in the future as you can make a fully informed decision.

Consideration must also be given to current and proposed ATO laws. Particularly those regarding Personal Services Income and Professional Profits. Speak to us about this.

The common choices for business structure are:

  • Sole trader: This is the simplest type of business structure. As a sole trader, the business is attached to you. You will be personally liable for the debts, liabilities and legal issues of your business.
  • Partnership: This is structure involving two or more people. Partners are jointly and severally liable for the debts, liabilities and legal issues of the business. This is rarely a good idea. Generally only used by spouses.
  • Company: These are the most common entity used by businesses. Companies are a separate legal entity from its owners. You would own shares in the company. You also need to select one or more people to be directors. Companies are limited liability entities, which means that the owners may not be personally liable for the debts and liabilities of the business – as long as the directors have not breached the corporations act. A company can sue and be sued. Companies can also retain profit and pay 25% company tax in most circumstances. Retained profit is paid out later via dividends.
  • Trusts – These are somewhat common for small business. You also need to form a Corporate Trustee (Company) to be trustee of the trust. Trusts must distribute ALL profits each year. There are certain advantages, and disadvantages to using a trust. The 2 main types of trust are:
    • Discretionary Trust – Directors of the trustee company have discretion as to how profit is distributed. This can be quite flexible.
    • Unit Trust – much like a company, owners buy units instead of shares. Distributions to unit holders is based on how many units are held as a % of the total units issued.

Step 5: Form your entity

Once you’ve chosen a business structure, you can work with your Accountant and legal advisor to form the entity. It is very important to get the paperwork correct at this step. We have seen and helped to correct many errors where people have tried to DIY this step.

If you choose a company, you will need to first get your MyGovID, then a Director ID, to be able to form a company.

Step 6: Get your Registrations

OK. Now you need to get comfortable with some acronyms. ACN, ABN, BAS, GST, PAYGW, ASIC, STP, ABR, not to mention the other things like ABRS, Director ID and MyGovID.

This is where you really need expert advice from your Wood Accounting to ensure you are setup correctly from day one.

Here is a quick run down of the most common small business acronyms everyone needs to become familiar with:

  • ABN (Australian Business Number) is a unique 11 digit identifier for your business. You need an ABN to operate a business in Australia.
  • GST (Good and Services Tax) is 10% added to most goods and services. You must register for GST if your turnover (income) will be more than $75,000 per year. GST is a user pays tax in that the end users end up paying the tax. So consumers that spend the most pay the most GST.
  • ACN (Australian Company Number) – a unique 9 digit number issued to all companies in Australia. Fun fact – your ABN is your ACN with 2 extra numbers added to the FRONT of the number.
  • ASIC (Australian Securities and Investment Commission) – The Australian regulator for companies. ASIC is responsible for promoting a fair, transparent and efficient financial system for all.
  • PAYGW (Pay as You Go Withholding) – This is a registration you must have in order to pay wages and with hold tax.
  • STP (Single Touch Payroll) – This is a new system that requires all businesses to submit each pay run to ATO in real time. Allowing ATO to have visibility on PAYGW and Super that is due for employees.
  • BAS (Business Activity Statement) – The is a monthly/quarterly/annual statement businesses lodge to report their GST, PAYGW, PAYG, FTC and other taxes payable for the period. Businesses use software such as Xero to capture this information and summarise it into the BAS.

Step 7: Finalise your Intellectual and Digital Property

Get your digital identity sorted ASAP. You will have checked all this out in your business plan but now you need to register:

  • Website domain names,
  • email systems,
  • social media tags – these are critically important digital assets
  • your logo and marketing collateral
  • Trademark – consider trademarking your logo, colours, tag lines etc. This will prevent others from using these to steal your business. Be aware that your business or company name DO NOT prevent others using them.

Step 8: Get your Systems Right

What systems are you going to use to run your business efficiently, so that you have a competitive advantage over your competition?

Each of your business functions will likely have a system. Most systems these days are digital cloud solutions.

Your Accounting system is the centre of any business. This provides the functions of payroll, quoting, invoicing, accounts payable, accounts receivable, bank reconciliations, reporting, BAS etc. Common solutions here are Xero and MYOB. Our preference is Xero due to it’s ease of use for the customer.

Secondary systems surround the core accounting system. These include, Job management systems, HR systems, POS systems, inventory systems, online store systems and many more.

Step 9: Open a business bank account

It’s important to have a separate bank account for your business. This will help you keep your personal and business finances separate. We always recommend a 2 account system.

