Need to declare income from investments

More and more Australians are investing as a means of creating wealth.  This has been made easier for first time investors with the advent of Exchange Traded Funds (EFT’s) and similar type products. 

While it is great to see Australians creating wealth and therefore needing less reliance on government support through financial independence, most are not aware of the tax laws surrounding these investments.

This particularly applies to long term investors and who’s investments may be subject to tax obligations relating to capital gains when it comes time to sell or will receive income in the current year through dividends (shares), interest (bonds, term deposits, banks) or distributions (EFT, managed funds) on which the investor will need to declare as income in the tax year.

One way of increasing wealth is through reinvesting the income earned on current investments through a dividend/distribution reinvestment plan where you physically don’t receive a dividend/distribution in the form of cash but rather through more shares/EFT’s instead.

But what many first-time investors don’t realise is that whether the dividend/distribution is received in cash or more shares/EFT’s, it is deemed income for tax purposes in the years it is received.

Furthermore, if your investment has increased in value over a period of time and you decide to draw down some of the gain to take a holiday, pay school fees, do an extension on the house etc, it may be subject to capital gains tax which is the difference between what you paid for the shares for example and what you sell them for, allowing for costs associated with the buying and selling of the shares.

A simple example might be as follows:  

Buy $5,000 in shares on 1 January 2020 and sell for $10,000 on 1 January 2022.  You are liable for capital gains and have access to the 50% general deduction for tax purposes and your current tax rate is 30% on your income.

In this case you would have a capital gain of $5,000 (difference between purchase price $5,000 and selling price $10,000).  As you are entitled to the 50% general deduction you would need to pay tax on $2,500 at your tax rate of 30% ($750).

Congratulations on building your own wealth through investments. It is suggested you work with your accountant or investment advisor to ensure you are maximising your returns.

The above comments are general in nature and should not be acted on without seeking professional advice.  Should you have any questions or want specific advice relation to your tax position contact Balanix Solutions on 3264 47783.

New Director ID Requirement – Update

Balanix Solutions Taxation Accounting Business Adice Bookkeeping

The Director Identification number (Director ID) requirement is now available via the new Australian Business Registry Services (ABRS). A Director ID is a unique identifier that a Director or prospective Director of a Company applies for once and keeps forever.  A person will keep their Director ID even if they stop being a Company Director, change their name or move interstate or overseas.

Director IDs is about preventing the use of false or fraudulent director identities, will provide accountability and traceability of a director’s relationships over time, across all companies and will provide information on a director’s involvement in what may be repeated unlawful activity, including illegal phoenix activity.

If you are planning on becoming a Company Director in Australia or are already a Director, you will need to apply for a Director ID. Your accountant or other person cannot apply on your behalf – you have to undertake the application for yourself as the ABRS needs to verify your identity.

A Director ID is a unique digit identifier and is a legal requirement for all new and existing Directors of Companies, Body Corporates and Corporations (it is not applicable to Secretaries). Alternate Directors are also required to apply for a Directors ID.

Important Dates in Relation to Applying for a Director ID

Applications for Director IDs commenced on 1 November 2021.

  • If you become a Director between 1 November 2021 and 4 April 2022, you need to apply for your Director ID within 28 days from your appointment.
  • If you are an existing Director prior to 1 November 2021 (ie, on or before 31 October 2021) , you need to apply for your Director ID before 30 November 2022.
  • If you are to become a Director after 4 April 2022 (ie, from 5 April 2022), you need to have applied for your Director ID before being appointed as a Director (you can apply for a Director ID up to 12 months before being appointed a Director).

How to Apply for a Director ID (online)

Applying for a Director ID is free.

Step 1:  Set-up a myGovID

You will need a myGovID with a Standard or Strong identity strength to apply for a Director ID online. You need to download the myGovID app to a smart device and follow the information on how to setup a MyGovID at https://www.mygovid.gov.au/set-up (Please note a myGovID is different to a myGov account).

Step 2:  Apply for a Director ID

Once your myGovID is set up go to https://www.abrs.gov.au/director-identification-number/apply-director-identification-number and apply for your Director ID. You will need additional information to your myGovID to apply so get this information together before applying.

Step 3:  Provision of Director ID

Once you have applied for the Director ID, you will receive it instantly (assuming application is successful). You then need to provide your Director ID to the Company Secretary and your Tax and/or ASIC Agent.

How to apply if you cannot get a MyGovId

If you can’t get a myGovID with a Standard or Strong identity strength, you can apply by phone or by paper form.

Apply by Phone

If applying by Phone, you will need you Tax File Number (TFN) and information to verify your identity (click here to find this information). Once you have all the required information together contact ABRS.

Applying with a Paper Form

If you can’t apply online or over the phone, you can apply using a downloadable form – Application for a director identification number (NAT75329, PDF, 306KB). This is a slower process and you will also need to provide certified copies of your documents to verify your identity. If you have issues completing the form, you can find help on ABRS Accessibility page.

If you require any further information, please book an appointment by contacting Balanix Solutions as a matter of priority on 07 3264 4783 or info@balanixsolutions.com.au

New Director ID for Company Directors

Balanix Solutions Taxation Accounting Business Adice Bookkeeping

If you are a Director of a company, from November 2021, you will need to verify your identity as part of a new Director Identification Number (Director ID) requirement.

