What is the $1,500 low and middle income tax offset (LMITO), and how will it affect my tax return in 2023?
As you may have heard through various news channels and articles, millions of Australians are due to feel a sharp increase in their taxes which will result in lower tax returns in 2023. Why? Because the generous ‘LMITO’ of up to $1,500 has expired and will not be available for the 2023 financial year. It’s important to note that there is a difference between the low income tax offset (LITO), which is still available, and the low and middle income tax offset (LMITO), which has expired.
Overview of the low and middle income tax offset (LMITO)
The low and middle income tax offset (LMITO) is a tax benefit that has been available to eligible Australian taxpayers since 2018.
Taxpayers earning between $37,000 and $126,000 for the 2021-22 financial year could benefit from this offset for up to $1,500. However, this offset is no longer available for the 2023 financial year. In turn, this will lead to smaller tax returns for millions of individuals and sole traders compared to last year.
Overview of the low income tax offset (LITO)
The low Income Tax Offset (LITO) has been available for many years, is still available, and has not expired like the LMITO. This tax benefit will still provide some relief to those who earn less than $66,667 for the 2022-23 financial year.
Eligible taxpayers can claim the LITO when they file their tax returns. For the 2022-23 financial year, the maximum LITO amount is $700.
We certainly understand that some of our clients will greatly feel the affect of LMITO expiring. We appreciate your understanding that this change is beyond our control.
Need some extra cash to take your business to the next level but daunted by the loan process? You’re not alone. There’s a lot of paperwork and number-crunching involved.
Before you start, remember that banks want your application to succeed, as the interest you pay is a vital revenue stream. So it’s up to you to make their job easy by turning up with a good business case.
Connect the dots for them. While banks are money experts, they’re not necessarily knowledgeable about your area of business. Remember to present a clear story and demonstrate how the loan will unlock your growth, ultimately ensuring the bank gets paid back.
When applying for a business loan, ensure you have the following:
income statements and balance sheets for the past two years
up-to-date financial statements
business plans or project plans to show the direction your business is taking
Family and Domestic Violence Leave – New Entitlement Rules
Employees of non-small business employers can now access ten days of paid family and domestic violence leave over a 12-month period.
From 1 August 2023, employees of small businesses can access the leave.
Employees have had an entitlement to unpaid family and domestic violence leave (FDVL) for some time as part of the National Employment Standards (NES). But as of 1 February, this is a paid leave entitlement for employees of larger employers. From 1 August 2023 for employees of small employers (fewer than 15 employees) can access the paid leave entitlement.
The new law allows ten days of paid leave every 12 months, but the leave does not roll over and accumulate.
The full pay rate will apply as if the employee had worked as usual on the day of the leave.
The new FDVL means employees can take time off to deal with the impacts of domestic violence or abuse if they need to take care of things during working hours. This includes attending court, accessing police or support services, or making arrangements for the safety of oneself or close relatives.
FDV Leave Eligibility and Proof
Applies to all employees, permanent and casual.
Close relatives include a spouse, partner, former partner, child, grandchild, parent, grandparent, or sibling; or the child, parent, grandparent, grandchild, or sibling of a current or former spouse or partner. Torres Strait Islander and Aboriginal kinship relatives are also included.
The leave is available as soon as an employee starts with an employer.
Employees must inform the employer as soon as possible about the need for FDVL and the expected length of leave.
The employer can ask for evidence such as police, court, support service documents, or a statutory declaration, even if the leave period is less than a day.
Plan for Increased Payroll Costs
Because the new leave provision applies from day one of employment for all employees, employers should plan for the potential cost of the leave. While it’s unlikely that all employees will take this leave, preparing for the possible cost means you won’t get caught if you do have to pay FDV leave, particularly for casual workers.
Goodwill in accounting refers to the intangible value that a company can hold, above and beyond the pure financial value of its assets. This covers brand reputation, intellectual property, and external and internal relationships.
A business that can show its goodwill in the marketplace is worth more– intangibly and financially. When a company is up for sale, the price a buyer is willing to pay will significantly increase if the seller demonstrates this goodwill quality.
What do we mean by goodwill?
Goodwill includes the value of your business brand, loyal customers, proprietary technology, a reputation for excellent customer service, and good employee relationships. It is the amount someone is prepared to pay for your business that is above your net assets at fair value. Building goodwill in your business is good for its market value, and these aspects of your business potentially represent a competitive advantage.
Five key ways to build goodwill in your business through relationships
In a business context, building goodwill is all about developing a trusted and benevolent way to work with your stakeholders. Thereby increasing your business idea’s longevity (and value). In the long term, a business that’s part of a trusted industry network has great potential in the marketplace.
Make goodwill one of your core values – every business needs a set of core values at its heart. With the right values in place, you can put goodwill front and center of how you operate. Be kind and thoughtful. Always be honest and upfront. Additionally, behave in a way that helps the business, but also helps your stakeholders, community, and team. Living goodwill in this way makes it second nature for everyone on the team. In turn, helping set the best possible reputation for your company.
