The Garis Group

How Professional Accountants Can Help Newcastle Tradies Manage Finances

Mon, 22 Sep 2025 05:02:26 GMT

Running a trade business often means working long days on site, juggling multiple jobs, and managing the constant pressure of deadlines. Beyond the tools and materials, there’s also the financial side of running a business, which can quickly become a source of stress. For many tradies, it’s not just about doing the work—it’s about keeping track of money flowing in and out, handling tax obligations, and making decisions about expenses and future growth. This is where accounting services can play a valuable role, helping small business owners in trades manage the numbers while they stay focused on their craft.

In this blog, we’ll explore the key financial challenges tradies face and how accountants provide practical support to keep their businesses moving forward.

Tackling Cash Flow Challenges with Accounting Services Newcastle

Cash flow is one of the most common challenges for tradies. Payments from clients may not always arrive on time, but bills, wages, and supplies still need to be covered. When money in and money out don’t align, it can create financial strain. Accountants can help set up systems that provide clarity around cash flow and make it easier to predict shortfalls before they happen.

Monitoring incoming and outgoing payments on a regular basis
Preparing cash flow forecasts to identify periods where money may be tight
Developing strategies such as setting aside reserves for quieter months

By using structured systems, tradies gain visibility over their finances and can make more informed decisions about how to manage day-to-day expenses.

Keeping on Top of Tax Obligations Without the Stress

Tax compliance can be a time-consuming task for anyone running a small business. For tradies, it often means keeping track of GST, preparing BAS statements, and lodging income tax returns—all while managing busy work schedules. Accountants can assist by handling much of this administration, helping tradies stay organised throughout the year.

Preparing and submitting BAS statements
Keeping track of GST reporting obligations
Identifying allowable deductions relevant to trade businesses

This type of support allows tradies to reduce the burden of paperwork and keep their focus on completing jobs and managing clients.

Separating Personal & Business Finances for Clarity

It’s common for tradies starting out to mix personal and business finances. However, over time this can lead to confusion, especially when it comes to tax time or evaluating business performance. Accountants encourage setting up separate accounts and structured record-keeping so tradies can clearly see how their business is performing without personal expenses getting in the way. Clear records not only simplify reporting but also provide a better picture of profitability over time.

Managing Equipment & Vehicle Expenses the Smart Way

Tradies rely heavily on vehicles, machinery, and tools, which often represent some of the biggest business expenses. Tracking these costs accurately can make a significant difference when reviewing financial reports. Accountants provide guidance on recording expenses and understanding how these assets impact the overall business position.

Recording vehicle-related expenses such as fuel, servicing, and repairs
Tracking depreciation of large assets like machinery and tools
Maintaining digital records of receipts and expenses for reporting purposes

By keeping detailed records, tradies gain a clearer understanding of the true cost of operating their business.

Understanding Profit vs Revenue in Day-to-Day Operations

Many tradies focus on revenue, celebrating when they secure big jobs or see high invoicing. However, revenue doesn’t always reflect profitability. After materials, wages, and overheads are paid, the figure left over can tell a very different story. Accountants help tradies understand the importance of distinguishing between the two.

This clarity helps tradies make decisions based on profitability rather than just turnover, which supports longer-term stability and growth planning.

Simplifying Payroll & Super for Growing Teams

As trade businesses expand, many take on apprentices, contractors, or employees. With this growth comes the responsibility of managing payroll and superannuation contributions. This can be a complex area, particularly with frequent regulatory updates, but accountants provide valuable assistance in keeping it manageable.

Processing wages and keeping accurate employee records
Managing super contributions according to current requirements
Staying aligned with obligations around entitlements and reporting

This level of organisation supports tradies in meeting their responsibilities while freeing up time to focus on on-site work.

Planning Ahead with Budgets & Business Forecasts

It can be difficult for tradies to plan beyond the next job, especially when work comes in peaks and troughs. Accountants provide tools like budgets and forecasts that help tradies prepare for the future. These forward-looking insights allow small business owners to identify when to reinvest, how to allocate resources, and what to expect in the months ahead.

Creating budgets tailored to business goals and expected income
Forecasting expenses for tools, vehicles, and supplies
Highlighting areas where savings could be made or investment considered

This type of planning helps tradies make decisions with a clearer understanding of their financial position.

Building Long-Term Stability with Business Accounting Support

Accounting isn’t only about reporting past figures; it’s also about supporting the future of a business. By working with accountants, tradies can set up structures and processes that help reduce uncertainty and provide a foundation for growth.

Reviewing business performance regularly to highlight trends
Offering guidance on setting achievable financial goals
Establishing systems that make day-to-day money management less stressful

This partnership allows tradies to feel more supported in running their businesses, knowing they have reliable systems in place for the financial side of operations.

Explore How Our Small Business Accountant in Newcastle Can Assist You

At The Garis Group , we provide accounting services in Newcastle tailored to tradies and small business owners. From managing cash flow and tax obligations to helping with payroll and long-term planning, our services are designed to simplify the financial side of running a business. If you’d like to focus more on your trade and less on paperwork, get in touch via our contact page or give us a call to book a consultation.

Can You Pay Less Tax? Smart Tax Strategies for Newcastle Professionals & Business Owners

Wed, 27 Aug 2025 02:31:32 GMT

Managing tax obligations can feel daunting for many professionals and small business owners. The system is complex, and while it is necessary to remain compliant, there are legitimate ways to approach your tax position more thoughtfully. With careful planning and awareness of available strategies, it may be possible to pay less tax , improve cash flow, and strengthen your long-term financial outlook.

In this blog post, we’ll explore practical tax strategies tailored to the circumstances of Newcastle professionals, sole traders, small business operators, and property investors.

Maximising Work-Related Deductions Without Overstepping Rules

Claiming deductions is one of the most common ways to reduce taxable income. However, the Australian Taxation Office requires that expenses be directly connected to your income-earning activities and supported by records.

Work-related deductions may include:

Home office expenses include electricity, phone, and internet when working from home.
Equipment, tools, and technology used in the course of business.
Education and training directly linked to your role.
Motor vehicle expenses when travel is required for business purposes.

Accurate records are essential, as deductions are only valid when properly substantiated. Simple systems, such as using accounting software or storing receipts digitally, can make compliance easier.

Structuring Your Business for Tax Efficiency

The way a business is structured influences how income is reported and taxed. The right choice depends on factors such as business size, level of risk, and long-term goals.

Choosing a structure is not just about current needs but also about long-term implications. Reviewing your business setup may highlight opportunities for managing tax more effectively.

Leveraging Superannuation Contributions to Reduce Taxable Income

Superannuation is a long-term savings vehicle that also plays a role in tax management. Contributions can reduce taxable income and support retirement planning.

Contribution types to consider include:

Concessional contributions (before tax), such as salary sacrifices, are taxed at 15% instead of marginal rates up to the contribution cap.
Non-concessional contributions (after-tax) can be made from personal savings to grow retirement balances.
Catch-up contributions may be available if you haven’t used the full concessional cap in previous years.

These strategies should be considered carefully, particularly as contribution caps apply, and exceeding them can trigger additional tax

Investment Property Tax Strategies That Could Lighten the Load

Property investments remain popular across Australia but come with specific tax considerations.

Depreciation

Depreciation schedules allow investors to claim deductions on wear and tear of fittings, fixtures, and certain building costs.

Negative Gearing

When expenses on a property exceed rental income, the loss may be used to offset other taxable income.

Record-Keeping

Maintaining receipts for property-related expenses such as maintenance, management fees, and insurance is crucial.

Capital Gains

Capital gains tax (CGT) applies when selling, though concessions may reduce the amount payable depending on how long the property has been owned.

Each element plays a role in how property ownership influences tax outcomes.

Timing Income & Expenses to Manage Your Tax Position

The timing of income and expenses can influence your tax obligations. By carefully planning when revenue is received or costs are incurred, it may be possible to shift taxable income between financial years.

Possible approaches include:

Paying business expenses such as rent, interest, or insurance on time
Deferring invoicing to push taxable income into the following year, if cash flow allows.
Aligning major purchases, such as new equipment, with available concessions.

While timing strategies can be useful, they should always be considered in the context of practical considerations such as cash flow requirements.

Claiming Small Business Concessions & Offsets Where Eligible

Small businesses in Australia may be entitled to concessions that support growth and reduce tax liability.

Not all businesses qualify for every concession, so it's important to check eligibility criteria before including them in your tax return.

The Role of Record-Keeping in Paying Less Tax

Accurate records are not just a compliance requirement—they can also highlight deductions and concessions that may be overlooked. Claims cannot be substantiated without proper documentation, which may result in higher taxable income.

Good record-keeping practices include:

Using accounting software to track transactions.
Digitally storing receipts and invoices to avoid paper loss.
Reconciling accounts regularly to identify errors or missed entries.
Retaining records for the required minimum period set by the ATO.

Strong record-keeping habits can save time and support tax planning across multiple financial years.

When Professional Guidance Becomes an Essential Tax Strategy

While many tax-saving approaches can be applied individually, the tax system's complexity often means that tailored guidance is valuable. This is especially relevant for business owners, property investors, and high-income professionals whose situations may involve multiple income sources, concessions, or structures.

Benefits of seeking guidance include:

Identifying deductions and concessions relevant to your situation.
Reviewing business structures for tax implications.
Managing compliance obligations and deadlines with confidence.

In many cases, engaging a tax accountant is about tax returns and building a longer-term strategy that considers both business and personal goals.

Take Control of Your Tax Position Today

At The Garis Group , we work with Newcastle professionals, sole traders, and business owners to explore opportunities for managing tax more thoughtfully. Our tax accountants in Newcastle assist with deductions, superannuation contributions, business structuring, and investment property tax matters. If you’d like to explore practical ways to approach your tax obligations, get in touch with our team via our contact page or give us a call to book a consultation.

Avoid These Small Business Accounting Mistakes with the Right Accountant

Tue, 26 Aug 2025 01:15:23 GMT

Are you a small business owner trying to juggle sales, operations, and finances all at once? It’s common for business owners to handle their own books to save costs. However, even small errors can lead to bigger issues over time, impacting cash flow, compliance, and business decisions.

In this blog, we’ll look at some of the most common small business accounting mistakes and why working with a small business accountant in Newcastle could help protect your business from unnecessary risks.

Misclassifying Expenses

One of the most frequent small business accounting errors involves incorrectly classifying expenses. For example, mixing personal and business costs can create confusion during tax time and may affect financial statements.

A qualified accountant can help:

Create clear categories for business spending.
Track expenses correctly for tax purposes.
Identify costs that may be deductible, saving money in the long run.

Proper categorisation makes it easier to understand where your money goes and supports more accurate reporting.

Failing to Keep Records Updated

Busy business owners sometimes fall behind on maintaining accurate financial records. Whether it’s receipts, invoices, or bank reconciliations, delays can result in:

Missed deductions.
Inaccurate cash flow reporting.
Difficulties preparing for tax lodgements.

A small business accountant in Newcastle can help establish processes that keep records current, reducing stress and saving time when financial reports are required.

Not Tracking Cash Flow Properly

Cash flow represents the money coming in and going out of your business. Many small business owners focus on sales but neglect cash flow tracking, leading to problems like:

Being unable to pay suppliers on time.
Falling short during quieter trading periods.
Relying on high-interest credit options unnecessarily.

By working with an accountant, you can set up tools and processes that help predict cash flow trends and avoid financial surprises.

Ignoring Reconciliation

Bank reconciliation is the process of matching your records to your bank statements. Skipping this step can lead to:

Overstated income.
Missed payments.
Fraud going undetected.

Regular reconciliation helps maintain accurate records and provides confidence in your financial statements. An accountant can assist with scheduling and managing this vital task.

Mistakes in Payroll Calculations

Managing payroll isn’t simply about paying wages. It involves:

Calculating superannuation contributions.
Managing tax withholding.
Keeping up with regulatory changes.

Payroll mistakes can lead to penalties, employee dissatisfaction, or audits. An accountant who understands current regulations can help you navigate this complex area.

Not Reviewing Financial Reports Regularly

Some business owners avoid looking at financial statements, believing they only matter at tax time. However, regular reviews can highlight issues such as:

Excessive spending in certain categories.
Drops in revenue.
Trends that may affect future planning.

Having a small business accountant in Newcastle review your reports with you can make the numbers easier to understand and help you make informed decisions.

Overlooking GST Obligations

If your business is registered for GST, you’re required to:

Collect GST on sales.
Lodge Business Activity Statements (BAS).
Pay any GST owed to the ATO.

Misunderstanding GST rules can result in underpayment or overpayment, both of which can cause cash flow issues or trigger audits. An accountant can guide you through the correct GST treatment and timing of lodgements.

Relying on Spreadsheets Alone

While spreadsheets are useful, they’re prone to errors, particularly if multiple people access them or complex formulas are involved. Common issues include:

Accidental data deletion.
Broken formulas.
Difficulty scaling with business growth.

Cloud accounting software offers better security, easier sharing, and live data updates. An accountant can help you choose and implement the right solution for your business.

Not Planning for Tax Obligations

Many businesses get caught out by unexpected tax bills. Without proactive tax planning, you may face:

Struggles to pay tax liabilities on time.
Penalties or interest from the ATO.
Disruption to cash flow.

Accountants can provide guidance on setting aside funds for tax, reducing surprises and helping keep finances stable.

Underestimating the Value of Professional Advice

Some business owners avoid engaging an accountant, believing it saves money. However, trying to handle complex accounting tasks alone can lead to:

Avoidable mistakes.
Higher costs to fix errors later.
Missed opportunities to improve profitability.

Working with an accountant provides clarity and confidence in your business finances. The cost of professional advice is often outweighed by savings, compliance, and peace of mind.

Potential Benefits of Working with a Small Business Accountant in Newcastle

Choosing to work with a professional who understands commercial accounting in your local area can offer significant advantages:

Familiarity with industry-specific requirements.
Knowledge of local regulations and ATO expectations.
Quick access to support when questions arise.

Local accountants also build relationships with businesses and can provide tailored insights relevant to the Newcastle business environment.

How an Accountant Supports Long-Term Growth

A small business accountant does more than prepare tax returns. They may assist with:

Budgeting and forecasting.
Cash flow planning.
Financial analysis to support business decisions.
Structuring your business for efficiency and compliance.

With professional guidance, businesses can focus more on growth rather than financial stress.

Steps You Can Take Today

If you’re running your own business accounts, consider taking these first steps:

Schedule regular times each month to review financial reports.
Separate personal and business expenses completely.
Investigate cloud accounting solutions for better accuracy.
Speak with an accountant about your specific needs.

Taking even small steps toward professional support can help avoid the common small business accounting mistakes outlined above.

Connect with a Small Business Accountant in Newcastle Today

Running a business requires attention to many moving parts. Avoiding small business accounting errors is important to maintaining financial stability, avoiding penalties, and keeping your business on a healthy path.

At The Garis Group , our team assists clients with commercial accounting services tailored to the needs of small businesses. Whether you’re looking to improve record-keeping, manage cash flow, or prepare for future growth, working with a small business accountant in Newcastle can help keep your business on track.

Contact us today to discover how accounting services may help you avoid costly mistakes and support your business success.

8 Signs Your Business Needs a Professional Business Accountant

Thu, 14 Aug 2025 01:59:08 GMT

Managing a business comes with its fair share of complexities, and financial tasks can quickly become overwhelming for many owners. Whether you’re running a growing enterprise or just starting, the numbers behind your business matter. They can influence everything from your ability to pay staff to how you plan for growth or respond to unexpected changes.

While some small businesses initially manage their accounts, there often comes a point where external guidance may be helpful. Commercial accountants can assist businesses in interpreting financial data, managing compliance and navigating decisions with the support of clear reporting. If you’re unsure whether it’s time to involve a professional, here are few common signs that may indicate your business could benefit from commercial accounting services.

1. Your cash flow is unpredictable month to month

Irregular cash flow can make even the most promising businesses feel unstable. If you're unsure whether you’ll have enough to cover wages, bills, or supplier payments next month, it's worth taking a step back.

A commercial accountant can help you with the following:

Monitor inflows & outflows to identify spending trends
Set up cash flow forecasting to anticipate shortfalls or surpluses
Develop systems that improve payment cycles & supplier terms

Having greater visibility over the timing and movement of funds within your business can assist with day-to-day planning and support more informed financial decisions.

2. You’re spending too much time managing finances

Time spent trying to keep up with bookkeeping, reconciling accounts, or lodging BAS statements can quickly eat into time better spent elsewhere.

Common tasks that often pull business owners away from their core focus:

Chasing unpaid invoices
Managing payroll & superannuation
Inputting receipts & bank transactions
Trying to meet compliance deadlines without support

Outsourcing these to a business accountant can allow you to refocus on operations, client relationships and business development.

3. You’re not confident about your tax obligations

Tax legislation can be hard to keep up with, especially when rules change or new obligations emerge. If you’re unsure about your GST, income tax, or whether you're claiming deductions correctly, that uncertainty can create unnecessary stress.

Business accountants may assist with the following:

Interpreting ATO requirements that apply to your specific industry
Preparing & reviewing BAS statements
Helping lodge required documentation accurately and on time

While many factors influence tax outcomes, working with someone familiar with these processes may help reduce the likelihood of unintentional oversight.

4. Your financial reports don’t make sense

Having reports on hand is one thing—knowing how to interpret them is another. If your profit and loss statement or balance sheet leaves you with more questions than answers, it could be time to bring in help.

Key financial reports commercial accountants can assist with:

Profit & Loss Statement: Tracks income versus expenses over a period.
Balance Sheet: Shows your assets, liabilities and equity at a specific point.
Cash Flow Statement: Details how cash enters and exits your business.

Understanding these reports helps inform decisions on pricing, staffing and stock levels, among others.

5. You’re planning to grow or expand your business

Growth often requires more than increased sales—it also involves careful planning, financial modelling and scenario testing. Whether you're thinking of hiring more staff, leasing a second location or launching a new product line, assessing the financial viability beforehand is helpful.

A commercial accountant may:

Help build forecasts to model various growth outcomes
Provide insight into financing options & repayment capacity
Work with you to understand the financial impact of scaling up

This level of planning can offer useful guidance when moving from ideas to action.

6. You’ve experienced a recent audit or compliance issue

Receiving an audit notice or flagging an issue during review can be daunting, especially if you're unsure where things went wrong. Even well-meaning recordkeeping practices can result in errors without the right checks.

A business accountant can help:

Review past financial records to identify gaps or inconsistencies
Organise supporting documentation required for audits
Establish systems to track & record financial activity more effectively

Although no system can eliminate risk, reviewing and improving your approach to compliance may help support clearer financial oversight in the future.

7. You’re not using financial software effectively

Accounting software can simplify your workflow—but only when set up and used correctly. In some cases, business owners may not be using all available features or may be entering data manually, increasing the chance of errors.

How a commercial accountant might assist:

Selecting & implementing software that aligns with your business size & structure
Automating tasks like invoicing & bank reconciliation
Producing reports that reflect real-time data for improved oversight

Using digital tools effectively can support more accurate recordkeeping and may improve the consistency of your financial processes over time.

8. You feel unsure about your business’s financial health

It’s one thing to know how much money is in the bank; it’s another to understand your financial position. If you’ve ever found yourself unsure about whether your business is profitable or how long you can sustain operations, you're not alone.

A commercial accountant can help you get a clearer picture by:

Summarising financial activity over time
Identifying patterns in revenue or expenses
Helping you set realistic financial goals

Access to detailed and timely financial information can help you build a clearer view of your business’s position and support more structured planning across different areas of operations.

Need More Support in Navigating Your Business Finances?

At The Garis Group , we support businesses across Newcastle and beyond with tailored commercial accounting services. Our work involves helping clients organise financial reporting, navigate compliance, and structure financial processes around their operational goals.

Our small business accountants in Newcastle work with various industries to support tasks like cash flow tracking, strategic planning, payroll processing, tax compliance and financial forecasting. Whether you’re looking to refine internal systems or respond to recent business changes, we can meet with you to discuss how our services may align with your needs.

If any of the above signs feel familiar, it might be time to consider a more structured approach to managing your business finances. Get in touch via our contact page or give us a call to discuss how we can support your goals.

8 Smart Strategies for Your Taxes

Wed, 13 Aug 2025 02:59:01 GMT

With tax planning strategies always evolving, it’s important to stay ahead of upcoming financial years and consider what may benefit your business. The Australian tax environment continues to change, with new compliance frameworks, digitised systems, and economic conditions all shaping how businesses approach their accounting strategies. Understanding these changes—and planning accordingly—is important to maintaining financial clarity and staying on the right side of the law.