  • 1 main bank account – for every day trading
  • 2 tax and super account – we have clients move their tax obligations to this account so that they have the $$ available when their tax obligations are due.

We do not recommend a certain bank but we do ask clients to use a bank that is able to connect bank feeds to Xero. Without this bookkeeping and BAS become a really painful experience.

Step 10: Get the right insurance

There are a number of different types of insurance that you may need for your business, such as business interruption insurance, public liability insurance, cyber insurance and workers’ compensation insurance. Worker’s Comp is compulsory for all businesses that have employees. That includes those who only employ the owners.

If you are unsure, speak to a business insurance broker for tailored advice.

Step 11: Get the necessary permits and licenses

Depending on the type of business you’re starting, you may need to obtain certain permits and licenses. For example, if you’re selling food, you’ll need a food handling permit. Tradies may need a new permit to add their new entity details to current licences.

Step 12: Market your business

Once you have your business up and running, you need to let people know about it. There are a number of different ways to market your business, such as online marketing, print advertising, and public relations.

Step 13: Have Fun!

Starting a business is a lot of work, but it can be very rewarding. By following these steps, you can increase your chances of success. Enjoy the process of building your own successful business.

Step 14: Think about your Exit Strategy

Building a business is like building a house. At some point in the future you may not fit with the business any more and need to move on. Again the 5 Ps come into play. Proper Planning Prevents Poor Performance. Think about and have a rough plan for some common scenarios:

  • Retirement
  • Sale after a planned time period
  • Illness or death – make sure you have personal wills and estate planning in place.
  • Shareholder/Unitholder agreements – if you are in business with other owners and directors get a legal agreement in place to clarify how changes in to ownership will play out.

As Accountants we can help plan these scenarios and refer you to lawyers who are experienced in drafting practical shareholder agreements. Book a chat to run through these steps.

Additional tips for starting a business in Australia

  • Network: Networking with other entrepreneurs can help you learn from their experiences and get advice and support.
  • Challenges: Starting a business is a challenging but rewarding experience. Speak to us at Wood Accounting for advice and support if you experience any challenges along the way.

How to Sell Your Business – Tax Free!


Australian small business CGT concessions: A simple overview

If you’re a small business owner in Australia, you may be entitled to a number of capital gains tax (CGT) concessions. These concessions can help you to reduce or defer the amount of CGT you pay when you sell your business or business assets.

What are the different small business CGT concessions?

There are four main small business CGT concessions:

  • 15-year retirement exemption: This concession allows you to exempt a capital gain from a small business asset if you are 55 years old or older and have owned the asset for at least 15 years.
  • 50% active asset reduction: This concession reduces the capital gain on an active business asset by 50%.
  • Small business retirement exemption: This concession allows you to contribute remaining capital gains to super tax free, or if you are over 55, take the funds personally, tax free.
  • Small business rollover: This concession allows you to defer a capital gain on an active business asset if you reinvest the proceeds from the sale of the asset into another active business asset.

Depending on the structure you own the business in you may also be able to claim the general 50% CGT Discount, before applying the above concessions. Expert advice is essential to ensure you optimise the order in which you use these concessions.

Who is eligible for the small business CGT concessions?

To be eligible for the small business CGT concessions, you must meet the following criteria:

  • You must be a small business entity. This means that your aggregated turnover for the year must be less than $2 million.
  • You must own the asset for which you are claiming the concession.
  • The asset must be an active business asset. This means that the asset must be used in your business to generate income.
  • Different rules apply depending on what structure you own your business within. Concessions apply to sole traders, partnerships, trusts and companies.

How do I claim the small business CGT concessions?

To claim a small business CGT concession, you are best to consult with an Accountant who is experienced in dealing with this complex set of concessions. At Wood Accounting we have many years of experience assisting clients maximise their benefits, and minimise any Capital Gains Tax. You may also need to provide additional information to the Australian Taxation Office (ATO), such as a valuation of the asset.

When should I speak to an accountant about the small business CGT concessions?

If you are thinking of selling your business or business assets, it is important to speak to an accountant to discuss your eligibility for the small business CGT concessions. An accountant can help you to calculate your potential CGT liability and advise you on the best way to structure your sale to minimise your tax.

Recommendation

If you are a small business owner in Australia and you are thinking of selling your business or business assets, speak to our experts at Wood Accounting for advice on how to minimise or eliminate your tax liability. Wood Accounting has a team of experienced accountants who can help you to understand the small business CGT concessions and ensure that you claim all of the concessions to which you are entitled.

Contact WOOD ACCOUNTING Today!