Nurture your customer relationships and make them feel valued – a solid customer base is one of your most significant assets. Therefore, treat these customers well and do your best to create long-term, valued relationships. The more you can do to reinforce this value, the more likely it is that customers will become proactive advocates for your brand.
Build long-term trusted relationships with suppliers – your supply chain is the arterial system that feeds your business. So, to keep this supply chain stable and affordable, you must be professional with your suppliers. Pay them on time and negotiate fairly over prices. Be reliable with your orders and work together if there are any supply problems. Above all, treat these businesses as you would want to be treated.
Treat your employees well and make them feel engaged – be transparent and open with your team. Keep them in the loop with planned strategies and results. Offer them great benefits and time off. Further to this, make sure they are happy, healthy, and loving their jobs – and do everything you can to create a great team spirit within the organisation.
Be truthful and honest in all your business dealings – Sometimes, telling the truth won’t seal the deal, but it’s always better to demonstrate this goodwill and to be open and honest. Dishonesty is never the path to greatness and could break your trust with your customers, suppliers, team, or community.
Talk to us about nurturing goodwill in your business
Demonstrating goodwill in your business isn’t just one of those ‘nice-to-have’ goals on the CEO’s wishlist. It’s actually an intangible part of the value of your business.
Keeping up-to-date records of your business transactions isn’t the most glamorous part of being an entrepreneur, that’s for sure. But, in reality, having accurate and up-to-date digital bookkeeping is one of the core ways to control your finances (and your business).
Digital bookkeeping is the future of your finance
The digital age has revolutionised how many business owners carry out their bookkeeping. From digital accounting to real-time data, the modern bookkeeper is now equipped with many tools and resources. These tools make the job easier, more efficient, and (crucially) less time-consuming.
When your bookkeeping goes digital, that means:
Your data entry process gets automated – receipts, invoices, and other supporting documents can all be scanned using OCR software. This gives you a digital copy of the paperwork, digitises the data, and pulls it into your online ledgers. There’s no need for tedious manual data entry, and you also reduce the chances of human error.
Your digital records are available 24/7 in the cloud – instead of searching through messy hard drives or dusty filing cabinets, all your financial documentation is available at the press of a button. You can pull up the documents you need anytime from any location with internet access. And everything is safely encrypted and backed up.
Your tax returns can be filed digitally – with all your bookkeeping data saved and accessed via your cloud bookkeeping/accounting software, your tax returns become much more straightforward. Whether it’s quarterly GST/VAT or annual corporation tax returns, you have all the data the tax office needs ready to send in a digital format.
Your finance data goes real-time – scanning and digitising your receipts when you make the transaction doesn’t just keep your records up to date. It also gives you real-time data on all your income, expenditure, and operational costs. Instead of working with management information that’s months out of date, you’ll have informative real-time data. With this data you can safely base all your big business decisions.
You’re 100% in control of your finances – by embracing the benefits of digital bookkeeping, you kick your finances into shape. You and your finance team have accurate real-time records of all income and outgoings. So you can stay in complete control of the financial management of the business. Your accounts are in tip-top shape, and you’re ready to file your tax returns whenever necessary.
Talk to us about switching to digital bookkeeping
If you want to transform your bookkeeping, now’s the ideal time to go digital.
Talk to our team and determine what bookkeeping or accounting software is right for your business.
Once you see the efficiency, accuracy, and long-term benefits of digital bookkeeping, you’ll understand why going digital is a no-brainer, whatever type of business you run.
Small businesses are particularly vulnerable in tough economic times. How can you keep your cashflow strong?
When sales are slow, overheads and salaries still need to be sorted. Pre-planning and being proactive can help you weather tighter economic periods and allow you to continue to thrive.
Ensure you have a clear picture of your payroll and any other planned expenses that must be accounted for.
If there’s even a possibility of a shortfall, it’s essential to meet this head-on. Whether this means talking to your supplier or creditors to figure out an arrangement or compromising on other business outgoings, you must make a plan to ensure that the business, or your staff, won’t suffer.
Minimise the stress of cashflow
Invoice early – Send any invoices you can, in advance, if possible. Perhaps consider whether you have any regular clients or customers that you could offer a retainer or similar deal if they book services or make a purchase from you in advance.
Chase payment – Use this opportunity to chase up any outstanding payments. Strong communication and relationships matter – talk to clients and chase invoices.
Talk to suppliers – A little honesty can go a long way. Perhaps they can extend a line of credit for your payments to them. In most cases, a good supplier would rather offer a little flexibility to keep an ongoing business relationship.
Review Inventory – Can you find a cheaper supplier locally to avoid the shipping costs or discuss alternative products that allow you to reduce expenses?
Review your costs – It’s also a good idea to do a general review of expenses. Business costs can creep up, and it’s a great idea to make a time to check on your expenses regularly, no matter what your financial situation. Review all of your regular payments and subscriptions as well as upcoming costs. There may be travel, functions, or purchases to which you can decide on an alternative approach.
Talk to the bank or tax department – If cashflow is tight, ensure you have conversations early, so you have everything in place to see you through.
We can help you implement strategies to protect your business for the long term and help you alleviate cashflow worries and keep your cashflow strong through tough times.