Collaborating with accountants who stay informed about regulatory changes can be highly beneficial. Whether you run a small business or oversee a larger operation, their guidance supports your ability to navigate evolving requirements while maintaining stability.

1. Understand the Changing Tax Landscape

Changes to tax policy and administration regularly influence how businesses plan their finances. While it’s important to remain flexible, keeping up to date with current legislative reforms is crucial.

Adjustments to instant asset write-off thresholds influence capital investment strategies.
Updates to superannuation regulations impact business contributions and employee entitlements.
The Australian Taxation Office (ATO) 's focus on digital transparency has led to increased scrutiny of digital reporting obligations.

A trusted accounting partner can help interpret these regulatory shifts, providing practical insight into what these changes mean for day-to-day business operations.

2. Plan with Quarterly Tax Reviews

Waiting until the end of the financial year to review tax positions often leads to missed opportunities and rushed decision-making. Quarterly tax reviews allow businesses to consistently oversee financial obligations and respond quickly to financial or legislative changes.

Key benefits include:

Identifying potential issues with GST, PAYG, or payroll early in the year.
Allowing time to prepare for upcoming obligations, such as superannuation contributions or fringe benefits tax.
Supporting informed business decisions through accurate financial data.

By adopting this regular review approach, businesses are better placed to manage their obligations methodically, reducing the risk of oversight..

3. Maximise Small Business Concessions

Many small to medium businesses may be eligible for various tax concessions to support their growth and resilience. Knowing which concessions apply and how to access them is a matter of understanding the business structure and the thresholds set out by the ATO.

The small business income tax offset may provide relief for businesses operating as sole traders or partnerships.
Simplified depreciation rules can enable more efficient treatment of capital expenses.
Concessions on capital gains tax may apply when disposing of active business assets under qualifying circumstances.

If used correctly, these measures can support cash flow and planning, but professional advice is key to applying them correctly and within regulatory guidelines.

4. Stay Alert to ATO Digital Transformation Initiatives

As part of its push towards digital-first tax administration, the ATO has introduced a range of technologies designed to enhance visibility and streamline reporting. Businesses must now keep up with these technologies to remain compliant and efficient.

Single Touch Payroll is compulsory for all employers, providing real-time reporting of employee income and superannuation.
Digital identity tools such as myGovID and Relationship Authorisation Manager (RAM) are required to access ATO online services securely.
E-invoicing is gaining momentum and influences how businesses interact and report financial data.

Accountants familiar with these tools can assist with implementation and compliance, helping businesses remain aligned with ATO requirements.

5. Use Strategic Asset Write-Offs to Reduce Liability

The timing and categorisation of asset purchases significantly affect how expenses are treated for tax purposes. For eligible businesses, using the instant asset write-off provides a pathway to claim deductions on certain capital purchases in the year they are installed and ready for use.

Points to consider:

Only assets below the prescribed threshold can be immediately written off.
The business must use the asset or have it installed and ready for use within the relevant timeframe.
Careful documentation is necessary to substantiate claims in the event of an audit.

This approach requires a thoughtful balance between financial management and meeting tax eligibility criteria, an area where a business accountant can provide valuable support.

6. Streamline BAS & GST Reporting with Expert Oversight

Business Activity Statement (BAS) and Goods and Services Tax (GST) reporting can become time-consuming for commercial businesses. Errors or omissions in these documents can lead to penalties or the need for retrospective corrections.

Accountants assist in tracking GST collected versus GST paid, helping to maintain accuracy in the net obligation.
BAS preparation support helps manage PAYG instalments and withholding tax efficiently.
Keeping digital records aligned with ATO systems supports real-time reporting accuracy.

A structured reporting system supported by an advisor helps ensure that reporting remains timely and accurate.

7. Build Tax-Effective Structures for Growth

Choosing the right structure for your business is fundamental to its long-term stability. As businesses expand, their structure may need to evolve to accommodate new operational demands or financial goals.

Companies offer a separate legal entity with access to lower company tax rates under certain thresholds.
Trusts may offer more flexible income distribution, supporting planning across stakeholders. Partnerships provide simple administrative frameworks but may be less flexible when scaling.

Choosing or revisiting your business structure is not just about tax—it impacts risk management, succession, and compliance. Working with an accountant helps align the framework with your business objectives.

8. Protect Against Penalties with Real-Time Compliance Checks

As ATO systems become more automated, the importance of ongoing compliance checks grows. Businesses need to keep their records current and avoid delays or omissions in their lodgements.

Practical compliance strategies:

Schedule regular reconciliation of accounts to maintain accurate and reliable data.
Establish calendar alerts for all tax and compliance deadlines.
Maintain records that support all financial entries, including invoices and receipts.

Preventive strategies tend to be more effective than reactive measures. Accountants can provide important oversight that helps minimise the likelihood of overlooking key compliance obligations.

Connect with Our Accountants in Newcastle for Commercial Tax Assistance

At The Garis Group , we support businesses in building financial strategies that align with regulatory expectations. Our services are designed to help businesses of all sizes navigate the evolving tax environment with guidance.

Contact our tax accountants in Newcastle today to learn more about our commercial accounting and tax services or to book a consultation.

Understanding the Types of Commercial Accounting Reports

Mon, 11 Nov 2024 02:52:00 GMT

Ever wondered which financial reports are most important for a business? Commercial accounting reports are essential tools that support business owners in evaluating performance, forecasting, and staying compliant. In this blog, we’ll look at the primary types of commercial accounting reports and explore their purpose, helping you understand their unique roles in financial analysis and decision-making.

Income Statement

The income statement, or profit and loss (P&L) report, shows a company’s revenues, expenses, and profits over a specific period. This report provides insights into operational efficiency by breaking down sources of income and expenses, making it easier for business owners to assess profitability and identify areas where costs can be managed. Regularly reviewing income statements can help in setting financial goals and tracking business growth.

Balance Sheet

The balance sheet offers a snapshot of a business’s assets, liabilities, and equity at a particular moment. Assets might include cash, inventory, and property, while liabilities cover outstanding debts and obligations. The equity portion represents the owner’s stake in the business after liabilities. This report is crucial for understanding a company’s financial health, showing whether assets outweigh liabilities and indicating long-term stability.

Cash Flow Statement

Tracking the inflows and outflows of cash, the cash flow statement highlights how a business generates and spends its cash. Split into operating, investing, and financing activities, this report helps assess whether a business can cover its expenses, invest in growth, and manage debt. Cash flow statements also offer insights into liquidity, an essential factor for maintaining day-to-day operations.

Statement Of Change Equity

This report outlines shifts in owners’ equity over a period due to investments, withdrawals, and profits or losses. It’s particularly helpful for companies with multiple stakeholders as it tracks how retained earnings and additional capital injections affect overall equity. Business owners and investors alike use this report to gauge financial returns and make decisions regarding reinvestment or withdrawal of capital.

Budget vs Actual Report

Comparing planned (budgeted) figures with actual results, this report reveals discrepancies and provides insights into business performance versus projections. Businesses can pinpoint underperforming areas, adjust forecasts, and refine budgets for more realistic financial planning. This report is ideal for staying aligned with financial targets, adapting strategies, and managing resources effectively.

Accounts Receivable Ageing Report

The accounts receivable ageing report categorises outstanding invoices by age. By sorting receivables based on due dates, this report helps businesses monitor overdue accounts and track customer payments. Regularly reviewing this report supports proactive collection efforts, potentially reducing bad debt and improving cash flow by prioritising follow-ups with overdue clients.

Inventory Report

For businesses with inventory, an inventory report tracks stock levels, turnover, and costs. By monitoring inventory status, business owners can determine reorder points and optimise stock levels to meet demand without overstocking. Inventory reports also contribute to cost management by identifying excess or slow-moving stock that might otherwise impact cash flow.

Expense Report

The expense report is a breakdown of expenditures over a specific period, categorising costs to help businesses track spending. This report enables business owners to understand where funds are allocated and identify potential areas for cost reduction. Expense reports can be customised to reveal detailed insights, supporting informed budgeting and spending adjustments.

Unlock Growth with Professional Accounting Support

Understanding and utilising commercial accounting reports can provide valuable insights for making sound business decisions.

At The Garis Group , our team of commercial accountants in Newcastle assists clients in producing and interpreting these essential reports, offering support with everything from income statements to cash flow analysis. By partnering with a professional team, your business can access financial insights and tailored advice to help meet your financial goals. Contact us today to learn more about how our commercial accounting services can enhance your business’s financial health.

Why Should I Hire an Accountant for My Small Business?

Tue, 22 Oct 2024 01:06:00 GMT

Have you ever felt overwhelmed by the financial aspects of running your small business? Managing the books, understanding tax obligations and making informed financial decisions can be daunting. If you’re nodding in agreement, you’re not alone. Many small business owners face these challenges daily. This is where hiring an accountant can make a difference. In this blog, we’ll explore why hiring an accountant for your small business can be a wise investment.

Navigating Tax Compliance With Ease

Navigating the intricate world of tax regulations can be challenging, particularly for small business owners who manage multiple responsibilities. Accountants bring a deep understanding of tax compliance, helping your business align with relevant tax laws and regulations. They can assist in identifying deductions and credits, potentially lowering your overall tax obligations. By working with an accountant, you can reduce the likelihood of errors on your tax returns, which may help you avoid costly fines and penalties.

Accurate Financial Reporting

Maintaining accurate financial records plays an important role in the success of any business. An accountant may offer detailed and precise financial reports, which can give you a clearer picture of your business’s financial health. These reports can be valuable for making informed decisions, securing loans and attracting investors. With accurate financial reporting, you can track your business’s performance, identify areas for improvement and set realistic financial goals.

Strategic Tax Planning

Accountants do more than just crunch numbers; they play an important role in strategic tax planning. They can assist you in developing a detailed financial plan that aligns with your business goals. This process might include budgeting, forecasting and managing cash flow. By understanding your business’s financial landscape, an accountant can offer insights and suggestions for growth and sustainability. They can also help with risk management, aiming to prepare your business for potential financial challenges.

Time And Stress Savings

As a small business owner, your time is valuable. Managing finances often requires a significant amount of time and can be stressful, taking your focus away from core business activities. By outsourcing your accounting needs, you can spend more time concentrating on what you do best – running your business. An accountant can handle various financial tasks, including bookkeeping and payroll management. This shift alleviates some of the stress and may enhance your overall productivity.

Improved Cash Flow Management

Managing cash flow plays a significant role in the health and growth of any small business. An accountant can assist in monitoring and managing your cash flow by offering accurate forecasts and timely financial insights. They might spot potential cash flow issues before they escalate, helping to maintain sufficient liquidity for your operational expenses. With an accountant’s support, you can keep your cash flow balanced, making it simpler to consider new opportunities and address unexpected financial challenges.

Professional Financial Advice

Accountants can bring valuable insights and support to your business. They can provide professional financial advice tailored to your business’s unique needs. Whether you’re considering expansion, investment opportunities or cost-cutting measures, an accountant can offer guidance and support. Their insights can help you make informed decisions that enhance your business’s financial stability and growth. Having an accountant as a partner can be a useful resource for your business.

Schedule A Consultation To Discuss Your Commercial Accounting Needs

Hiring an accountant for your small business can offer various benefits, such as assistance with tax compliance, accurate financial reporting, strategic planning and reduced stress. At The Garis Group we understand the unique challenges that small businesses encounter. Our commercial accountant in Newcastle provides various accounting services tailored to suit your needs. Allow us to assist you in navigating the financial aspects of your business so you can concentrate on your core activities. Contact us today to learn how we might support your business’s financial success.

The Role of Commercial Accounting in Risk Management

Mon, 21 Oct 2024 07:12:00 GMT

Running a business involves constant decision-making. One of the most critical aspects of this process is managing financial risks, which can arise from various sources—from market fluctuations to cash flow inconsistencies. Commercial accounting serves as a key resource in this area, helping business owners maintain a clear understanding of their financial standing. In this blog, we’ll explore how different elements of commercial accounting can contribute to a more robust risk management strategy.

Identifying Financial Risks

Commercial accounting can offer a comprehensive view of a business’s financial health, allowing for the early identification of potential risks. By analysing financial statements and balance sheets, accountants can identify potential issues. Some key areas where financial risks may arise include:

Inconsistent cash flow
Rising operational costs
Unpaid debts & overdue receivables
Unforeseen tax liabilities

Identifying these risks early can help you take corrective action, reducing the likelihood of financial distress.

Financial Reporting & Analysis

Accurate and timely reporting can help you gain insights into your business’s financial health and identify potential risks. Regular financial reports can offer a snapshot of the company’s performance, enabling decision-makers to evaluate trends, spot irregularities and make informed choices to mitigate financial risks. These reports can allow businesses to adapt to changing market conditions and economic uncertainties.

In addition to routine reporting, regular financial analysis is an integral component of risk management. By identifying discrepancies or areas of concern, it can help prevent financial misstatements that might otherwise go unnoticed. Furthermore, financial analysis can reinforce transparency and accountability, which are vital in maintaining stakeholder trust and supporting long-term business stability. Regular analysis could also help businesses stay aligned with industry standards and legal requirements.

The Importance of Cash Flow Management

Managing cash flow is crucial for reducing financial risks. Without a steady flow of funds, even a profitable business may encounter difficulties. By working closely with an accountant, businesses can prioritise cash flow management.

Monitoring Inflows & Outflows

An accountant can assist businesses in closely monitoring their cash inflows and outflows. This can involve meticulously tracking sales, collections and payments and making data-driven adjustments as needed to help maintain a positive cash flow.

Managing Revenue Fluctuations

For businesses that experience seasonal revenue fluctuations, understanding and adapting to these cycles is important. By forecasting periods of lower income and advising on setting aside reserves during more profitable times, accountants can help businesses navigate these cyclical changes.

Budgeting & Forecasting for Risk Preparedness

Budgeting provides businesses with a structured approach to managing their financial resources. Accountants can play a vital role in this process by helping to create accurate and realistic budgets that reflect the business’s unique needs and challenges. They can analyse past financial data, forecast future trends and identify potential risk areas.

In addition to creating the initial budget, accountants can assist businesses in regularly reviewing and adjusting their budgets to align with changing circumstances. This ongoing support can allow businesses to remain agile and responsive to new risks as they arise. By continuously monitoring financial performance and comparing it against the budget, accountants can provide valuable insights into areas where adjustments may be needed. This proactive approach to budgeting can help businesses stay aligned with their financial goals.

Reach Out to Us for a Consultation

At The Garis Group , we understand that managing financial risks is crucial for your business. Our accountants are dedicated to helping you navigate the complexities of commercial accounting. We can provide tailored solutions to meet your specific needs. To learn more about how we can assist with your risk management strategies, contact us in our commercial accountants in Newcastle today.

The Importance Of Hiring A Certified Tax Accountant For Your Business

Thu, 25 Apr 2024 10:15:00 GMT

In the competitive world of business, success often depends on much more than just innovative ideas or products. The foundations of ongoing growth and financial stability are typically established by those who work behind the scenes. Among these contributors, tax accountants play a critical role. Their assistance is important for any business seeking to navigate the tax laws and maintain a competitive advantage in the market. In this blog, we’ll discuss the importance of selecting a certified tax accountant.

Compliance with Tax Laws

Tax laws are intricate. Given that tax regulations can differ greatly depending on various factors, keeping up with compliance is often a challenging task. Certified tax accountants can help you keep up with these changes, allowing your business to adhere to all the latest tax laws and regulations. This can help you prevent penalties and legal issues that can arise from non-compliance.

Furthermore, tax professionals can help with more than just legal compliance—they can protect your business from potential financial pitfalls associated with incorrect or incomplete tax filings. They can identify legal nuances that can provide you with peace of mind.

Maximising Tax Efficiency and Deductions

One of the primary roles of a certified tax accountant is to make your business tax-efficient. They focus on avoiding unnecessary overpayments. Through strategic planning and a deep understanding of available tax allowances and deductions, these professionals can help you mitigate tax liabilities. This proactive approach can allow you to retain more of your earnings, potentially reallocating these funds towards growth initiatives.

Further exploring the avenues for tax savings, certified tax accountants can help you capitalise on lesser-known deductions and tax credits that are often underutilised. Each strategy is typically customised to the specific circumstances and needs of your business, aiming to secure meaningful reductions in tax payments.

Guidance Through Financial Decisions

Decisions regarding capital investments, business expansions and other financial commitments can have significant tax implications. Certified tax accountants can provide guidance in this area, helping you evaluate the potential impacts of your financial choices. By analysing investment options with an emphasis on optimising tax-related financial performance, these professionals might help prevent errors that can negatively impact your business.

Moreover, they can offer proactive advice on risk management and financial strategy optimisation. This may include crafting tailored solutions that align with both short-term needs and long-term goals. By turning to a certified tax accountant for financial decision-making support, you might be able to make sound financial decisions.

Streamlining Tax Management to Save Time

For business owners, time is a resource just as precious as money. Managing your taxes can be time-consuming and complex, detracting from the focus on your core business operations. A certified tax accountant can help you save time by streamlining tax processes and handling all tax-related activities.

This can help you devote your time and resources to core business activities instead of being overwhelmed by the intricacies of tax laws. Such a reallocation of efforts could potentially lead to improved productivity and efficiency within the company. It might contribute to enhanced business performance and profitability.

Looking for Certified Tax Accountants in Newcastle?

Aligning with a certified tax accountant can bring financial clarity and efficiency to your business operations. Consider finding the right professional as you plan for future growth and navigate financial challenges. At The Garis Group , we are dedicated to providing comprehensive financial guidance tailored to your unique needs. Whether you’re seeking strategic tax advice or detailed financial planning, our tax accountants in Newcastle are here to support you. Reach out to us for a consultation tailored specifically to your goals.

What To Know About Commercial Accounting

Tue, 09 Apr 2024 00:25:00 GMT

Understanding commercial accounting is important for anyone running a business. It might offer you insights into financial decision-making and strategy. This blog introduces the key aspects of commercial accounting, aiming to provide a clear overview for business owners and those interested in the financial workings of a company.

What Is Commercial Accounting and Why Does It Matter?

Commercial accounting involves the systematic recording, analysis and interpretation of financial transactions. This process helps organisations track their financial performance, identify areas of improvement and make informed decisions. Accounting can offer insights that might be instrumental for strategic planning and decision-making. For all kinds of businesses—ranging from start-ups to sole traders and established corporations—commercial accounting provides a framework for understanding their financial health and guiding their future direction.

The importance of commercial accounting extends beyond mere bookkeeping. It might serve as the foundation for informed financial oversight, enabling business owners to understand the complexities of the economic landscape. Accurately tracking financial activities may allow companies to make strategic decisions that can foster growth and sustainability. In essence, beyond just maintaining financial records, commercial accounting might provide businesses with the knowledge to survive in a competitive market.

Key Concepts in Commercial Accounting

Revenue Recognition: Identifying the correct timing and method for recording income to reflect business activities in financial statements.
Expense Matching: Aligning expenses with the revenues they generate to provide an overview of financial performance over a specific period.
Asset Management: Tracking and valuation of company assets, from physical equipment to intangible intellectual property.
Liability Management: Reporting and managing obligations to maintain proper accounting and management practices.
Equity Insights: Grasping the residual interest in the assets of the company after deducting liabilities, which can reflect the owner’s stake in the business.

Navigating Commercial Accounting with Professionals

Qualified accountants can offer invaluable insights and guidance for businesses looking to streamline their financial operations. Here are some ways in which accountants might help:

Cash Flow Management: Guiding businesses on how to maintain optimal cash flow levels.
Reduction in Expenditure: Identifying areas where costs can be minimised without compromising on quality.
Business Plans and Reporting: Assisting in the creation of comprehensive business plans and regular financial reports to track progress and guide future decisions.
Applying for Business Loans: Providing guidance for preparing and presenting the financial documents required for loan applications.
Tax Entitlements and Requirements: Offering advice on tax-related issues, potentially helping in regulation compliance and optimising entitlements and deductions.
Superannuation: Helping businesses to meet superannuation requirements and make decisions on contributions.
Asset Acquisition and Disposal: Providing guidance on when to invest in assets and when to sell them, taking into account tax implications.An accountant who has a thorough grasp of commercial accounting principles may offer businesses the assurance and support they need to thrive in a competitive market.

Comprehensive Accounting Services for Your Business

Commercial accounting is considered a critical aspect of business management that demands attention and understanding. Whether you’re just starting out or looking to expand, an accountant could help you create a foundation for financial stability and growth.

