Super can to improve cashflow for SMEs

Experienced SME owners can reduce their outgoing costs by restructuring their wage programs to include the Transition to Retirement Pension.

The Income Tax Act allows for eligible SME owners to reduce wages and leave extra cashflow in the business through a mechanism called the Transition to Retirement Pension. This enables a portion of income to be earned from super,with considerable tax benefits.

SME owners over 55 can receive a highly tax advantaged pension from their super fund.  Once over 60, the pension becomes completely tax-free. This means that eligible owners can earn a portion of their income through their super fund while still working.  One benefit will be the reduction of wage bills to the SME, without compromising their take home income. One of the major benefit of SME owners placing themselves on some form of pension in a super fund is that the income from the assets that support a pension becomes tax-free in the super fund it iself.

For example, if a pension is supported by assets of $200,000 and the fund’s income on those assets is, say, $10,000, normally the tax on that income is $1,500 i.e.15 percent.  By simply receiving the minimum pension amount allowable SME owners can save themselves $1,500 tax within the super fund.

Fuel tax credit rate

Changes made to the Fuel Tax Credit system (FTC) on 1 July have to potential to significantly impact FTC entitlements for many SMEs.

Businesses that have a fleet of more than one vehicle will need to familiarise themselves with the changes to avoid paying too much tax.

The biggest change is that fuel used in off-road activities, such as forklifts will become entitled to the full credit rate.  Before 1 July such vehicles only qualified for a half credit rate.

The other major change involves the taxation of gaseous fuels (LNG, LPG and CNG).  These fuels that are supplied for use in non-transport activities were previously not subjected to tax.  The carbon tax now applies to these fuels.  They will now only receive a partial exemption from tax on gaseous fuels.

Users of non-transport gaseous fuels may be able to recover some of the carbon tax placed on the fuel if their business is classified within an industry or use that is exempt from the clean energy measures.

The following table summarises the impact of the changes for the fuel tax credit update.

Tax refunds

The tax office reports that 5.5 million individuals had lodged their 2011-12 tax returns by early this month, and more than 4.2 million refunds totaling $9.76 billion had been paid.

The attraction of a decent refund can be a powerful motivation for millions of taxpayers to file their returns as soon as possible. And, of course, many taxpayers simply want to get the task quickly out of the way.

To date, the average refund is $2324 – enough to buy some decent electronic equipment or new summer fashions. Needless to say, struggling retailers would welcome the spending of your refund in their shops.