Hiring employees for the festive season  As the festive season approaches, employers that hire new employees to help with their business should remember the following when it comes to their employer tax and super obligations: Employers should make sure they are withholding the right amount of tax from payments they make to their employees and other payees, especially as this will help their employees meet their end-of-year tax liabilities; Employers must pay super guarantee (currently at 11.5%) to all eligible employee's super funds in full and on time to avoid paying the super guarantee charge; and If employers are still not reporting through single touch payroll (STP) and they do not have an approved exemption, deferral or concession in place, they should start reporting now. If they have just started a business or recently employed staff, they will need to report through STP from their first payday.

Are Special Purpose Financial Statements Still Acceptable for Not-For-Profit (NFP) Entities? Following on from our post 23rd October 2024 which addressed special purpose financial statements in relation to for-profit entities, we have received a number of questions regarding the same topic for not-for-profit entities. Not-for-profit entities may continue to choose to prepare Special Purpose Financial Statements (SPFS) if they assess themselves as non-reporting entities. Per Statement of Accounting Concepts 1 (SAC 1), a non-reporting entity is one where users, such as donors, members, creditors, or regulators, are not reliant on general-purpose financial reports for making decisions. This assessment is not static; it must be revisited annually by the governing body to ensure it remains accurate. Although NFPs self-assess their reporting status, it is crucial to remember that there may be legislation governing financial statements which can vary depending on the type of entity, the State of incorporation and ACNC registration. For instance, SPFS prepared under the ACNC Act must comply with either: The full presentation and disclosure requirements in the compulsory standards for SPFS listed in section 60.30 of the ACNC Regulations (AASB 101, AASB 107, AASB 108, AASB 124, AASB 1048, AASB 1054) or the relevant paragraphs from AASB 1054 and AASB 1060 being paragraphs 8, 11, 14-103, 106-110, 189-203 of AASB 1060 and paragraphs 1 to 6, 9, 9A, 9B and 17 of AASB 1054. The Australian Accounting Standards Board (AASB) is also developing a new Tier 3 standard specifically for smaller not-for-profits, we are expecting an exposure draft of the proposals by the end of 2024. This upcoming standard and proposed changes to the Conceptual Framework aims to simplify reporting requirements while mandating general purpose financial statements for more NFPs. In conclusion, while SPFS might still be permissible, not-for-profits should carefully assess their reporting obligations and the needs of their users to ensure that your financial reporting remains relevant, compliant, and transparent while serving the best interests of your organisation and its stakeholders.  Monitoring the proposed developments from the AASB will allow you time to prepare for changes that might be needed.

Are Special Purpose Financial Statements Still Acceptable for For-Profit Entities? The financial reporting landscape in Australia has seen significant changes over the last few years, particularly in the acceptability of special purpose financial statements (SPFS) for for-profit entities. Historically, many for-profit entities prepared SPFS to meet specific needs without adopting the full suite recognition, measurement and disclosure requirements of accounting standards. We continue to receive lots of questions about whether for-profit entities can continue to prepare special purpose financial statements. The AASB introduced new requirements for assessing whether a for-profit, private sector entity needs to prepare general purpose financial statements through amendments released in AASB 2020-2 Amendments to Australian Accounting Standards – Removal of Special Purpose Financial Statements for Certain For Profit Private Sector Entities. In summary, from 30 June 2022, a for-profit private sector entity must prepare general purpose financial if one of the following criteria is met – the entity complies with: A legislative requirement to prepare financial statements in accordance with Australian Accounting Standards or accounting standards – this would include, for example Companies required to financial statements under the Corporations Act, e.g. all large proprietary companies, small foreign owned companies, public companies greater than $250k revenue OR A constituting or other document that requires the preparation of financial statements in accordance with Australian Accounting Standards. This might include documents such as constitution, trust deed, joint venture agreement, bank loan agreement. If this requirement exists and the agreement was created / amended prior to 1 July 2021 then an entity can continue preparing special purpose financial statements with some extra disclosures the document was created or amended after 1 July 2021 then then general purpose financial statements must be prepared. While SPFS might still be permissible in specific cases, entities should evaluate whether their current financial statements are appropriate given the change in accounting standards.

Material Accounting Policies: Moving towards less cluttered and more readable financial statements Many entities preparing financial statements are required to comply with AASB 101 Presentation of Financial Statements. This standard requires disclosure of accounting policy information, however from 31 December 2023 the requirement has shifted from disclosing significant accounting policies to focusing on material accounting policy information. This aims to enhance the relevance of financial statements by ensuring that only material information about accounting policies, i.e. information that is essential for understanding the entity’s financial performance and position, is disclosed. Financial statements should no longer have pages of boilerplate words detailing accounting standard requirements included in the accounting policy section. The accounting policies disclosed should be specific to the entity covering: Changes to accounting policies Selection of options with accounting standards Information relating to significant judgements and estimates Development of an accounting policy for a specific transaction not explicitly covered by the accounting standards Accounting treatment for a particularly complex transaction. Instead of a checklist approach, the focus is now on whether the information is material to the users of the financial statements and will result in less pages, less clutter and more focussed information to users which must be a good thing. In addition, restructuring the accounting policy information into the relevant notes means that users have all the information on a particular topic in the one place.  During the last few months, we have been working with clients on implementing these changes and have seen reductions in accounting policies (and associated pages of the financials) of between 50 and 80% with positive user feedback on the new structure.

Avoid a tax time shock Individual taxpayers can take the following steps right now to ensure the correct amount of tax is being put aside throughout the year: let their employer know if they have a study or training support loan, such as a HECS or HELP debt; check they are only claiming the tax-free threshold from one employer; consider whether the Medicare Levy Surcharge may affect them this financial year (ie. whether they have the appropriate private health insurance); check their income tier is correct for their private health insurance rebate; and consider voluntarily entering PAYG instalments and pre-paying tax throughout the year to avoid a large tax bill at tax time for investment or business income. If you would like to discuss or implement any of these steps and strategies in more detail, please feel free to contact our office.