If you’re seeking professional guidance to manage the intricacies of commercial accounting, reach out to our team at The Garis Group . We are dedicated to supporting you in achieving the financial goals of your business by offering tailored advice and solutions. Contact us today to learn how we can help you.

How To Find A Good Tax Accountant

Mon, 19 Feb 2024 07:09:00 GMT

Choosing a competent tax accountant is a pivotal decision for individuals and businesses alike. A tax professional can offer valuable insights, maximise deductions and ensure compliance with ever-evolving tax laws. This blog delves into key considerations to help you find a tax accountant who aligns with your financial needs and goals. When choosing the right accountant for you, consider the following:

Assessing Qualifications & Credentials

A fundamental step in finding a good tax accountant is assessing their qualifications and credentials. Look for professionals who are Certified Practicing Accountants (CPAs) or members of recognised accounting bodies. These certifications indicate a commitment to high professional standards and ongoing education, ensuring your tax accountant stays abreast of industry changes and regulations. Choose a team of qualified and accredited tax professionals for greater expertise and reliability.

Experience in Your Industry or Circumstances

The complexity of tax regulations varies across industries and individual financial situations. Seek a tax accountant with relevant experience in your specific industry or circumstances. Whether you’re a small business owner, a freelancer or an individual with complex investments, a tax accountant with a track record in similar scenarios can provide tailored advice and solutions. Additionally, a diverse client portfolio can highlight experience across various industries, helping to ensure personalised and effective tax strategies.

Client Testimonials & Referrals

Word-of-mouth recommendations and client testimonials are powerful indicators of a tax accountant’s reputation and reliability. Consider seeking referrals from friends, colleagues or fellow business owners who have had positive experiences with their tax professionals. Additionally, online reviews and testimonials can provide insights into the client experience. Look out for long-standing client relationships and positive feedback.

Communication & Accessibility

Effective communication is paramount in the client-accountant relationship. Choose a tax professional who communicates clearly, listens attentively and is accessible when needed. Open and transparent communication helps ensure you are well informed about your financial situation and tax obligations. A tax accountant should value clear and open lines of communication, prioritising client understanding and engagement in the tax process. A tax team should be readily available to address queries and provide guidance throughout the year.

Fee Structure & Transparency

Understanding the fee structure of a tax accountant is crucial to avoiding surprises and managing costs effectively. Seek professionals who provide transparent and detailed information about their fees. Some accountants may charge hourly rates, while others may offer fixed fees for specific services. A commitment to transparency in fee structures aims to ensure clients are fully informed about costs upfront. Clients should look to pursue value-driven services that contribute to their financial success.

Technology Integration & Efficiency

In the digital age, a good tax accountant should leverage technology to enhance efficiency and accuracy. Inquire about the tools and software the accountant utilises for tax preparation and financial analysis. A technologically savvy accountant can streamline processes, reduce errors and provide you with real-time insights into your financial situation. Embracing digital solutions ensures your tax professional stays at the forefront of industry advancements, ultimately contributing to a more seamless and modernised client experience.

Helping to Ensure Your Financial Well-being

Finding a good tax accountant is a strategic decision that significantly impacts your financial well-being. At The Garis Group , we recognise the importance of aligning with a tax professional who possesses the right qualifications, industry experience, positive client feedback, effective communication, transparent fee structures and technological efficiency. By considering these key factors, individuals and businesses can navigate the process of selecting a tax accountant with confidence. Our Newcastle team provides personalised tax services, tailored to your unique needs. Contact us today to arrange a consultation.

The problem when the evidence doesn’t match what the taxpayer tells the ATO

Tue, 06 Feb 2024 05:10:00 GMT

A recent case before the Administrative Appeals Tribunal (AAT) highlights the importance of ensuring that the evidence supports the tax position you are taking.

The case involves heritage farmland originally purchased for $1.6m that sold 7 years later for $4.25m and the GST debt that the ATO is now pursuing on the sale.

In 2013, the taxpayer purchased Sutton Farms in Western Australia – 1.47 hectares consisting of an uninhabitable homestead, large barn and quarters.

Over the course of 7 years, the taxpayer rezoned the property, obtaining conditional subdivision approval to subdivide the property into four lots with plans for a further subdivision into approximately 15 lots, as well as undertaking sewerage, water and electrical works. The work was supported by a $1m loan from a bank and a further $1.5m from his brother-in-law.

While the property was never used for this purpose, the taxpayer’s stated intention was to use the property as their home, gift the subdivided lots to his daughter and son for use as their own respective residences, and use the last subdivided lot as a memorial dedicated to another child who had passed away.

Without being subdivided, the property was eventually sold at a profit as a single lot in 2020 for $4.25m.

When the ATO audited the transaction and issued an assessment notice for GST on the sale transaction, the taxpayer objected. The taxpayer’s argument was that Sutton Farms was intended to be used as a family home and the subdivision application had no commercial purpose. Therefore, GST should not apply as the sale was not made in the course of an enterprise. However, there were a number of factors and inconsistencies working against the taxpayer’s argument:

Local media articles that outlined the taxpayer’s plan to commercialise the property, “with the plans to lease it out as a restaurant, wine bar or coffee house, turn the barn into an art studio and add 8 – 10 finger jetties in the canal adjacent.”
Statements made to the ATO during the objection stage of the dispute indicating that the taxpayer intended to subdivide the property to sell some of these lots to repay loans owed to the taxpayer’s brother-in-law; and
GST credits were claimed on the original development costs. The taxpayer’s accountant also made representations to the ATO stating that the GST credits were claimed because the intended subdivision and sale of the several lots within the property amounted to an enterprise.

The problem for the taxpayer is that although he did not develop the property in the way he originally intended and ended up selling the property as one lot, through the ownership period he acted as if the project was a commercial venture with a stated commercial outcome.

The importance of objective evidence

Determining the tax treatment of a property transaction can sometimes be a difficult exercise and there are a number of factors that need to be considered. This will often include the intention or purpose of the taxpayer when acquiring a property. However, merely stating your intention isn’t enough, it needs to be supported by objective evidence. This might include loan terms, correspondence with advisers and real estate agents, the way expenses have been accounted for, or the conversation you have with a journalist.

Contractor or employee?

Tue, 06 Feb 2024 05:08:00 GMT

Just because an agreement states that a worker is an independent contractor, this does not mean that they are a contractor for tax and superannuation purposes, new guidance from the ATO warns.

Where there is a written contract, the rights and obligations of the contract need to support that an independent contracting relationship exists. The fact that a contractor has an ABN does not necessarily mean that they have genuinely been engaged as a contractor. The ATO says that “at its core, the distinction between an employee and an independent contractor is that:

an employee serves in the business of an employer, performing their work as a part of that business
an independent contractor provides services to a principal’s business, but the contractor does so in furthering their own business enterprise; they carry out the work as principal of their own business, not part of another.”

Contracts over time

The ATO points out that a contracting agreement at the start of a relationship may not continue to be one over time. For example, if the project the contractor was engaged to complete has finished, but the worker continues working for the company then the classification needs to be revisited.

What happens if there is no contract?

If no contract exists, then it’s important to look at the form and substance of the relationship to come to a reasonable position about whether an employment or contractor relationship exists.

Can my SMSF invest in property development?

Tue, 06 Feb 2024 05:05:00 GMT

Australians love property and the lure of a 15% preferential tax rate on income during the accumulation phase, and potentially no tax during retirement, is a strong incentive for many SMSF trustees to dream of large returns from property development. We look at the pros, cons, and problems that often occur.

An SMSF can invest in property development if trustees ensure the investment complies with the rules. And, there are a lot of rules. A key is the sole purpose test. Trustees need to ensure the fund is maintained to provide benefits for retirement, ill health or death. Breaches of this fundamental tenet are serious and include the loss of the fund’s concessional tax treatment and civil and criminal penalties.

By its nature property development is high risk and fund trustees need to ensure that the SMSF is not simply a handy cash-cow for a pipe dream, particularly when the developers are related parties.

There are multiple ways an SMSF can invest in property development if the investment strategy of the fund allows:

Directly developing property
An ungeared unit trust or company (the parties can be related)
Investment in an unrelated entity
A joint venture

Directly developing property from fund assets

An SMSF can purchase land from an unrelated party and develop the property in its own right. Common issues that often arise include:

Acquiring the land from a related party – An SMSF cannot purchase land from a related party (unless it is business real property used wholly and exclusively in a business). This means that the lovely block of land inherited by one of the members, or owned by a family trust, that is perfect for development cannot be purchased by the SMSF.

An SMSF cannot borrow to develop property – An SMSF can borrow money to purchase land using a limited recourse borrowing arrangement but it cannot use a loan to improve the asset. That is, borrowings cannot be used to develop the land. And, where the SMSF has borrowed to purchase land, it cannot change the nature of that asset until the loan has been repaid. That is, no development.

Who will develop the property? – Problems often occur when the property developers are related to the fund members. Whilst it is possible to engage a related party builder to undertake the work, there are strict rules that mean that the work and materials must be acquired at market value. That is, there is no advantage from “mates rates”. If you are using a related party builder, ensure that the paperwork is pristine, any transactions are at market value, and all interactions are documented.

GST might apply – Goods and services tax might apply to the development and the sale of any developed property. If the ATO considers that an SMSF is in the business of developing property or is undertaking a one-off development in a commercial manner then GST could potentially apply.

If your SMSF is not undertaking a property development project in its own right, there are a few ways for an SMSF to invest in property development projects:

Related ungeared trust or company

An ungeared company or trust is often used (under SIS Regulation, section 13.22C ) when related parties want to invest in a property development together. The SMSF can invest in a company or trust that is undertaking a property development as long as the company or trust:

Does not lease to a related party (unless business real property)
Does not borrow money or have borrowings (must be ungeared)
Does not conduct a business
Conducts any dealings at arm’s length
And, the assets of the unit trust or company:
Do not include an interest in another entity (i.e., cannot have shares in a company)
Do not have a charge over them (i.e., mortgage over any asset)
Are not purchased from a related party (or was ever an asset of a related party) unless the asset is business real property acquired at market rates.

See section 13.22C for full details.

Profits from the company or trust are then distributed to the SMSF according to its share.

Using the provisions of 13.22C means that the SMSF can invest in property development with a related party without the development being considered an in-house asset. However, if the criteria are not met (at any point), the in-house asset rules apply, and the SMSF might have to sell the units in the trust or shares in the company to return to the maximum 5% in-house asset limit. Generally, this means the sale of the underlying property or a significant restructure.

Problems arise with 13.22C arrangements where the trust or company:

Needs more money to complete the development and borrows money, or issues more units and sells them (is in business)
Accepts a loan from a member of the SMSF
Overdrafts (may be considered loans and breach 13.22C)
Uses a related party builder who either under charges for the work completed or overcharges and strips the profits that should have been returned to the SMSF.

Warning on conducting a business

One of the criteria for the exemption in 13.22C to apply is that the trust or company cannot be conducting a business. This requirement may prevent short-term property developments that are built and sold for profit.

Typically, 13.22C arrangements are used for long term investments where the development enables the creation of an asset that is then leased by the trust or company. This could be commercial premises leased to a related or unrelated party (e.g., premises for a child care centre or manufacturing), or residential premises leased to unrelated parties (e.g., townhouses or small developments).

Unrelated property developments

Investing in unrelated entities for a property development is attractive as there is no limit to how much of the fund’s assets can be invested (subject to the investment strategy and trust deed allowing the investment), and unlike ungeared entities, the entity is able to borrow money/place charge over the assets.

Where related parties are investing in the same entity, there are rules governing the percentage of ownership the SMSF and their related parties can hold. To meet the definition of unrelated entity for in-house asset purposes, the SMSF and their related parties must not own more than 50% of the units available. This is because the SMSF cannot control or hold sufficient influence over the entity and remain an unrelated entity. If the ATO considers the entity is related to the SMSF, then it would become a related party and the investment an in-house asset.

Joint venture arrangements

An SMSF can potentially invest in a joint venture (JV) property development, but the criteria are necessarily strict and there are a range of issues that need to be considered carefully. One of the issues that needs to be considered up-front is determining the substance of the arrangement between the parties, because the term JV can be used to describe a variety of arrangements. The ATO confirms that care must be taken to ensure that arrangements with related parties are true JVs.

Under a JV, the SMSF invests in and has a share of the property being developed (not the entity undertaking the development). Each party bears the costs (time and/or money) of the JV and receives this same proportionate contribution from the returns. If the arrangement is not structured properly then the SMSF’s stake in the JV could be treated as an investment in or loan to a related party and be treated as an in-house asset. For example, this could be the case if the SMSF only provides a capital outlay for the arrangement and has no rights other than a contractual right to a return on the final investment.

It is also necessary to consider whether the arrangement between the parties could be treated as a partnership for tax, GST and legal purposes. For example, this could be the case if the arrangement involves the sharing of income, sale proceeds or profits, rather than sharing the output from the project.

It’s essential to get advice well in advance – tax, legal and financial – before pursuing a JV.

Is your SMSF the best vehicle for property development?

Trustees need to carefully consider any investment decisions and have a sound rationale for the investment.

Any advice on a property development needs to be from a licenced financial adviser. A lawyer should be used for any contracts or agreements between parties. And, compliance assistance from a qualified accountant.

The Difference Between Bookkeeping And Accounting

Mon, 27 Nov 2023 04:44:11 GMT

Navigating the financial aspects of a business can often feel like piecing together a complex puzzle. Two key pieces of this puzzle are bookkeeping and accounting terms, frequently used interchangeably but are distinct in their roles and impacts. In this blog post, we’ll explore the core functions of both, how accounting adds more value to your business, the top differences between the two, why accounting is important for strategic decision-making and how to identify which service your business needs.

Understanding The Core Functions: Bookkeeping Vs Accounting

Let’s explore the specific responsibilities of bookkeeping and accounting to see how they contribute to the financial health of your business:

Bookkeeping:

Recording Transactions : Bookkeeping involves the systematic recording of daily financial transactions, such as sales, purchases, receipts and payments.
Organising Financial Data : It ensures records of individual financial transactions are accurate, up-to-date and comprehensive.

Accounting:

Interpreting Data : Accounting takes this information and interprets it, turning data into meaningful insights.
Financial Reporting : It involves preparing financial statements like balance sheets and income statements that reflect the company’s performance.

How Does Accounting Add More Value To Your Business Than Bookkeeping?

Accounting extends far beyond the basic task of recording financial transactions. It offers a deeper, more nuanced perspective of your financial situation. This field is important in providing strategic financial advice, important for effective tax planning and ensuring compliance with financial regulations. These elements are important for the long-term planning and decision-making processes within a business. With knowledge across various sectors, accounting professionals can offer customised solutions that are not only compliant but also strategically aligned with your business objectives, fostering sustainable growth and stability.

Why Accounting Is Important For Strategic Financial Decision-making

Accounting plays an important role in guiding the strategic direction of a business. It’s not just about crunching numbers; it’s about interpreting those numbers to make informed decisions. Here’s how accounting becomes a cornerstone for strategic financial decision-making:

Insightful Financial Analysis

Future Projections : Accounting helps in forecasting future trends, which is important for strategic planning.
Budgeting and Financial Planning : It helps in creating effective budgets and financial plans.

Compliance and Advisory

Tax Strategy : Accounting ensures compliance with tax laws and develops efficient tax strategies.
Business Advisory : Accountants provide valuable advice on financial strategies and business decisions.

Identifying Your Business Needs

In order to effectively navigate the financial landscape of your business, it’s important to recognise the distinct roles that bookkeeping and accounting play. Let’s break down these roles to better understand how they cater to different aspects of your business’s financial management:

Stage of Business : Bookkeeping suits early-stage businesses focusing on daily transactions, while accounting is important for mature businesses needing complex financial analysis.
Business Goals : Bookkeeping is key for maintaining financial order; accounting is important for businesses aiming for growth, expansion or significant investments.
Nature of Service : Bookkeeping involves systematic record-keeping of financial activities, whereas accounting provides strategic insights and financial planning.
Compliance and Reporting : While bookkeeping ensures basic financial recording, accounting offers comprehensive reporting, financial statements and tax strategies.
Decision Making : Bookkeeping data supports routine decisions; accounting offers in-depth analysis for informed strategic business decisions and policy development.

Making The Right Choice For Your Financial Future

At The Garis Group , we provide comprehensive accounting services that do more than just keep your books in order. We offer insights and strategies that help your business thrive and grow. If you’re looking for guidance on financial planning and tax strategy or need assistance in making informed business decisions, we’re here to help. Our team is dedicated to understanding the unique aspects of your business and providing tailored accounting solutions. Contact us today!

How to Stay Up-to-Date on Accounting Regulations

Thu, 26 Oct 2023 04:41:11 GMT

In the dynamic world of finance and business, staying updated on accounting regulations is integral for financial success. With constantly shifting rules and guidelines, businesses should stay updated on accounting regulations to avoid hefty fines and maintain a positive reputation. This blog explains the importance of staying informed and how accountants play an important role in navigating these changes.

Why Staying Updated on Accounting Regulations is Important

Understanding and adhering to the latest accounting regulations is important for businesses. Not only does this prevent potential fines and legal complications, but it also helps with financial transparency and fosters trust with customers and stakeholders.

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The Role of Accountants in Navigating Regulatory Changes

The knowledge of accountants in commercial accounting is invaluable for businesses that want to be successful and stay relevant. By staying updated on accounting regulations, these professionals help businesses remain compliant, make informed decisions and utilise new opportunities:

Commercial Accounting : Accountants are well-versed in commercial accounting and can help businesses maintain accurate financial records and make informed decisions.
Staying Updated for Success : Accountants can help businesses stay a step ahead by making them ready to adapt to new regulations and utilise potential avenues for growth.

Key Regulatory Updates: What You Need to Know

When it comes to business finance, regulatory updates are frequent and can impact operations. Staying informed about these changes is not just about compliance; it’s about using them for the benefit of your business. Here are some updates every business should monitor and keep in mind:

Recent Changes in Accounting Standards : Stay informed about the latest amendments and how they impact your business operations .
Taxation Updates : Accountants can help you keep your business compliant with the latest tax guidelines and benefits from any new tax incentives.
Superannuation Adjustments : Understand the recent changes in superannuation regulations and how they affect your business and employees.

Staying Ahead: Continuous Learning and Training for Accountants

It’s important for accountants to commit to ongoing education to refine their knowledge. This continuous learning and training also equips them to offer businesses the insights needed to overcome regulatory complexities and make well-informed decisions. Among the advantages of such continuous learning are staying informed of current regulations, grasping international financial shifts and harnessing the latest accounting technologies and software.

Leveraging Technology: How Accountants Stay Updated

Accounting Software : Software tools allow accountants to maintain accurate financial records, generate reports and help businesses comply with the latest regulations.
Regulatory Update Platforms : Websites and platforms that provide real-time updates on regulatory changes keep accountants well informed.

Your Trusted Accounting Partner in Newcastle: The Garis Group

At The Garis Group , we understand the unique challenges and opportunities businesses in Newcastle face. Our team of dedicated professionals is committed to helping you stay ahead of the curve, using our knowledge of commercial accounting and our understanding of the latest regulations. Whether you’re a small business owner or a large corporation, we’re here to guide you every step of the way. Don’t navigate the complex world of accounting regulations alone; let us be your partner. For more information or to book a consultation, get in touch via our contact page . Your financial future is our priority.

Self-education: What can you claim?

Fri, 06 Oct 2023 04:47:43 GMT

The Australian Taxation Office have released a new draft ruling on self-education expenses. We revisit the deductibility of self-education expenses and what you can and can’t claim.

If you undertake study that is connected to your work you can normally claim your costs of that study as a tax deduction – assuming your employer has not already picked up your expenses. There is also no limit to the value of the deduction you can claim. While this all sounds great and very encouraging there are still issues to consider before claiming your Harvard graduate degree, accommodation, and flights as a self-education expense.

Clients are often surprised by what cannot be claimed. Self-education expenses are not deductible if you are undertaking the education to obtain a new job or something not connected to how you earn your income now. Take the example of a nurse’s aide who attendees university to qualify as a registered nurse. The university degree and the expenses associated with degree are not deductible as the nursing degree is not sufficiently connected to their current role as a nurse’s aide.

The ATO have recently released a new draft ruling on self-education expenses. While the ruling does not introduce new rules, it does reinforce what the ATO will accept…and what they won’t.

Personal development courses

While not always the case, one of the key challenges in claiming deductions for self-development or personal development courses is that the knowledge or skills gained are often too general. Take the example of a manager who is having difficulty coping with work because of a stressful family situation. She pays for and attends a 4-week stress management course.