A Director ID is a unique identifier that a Director will apply for once and keep forever.

This requirement applies to Directors of a company, registered foreign company, registered Australian body or Indigenous corporation. For more information on business structures https://business.gov.au/planning/business-structures-and-types/business-structures

Existing company Directors will be required to apply for Director ID by 30 November 2022, while Directors of Indigenous corporations that are governed by the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act) will be required to apply by 30 November 2023. New Directors appointed between 1 November 2021 and 4 April 2022 will have 28 days after appointment to apply for their Director ID and Directors who are appointed from 5 April 2022 will be required to apply for their Director ID before appointment.

Directors must apply for their Director ID themselves – no one else can do it on your behalf.

So how do you apply? The Australian Business Registry Services (ABRS) has been established which is a single platform, administered by the Commissioner of Taxation (ATO),which brings together the Australian Business Register and over 30 ASIC registers. The ABRS is responsible for the implementation and administration of Director ID.

ASIC will be responsible for the enforcement of associated offences. 

As mentioned previously, applications for Director ID do not commence until November 2021. However, if you are a Director of a Company you can start preparing now.

Firstly, you need to setup a myGovID.  myGovID is different to a myGov account. A myGovID is an app you download to your smart device that lets you prove who you are and log in to a range of government online services, including myGov.  myGov is an account that lets you link to and access online services provided by the Australian Taxation Office (ATO), Centrelink, Medicare and more.

Once you have a myGovID you need to gather additional information that you will need to verify who you are. You will need to have some information the ATO knows about you when you apply for your director ID:

  • your tax file number (TFN)
  • your residential address as held by the ATO
  • information from two documents to verify your identity.

Examples of the documents you can use to verify your identity include:

  • bank account details
  • an ATO notice of assessment
  • super account details
  • a dividend statement
  • a Centrelink payment summary
  • PAYG payment summary.

In November 2021, you can apply for your DirectorID – Visit the ABRS website for more information.

If you have any questions, please book an appointment with Balanix Solutions on 07 3264 4783 or email at info@balanixsolutions.com.au .

New super step when employing new staff

From 1 November 2021, an employer may be required to add an extra employment step, in relation to Superannuation, so as to comply with “the choice of funds” rules.

Under the existing rules, where a new employee does not choose a specific super fund, an employer can pay the super contributions to their (employer’s) default fund.

However, from 1 November 2021, an employer may be required to request a new employee “stapled super fund” detail if the new employee does not nominate a specific super fund of their choice. 

What is a “stapled super fund?  It is an existing account which is linked (stapled) to an individual employee, and as a result follows the employee from job to job.

This will help reduce the number of super funds employees accumulate over time particularly those who regularly change jobs.

How do employers’ access super fund details for new employees?  Employers will be able to request stapled super fund details for new employees using the ATO’s Online Services for Business www.ato.gov.au/general/online-services/businesses/ .

If you need any assistance or guidance, please contact Balanix Solutions 07 32644783.

How would a cashless society affect your business

With COVID being around for over12 months now, we have seen many changes in the way we do business.  Recently, I went to a rugby game which was a card only event, so without a credit/debit card or a digital wallet attendees could not purchase a ticket, buy a drink or food or any merchandise.

So, what would a cashless society look like and how would your business cope?  Do you know how many of your customers/clients would be directly affected?

There have been some projections that a cashless society could occur by 2022.  It is interesting that the Commonwealth Bank in its’ article “Turning Point: calling time on cash” stated that the percentage of payments made by cash dropped from 69% in 2007 to 37% in 2016.

As the demand for cash decreases so will the number of suburban bank branches and ATMs.  Merchants, according to research by market analysis East and Partners, saw a drop of some 46% in cash payments between 2010 and 2016.

While research by MyState Bank shows cash being used less, there is still not a large support for a completely cashless society.  It is interesting that Woolworths recently stopped it trials for cashless stores due to consumer backlash and resumed cash payments by 10 March 2021.

Also, there is a significant issue in relation to indigenous people who have limited access to the internet and this number is even less in remote areas.  Therefore, such a move would severely restrict their ability to deal with a cashless society.  While there have been trials of card only transactions in some communities, this has been more targeted at specific social activities.

Another significant group within our society who struggle with the internet are the aging population who either don’t have computers or lack the financial knowledge to understand how a cashless world would work for them.

From the government’s perspective having regard to its desire to limit the black/cash economy it might appear a good strategy.   It has already shown its desire to limit by legislation cash payments over $10,000 and there has been talk at various times at reducing or eliminating $100 notes.  One could also argue that the government has sufficient powers to severely restrict the black/cash economy if it chose to, without further restriction on society rights as a cashless society brings with it significant privacy issues.

So, if you are in business what does this all mean for you as a business owner?  How would it affect your clients?  Do you have a large percentage of clients who are elderly or indigenous and may not have a card of any description or even have a computer to use to transfer a payment?

What do you do if your terminal goes down or worse becomes damaged and you are a small business and you are not able to replace it quickly?  Recent problems with Tyro terminals highlight this point.

All these points need to be considered now, if you have not already thought of them, in order to remain on trend and contemporary within your industry.