In that case, the stress management course is not deductible because the course was not designed to maintain or increase the skills or specific knowledge required in her current position.

When your employment ends part the way through your course

If your employment (or your income earning activity) ends part the way through completing a course, your expenses are only deductible up to the point that you stopped work. Anything from that point forward is not deductible (that is until you obtain a new role and assuming the course remains relevant).

Overseas trips with some work thrown in

Overseas study tours are deductible in limited circumstances. If you are travelling overseas, you need to prove that the dominant purpose of the trip is related to how you earn your income. Factors that help demonstrate this include the time devoted to the advancement of your work related knowledge, the trip not being merely recreational, and that the trip was requested by or supported by your employer. The ATO are strict on this. Take the example of a senior lecturer in history at a University. He takes a trip to China with his wife while on leave over the Christmas break to update his knowledge on his area of academic interest. While his job does not require him to undertake research, he incorporated some of the 600 photos he took and some of the learnings from the tour into the courses he teaches. Despite having a relationship to work, the trip is not deductible as, while relevant in some ways to his field of activity, it is incidental to the overall private and recreational nature of the trip.

Overseas conference with some recreation thrown in

We’ve all had them. Conferences where you spend a few days in sessions and then a day (or more) of touring or golf. When the dominant purpose of the trip is related directly to your work, then the ATO are more accommodating. If the leisure time, for example an afternoon tour organised by the conference, is incidental to the conference itself, then you can claim the full conference expenses.

Where you are extending your stay beyond the conference dates and this isn’t considered incidental, then you apportion the expenses and only claim the portion related to the conference. Let’s say you attend a conference for four days, then spend another four days on holiday. Assuming the conference is directly related to your work, you can claim your expenses related to the conference (assuming they were not picked up by your employer), and half of your airfare (as it’s a 50/50 split on how you spent your time between the conference and recreation).

Not fully deductible? Part of the course might qualify

If a particular course is not entirely deductible, a deduction may still be available for some of the course fees where there are particular subjects or modules in that course that are sufficiently related to your employment or income earning activities. In these cases, the course fees would be apportioned. Take the example of a civil engineer who is completing her MBA. While the MBA itself may not have a sufficient connection to her engineering role to be fully deductible, her expenses related to the project management subject she took as part of the degree could qualify.

Interaction with government assistance

If your course is a Commonwealth supported place, you cannot claim the course fees. But, the deductibility of course fees are not impacted merely because you borrow money to pay for those fees, for example a full-fee paying student using a government FEE-HELP loan to pay for course fees.

A warning on large claims

There is no limit on the amount you can claim as a self-education expense but the ATO is more likely to target large self-education expenses. For anyone who has completed post graduate study you know that these expenses can ratchet up very quickly, particularly when you add in any other expenses such as books or travel. It’s important to ensure that there is a clear connection between your current job or business activity and the self-education expenses before you claim them.

Airfares incurred to participate in self-education, provided you are not living at the location of the self-education activity, are deductible. Airfares are part of the cost of undertaking the self-education activities.

The ‘Airbnb’ Tax

Fri, 06 Oct 2023 04:36:03 GMT

Property investors that choose to utilise their property for short-term stays (or leave it vacant) are firmly in the sights of the regulators.

The Victorian Government’s recent Housing Statement announced Australia’s first short-stay property tax. The additional tax, which is scheduled to come into effect from 1 January 2025, is expected to generate $70 million plus annually. The Short Stay Levy will be set at 7.5% of the short stay accommodation platforms’ revenue – so, a few days in Melbourne at $850 will cost an extra $63.75 taking the stay to $913.75.

According to the statement there are more than 36,000 short stay accommodation places – with almost half of these in regional Victoria. More than 29,000 of those places are entire homes.

Airbnb’s ANZ Country Manager Susan Wheeldon however says that “short-term rentals in Victoria make up less than one percent of total housing stock. Acute housing issues existed long before the founding of Airbnb, and targeting these properties is not a long term solution.”

Property investors are now braced for an onslaught of similar taxes at either the local Government or State level.

For Victorian investment property owners this comes after a temporary land tax surcharge from the 2024 land tax year and for those keeping a property vacant, an increase to the absentee owner surcharge rate from 2% to 4% including a reduction in the tax-free threshold from $300,000 to $50,000 (for non-trust absentee owners).

Some local Government taxes on Airbnb style accommodation will be removed once the new tax comes into effect.

Some Councils already impose a surcharge on short stay accommodation. Brisbane City Council for example imposed a 50% rate surcharge on properties listed for short-term rental for more than 60 days a year in their 2022-23 Budget, only to increase it to 65% in 2023-24.

What happens overseas?

Bed taxes in some form are not uncommon internationally but it is unusual to isolate one form of tourist accommodation from another as the Victorian Government have chosen to do. Also unusual is the 7.5% rate – many local taxes on short stay accommodation are in the 5% range (despite California’s Transient Occupancy Tax of up to 15% depending on the region you are staying).

Globally, the idea of taxing vacant and short-term accommodation is also not new.

In British Columbia, the Underused Housing Tax – a 1% tax on the ownership of vacant or underused housing introduced from 1 January 2022 – has been credited with increasing the rental stock by up to 20,000 properties.

Taking the alternative route to freeing up rental stock, New York introduced new rules in September 2023 that severely restrict Airbnb style accommodation options. Hosts need to register with the city if they offer accommodation for less than 30 consecutive days (unless their building is exempt as a hotel or accommodation establishment). Under the new rules the host must permanently reside in the property – entire properties will no longer be available – and, only two guests are allowed. The platforms are responsible for monitoring and enforcing compliance with the new rules.

New York is not alone in curbing the rise of short-term rentals. Amsterdam, Paris and San Francisco limit the number of days in a year an entire residence can be listed – between 30 and 90 days.

Closer to home in Byron Bay, the Byron Bay Council will limit “non hosted holiday letting to 60 days per year for most of the Shire” from 23 September 2024.

But do restrictions on Airbnb create rental stock?

According to Professor Nicole Gurran , from the University of Sydney’s School of Architecture, Design and Planning, if Australia is serious about controlling short-term rentals to solve Australia’s long-term rental crisis, then more needs to be done.

“In comparison to much of the international regulation of the short-term rental market, Australia is very “light touch”. The overarching aim is to encourage the tourism economy.

While this might have been appropriate five years ago when the rental market was in better shape, and long-term housing demand focused on inner city areas, the current crisis demands a new approach. Regulations must be tailored to the conditions of local housing markets, rather than the one-size-fits-all approach that exists today,” Professor Gurran says.

In a 2017 study, Professor Gurran and Professor Peter Phibbs found that, Airbnb absorbed 7% of stock in one Sydney municipality.

So, where is all this going? Governments are unlikely not to take advantage of the opportunity to share in what has become a lucrative short-term rental market. What that looks like will really depend on the States and Territories. Beyond revenue, further regulation is likely to ensure that private gain from short-term rentals is not at the expense of supply of long-term accommodation.

$20k deduction for ‘electrifying’ your business

Fri, 06 Oct 2023 04:29:38 GMT

Electricity is the new black. Gas and other fossil fuels are out. A new, limited incentive nudges business towards energy efficiency. We show you how to maximise the deduction!

The small business energy incentive is the latest measure providing a bonus tax deduction to nudge the investment behaviour of small and medium businesses, this time towards more efficient energy use and electrification. Fossil fuels are out, gas is out, electricity is the name of the game.

Legislation before Parliament will see SMEs with an aggregated turnover of less than $50 million able to claim a bonus 20% tax deduction on up to $100,000 of their costs to improve energy efficiency in the business. But, the tax deduction is time limited. Assuming the legislation passes Parliament, you only have until 30 June 2024 to invest in new, or upgrade existing assets.

How much?

Your business can invest up to $100,000 in total, with a maximum bonus tax deduction of $20,000 per business entity. The energy incentive is not provided as a cash refund, it either reduces your taxable income or increases the tax loss for the 2024 income year.

What qualifies?

The energy incentive applies to both new assets and expenditure on upgrading existing assets. There is no specific list of assets that can qualify. Instead, the rules provide a series of eligibility criteria that need to be satisfied.

First, the expenditure incurred in relation to the asset must qualify for a deduction under another provision of the tax law.

If your business is acquiring a new depreciating asset, it must be first used or installed for any purpose, and a taxable purpose, between 1 July 2023 and 30 June 2024. If you are improving an existing asset, the expenditure must be incurred between 1 July 2023 and 30 June 2024.

If your business is acquiring a new depreciating asset the following additional conditions need to be satisfied:

The asset must use electricity; and
There is a new reasonably comparable asset that uses a fossil fuel available in the market; or
It is more energy efficient than the asset it is replacing; or
If it is not a replacement, it is more energy efficient than a new reasonably comparable asset available in the market; or
It is an energy storage, time-shifting or monitoring asset, or an asset that improves the energy efficiency of another asset.

If you are improving an existing asset the expenditure needs to satisfy at least one of the following conditions:

It enables the asset to only use electricity, or energy that is generated from a renewable source, instead of a fossil fuel;
It enables the asset to be more energy efficient, provided that asset only uses electricity, or energy generated from a renewable source; or
It facilitates the storage, time-shifting or usage monitoring of electricity, or energy generated from a renewable source.

What doesn’t qualify?

Certain kinds of assets and improvements are not eligible for the bonus deduction, including where the asset or improvement uses a fossil fuel. So, hybrids are out. Solar panels and motor vehicles are also excluded.

In addition, the following assets are specifically excluded from the rules:

Assets, and expenditure on assets, that can use a fossil fuel;
Assets, and expenditure on assets, which have the sole or predominant purpose of generating electricity (such as solar photovoltaic panels);
Capital works (such as buildings and structural improvements);
Motor vehicles (including hybrid and electric vehicles) and expenditure on motor vehicles;
Assets and expenditure on an asset where expenditure on the asset is allocated to a software development pool; and
Financing costs, including interest, payments in the nature of interest and expenses of borrowing.

What does qualify?

The legislation contains a few examples of what would qualify:

Electrifying heating and cooling systems
Upgrading to more efficient fridges and induction cooktops (for example replacing gas cook tops)
Installing batteries and heat pumps
Installing an electric reverse cycle air conditioner instead of a gas heater
Replacing a coffee machine with a more energy efficient coffee machine if the manufacturer’s electricity consumption information supports this – keep the documentation!
Thermal storage that can store heat or cold from a renewable source
Solar thermal hot water system (assuming it meets the other criteria)

The legislation to implement the energy incentive is before Parliament. We’ll keep you updated on its progress. If you intend to make a major outlay to take advantage of the bonus deduction, talk to us first just to make sure it qualifies.

5 Ways Accountants Can Save You Money

Fri, 22 Sep 2023 04:28:10 GMT

Imagine having a trusted financial partner by your side, helping you navigate the intricate world of money matters. Whether you’re an individual looking to secure your financial future or a business owner aiming to boost profitability, accountants can play a pivotal role in saving you money. In this blog post, we’ll explore five essential ways accountants can make a significant difference in your financial journey.

1. Maximising Tax Deductions

Accountants are like financial educators, helping you learn the information you need to provide to uncover every legitimate deduction you’re entitled to. Did you know that some everyday expenses, like home office costs for remote work, can be tax-deductible? Your accountant can ensure you don’t miss out on these opportunities. They’ll guide you through the labyrinth of tax laws, ensuring your claims are not only accurate but optimised for maximum savings. By leveraging their expertise, you can legally minimise your tax liability and keep more money in your pocket.

2. Strategic Financial Planning

Holistic Approach : Accountants don’t just crunch numbers; they help you create a roadmap for financial success.
Goal Assessment : They assess your financial goals and design strategies to achieve them, whether it’s saving for retirement, expanding your business or buying a new home.
Informed Decisions : With their guidance, you can make informed decisions that save you money in the long run by avoiding costly mistakes or missed opportunities.
Resource Allocation : They analyse cash flow, budgeting and investment options to ensure your financial resources are optimally allocated.
Tax Timing : Accountants also provide valuable insights on when to make major financial moves to minimise tax implications.

3. Streamlining Business Expenses

As a business owner, you probably have your attention spread across multiple areas and it can be difficult to keep track of your expenses. An accountant can help by:

Analysing Overheads

Accountants delve deep into your business’s financial data to identify unnecessary overheads. By trimming excess costs, you can boost profitability.

Optimising Supplier Relationships

They help you negotiate better terms with suppliers and identify opportunities for bulk purchasing or cost-effective alternatives.

Monitoring Cash Flow

Accountants keep a close eye on cash flow, ensuring you have the funds available when needed and minimising unnecessary borrowing costs.

Tax Efficiency

They can structure expenses in a way that maximises tax benefits, saving your business significant amounts over time.

Financial Reporting

Regular financial reporting and analysis provided by accountants may help you spot trends and adjust spending accordingly.

4. Ensuring Compliance with Tax Laws

Navigating the complex web of tax regulations can be daunting, but accountants are your shield against costly penalties. They ensure you’re up-to-date with changing tax laws, making sure your financial transactions and records adhere to the latest regulations. By staying compliant, you not only save money by avoiding fines but also prevent the stress and financial burden that comes with tax-related legal issues. Accountants keep your financial ship sailing smoothly in the treacherous waters of tax law.

5. Investment and Asset Management

Life can get busy and it can be easy to miss out on opportunities if you’re snowed under! An accountant can help manage your investment and property portfolio, assisting with:

Portfolio Assessment : Accountants assess your financial portfolio to identify underperforming investments, suggesting reallocation for better returns.

Custom Strategies : They consider your risk tolerance and financial goals to create an investment strategy tailored to your needs.

Market Watch : Accountants keep a watchful eye on market trends and financial news, making timely adjustments to your investments.

Diversification : They help diversify your investments to spread risk and potentially increase returns.

Steady Growth : Through diligent asset management, accountants ensure your wealth grows steadily, saving you money by capitalising on investment opportunities.

Your Key to Success

Financial challenges and opportunities are an ever-present. Through working with an experienced accountant, you’ll be able to better overcome these challenges, and identify and take advantage of more opportunities. Get in touch with our team at The Garis Group and let’s embark on a journey towards financial success together!

Why is my tax refund so small?

Fri, 25 Aug 2023 05:30:59 GMT

The tax refund many Australians expect has dramatically reduced. We show you why.

There is a psychology to tax refunds that successive Governments have been reticent to tamper with. As a nation, Australia relies heavily on personal and corporate income tax, with personal income tax including taxes on capital gains representing 40% of revenue compared to the OECD average of 24%. And, for the amount we pay, we expect a reward.

The reward is in the form of tax deductions that reduce the amount of net income that is assessed for tax purposes and tax offsets that reduce the tax payable, generating a refund for some. And, refunds have a positive impact on tax compliance

As part of the previous Government’s efforts to flatten out the progressive individual income tax system, a time-limited low and middle income tax offset was introduced. The lifespan of the offset was extended twice, partly as a stimulus measure in response to COVID-19. The offset delivered up to $1,080 from 2018-19 to 2020-21, and up to $1,500 in 2021-22 for those earning up to $126,000. This was a significant boost for many people each tax time and bolstered the tax returns of millions of Australians. For many, the end of this offset has meant that their tax refund has reduced dramatically compared to previous years.

Do we pay more tax than other nations?

It depends on how you look at the statistics. Australia relies heavily on income tax, collecting 40% of tax revenue from personal income. That makes Australia the fourth highest taxing nation for personal tax in the OECD – but we were second highest in 2019 if that makes you feel better. But, if you are looking at take home pay there is a separate measure for that. The Employee tax on labour income looks at our take home pay once tax is taken out and benefits have been added back in. This shows that the take home pay of an average single worker is 77% of their gross wage compared to the OCED average of 75.4%. For the average worker with a family (one married earner with 2 children), once tax and family benefits are taken into account, the Australian take home pay average is 84.1% compared to the OECD average of 85.9%. All of this means that Australia is a high taxing nation but returns much of that in the form of means tested benefits.

Australia also does not have social security contributions like other nations. These contributions represent an average of 27% of the total tax take for OECD nations.

And, because Australia has a progressive tax system, the pain of taxation is felt more by higher income earners. The top 11.6% of Australian income earners contribute 55.3% of the tax revenue from personal income tax.

With the final round of legislated income tax cuts due to commence on 1 July 2024, this should reduce the overall dependence on personal income tax relative to corporate and other taxes.

So, do we personally pay more tax than other nations? If you are a high-income earner the answer is likely to be yes. If not, the answer is no.

As Benjamin Disraeli reportedly said, “…lies, damn lies, and statistics”. It’s all how you read it.

Is a second job worth it?

In an Uber the other day, the driver revealed that he had become a driver to pay for his second mortgage. He invested in property but with interest rates spiking, the only way he could hold onto the property was to earn additional income. His “day job” starts early and ends at 3pm at which time he heads off to start driving.

He is not alone. The latest stats from the Australian Bureau of Statistics reveal that the number of workers holding multiple jobs has increased by 2.1% since December 2022 – in total, Australia has 947,300 people holding multiple jobs or 6.6% of the working population.

The reason why people take on second jobs is varied. For some, it is to manage increasing costs, for others it is to start up a new venture but with the security of a regular income stream from their primary occupation.

Is it worth it?

From a tax perspective, Australia has a progressive income tax system – the more you earn the more tax you pay, and access to social benefits tapers off. It’s important when looking at a second job to understand your overall position – how much you are likely to earn, your costs of generating income, and what this income level will mean.

The trap for many picking up a ‘gig economy’ second job is that they are often independent contractors. That is, you are responsible for managing your tax affairs. All Uber drivers for example, are required to hold an ABN and be registered for GST. There is a compliance cost to this and from a cashflow perspective, 1/11th of the fee collected needs to be remitted to the Tax Office once a quarter. It’s important to quarantine both the GST owing and income tax to ensure you have the cashflow to pay the tax when it is due. The upside is you can claim the expenses related to your second job.

If you are taking on a second job, ensure that your tax-free threshold applies to your highest paying job from a PAYG withholding perspective.

Thinking of subdividing?

Fri, 25 Aug 2023 05:23:19 GMT

The tax implications and pitfalls of small-scale subdivisions

You’ve got a block of land that’s perfect for a subdivision. The details have all been worked out with Council, the builders, and the bank. But, one important aspect has been left out; the tax implications.

Many small-scale developers often assume that their tax exposure is minimal – but this is not always the case and the tax treatment of a subdivision project can significantly impact on cashflow and the financial viability of the project.

New guidance from the Australian Taxation Office (ATO) walks through the tax impact of small-scale subdivision projects. We look at some of the leading issues:

Tax treatment of the subdivision

Subdividing land

The tax treatment of even a small subdivision can become complex very quickly and tax applies according to the circumstances. You cannot simply assume that just because it’s a small development, any profit from the eventual sale will be taxed as a capital gain and qualify for CGT concessions.

In general, if you own a property personally, it has been held and used for private purposes over an extended period, you subdivide it and sell the newly created block, then capital gains tax is likely to apply to any gain you make. The gain is recognised from the point you first acquired the land, although you will ned to apportion the amount paid for the property between the subdivided lots. If you are subdividing a property that contains your home – the main residence exemption will not generally be available if you sell a subdivided block separately from the block containing your home, even if the land has only ever been used for private purposes in connection with your home.

If a property is initially owned jointly but the property is subdivided and the lots split between the owners, then this will normally trigger upfront tax implications even though the land hasn’t been sold to an unrelated party yet. Arrangements like this (referred to as partitioning) can be complex to deal with from a tax perspective.

Developing a property

But what happens if you develop the land? It’s not uncommon for people to decide to subdivide and develop their block by building a house or duplex and then selling the new dwelling.

When someone develops a property with the intention of selling the finished product at a profit in the short term, there is a risk that this will be taxed as income rather than under the capital gains tax rules. This limits the availability of CGT concessions (such as the 50% CGT discount) and will often expose the owners to GST liabilities as well. This can be the case even for one-off property developments.

Let’s look at an example. Claude purchased his home on 1 July 2001 for $300,000. In July 2020, Claude began investigating the idea of subdividing his block and building a new house, then selling it. A registered valuers report on the subdivision says that the original house and land is now worth $360,000, and the subdivided lot is worth $240,000 (the valuation is an important step before commencement to prevent any debates with the ATO). Claude decides to go ahead and build a dwelling on the newly subdivided block and takes out a loan of $400,000 for the development. He intends to pay off the loan as soon as the house sells.

In July 2021, Claude sells the subdivided block and new home for $1,210,000 (GST-inclusive).

Here is how the tax works for Claude’s scenario:

Claude made an overall economic gain of $580,000.
The overall gain ($580,000) is based on the GST exclusive sale proceeds ($1,100,000, although we are assuming that the GST margin scheme isn’t applied) minus the GST exclusive development expenses ($400,000) and the original cost attributable to the newly subdivided lot of $120,000 ($300,000 × 40%).
The increase in the value of the newly created subdivided lot from when it was originally acquired (1 July 2001) up to when the profit-making activities began (1 July 2020) should be treated as a capital gain.
The value of the newly created subdivided lot at the time Claude began to undertake profit-making activities on 1 July 2020 was $240,000. The original cost, attributable to the newly created subdivided lot was $120,000 (40% × $300,000) on 1 July 2001. This means that there is a capital gain of $120,000.
As Claude has held the subdivided block for greater than 12 months he is entitled to a 50% CGT discount, hence there is a discounted capital gain of $60,000.
The increase in the value of the newly created subdivided lot from when the profit-making activities began up to the time of sale should be treated as ordinary income.
The net profit ($460,000) will be based on the GST exclusive sale proceeds ($1,100,000) minus the GST exclusive development expenses ($400,000) and the value of the subdivided lot ($240,000).

If Claude is not carrying on a business, he cannot claim a deduction for the development expenses as they are incurred. They will be taken into account in determining the net profit on sale.

If Claude finished the development but decided not to sell the property, then this would complicate the income tax and GST treatment. We would need to explore what Claude plans to do with the property.

Do I need to register for GST?

If you are an individual who is subdividing land that has been held and used for private purposes then you might not need to GST, although this will depend on the situation. However, if you are engaged in a property development business or a one-off project that is undertaken in a business-like manner, then it is more likely that you would need to register for GST.

In Claude’s scenario, because the projected sale price of the developed land was above the GST threshold of $75,000, he will probably need to register for GST. This will mean that he:

Has a ‘default’ GST liability of $110,000 on the sale price of the developed block, although it might be possible to reduce the GST liability by applying the GST margin scheme
Needs to provide a notification to the purchaser of the amount at settlement to be withheld and paid to the ATO
Is able to claim $40,000 credits for the GST included in the development expenses (subject to the normal GST rules), and
Must report these transactions by completing business activity statements.

The tax consequences of subdivision and other property projects can be complex. If you are contemplating undertaking a subdivision and any property development activities, please contact us and we can help walk you through the scenarios and tax impact of the project.

What Does It Take To and Your Business To The Next Generation

Fri, 25 Aug 2023 04:38:36 GMT

What is the end game for your business? Succession is not just a topic for a TV series or billionaire families, it’s about successfully transitioning your business and maximising its capital value for you, the owners.

When it comes to generational succession of a family business, there are a few important aspects:

Succession of the business;
Succession of the ownership of the business;
Succession planning/pathway; and
Moving from a business family to an investment family.

For generational succession to succeed, even if that succession is the sale of the business and the management of the sale proceeds for the benefit of the family, communication is essential. Where generational succession fails, it is often because succession has not been formalised until a catalyst event or retirement planning requires it.

A concept of ‘legacy’ is not enough. Successful succession occurs when the guiding principles of governance, family rules, aligning values, dispute resolution, succession and estate planning are managed well before discontent tears it apart.

Generational succession usually involves the transfer of an interest in a business to another generation of a family (usually younger). It is often a family in business rather than simply a family business.

“One-third of Australian family businesses expect that the next generation will become the majority shareholders within 5 years time. Yet only 25% of Australian family businesses have a robust, documented and communicated succession plan in place.” PWC Family Business Survey

The options for how a movement of an interest may occur are many and varied but usually focus on the transfer of some or all of the equity held in the business over a period or at a defined point in time and the payment of some form of consideration for the equity transferred. Alternatively, a part of the equity transfer may ultimately be dealt with through the estate.

Generational succession comes with its own set of issues that need to be dealt with:

Capability and willingness of the next generation

A realistic assessment of whether the business can continue successfully after the transition. In some cases, the older generation will pursue generational succession either as a means of keeping the business in the family, perpetuating their legacy, or to provide a stable business future for the next generation. While reasonable objectives, they only work where there is capability and willingness. Communication of expectations is essential.

Capital transfer

Consider the capital requirements of the exiting generation. To what extent do you need to extract capital from the business at the time of the transition? The higher the level of capital needed, the greater the pressure on the business and the equity stakeholders.

In many cases, the incoming generation will not have sufficient capital to buy-out the exiting generation. This will require the vendors to maintain a continuing investment in the business or for the business to take on an increased level of debt. Either scenario needs to be assessed for its sustainability at a business and shareholder level. In some scenarios the exiting owners will transition their ownership on an agreed timeframe.

Managing remuneration

In many small and medium businesses, the owners arrange their remuneration from the business to meet their needs rather than being reasonable compensation for the roles undertaken. This can result in the business either paying too much or too little. Under generational succession, there should be an increased level of formality around compensation. Compensation should be matched to roles, and where performance incentives exist, these should be clearly structured.

Who has operational management and control?

Transition of control is often a sensitive area. It is essential to establish and agree in advance how operating and management control will be maintained and transitioned. This is important not only for the generational stakeholders but also for the business. Often the exiting business owners have a firm view on how the business should be run. Uncertainty in the management and decision making of the business can lead to confusion or a vacuum – either will have an adverse impact. Tensions often arise because:

The incoming generation want freedom of decision making and the ability to put their imprint on the business.
Without operating control, they feel that they have management in name only.
The exiting generation believe that their experience is necessary to the business and entitles them to a continued say.
A perception that capital investment should equate to ultimate operating control.
An uncertainty by either or both generations about the extent of their ongoing roles.

Agreeing transition of control in advance, on an agreed timeframe, can significantly reduce tensions.

Transition timeframes and expectations

Generational succession is often a process rather than an event. The extended timeframe for the transition requires active management to ensure that there are mutual expectations and to avoid the process being derailed by frustration.

The established generation may have identified that they want to scale down their business involvement and bring on other family members to succeed them. This does not necessarily mean that they want to withdraw completely. An extended transition period is not uncommon and can often assist the business in managing the change. This can also work well in managing income and capital withdrawal requirements.

The need for greater formality and management structure

A danger for many SMEs is the blurring of the boundaries between the role of the Board, shareholders, and management. With generational succession, this can become even more pronounced. Formality in these structures is important, with clear definitions of the roles and clarification of the expectations. For example, who should be a director and what is their role?

For some, the role of the family is managed by a family constitution – an agreed set of rules. For others there will be an external advisory group that advises the family to ensure that the required independent expertise is brought to bear.

Successfully managing generational change is a process we can help you navigate. Talk to us about how we can help to structure an effective transition path.

Navigating The Complexities Of Small Business Accounting

Thu, 17 Aug 2023 04:24:29 GMT

Accurate financial records are important for a business’s success, but navigating the complexities of accounting can be challenging. That’s where a professional accountant steps in to streamline the process. This guide will provide you with insights into the intricacies of small business accounting .

Decoding the Basics: The Importance of Small Business Accounting

First, let’s understand the basics of small business accounting. Comprehending financial statements, tracking income and expenses and managing cash flow are important aspects of any small business. An accountant plays an important role in these processes by:

Analysing financial data to help you make informed decisions
Guiding budget preparation and expense tracking
Ensuring accurate and timely financial reporting

Comprehending Financial Reports: Critical Insights for Businesses

For any business owner, understanding financial reports is key to maintaining smooth operations. However, these can appear to be cryptic documents filled with technical terms and numbers. An accountant can help you comprehend these reports, including:

Income Statement : Also known as a profit and loss statement, this report outlines your business’s revenues, costs and expenses over a specified period. An accountant can provide invaluable insights, highlighting trends, potential issues and opportunities for growth.
Balance Sheet : This overview of your business’s financial standing at a specific point in time is invaluable. It details your assets, liabilities and equity. Your accountant can help interpret this data, guiding you to make informed decisions about future investments and strategies.
Cash Flow Statement : This report provides a clear breakdown of your business’s sources of income and its expenses. By thoroughly analysing this report, an accountant can identify any cash flow problems and suggest appropriate remedies to ensure a healthy cash flow.

Cash Flow Management: The Key to Business Survival

Cash flow is often referred to as the lifeblood of any business. Managing it effectively is paramount and an accountant can help by:

Tracking all income and expenses
Analysing cash flow patterns
Offering strategies to improve cash flow, such as timely invoicing and expense control

Planning for Growth: The Accountant’s Role in Scaling Your Business

Expansion is often an exciting yet challenging endeavour, demanding strategic financial decisions to ensure sustainable growth. As a small business grows and evolves, its financial needs become increasingly complex and varied. An accountant can assist in forecasting future income and expenses, helping you plan for growth and scalability while avoiding potential financial pitfalls.

Staying Compliant: Navigating Legal and Regulatory Requirements

Navigating the complex landscape of legal and regulatory requirements is an important part of running a small business. Compliance with these laws and regulations is non-negotiable, and falling short can lead to penalties, litigation and reputational damage. Here’s how a professional accountant can assist:

Tax Compliance : An accountant ensures adherence to tax laws and accurate and timely filing of tax returns, thereby eliminating risks of penalties and audits.
Industry-Specific Regulations : Every industry comes with its own set of regulations. An accountant provides guidance based on your specific industry and business model.
Corporate Governance : Accountants play an important role in establishing sound corporate governance. They help set up robust internal controls, ensure accurate financial reporting and assist with audits.
Risk Management : With their comprehensive understanding of business finances, accountants can help manage risks associated with regulatory compliance. They can identify potential areas of non-compliance, suggest corrective actions and implement changes to mitigate risk.

Accounting Services for Small Businesses in Newcastle

At The Garis Group , we understand the intricacies of small business accounting . Our team provides assistance to help you navigate these complexities so that you can focus on running your business. Get in touch with us for more information or book a consultation online .

Backing a winner: Digital games tax

Thu, 13 Jul 2023 05:20:49 GMT

The digital games and interactive entertainment sector is the largest creative sector in the world and one of the fastest growing industries worldwide. The global digital games industry is worth around $250 billion and in Australia, grew 22% between 2020 and 2021 generating $226.5 million in income and employing over 1,300 fulltime workers. And, it’s an industry the Government wants to support with a new tax offset.

The Digital Games Tax Offset is equal to 30% of the company’s total qualifying Australian development expenditure incurred from 1 July 2022. Companies can claim up to $20 million per company (or group of companies) per year (to reach the cap a company would need to spend around $66.7 million in eligible expenditure).

State based tax incentives are also available in South Australia, Victoria and New South Wales offering an additional 10% and Queensland offering 15% on top of the federal support. Globally, a 40% tax offset is standard for this industry so the tax offset brings Australia back into a competitive position.

Who is eligible?

Companies that are Australian tax residents or foreign tax residents with a permanent establishment in Australia can qualify.

To access the offset, the company needs a certificate issued by the Arts Minister following the completion of a new digital game, the porting of a digital game to a new platform, or for ongoing development of one or more existing digital games during the income year. This certificate then determines the offset claimed in the tax return with the Minister determining the amount of qualifying expenditure. More information will be available on the arts.gov.au website in early July 2023.

The company’s qualifying Australian development expenditure incurred needs to be at least $500,000 (could be over multiple years).

What is development expenditure?

The way the rules work is that any expenditure that a company incurs in relation to the development of the qualifying game is eligible expenditure…unless it is specifically excluded. A company develops a game by doing any of the activities necessary to complete, port, update, improve or maintain an eligible game.

The legislation takes a further step by specifically including employee remuneration or independent contractors engaged by the company to carry out work on the development of the game (excluding bonuses linked to the performance of the company or the game). Prototyping is also specifically included as is underlying game technology.

Employees that are not developing the game, for example admin staff or overseas contractors, are excluded. As are corporate costs like business overheads, marketing, travel, entertainment etc.

What games are eligible?

A digital game that can receive a classification and is made available to the general public over the internet (i.e., games developed for in-house purposes don’t qualify). The game does not include gambling or gambling like elements (loot boxes are likely to make a game ineligible if for example, the virtual items can be sold for currency) nor is used for advertising or for commercial purposes.

Australian digital games successes

Remember Fruit Ninja? Fruit Ninja, founded by HalfBrick , became a sensation in 2015 with over 1 billion downloads. Who knew a game that slices fruit with a sword would capture so much attention. Anyone with kids would have seen Crossy Road developed by Melbourne based Hipster Whale. Ninety days after it release it had 50 million downloads, earning over $10m. The Sims Freeplay was created by a merger of Melbourne studios Iron Monkey and Firemint when they were purchased by EA Games. Then there is Melbourne based Big Ant Studios, one of the world’s biggest sports game developers and known for games such as the Tennis World Tour Game, Cricket 22 and an upcoming Rugby World Cup 2023 game.

How To Avoid Penalties On Late Tax Returns?

Mon, 05 Jun 2023 03:15:49 GMT

Understanding tax return deadlines and ensuring timely submissions is an important aspect of managing personal and business finances. Whether you’re an individual or a small business, navigating tax returns can be tricky and while it may be tempting to put off your tax return, don’t! It can result in costly penalties and a bad reputation. In this article, our Newcastle tax accountants will tell you how to get your tax return in on time to avoid unnecessary penalties.

The Importance of Timely Tax Returns

A timely tax return is not just a smart move financially —it’s also a legal requirement. If you don’t get your tax return in on time you may receive a Failure to lodge (FTL) on time penalty. An FTL penalty may also be issued if you fail to report PAYG instalments, GST or PAYG withholding on an activity statement by the due date.

The importance of a Tax Accountant

A tax accountant plays a crucial role in helping individuals and businesses understand their tax obligations, prepare accurate tax returns and ensure timely submissions. They can help you navigate the complex waters of tax returns, providing clarity on the nuances of tax laws, regulations and deductions that apply to your situation.

Your tax agents must be registered with the Tax Practitioners Board (TPB). You can find a registered tax agent or check whether a person is registered by visiting the Tax Practitioners Board (TPB) website.

Added Perks of Hiring a Tax Accountant

Most registered tax agents have a special lodgement program and can lodge returns for you after the usual 31 October deadline. This gives you more time to get your ducks in a row so you can get your tax return in on time. If despite your best efforts, you do miss your deadline, by hiring a registered tax accountant you may be eligible for ‘Safe harbour from FTL penalty’. This will occur if you can prove:

You provided the agent with all relevant tax information to enable them to lodge the return or statement by the due date
The agent’s failure to lodge the return or statement was not because they were reckless or intentionally disregarded the law.

With the help of a tax accountant, you can ensure you submit your tax returns on time and avoid unnecessary costs.

The importance of Small Business Tax Accountants

For small businesses, managing taxes can be even more complex. Business tax returns require greater accuracy and compliance with business-specific regulations. By hiring a small business tax accountant, you also have the added potential for significant business deductions and greater wealth generation. A small business tax accountant can provide tailored services that will help your business manage their taxes effectively and ensure timely returns.

The Solution to Late Tax Return Penalties?

Planning, professional knowledge and timely action. Remember, avoiding penalties on late tax returns is not just about saving money—it’s also about maintaining your financial reputation and staying compliant with the law. For these reasons, it’s essential to understand the tax laws and regulations that apply to you and stay on top of your tax obligations. The best way to do this is by engaging a registered tax accountant.

Dedicated Tax Accountants in Newcastle

Tax matters can be complicated, but you don’t have to face them alone. At The Garis Group , our team of Newcastle tax agents are ready to assist you. Whether you’re an individual or a small business, we can help you understand your tax obligations, prepare accurate tax returns and ensure timely submissions. Reach out to us today and say goodbye to the stress of late tax returns!

How Chartered Accountants Help Small Businesses

Tue, 02 May 2023 01:41:18 GMT

The Role of Chartered Accountants in Business

Chartered Accountants (CAs) are financial experts who provide a range of services, from bookkeeping and tax planning to financial strategy and business advice. By partnering with a trusted CA, small businesses can feel confident their financial matters are in capable hands.

The Importance of Having a Chartered Accountant

Expert Guidance for Your Business

CAs have extensive training and experience in accounting, finance and business management. They’re well-equipped to advise small businesses on a variety of matters, such as cash flow management, tax planning and business strategy. By collaborating with a Chartered Accountant, you gain access to a wealth of knowledge and expertise, helping your business thrive and grow.

Save Time and Minimise Errors

Managing your finances can be time-consuming and complex. Chartered Accountants help small businesses by streamlining financial processes, reducing errors and ensuring compliance with tax laws and regulations. This frees up valuable time for business owners to focus on other aspects of their enterprise.

Financial Planning for the Future

Chartered Accountants don’t just look at the current financial situation; they also help small businesses plan for the future. This includes setting financial goals, creating budgets and developing strategies for long-term growth. By working with a CA, your business can establish a strong financial foundation for success.

How The Garis Group Can Assist Your Small Business

Tailored Solutions for Your Unique Needs

At The Garis Group, we understand that each business is unique. Our team of Chartered Accountants and business advisors take the time to learn about your specific needs and tailor our services to provide effective solutions for your business. Whether you need help with bookkeeping, tax planning or financial strategy, we’re here to support you every step of the way.

A Trusted Partner for Your Success

Building a successful business is no easy task, but with The Garis Group by your side, you can rest assured that your financial matters are in capable hands. We pride ourselves on building long-lasting relationships with our clients, providing ongoing support and advice to help your business thrive.

Access to Advanced Tools and Resources

In today’s fast-paced business environment, staying ahead of the curve is crucial. The Garis Group utilises the latest tools and technology to deliver cutting-edge accounting services for small businesses. By partnering with us, you’ll gain access to advanced software and resources, ensuring your business remains competitive and efficient.

Take the Next Step with The Garis Group

It’s clear that Chartered Accountants play a vital role in the success of small businesses . By providing expert guidance, saving time, minimising errors and planning for the future, CAs are invaluable partners for entrepreneurs and business owners. If you’re ready to take your business to the next level, consider partnering with The Garis Group .

We’re committed to helping small businesses succeed by offering tailored solutions, advanced tools and the expertise of our team of Chartered Accountants. Contact The Garis Group today and discover how we can support your business on its journey to success.

COMPANY MONEY: A guide for owners

Tue, 18 Apr 2023 03:12:26 GMT

When you start up a business, inevitably, it consumes not just a lot of time but a lot of cash and much of this is money you have already paid tax on. So, it only seems fair that when the business is up and running the business can pay you back. Right?

There a myriad of ways owners look for payback from a company they have invested their time and money into it from dividends, salary and wages, jobs for sometimes underqualified family members to cash advances and personal expenses like school fees and nights out picked up as a company expense. But, once the cash is in the company, it is company money.

We look at the flow of money in and out of a company and the problems that trip business owners up.

Repaying money loaned to the company

If you have lent money to your company, you can draw this money back out as a loan repayment. The loan repayment is not deductible to the company but any interest payments made to you will be as long as the borrowed money has been used in the company’s business activities (assuming interest has actually been charged on the loan).

Conversely, any repayments made by the company on the loan principal are not income for tax purposes but you will need to declare any interest earned in your income tax return. All loans, including the loan term and repayments, should be documented.

Dividends: Paying out profits

Dividends basically represent company profits being paid out to the shareholders of a company. If the company has franking credits from income tax it has paid, the dividends might be franked and the credits can often be used by the shareholder to reduce their personal tax liability.

When a dividend is paid by a private company it must provide a distribution statement to the shareholders within four months after the end of the financial year. This gives private companies up to four months after the end of the financial year to work out the extent to which dividends will be franked.

If any of the shares in the company are held by a discretionary trust then there are some additional issues that will need to be considered, including whether the trust has a positive amount of net income for the year, whether the trust has made a family trust election for tax purposes and who will become entitled to distributions made by the trust for that year.

Repaying share capital

Many private companies are set up with a relatively small amount of share capital. However, if a company has a larger share capital balance then there might be scope for the company to undertake a return of share capital to the shareholders. Whether this is possible will depend on the terms of the company constitution and there are some corporate law issues that need to be addressed.

From a tax perspective, a return of share capital will normally reduce the cost base of the shares for CGT purposes, which means that a larger capital gain could arise on future sale of the shares but there won’t necessarily be an immediate tax liability. Having said that, there are some integrity rules in the tax system that need to be considered. The risk of these rules being triggered tends to be higher if the company has retained profits that could be paid out as dividends.

Shareholder loans, payments and forgiven debts: Using company money

There are some rules in the tax law (known as Division 7A) that determine how money taken out of a company is treated. Division 7A is a particularly tricky piece of tax law designed to prevent business owners accessing funds in a way that circumvents income tax. While amounts taken from a company bank account by the owners are often debited to a shareholder’s loan account in the financial statements, Division 7A ensures that any payments, loans, or forgiven debts are treated as if they were dividends for tax purposes unless there is a loan agreement in place which meets certain strict requirements. These ‘deemed’ dividends cannot normally be franked.

If you have taken money out of the company bank account then the main ways of avoiding this deemed dividend from being triggered are to ensure that the loan is fully repaid or placed under a complying loan agreement before the earlier of the due date and actual lodgement date of the company’s tax return for that year. To be a complying loan agreement the agreement requires minimum annual repayments to be made over a set period of time and there is a minimum benchmark interest rate that applies – currently 4.77% for 2022-23.

For example, if your company is paying school fees for your kids, or you take money out of the company bank account to pay down your personal home loan, if you don’t pay back this amount or put a complying loan agreement in place then this amount is likely to be treated as a deemed unfranked dividend. That is, you need to declare this amount in your personal income tax return as if it was a dividend and without the benefit of any franking credits. This means that even though the company might have already paid tax on this amount, you will be taxed on it again without the ability to claim a credit for the tax already paid by the company (causing double taxation of the same company profits).

The rules are very strict when it comes to loan repayments. If a repayment is made but the same amount or more is loaned to the shareholder shortly afterwards then there are some special rules that can apply to basically ignore the repayment. There are some exceptions to these rules and the position needs to be managed carefully to avoid adverse tax implications.

How Does Tax Apply to Electric Cars?

Tue, 18 Apr 2023 03:06:57 GMT

Just in time for the Fringe Benefits Tax (FBT) year that started on 1 April, the Australian Taxation Office (ATO) has released new details on electric vehicles.Just in time for the Fringe Benefits Tax (FBT) year that started on 1 April, the Australian Taxation Office (ATO) has released new details on electric vehicles.

The FBT exemption for electric cars

If your employer provides you with the use of a car that is classified as a zero or low emissions vehicle there is an FBT exemption that can potentially apply to the employer from 1 July 2022, regardless of whether the benefit is provided in connection with a salary sacrifice arrangement or not. The FBT exemption should normally apply where:

The value of the car is below the luxury car tax threshold for fuel efficient vehicles ($84,916 for 2022-23) when it was first purchased. If you buy an EV second-hand, the FBT exemption will not apply if the original sales price was above the relevant luxury car tax limit; and
The car is both first held and used on or after 1 July 2022. This means that the car could have been purchased before 1 July 2022, but might still qualify for the FBT exemption if it wasn’t made available to employees until 1 July 2022 or later.

The exemption also includes associated benefits such as:

Registration
Insurance
Repairs or maintenance, and
Fuel, including electricity to charge and run the vehicle.

But, it does not include a charging station (see How do the tax rules apply to home charging units? ).

While the FBT exemption on EVs applies to employers, the value of the fringe benefit is still taken into account when working out the reportable fringe benefits of the employee. That is, the value of the benefit is reported on the employee’s income statement. While you don’t pay income tax on reportable fringe benefits, it is used to determine your adjusted taxable income for a range of areas such as the Medicare levy surcharge, private health insurance rebate, employee share scheme reduction, and certain social security payments.

Who the FBT exemption does not apply to

By its nature, the FBT exemption only applies where an employer provides a car to an employee. Partners of a partnership and sole traders are not employees and cannot access the exemption personally.

If you are a beneficiary of a trust or shareholder of a company, the exemption can only apply if the benefit is provided in your capacity as an employee or as a director of the entity (you need to be able to show you have an active role in the running of the entity).

How do the tax rules apply to home charging units?

The ATO has confirmed that charging stations don’t fall within the scope of the FBT exemption for electric cars. This means that FBT could be triggered if an employer provides a charging unit to an employee.

If an employee purchases a home charging unit then it might be possible to claim depreciation deductions for the cost of the unit over a number of income years if the unit is used to charge a vehicle that is used for income producing purposes. However, if an employee is only using the vehicle for private purposes then the cost of the charging unit is a private expense and not deductible.

What about the cost of electricity?

A friend of mine travels a lot for work and used to rack up large travel expenses…right up until he switched to an electric vehicle. Now it costs him 3 cents per km in electricity.

Because it is often difficult to distinguish home electricity usage, the ATO has set down a rate of 4.20 cents per km for running costs for EVs provided to an employee (from 1 April 2022 for FBT and 1 July 2022 for income tax).

If you use this rate, you cannot also claim any of the costs associated with costs incurred at commercial charging stations. It is one or the other, not both.

You also have the option of using actual electricity costs if you can calculate them accurately.

What will the ATO be Asking about your Holiday Home?

Thu, 23 Mar 2023 05:27:53 GMT

Taxpayers claiming deductions on holiday homes are in the ATO’s sights.

The ATO is more than a little concerned that people with holiday homes are claiming more deductions than they should and have published the starting questions they will be asking to scrutinise claims:

How many days was it rented out and was the rent in line with market values?
Where do you advertise for rent and were any restrictions placed on tenants?
Have you, your family or friends used the property

The problem is blanket claims for the holiday home regardless of the time the home was rented out or available for rent. You will need to apportion your expenses if:

Your property is genuinely available for rent for only part of the year.
Your property is used for private purposes for part of the year.
Only part of your property is used to earn rent.
You charge less than market rent to family or friends to use the property.

The ATO has also indicated that deductions might be limited if a property is only made available for rent outside peak holiday times and the location of the property (or other factors) mean that it is unlikely to be rented out during those periods.

The regulator is also likely to be suspicious if the owner claims that the property was genuinely available for rent during peak holiday periods but wasn’t deriving any income during those periods. This might indicate that the property was really being used for private purposes or that the advertised rental rate was unrealistic.

Whether a property is genuinely available for rent is a matter of fact. Factors that help demonstrate a property is genuinely available for rent include; it is available during key holiday periods, kept in a condition that people would want to rent it, tenants are not unreasonably turned away, advertised in ways that give it broad exposure to possible tenants, and the conditions are not so restrictive that tenants are unlikely to rent the property.

The ‘Super’ Wars

Thu, 23 Mar 2023 05:19:25 GMT

A consultation paper released by Treasury has sparked a national debate about the role, purpose and access to superannuation ahead of the 2023-24 Federal Budget.

What is the purpose of superannuation? At first glance, the consultation released by Treasury in February titled Legislating the objective of Superannuation sounds innocuous enough. The consultation seeks to anchor future policies relating to superannuation to a legislated objective:

The objective of superannuation is to preserve savings to deliver income for a dignified retirement, alongside Government support, in an equitable and sustainable way.

But what seems self-evident has opened a Pandora’s Box of what superannuation is not. If superannuation is to “preserve savings”, that is, restricting access to superannuation savings to retirement only, by default it is not a means of accumulating wealth in a concessionally taxed environment. It is not a strategy to manage intergenerational wealth. The definition would also prevent initiatives such as the COVID-19 early access scheme used widely during the pandemic to give those in financial distress access to quick cash (over 3 million people withdrew $37.8 billion from their superannuation funds). And, it is not a method of purchasing a home sooner.

As an aside, the Treasurer points out that the average super balance in Australia is $150,000 – taking account of all those with a super balance including new entrants into the workforce. For those 65 and over, the average balance is around $400,000 across all income brackets.

Superannuation and national building

The second component of the Treasury consultation is nation building. At a recent speech, the Treasurer stated, “to my mind, defining super’s task as delivering income for retirement isn’t to narrow super’s role in our economy…it’s to elevate it, and broaden it.” The consultation states:

“There is a significant opportunity for Australia to leverage greater superannuation investment in areas where there is alignment between the best financial interests of members and national economic priorities, particularly given the long‑term investment horizon of superannuation funds.”

The compulsory superannuation guarantee (SG) was introduced in 1992 at a rate of 3% rising to 9% by July 2002. Now, Australia’s superannuation pool has grown from around $148 billion in 1992 to over $3.3 trillion. It now represents 139.6% of gross domestic product (GDP) and is projected to grow to around 244% of GDP by 30 June 2061. Australia’s pool of pension assets is now one of the largest in the world, and the fourth largest in the OECD.

The consultation does not define how this ambition would be achieved.

*The Treasurer has ruled out changes to the existing early access hardship provisions for super.

The Federal Budget is released on 9 May 2023. Look out for our update with all the relevant news to you, your business and your super.

1 July 2023 Super Balance Increase but no Change for Contributions

The general transfer balance cap (TBC) – the amount of money you can potentially hold in a tax-free retirement account, will increase by $200,000 on 1 July 2023 to $1.9 million. The TBC is indexed to the consumer price index each December.

The TBC applies individually. If your transfer balance account reached $1.7m or more at any point before 1 July 2023, your TBC after 1 July 2023 will remain at $1.7m. If the highest amount in your account was between $1 and $1.7m, then your cap is proportionally indexed based on the highest ever balance your transfer balance account reached.

That is, the ATO will look at the highest amount your transfer balance account has ever been, then apply indexation to the unused cap amount.

For example, if you started a retirement income stream valued at $1,275,000 on 1 October 2022 and this was the highest point your account reached before 1 July 2023, then your unused cap is $425,000 ($1.7m-$1.275m). This unused cap amount is used to work out your unused cap percentage ($425k/$1.7m=25%). The unused cap percentage is then applied to the indexation increase ($200k*25%=$50k) to create your new TBC of $1,750,000.

But don’t worry, you don’t have to calculate this yourself, you can see your personal transfer balance cap, available cap space, and transfer balance account transactions online through the ATO link in myGov.

The caps on the contributions you can make into super however, will remain the same. That is, $27,500 for concessional contributions and $110,00 for non-concessional contributions. The contribution caps are linked to December’s average weekly ordinary time earnings (AWOTE) figures.

What’s the Deal with Working from Home?

Thu, 23 Mar 2023 03:01:18 GMT

The Australian Taxation Office (ATO) has updated its approach to how you claim expenses for working from home.

The ATO has ‘refreshed’ the way you can claim deductions for the costs you incur when you work from home. From 1 July 2022 onwards, you can choose either to use a new ‘fixed rate’ method (67 cents per hour), or the ‘actual cost’ method depending on what works out best for your scenario. Either way, you will need to gather and retain certain records to make a claim.

The first issue for claiming any deduction is that there must be a link between the costs you incurred and the way you earn your income. If you incur an expense but it doesn’t relate to your work, or only partially relates to your work, you cannot claim the full cost as a deduction.

The second key issue is that you need to incur costs associated with working from home. For example, if you are living with your parents and not picking up any of the expenses for running the home then you can’t claim deductions for working from home as you have not incurred the expenses, even if you are paying board (the ATO treats this as a private arrangement).

Let’s take a look at the detail:

The new ‘fixed rate’ method

Previously, there were two fixed rate methods to choose from for the 2021-22 income year:

A cover-all 80 cents per hour rate for expenses incurred while working from home (which was available from 1 March 2020). This COVID-19 related rate was intended to cover all additional running expenses incurred while working from home; or
If you had a space dedicated to work but were not running a business from home, you could claim 52 cents for every hour you worked from home to cover the running expenses of your home. This rate doesn’t cover certain items such as the depreciation of electronic devices, which can be claimed separately.

It’s clear that working from home arrangements are here to stay for many workplaces even though COVID restrictions have eased. So, from the 2022-23 financial year onwards, the ATO has combined these two fixed rate methods to create one revised method accessible by anyone working from home, regardless of whether they have a dedicated space or are just working at the kitchen table.

The new rate is 67 cents per hour and covers your energy expenses (electricity and gas), phone usage (mobile and home), internet, stationery, and computer consumables. You can separately claim the cost of the decline in value of assets such as computers, repairs, and maintenance for these assets, and if you have a dedicated home office, the cost of cleaning the office. If there is more than one person working from the same home, each person can make a claim using the fixed rate method if they meet the basic eligibility conditions.

What proof do the ATO need that I am working from home?

To use the fixed rate method, you will need a record of all of the hours you worked from home. The ATO has warned that it will no longer accept estimates or a sample diary over a four week period. For example , if you normally work from home on Mondays but one day you have an in-person meeting outside of your home, your diary should show that you did not work from home for at least a portion of that day.

Having said that, the ATO will allow taxpayers to keep a record which is representative of the total number of hours worked from home during the period from 1 July 2022 to 28 February 2023.

There is nothing in the ATO guidance to suggest that claims are limited to standard office hours. That is, if you work from home outside standard office hours or over the weekend, then make sure you keep an accurate record of the hours you are working so that you can maximise your deductions.

You also need to keep a copy of at least one document for each running cost you have incurred during the year which is covered by the fixed rate method. This could include invoices, bills or credit card statements. Where bills are in the name of one member of a household but the cost is shared, each member of the household who contributes to the payment of that expense will be taken to have incurred it. For example, a husband and wife, or flatmates where they jointly contribute to costs.

You need to keep these records for five years so that if the ATO come calling, you can prove your claim. If this proof is not available at the time, the deduction will be denied. If your work from home diary is electronic, ensure you can access this diary over time (such as producing a PDF summary of your calendar clearly showing the dates and times of your work at the end of each financial year).

The ‘actual’ method

Some people might find that the actual method produces a better result if their expenses are higher. As the name suggests, you can claim the actual additional expenses you incur when you work from home (and reduce the claim by any personal use and use by other family members). However, you will need to ensure you have kept records of these expenses and the extent to which the expenses relate to your work.

Using this method, you can claim the work related portion of:

The decline in value of depreciating assets – for example, home office furniture (desk, chair) and furnishings, phones and computers, laptops or similar devices.
Electricity and gas (energy expenses) for heating, cooling and lighting.
Home and mobile phone, data and internet expenses.
Stationery and computer consumables, such as printer ink and paper.
Cleaning your dedicated home office.

Be careful with this method because the ATO are looking closely to ensure these expenses are directly related to how you earn your income. For example, you can’t claim personal expenses such as coffee, tea and toilet paper even if you do use these items when you are at work. Nor can you claim occupancy expenses such as rent, mortgage interest, property insurance, and land taxes and rates unless your home is a place of business. It is unusual for an employee’s home to be classified as a place of business.

I run a business from home, what can I claim?

Where your home is also your principal place of business and an area is set aside exclusively for business activities, you can potentially claim a deduction for an appropriate portion of occupancy expenses as well as running costs. An example would be a doctor who runs their surgery from home.

The doctor may have one-third of the home set aside as a place of business where they see patients.

It is important to keep in mind that Capital Gains Tax (CGT) might be payable on the eventual sale of the home. While your main residence is normally exempt from CGT, the portion of the home set aside as a place of business will not generally qualify for the main residence exemption for the period it is used for this purpose, although if you are eligible, the small business CGT concessions and general CGT discount may reduce any resulting capital gain.

Why You Should Hire A Financial Advisor

Thu, 16 Feb 2023 03:22:08 GMT

When it comes to managing your finances, getting the advice of a professional financial advisor can be beneficial. Financial advisors are highly trained professionals that specialise in helping people make sound decisions with their money. They can provide guidance on how to save for retirement, invest wisely and stay ahead of economic trends. A financial advisor’s objectivity, market knowledge and plan-making skills can be invaluable in today’s modern world. Here are some of the most significant reasons why you should hire a financial advisor:

Retirement Planning

A financial advisor can provide invaluable guidance when it comes to retirement planning. They will be able to recommend the best investments for your situation, helping you build a portfolio that meets your long-term goals and provides a steady stream of income during your retirement years. A financial advisor can help you create an individualised plan that takes into account various factors such as inflation, market trends and taxes. Australians are living longer than ever, so having a financial advisor to help you make sound decisions about your future is essential.

Wealth Management

Financial advisors also offer wealth management services. They can provide advice on how best to accumulate and preserve your personal wealth, helping you make the most of what you have. This can include guidance on investments such as stocks, bonds and mutual funds. A financial advisor will be able to offer insight into which investments may produce the highest returns while keeping risk at an acceptable level. Wealth management services help you use your money more effectively so you can reach your short- and long-term financial goals.

Setting A Financial Plan

A financial advisor can help you create a personalised financial plan tailored to your individual needs. This will involve setting objectives and goals and putting together a strategy that makes sense for your current situation. Your financial plan should take into account all of the factors that may affect you, such as income, investments and debts. A financial advisor can also advise which assets are the most suitable for your needs and help ensure you stay on track in achieving your goals. Whether you’re trying to save for retirement, pay off debt or start a business, having the right financial plan in place can make all the difference.

Creating Realistic Financial Goals

Creating realistic financial goals is one of the most important aspects of personal finance. A financial advisor can help you evaluate your current situation and develop a realistic and achievable plan. They will be able to provide guidance on setting meaningful goals and chart out a path towards achieving those goals. This includes providing advice on budgeting, investing, debt management and saving. Financial advisors can also help you understand the financial risks and rewards associated with different investments so you can make informed decisions about your money.

Having a Professional on Your Side

Hiring a financial advisor is one of the most important steps you can take to ensure that your finances are in good shape. If you’re looking for the right advice to help you make sound financial decisions, a professional financial advisor is the way to go. Australian business owners, retirees and pre-retirees can all benefit from the knowledge and experience of a financial advisor.

Chat to our accountants at The Garis Group in Newcastle to find out more about our services and how we can help you reach your financial goals. We are here to provide comprehensive advice and support so you can make the most of your money. Phone us on (02) 4969 4699 to book a consultation .

How good is ChatGPT at tax?

Fri, 10 Feb 2023 05:17:27 GMT

Not being paranoid or anything but we were curious about the skills of the latest innovation to take the world by storm, ChatGPT, and its ability to work with the Australian tax system.

Let’s start by saying that we were impressed. Not so much by ChatGPT’s ability to work with the complexities of the tax system, but for its tone and approach. The outcome from our testing, including the example below, is that you might end up with some general comments that are reasonably accurate, but you’re unlikely to get an answer that can be relied on. And with most technical commentary tied up in personal advice rather than on the web where ChatGPT can explore it, it is unlikely that we will get there any time soon.

Here are the results of our test question and our commentary (ChatGPT’s response is in italics).

Question: How much capital gains tax does an Australian resident pay on an investment property with a worked example.

ChatGPT: An Australian resident pays capital gains tax (CGT) on the profit made from selling an investment property. The CGT is calculated by subtracting the cost of the property (purchase price plus any costs associated with acquiring and owning the property) from the sale price.

For example, let’s say an Australian resident purchased an investment property for $500,000 and spent $50,000 on costs associated with acquiring and owning the property (such as legal fees, stamp duty, and repairs). The total cost of the property is $550,000.

The accountant: Let’s stop there and take stock. There are some tricks and traps that need to be considered when working out an asset’s cost base.

While repair costs in some cases can form part of a property’s cost base, this is not always the case. The situation is often different where the asset being sold is an investment property that has been rented to tenants. When a landlord repairs damage that occurs while the property is rented to a tenant, this will often be deductible to the landlord at the time the repair costs are incurred. Because deductions are available for these repair costs, they should not also be included in the property’s cost base.

There are also other adjustments that need to be considered. In the context of investment properties, it will often be necessary to make adjustments to the cost base to take into account capital works deductions. Landlords can often claim capital works deductions when an investment property is used to derive assessable rental income. The property’s cost base should then be reduced by capital works deductions that have been or could be claimed by the landlord (although there is an exception to this if the property was acquired before 13 May 1997 and the cost of improvements was incurred by 30 June 1999).

The longer the period of ownership, the more likely that capital works deductions and repair costs can end up being quite significant and have a material impact on the capital gain calculation.

ChatGPT: After several years, the resident decides to sell the property for $700,000. The profit made from the sale is $700,000 – $550,000 = $150,000. The CGT rate in Australia is currently at 45% and the resident will pay 45% of the $150,000 profit, which is $67,500.

The accountant : Let’s take a closer look at that calculation. There is no CGT rate of 45% that applies specifically to capital gains. Net capital gains form part of an individual taxpayer’s assessable income. This figure is then used to calculate the individual’s taxable income for the relevant income year. If there is a positive taxable income figure, then we apply the individual’s marginal tax rates.

One way of explaining this is that a higher taxable income normally results in a higher tax bracket and a higher rate of tax. In other words, the tax rate that applies to an individual’s net capital gains is impacted by the individual’s other income or losses (if any).

Also, while the highest marginal tax rate for individuals is currently 45 per cents for each dollar of taxable income above $180,000, Australian residents are also normally subject to the Medicare levy of 2%. This should be considered and factored in.

ChatGPT: It’s worth noting that there are certain exemptions and reductions that can be applied to the CGT calculation, such as the main residence exemption and the small business CGT concessions.

The accountant: If only tax was that simple! There are certain exemptions and reductions that can apply to capital gains. While the answer mentions the main residence exemption and the small business CGT concessions, these concessions do not normally apply to the sale of an investment property.

For the main residence exemption (or partial main residence exemption) to be available, one of the key conditions is that property would need to have been established and used as the individual’s main residence. The exemption is unlikely to be available if the property has been used solely as an investment property to derive assessable rental income, although if the property was inherited then the position could be different.

Also, the small business CGT concessions would not normally apply to the sale of an investment property. This is because the concessions can only apply if the asset passes an active asset test, which requires the property to have been used in qualifying business activities for a minimum period of time.

Assets used in a business carried on by the owner or certain related parties can often be treated as active assets for the purpose of these concessions, but there is a specific exception for assets used mainly to derive rent from unrelated parties.

If the property has been solely used to derive rent (even if used in a rental business) from unrelated parties, the property is likely to fail the active asset test and the small business CGT concessions shouldn’t be available.

Interestingly, the answer didn’t refer to the general CGT discount or indexation, which are the most likely concessions that would apply to a situation like this.

If the seller is an Australian resident (and not a temporary resident) during the period they owned the property and has owned the property for more than 12 months, the 50% CGT general discount would often be available to reduce the capital gain.

If the property was acquired before 21 September 1999, indexation of the cost base could be available instead. It would be necessary to compare both options to see which provides the more favourable result

ChatGPT: It is advisable to consult with a tax professional to determine the specific tax implications of selling an investment property.

The accountant: Yes, indeed it is. Thank you ChatGPT.

Full throttle in 2023

Fri, 10 Feb 2023 02:57:36 GMT

In a volatile market, keeping to a strategy, or let’s face it creating one, can be tough.

The downside of not taking time out for your strategy is that there is a tendency to keep a short-term focus at an operational level to try and pick quick wins to generate financial returns. Sometimes in the process, this short-term focus undermines longer term value and returns.

Here are our ‘must dos’:

Know what your position is.

A business health check is an analysis of the current state of your business. It is an analytical review of its operation with view to providing a broad overview of operating performance and identifying potential issues. Understanding your position will reveal your risks and capacity to develop.

Know what to look for.

Once you know your position, the next question is what are the measures that are going to give you the best insight into business performance. In a volatile market, this information will give you what you need to make informed decisions at any one point in time.

Be prepared to make quick decisions.

If you know your position and have the data you need, be prepared to make quick decisions and take the first mover advantage. If you have the two elements above, you have your radar for identifying opportunities and mitigating risk. Most businesses are simply a replication of what they see. While the pandemic and market instability is difficult, we have also seen a wave of innovation as people adapt to find solutions.

Don’t bank on a single opportunity.

If COVID has taught us anything it is that things change, and we need to adapt and change with the circumstances. While one single opportunity might make all the difference, an overreliance on one product, service, or methodology of delivering those products and services, exposes you to risk.

Understand your end game.

What are you aiming for? Family empire? Fast growth and sale? Sustainable growth and sale as a retirement plan? Public listing? Even if you plan on simply running and growing your business for decades to come, that is a decision. Your end game and your progress towards that end game impacts your structure, focus, and decision making.

Document your strategy.

Document your strategy – knowing it in your head is not enough. This does not have to be an onerous War & Peace approach. It is understanding what you are aiming for, and breaking that down into measurable objectives, then into measurable outcomes and timeframes (preferably actionable against rolling 90 day plans). This approach also makes management meetings a lot more meaningful.

SMSF reporting changes from 1 July 2023

Fri, 10 Feb 2023 02:54:44 GMT

If you have an SMSF with a total balance of less than $1 million , from 1 July 2023 you will need to report quarterly to the ATO instead of annually. Previously, SMSFs with a balance under $1m reported annually at the same time as lodging the SMSF annual return.

The ATO’s final position on risky trust distributions Copy

Fri, 10 Feb 2023 02:50:33 GMT

The ATO has released its final position on how it will apply some integrity rules dealing with trust distributions – changing the goal posts for trusts distributing to adult children, corporate beneficiaries, and entities with losses. As a result, many family groups will pay higher taxes because of the ATO’s more aggressive approach.

Section 100A

The tax legislation contains an integrity rule, section 100A, which is aimed at situations where income of a trust is appointed in favour of a beneficiary, but the economic benefit of the distribution is provided to another individual or entity. For section 100A to apply, there needs to be a ‘reimbursement agreement’ in place at or before the time the income is appointed to the beneficiary. Distributions to minor beneficiaries and other beneficiaries who are under a legal disability are not impacted by these rules.

If trust distributions are caught by section 100A, this generally results in the trustee being taxed on the income at penalty rates rather than the beneficiary being taxed at their own marginal tax rates.

While section 100A has been around since 1979, until recently there has been relatively little guidance on how the ATO approaches section 100A. This is no longer the case and the ATO’s recent guidance indicates that a number of scenarios involving trust distributions could be at risk.

For section 100A to apply:

The present entitlement (a person or an entity is or becomes entitled to income from the trust) must relate to a reimbursement agreement;
The agreement must provide for a benefit to be provided to a person other than the beneficiary who is presently entitled to the trust income; and
A purpose of one or more of the parties to the agreement must be that a person would be liable to pay less income tax for a year of income.

High risk areas

Until recently many people have relied on the exclusions to section 100A which prevent the rules applying when the distribution is to a beneficiary who is under a legal disability (e.g., a minor) or where the arrangement is part of an ordinary family or commercial dealing (the ‘ordinary dealing’ exception). It is the ordinary dealing exception that is currently in the spotlight.

For example, let’s assume that a university student who is over 18 and has no other sources of income is made presently entitled to $100,000 of trust income. The student agrees to pay the funds (less tax they need to pay to the ATO) to their parents to reimburse them for costs that were incurred when the student was a minor. This situation is likely to be considered high risk if the student is on a lower marginal tax rate than the parents because the parents are receiving the real benefit of the income.

The ATO is also concerned with scenarios involving circular distributions. For example, this could occur when a trust distributes income to a company that is owned by the trust. The company then pays dividends back to the trust, which distributes some or all of the dividends back to the company. And so on. The ATO views these arrangements as high risk from a section 100A perspective.

Common scenarios identified as high risk by the ATO include:

The beneficiary is a company or trust with losses and the beneficiary is not part of the same family group as the trust making the distribution.
A company or trust which is entitled to distributions from the trust returns the funds to the trustee (i.e., circular arrangements).
The beneficiary is issued units by the trustee of the trust (or a related trust) with the amount owed for the units being set-off against the entitlement and where the market value of the units is less than the subscription price or the trustee is able to do this without the consent of the beneficiary.
Adult children are made presently entitled to income, but the funds are paid to a parent in relation to expenses incurred before the beneficiary turned 18.

Where to from here?

If you have a discretionary trust, it will be important to ensure that all trust distribution arrangements are reviewed in light of the ATO’s guidance to determine the level of risk associated with the arrangements. It is also vital to ensure that appropriate documentation is in place to demonstrate how funds relating to trust distributions are being used or applied for the benefit of the beneficiaries.

The ATO’s new approach applies to entitlements before and after the publication of the new guidance but for entitlements arising before 1 July 2022, the ATO will not generally pursue these if they are either low risk under the new guidance, or if they comply with the ATO’s previous guidance on trust reimbursement agreements.

Is ‘downsizing’ worth it?

Fri, 10 Feb 2023 02:47:01 GMT

From 1 January 2023, those 55 and over can make a ‘downsizer’ contribution to superannuation.

Downsizer contributions are an excellent way to get money into superannuation quickly. And now that the age limit has reduced to 55 from 60, more people have an opportunity to use this strategy if it suits their needs.

What’s a ‘downsizer’ contribution?

If you are aged 55 years or older, you can contribute $300,000 from the proceeds of the sale of your home to your superannuation fund.

Downsizer contributions are excluded from the existing age test, work test, and the transfer balance threshold (but are limited by your transfer balance cap).

For couples, both members of a couple can take advantage of the concession for the same home. That is, if you and your spouse meet the other criteria, both of you can contribute up to $300,000 ($600,000 per couple). This is the case even if one of you did not have an ownership interest in the property that was sold (assuming they meet the other criteria).

Sale proceeds contributed to superannuation under this measure count towards the Age Pension assets test. Because a downsizer contribution can only be made once in a lifetime, it is important to ensure that this is the right option for you.

Let’s look at the eligibility criteria:

You are 55 years or older (from 1 January 2023) at the time of making the contribution.
The home was owned by you or your spouse for 10 years or more prior to the sale – the ownership period is generally calculated from the date of settlement of purchase to the date of settlement of sale.
The home is in Australia and is not a caravan, houseboat, or other mobile home.
The proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption, or would be entitled to such an exemption if the home was a post-CGT asset rather than a pre-CGT asset (acquired before 20 September 1985). Check with us if you are uncertain.
You provide your super fund with the Downsizer contribution into super form (NAT 75073) either before or at the time of making the downsizer contribution .
The downsizer contribution is made within 90 days of receiving the proceeds of sale , which is usually at the date of settlement.
You have not previously made a downsizer contribution to super from the sale of another home or from the part sale of your home.

Do I have to buy another smaller home?

The name ‘downsizer’ is a bit of a misnomer. To access this measure you do not have to buy another home once you have sold your existing home, and you are not required to buy a smaller home – you could buy a larger and more expensive one.

Is Investing In Property Still Profitable With Interest Rate Rises?

Mon, 23 Jan 2023 02:44:08 GMT

There has been a lot of talk lately about interest rates rising and how this will impact investors in the property market. Many are wondering if property investment is worth it, considering that house prices have also been rising. So, is investing in property still profitable with interest rate rises? Let’s take a closer look.

Property remains an attractive investment option

Many people are still buying property as an investment, despite the higher interest rates.
Current market conditions so far have not deterred people from investing in residential property.

Property investment is still considered to be a strong and secure way to invest in the long term with residential real estate believed to yield better returns than stocks or bonds when held over a longer period. Furthermore, the rise in demand for homes due to population growth helps to ensure that prices increase over time.

Investing in real estat e also allows buyers to earn rental income, enabling them to pay off their mortgage debt more quickly and potentially build equity much faster than investing in other options.

Consider these factors when deciding to invest in property

If you’re thinking about investing in property, there are a few factors to consider:

Location

This is important, as investing in a property located in an area that is likely to attract tenants or buyers means you may be able to get good rental yields or sell at a higher price later.

The condition of the property

Investing in properties that are well-maintained and of good quality will help ensure they remain attractive to tenants and buyers over time.

Costs

Keep in mind that buying real estate can involve significant upfront costs such as purchase fees and mortgage repayments so it’s essential to make sure you’re comfortable with committing this kind of money before taking the plunge. Once these funds have been applied towards your investment, however, there is a good chance for potentially high returns if done correctly.

Current market trends

Researching the current market trends and being aware of legal regulations surrounding property ownership will also provide helpful insight when deciding whether to invest.

In short, if you take the time to research thoroughly, consider all available options and make informed decisions regarding your investments, you’ll set yourself up for success when it comes to purchasing property.

Risks and rewards

In Australia, investing in property is still seen as an effective way to grow one’s wealth and assets. The potential gains from successfully purchasing and managing a residential or commercial space can be considerable.

Of course, there are also risks to consider when diving into the world of real estate investments as well. These may include challenges associated with finding suitable tenants or buyers, legal fees related to obtaining proper permits, and having the necessary cash flow reserves available to cover mortgage payments during long periods of vacancy. Additionally, it is important to remember that property investments are subject to market changes which can cause prices to rise and fall on a regular basis.

Ultimately, it is up to the individual investor to thoroughly evaluate the potential risks and rewards of a real estate investment transaction before deciding about whether this is right for them at this time. Many find that professional advice from an experienced accountant can help guide them through the process and ensure they make an informed choice about their finances moving forward. With responsible planning and dedication, investing in property can be an excellent option for those looking to secure their economic future in the years ahead.

We hope that this blog post has been helpful in providing some information about investing in property. If you have any questions or would like more advice, please don’t hesitate to contact The Garis Group . Our team is dedicated to helping you create a beautiful financial future. Contact us via our website or give us a call today on 02 4969 4699 .

States Move on Property Based Taxes

Thu, 13 Oct 2022 02:42:44 GMT

Queensland backs down on Australia wide land tax

The Queensland Government has backed away from an amendment that would have seen the land tax rate for investment property in Queensland assessed on the value of the investor’s Australia wide land holdings from 1 July 2023, not just the value of their Queensland property.

The amendment passed the Queensland Parliament and became law on 30 June 2022. The amendment would see the value of all of the landholder’s Australian investment property assessed, the value of Queensland land tax calculated on taxable Australian wide investments, then apportioned to the Queensland portion of the land. The amendment requires the landholder to declare their interstate landholdings and data from other sources to verify the landholdings. The end result is many investors being tipped into a higher land tax rate.

The Bill states, “The land tax reform is intended to make Queensland’s land tax system fairer by addressing an inequity which can result in a landholder with all of their landholdings in Queensland paying more land tax than a landholder with a similar value of landholdings spread across jurisdictions.”

Following the National Cabinet Meeting on 30 September, Premier Palaszczuk rescinded the reform as it relied on the “goodwill of other states, and if we can’t get that additional information, I will put that aside.”

Stamp duty or an annual property tax for NSW first home buyers?

First home buyers purchasing property in NSW of up to $1.5m will have a choice of paying stamp duty or an annual property tax from 16 January 2023.

The annual property tax payments will be based on the land value of the purchased property. The property tax rates for 2022-23 are:

$400 plus 0.3% of land value for properties whose owners live in them
$1,500 plus 1.1% of land value for investment properties.

Property tax assessments will be issued annually to home buyers who take the annual property tax option. As an example, a first buyer purchasing a $1.2m NSW property with a land tax value of $720,000, could pay stamp duty of $50,875 or opt to pay the annual property tax ($2,560 for 2022-23). The property tax rates will be indexed annually.

Eligible first home buyers who sign a contract of purchase on or after 16 January 2023 will be eligible to opt into the property tax. If the property tax option is selected, first home buyers must move into the property within 12 months of purchase and live in it continuously for at least 6 months.

The annual property tax is only applicable to the purchaser. If the property is sold, the property tax does not apply to subsequent purchasers. For eligibility details, see First Home Buyer Choice on the NSW Government website.

Legislation enabling the property tax is expected before the NSW Parliament this month. If passed, eligible first home buyers who sign a contract of purchase between the passage of the legislation and 15 January 2023 will be eligible to opt into the property tax. These purchasers will pay land stamp duty but will be able to apply for and receive a refund of that duty if they opt into property tax.

Australian Super Funds Gorge on Cryptocurrency

Thu, 13 Oct 2022 02:39:24 GMT

The value of cryptocurrency assets inside Australian self managed superannuation funds (SMSFs) increased by 589.9% ($1.17bn) between June 2019 and June 2022, according to the latest ATO statistics.

Smaller funds, with an asset value below $200,000, are more likely to have a larger proportion of their value in cryptocurrency.

ASIC warns of SMSF cryptocurrency scams

Earlier this year, the Australian Securities and Investments Commission (ASIC) issued a warning on an increase in marketing encouraging Australians to switch from retail superannuation funds to SMSFs so they can invest in ‘high return’ portfolios. The regulator states that crypto-assets are a high risk and speculative investment and best practice is to seek advice from a licensed financial adviser before agreeing to transfer superannuation out of a regulated fund into an SMSF.

An example of one of these schemes was A One Multi Services Pty Ltd that was shut down by ASIC late last year. The company promoted a scheme encouraging investors to roll their superannuation into an SMSF, then for the SMSF to loan money to A One Multi to generate “returns of between 10% and 20% on the investment and perhaps as high as 26%.” Over 60 SMSFs transferred $25 million into A One Multi’s accounts between January 2019 and June 2021. The money “invested” for the clients, between $7 million to $22 million of Bitcoin, was held in the name of one of the directors. An additional $5.7m was used by the directors to acquire property and luxury cars.

Investing in crypto

Trustees are free to invest in assets that meet the requirements of the fund and comply with the regulatory requirements:

Trust Deed – must allow for cryptocurrency assets. Most SMSF trust deeds are drafted broadly to enable trustees to invest in assets permitted by the superannuation laws and leave the investment strategy to manage the choice of assets and their appropriateness. However, it is important to check.
Investment strategy – With cryptocurrency’s high volatility and risks, there must be clearly articulated information in the Investment Strategy. That is, it must articulate the trustees’ plan for making, holding and realising assets in a in a way that is consistent with the retirement goals of members being mindful of the member’s individual circumstances.
Separation of assets – cryptocurrency assets must be held in a wallet in the name of the SMSF and the IP address is provided to the SMSF auditors to verify the transactions (against the fund bank account). Problems often arise when a wallet (in the name of the SMSF) is connected to a personal credit card to acquire cryptocurrency. In these cases, the payment may be considered as either a contribution or a loan to the SMSF.
Sole purpose test – Your SMSF needs to meet the sole purpose test to be eligible for the tax concessions normally available to super funds. This means your fund needs to be maintained for the sole purpose of providing retirement benefits to your members, or to their dependants if a member dies before retirement.

The 120% technology and skills ‘boost’ deduction

Wed, 13 Jul 2022 04:14:15 GMT

The 120% skills and training, and technology costs deduction for small and medium business have passed Parliament. We’ll show you how to take maximise your deductions.

Almost a year after the 2022-23 Federal Budget announcement, the 120% tax deduction for expenditure by small and medium businesses (SME) on technology, or skills and training for their staff, is finally law. But there are a few complexities in the timing – to utilise the technology investment boost, you had to of purchased the technology and when it comes to acquiring eligible assets, installed it ready for use by 30 June 2023; that’s just seven days from the date the legislation passed Parliament.

Who can access the boosts?

The 120% skills and training, and technology boosts are available to small business entities (individual sole traders, partnership, company or trading trust) with an aggregated annual turnover of less than $50 million. Aggregated turnover is the turnover of your business and that of your affiliates and connected entities.

$20k technology investment boost

The Technology Investment Boost provides SMEs with a bonus deduction for expenses and depreciating assets for digital operations or digitising from 7:30pm (AEST) on 29 March 2022 until 30 June 2023.

You ‘incur’ an expense when you are in debt for it; this might be a tax invoice or it might be a contract where you are legally liable for the cost.

For depreciating assets, like computer hardware, there is an extra step. The technology needs to have been purchased and installed ready for use. For example, if you ordered 10 computers, you need to have received the computers and had them set up ready to use by at least 30 June 2023. Ordering them on 29 June won’t be enough to claim the boost if you did not receive them.

The types of expenses that might be eligible for the technology boost include:

Digital enabling items – computer and telecommunications hardware and equipment, software, internet costs, systems and services that form and facilitate the use of computer networks;
Digital media and marketing – audio and visual content that can be created, accessed, stored or viewed on digital devices, including web page design;
E-commerce – goods or services supporting digitally ordered or platform-enabled online transactions, portable payment devices, digital inventory management, subscriptions to cloud-based services, and advice on digital operations or digitising operations, such as advice about digital tools to support business continuity and growth; or
Cyber security – cyber security systems, backup management and monitoring services.

The technology also must be “wholly or substantially for the purposes of an entity’s digital operations or digitising the entity’s operations”. That is, there must be a direct link to your business’s digital operations. For example, claiming the drone you bought at say Christmas 2022 won’t be deductible unless your business is, for example, a real estate agency that needed a drone to take aerial images of client homes to market on their website. The expense needs to relate to how the business earns its income, in particular its digital operations.

Repair and maintenance costs can be claimed as long as the expenses meet the eligibility criteria.

Where the expenditure has mixed use (i.e., partly private), the bonus deduction applies to the proportion of the expenditure that is for business use.

There are a few costs that the technology boost won’t cover such as costs relating to employing staff, raising capital, construction of business premises, and the cost of goods and services the business sells. The boost will not apply to:

Assets that you purchased but then sold within the relevant period (e.g., on or prior to 30 June 2023).
Capital works costs (for example, improvements to a building used as business premises).
Financing costs such as interest expenses.
Salary or wage costs.
Training or education costs, that is, training staff on software or technology won’t qualify (see Skills and Training Boost).
Trading stock or the cost of trading stock.

Let’s look at the example of A Co Pty Ltd (A Co) that purchased multiple laptops on 15 July 2022 to help its employees to work from home. The total cost was $100,000. The laptops were delivered on 19 July 2022 and immediately issued to staff entirely for business use.

As the holder of the assets, A Co is entitled to claim a deduction for the depreciation of a capital expense. A Co can claim the cost of the laptops ($100,000) as a deduction under the temporary full expensing in its 2022-23 income tax return. It can also claim the maximum $20,000 bonus deduction in its 2022-23 income tax return.

The $20,000 bonus deduction is not paid to the business in cash but is used to offset against A Co’s assessable income. If the company is in a loss position, then the bonus deduction would increase the tax loss. The cash value to the business of the bonus deduction will depend on whether it generates a taxable profit or loss during the relevant year and the rate of tax that applies.

The good news for many eligible businesses is that your technology subscriptions and other products you use in your business might qualify for the boost.

The boost is claimed in your tax return with the extra 20% sitting on top your normal claim. That is, however the way the expense or asset is claimed (immediately or over time), the bonus 20% applies in the same way.

The Skills and Training Boost

The Skills and Training Boost gives you a 120% tax deduction for external training courses provided to employees. The aim of this boost is to help SMEs grow their workforce, including taking on less-skilled employees and upskilling them using external training to develop their skills and enhance their productivity.

Sole traders, partners in a partnership, independent contractors and other non-employees do not qualify for the boost as they are not employees. Similarly, associates such as spouses or partners, or trustees of a trust, don’t qualify.

As always, there are a few rules:

Registration for the training course had to be from 7:30pm (AEST) on 29 March 2022 until 30 June 2024. If an employee is part the way through an eligible training course, enrolments in courses or classes after 29 March 2022 are eligible, not before.
The training needs to be deductible to your business under ordinary rules. That is, the training is related to how the business earns its income.
A registered training provider needs to charge your business (either directly or indirectly) for the training (see What organisations can provide training for the boost).
The training must be for employees of your business and delivered in-person in Australia or online.
The training provider cannot be your business or an associate of your business.

Training expenditure can include costs incidental to the training, for example, the cost of books or equipment necessary for the training course but only if the training provider charges the business for these costs.

Let’s look at an example. Animals 4U Pty Ltd is a small entity that operates a veterinary centre. The business recently took on a new employee to assist with jobs across the centre. The employee has some prior experience in animal studies and is keen to upskill to become a veterinary nurse. The business pays $3,500 for the employee to undertake external training in veterinary nursing. The training meets the requirements of a GST-free supply of education. The training is delivered by a registered training provider, registered to deliver veterinary nursing education.

The bonus deduction is calculated as 20% of the amount of expenditure the business could typically deduct. In this case, the full $3,500 is deductible as a business operating expense. Assuming the other eligibility criteria for the boost are satisfied, the bonus deduction is calculated as 20% of $3,500. That is, $700.

In this example, the bonus deduction available is $700. That does not mean the business receives $700 back from the ATO in cash, it means that the business is able to reduce its taxable income by $700. If the company has a positive amount of taxable income for the year and is subject to a 25% tax rate, then the net impact is a reduction in the company’s tax liability of $175. This also means that the company will generate fewer franking credits, which could mean more top-up tax needs to be paid when the company pays out its profits as dividends to the shareholders.

What organisations can provide training for the boost?

Not all courses provided by training companies will qualify for the boost; only those charged by registered training providers within their registration. Typically, this is vocational training to learn a trade or courses that count towards a qualification rather than professional development.

Qualifying training providers will be registered by:

Tertiary Education Quality and Standards Agency ( search the register – includes States and Territories)
Australian Skills Quality Authority (ASQA)
Victorian Registration and Qualifications Authority ( search the register )
Training Accreditation Council of Western Australia

While some training you might want to have engaged might not be delivered by registered training organisations, there is still a lot out there, particularly the short-courses offered by universities, or the flexible courses designed for upskilling rather than as a degree qualification. If you have recently completed performance reviews for staff and training is part of their development pathway, it might be worth exploring.

How To Raise Financially Responsible Children

Sun, 10 Jul 2022 04:11:22 GMT

Times are tough and financial responsibility is stressful for people at the moment. Did you know that your kids can pick up on this emotion and feel disempowered? By discussing and teaching financial acumen in their formative years, you can help to improve their self-esteem and social awareness.

It’s in these years that attitudes towards money take root, setting the foundation for financial responsibility in later life. As parents, we play a critical role in teaching our children about money management. But how do we do it effectively? The answer lies in making financial education an integral part of their childhood education.

Start Early

Teaching children about financial responsibility is a crucial aspect of their development. By instilling healthy money habits from an early age, we empower them to make wise financial choices as they grow older. Why not begin by introducing the basics of money and transactions? Teach children that money doesn’t simply appear—it’s earned through hard work. Whether it’s completing household chores or achieving good grades, children should understand the real value of time and hard work.

Instil A Savings Habit

In a world that is more and more focused on instant gratification, children need to learn to value the habit of saving their money. Explain to them that they don’t always need the newest technology, toys or clothing and that sometimes they must make do with what they have.

You can teach them about the savings process by helping them save for something they want—a toy, a game, an outing or anything else that they really want. This can be an invaluable lesson in delayed gratification, a key component of financial responsibility.

Introduce Budgeting

As your children grow older, introduce them to the concept of budgeting, where income is allocated to different categories like saving, spending and giving. Help them understand the difference between what they want and what they need and encourage them to prioritise their needs over their wants. In doing so, you’ll be teaching them a critical life skill that even many adults struggle with.

Financial Planning

Once they’ve grasped budgeting, it’s time to delve into the more advanced aspects of personal finance. That includes investments, insurance and taxes. Educate your children about the benefits of saving and investing and discuss different savings accounts, long-term investments and the power of compound interest.

Show your child that savings can grow through investments and explain why insurance is essential for risk management. While these concepts might seem daunting, it’s important you introduce these concepts early. Remember, the goal isn’t to turn your child into a financial whizz overnight but to gradually expose them to these ideas over time.

Lead By Example

Children learn best by observing their parents’ behaviours and actions. By modelling responsible financial habits, you can significantly impact your child’s understanding of money. Engage in open conversations about money matters. Explain how you budget, save and make financial decisions as a family. Encourage questions and ensure your child feels comfortable discussing money-related topics. Explain to children that while money is important, it isn’t everything. Teach them about generosity, empathy and the importance of giving back to society.

Need Help With Your Finances?

If you want to empower your children to make smart decisions in the future, make sure you first have your own finances in order. One of the best ways to do that is by hiring an experienced accountant. At The Garis Group , we help our clients with matters of tax , Self-Managed Super Funds (SMSF) and property investment strategies. We can also refer you to our referral partners Politis Investment Strategies for Financial Planning services. Book a consultation today to learn more.

Don’t Double Dip Your Deductions this Tax Time

Mon, 20 Jun 2022 04:08:25 GMT

The Australian Taxation Office (ATO) is reminding people not to make the mistake of double dipping their deductions in their tax return this year.

Assistant Commissioner Tim Loh explained “Around 8.4 million Australians claimed nearly $19.8 billion in work-related expenses in 2021. That’s a lot of deductions so we want to make sure you get it right the first time. It’s important you claim what you’re entitled to – no more, no less.”

When people prepare their tax return, it’s important to remember the rules for claiming different types of work-related expenses. What can be claimed depends on the type of job, individual circumstances, and whether there are the required records to support the claim.

“While some people make genuine mistakes, we do see people trying to gain an unfair advantage by claiming incorrect or false expenses. A mistake that we often see in tax returns is people claiming expenses twice.”

“You wouldn’t double dip your chip, so don’t double dip your deductions” Mr Loh said.

“Remember, we use sophisticated data analytics to monitor for incorrect information and you risk being audited or penalised for deliberately providing incorrect information.”

Working from home expenses and the shortcut method

“One in three Aussies claimed working from home expenses in their tax return last year and we expect this trend to continue” Mr Loh said.

A common mistake we see is people using the working from home shortcut method to claim their working from home expenses and then double dipping, claiming additional amounts in their return for expenses such as their mobile phone and internet bills, as well as the decline in value of equipment and furniture.

When the working from home shortcut method is used to claim working from home expenses, it is all-inclusive.

There are three methods available to claim a deduction for working from home expenses depending on individual circumstances, the shortcut, fixed rate and actual cost methods. The method that gives people the best outcome can be used, as long as the eligibility and record-keeping requirements for their chosen method are observed.

Taxpayers can use the home office expenses calculator to help them work out which method will give them the best outcome.

“While the traditional methods require receipts, paperwork and other record keeping, the shortcut method only requires a record of hours worked – diary entries or timesheets will suffice,” Mr Loh said.

When claiming working from home expenses using the shortcut method, the amount needs to be included at the Other work-related expenses question in tax returns with ‘COVID-hourly rate’ in the description field.

If a method other than the shortcut method is used in later years and you want to claim depreciation for an expensive purchase such as a laptop, the correct records for that item must be kept.

“Getting your tax return right is simple if you have the right records. Make sure you have your records before you lodge your tax return and keep your records after you’ve lodged, in case we have any questions. The easiest way to keep track of your records is with the ATO app” Mr Loh said.

“Even if you choose to lodge your tax return with a registered tax agent, it is still your responsibility to make sure the agent has all the correct records” explains Mr Loh.

Car expenses

Nearly 3 million people claimed work-related car expenses in 2021 and one of the most common mistakes was people using the cents per kilometre method to make their claim, and then double dipping by claiming expenses separately such as fuel, car insurance, and registration.

The cents per kilometre rate is all-inclusive and covers decline in value, registration, insurance, maintenance, repairs, and fuel costs. These expenses can’t be added on top of the rate when calculating deductions.

The ATO will also be taking a closer look at claims calculated using the logbook method, to ensure they reflect people’s circumstances coming out of the pandemic.

“You must choose your preferred method when calculating car expenses, the cents per kilometre or the logbook method. Just because there is a dip in the road, doesn’t mean you can double dip your car expenses” Mr Loh said.

Reimbursed expenses

Finally, the ATO is making sure taxpayers aren’t claiming expenses where they have already been reimbursed by their employer.

“If your boss has reimbursed your dry-cleaning costs for your uniform, but you then claim laundry deductions on your tax return, well you’re picking your neighbours’ pockets” Mr Loh said.

For more information visit ato.gov.au/deductions

Tax Time Targets

Mon, 20 Jun 2022 03:26:36 GMT

The ATO has flagged four priority areas this tax season where people are making mistakes.

With tax season almost upon us the Australian Taxation Office (ATO) has revealed its four areas of focus this tax season.

Record-keeping
Work-related expenses
Rental property income and deductions, and
Capital gains from crypto assets, property, and shares.

In general, there are three ‘golden rules’ when claiming tax deductions:

You must have spent the money and not been reimbursed.
If the expense is for a mix of work related (income producing) and private use, you can only claim the portion that relates to how you earn your income.
You need to have a record to prove it.

1.0 Record keeping

101 of working with the ATO is that you can’t claim it if you can’t prove it. If you are audited, the ATO will disallow deductions for unsubstantiated or unreasonable expenses. Even if the expense is below the substantiation threshold of $300 ($150 for laundry), the ATO might ask how you came up with that number. For example, if you claim $300 in work related expenses (that is, make a claim right up to the substantiation threshold), how did you come up with that number and not something else?

In addition to the obvious records of salary, wages, allowances, government payments or pensions and annuities, you need to keep records of:

Interest or managed funds.

Records of expenses for any deductions claimed including a record of how that expense relates to the way you earn your income. That is, the expense must be related to how you earn your income. For example, if you claim the cost of RAT tests, you need to be able to prove that the RAT test was necessary to enable you to work. If you were working from home and not required to leave home, it will be harder to claim the cost of the test.

Assets such as shares or units in a trust, rental properties or holiday homes, if you purchased a home or inherited a property, or disposed of an asset (including cryptocurrency).

You need to keep your records for five years. These can be digital copies of the records as long as they are clear and legible copies of the original. If your records are digital, keep a backup.

Records can be tax invoices, receipts, diary entries or something else that proves you incurred the expense and how it related to how you earn your income.

2.0 Work-related expenses

To claim a deduction, you need to have incurred the expense yourself and not been reimbursed by your employer or business, and the expense needs to be directly related to your work.

What expenses are related to work?

You can claim a deduction for all losses and outgoings “to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.” That is, there must be a nexus between the expenses you are claiming and how you earn your income.

It all sounds simple enough until you start applying this rule. Take the example of an actor. To land the acting job she needs to attend auditions. She wants to claim the cost of having her hair and make-up done for the audition. But, because she is not generating income at the stage of the audition, she cannot claim her expenses. The expense must be related to how you are currently earning your income, not future potential income. The same issue applies to upskilling. If you attend investment seminars with the intention of building your investment portfolio the seminar is not deductible as a self-education expense unless it relates to managing your existing investment portfolio – not a future one. Or, a nurse’s aide who attendees university to qualify as a nurse. The university degree and the expenses associated with this are not deductible as the nursing degree is not required to fulfil the role of a nurse’s aide.

The second area of confusion is over what can be claimed for work. If the item is “conventional” it’s unlikely to be deductible. For example, you can’t claim conventional clothing (including footwear) as a work-related expense, even if your employer requires you to wear it and you only wear the items of clothing at work. To be deductible clothing must be protective, occupation specific such as a chef’s chequered pants, a compulsory uniform, or a registered non-compulsory uniform.

Work related or private?

Another area of confusion is where expenses are incurred for work purposes but used privately. Internet access or mobile phone services are typical. A lot of people take the view that the expense had to be incurred for work so what does it matter if it’s used for private purposes? But, if you use the service on more than an ad-hoc basis for any purpose other than work, then the expense needs to be apportioned and only the work-related percentage claimed as a deduction. And yes, the ATO does check usage in an audit.

Claims for COVID-19 tests will be a test of this rule. COVID-19 tests are deductible from 1 July 2021 if the purpose was to determine whether you may attend or remain at work. The tax deduction does not apply if you worked from home and didn’t intend to attend your workplace, or the test was used for private purposes (for example, to tests the kids before school).

Claiming work from home expenses

Last financial year, one in three Australians claimed working from home expenses. Now we’re out of the pandemic, the ATO will be focussing specifically on what is being claimed. If you claimed work from home expenses last year and returned to the office this year, then there should be a reduction in your work from home claim. The ATO will be looking for discrepancies.

If you are claiming your expenses, there are three methods you can use:

The ATO’s simplified 80 cents per hour short-cut method – you can claim 80 cents for every hour you worked from home from 1 March 2020 to 30 June 2022. You will need to have evidence of hours worked like a timesheet or diary. The rate covers all of your expenses and you cannot claim individual items separately, such as office furniture or a computer.
Fixed rate 52 cents per hour method – applies if you have set up a home office but are not running a business from home. You can claim 52 cents for every hour and this covers the running expenses of your home. You can claim your phone, internet, or the decline in value of equipment separately.
Actual expenses method – you can claim the actual expenses you incur (and reduce the claim by any personal use and use by other family members). You will need to ensure you have kept records such as receipts to use this method.

It’s this last method, the actual method, the ATO is scrutinising because people using this method tend to lodge much higher claims in their tax return. Ineligible expenses include:

Personal expenses such as coffee, tea and toilet paper
Expenses related to a child’s education, such as online learning courses or laptops
Claiming large expenses up-front (instead of claiming depreciation for assets), and
Occupancy expenses such as rent, mortgage interest, property insurance, and land taxes and rates, that cannot generally be claimed by employees working from home (especially by those who are working from home solely due to a lockdown).

3.0 Rental property income and deductions

For landlords, the focus is on ensuring that all income received, whether long-term, short-term, rental bonds, back payments, or insurance pay-outs, are recognised in your tax return.

If your rental property is outside of Australia, and you are an Australian resident for tax purposes, you must recognise the rental income you received in your tax return (excluding any tax you have paid overseas), unless you are classified as a temporary resident for tax purposes. You can claim expenses related to the property, although there are some special rules that need to be considered when it comes to interest deductions. For example, if you have borrowed money from an overseas lender you might be subject to withholding tax obligations.

Co-owned properties

For tax purposes, rental income and expenses need to be recognised in line with the legal ownership of the property, except in very limited circumstances where it can be shown that the equitable interest in the property is different from the legal title. The ATO will assume that where the taxpayers are related, the equitable right is the same as the legal title (unless there is evidence to suggest otherwise such as a deed of trust etc.,).

This means that if you hold a 25% legal interest in a property then you should recognise 25% of the rental income and rental expenses in your tax returns even if you pay most or all of the rental property expenses (the ATO would treat this as a private arrangement between the owners).

The main exception is where the parties have separately borrowed money to acquire their interest in the property, then they would claim their own interest deductions.

4.0 Capital gains from crypto, property or other assets

If you dispose of an asset – property, shares, crypto or NFTs, collectables (costing $500 or more) – you will need to calculate the capital gain or loss and record this in your tax return. Capital gains tax (CGT) does not apply to personal use assets such as a boat if you bought it for less than $10,000.

Crypto and capital gains tax

A question that often comes up is when do I pay tax on cryptocurrency?

If you acquire the cryptocurrency to make a private purchase and you don’t hold onto it, the crypto might qualify as a personal use asset. But in most cases, that is not the case and people acquire crypto as an investment, even if they do sometimes use it to buy things.

Generally, a CGT event occurs when disposing of cryptocurrency. This can include selling cryptocurrency for a fiat currency (e.g., $AUD), exchanging one cryptocurrency for another, gifting it, trading it, or using it to pay for goods or services.

Each cryptocurrency is a separate asset for CGT purposes. When you dispose of one cryptocurrency to acquire another, you are disposing of one CGT asset and acquiring another CGT asset. This triggers a taxing event.

Transferring cryptocurrency from one wallet to another is not a CGT disposal if you maintain ownership of the coin.

Record keeping is extremely important – you need receipts and details of the type of coin, purchase price, date and time of transactions in Australian dollars, records for any exchanges, digital wallet and keys, and what has been paid in commissions or brokerage fees, and records of tax agent, accountant and legal costs. The ATO regularly runs data matching projects, and has access to the data from many crypto platforms and banks.

If you make a loss on cryptocurrency, you can generally only claim the loss as a deduction if you are in the business of trading.

Gifting an asset might still incur tax

Donating or gifting an asset does not avoid capital gains tax. If you receive nothing or less than the market value of the asset, the market value substitution rules might come into play. The market value substitution rule can treat you as having received the market value of the asset you donated or gifted for the purpose of your CGT calculations.

For example, if Mum & Dad buy a block of land then eventually gift the block of land to their daughter, the ATO will look at the value of the land at the point they gifted it. If the market value of the land is higher than the amount that Mum & Dad paid for it, then this would normally trigger a capital gains tax liability. It does not matter that Mum & Dad did not receive any money for the land.

Donations of cryptocurrency might also trigger capital gains tax. If you donate cryptocurrency to a charity, you are likely to be assessed on the market value of the crypto at the point you donated it. You can only claim a tax deduction for the donation if the charity is a deductible gift recipient and the charity is set up to accept cryptocurrency.

What to Expect from the New Government

Mon, 20 Jun 2022 03:25:34 GMT

Anthony Albanese has been sworn in as Australia’s 31st Prime Minister and a Government formed. We look at what we know so far about the policies of the new Government in an environment with plenty of problems and no easy fixes.

The Economy

The Government has stated that its economic priority is, “creating jobs, boosting participation, improving and increasing productivity, generating new business investment, and increasing wages and household incomes.”

A second Federal Budget will be released in October this year to set the fiscal policy direction of the Government. The Albanese Government has stated that its focus is on growing the economy as opposed to increasing taxes, but it is a delicate balance to keep growth ahead of inflation. Treasurer Jim Chalmers has said that the Government will look to “redirect spending from unproductive purposes to more productive purposes.”

In a recent speech , Treasury Secretary Dr Steven Kennedy, summed it up when he said that the most significant economic development of late has been the, “…higher-than-expected surge in inflation. Headline inflation reached 5.1% in the March quarter of 2022, the highest rate of inflation in more than 2 decades… Price increases are reflecting a range of shocks, some temporary and some more persistent.” These shocks include:

Increased global demand for goods straining supply chains, increasing shipping costs, and clogging ports;
The Russian invasion of Ukraine which sharply increased the price of oil, energy and food. Russia accounts for 18% of global gas and 12% of global oil supply. Together Russia and Ukraine account for around one quarter of global trade in wheat; and
COVID-19 lockdowns in China impacting supply chains. China maintains a zero-COVID policy.

In Australia, energy prices have contributed strongly to inflation (the temporary reduction in fuel excise ends on 28 September 2022).

Personal income tax

The 2019-20 Budget announced a series of personal income tax reforms. Stage 3 of those reforms is legislated to commence on 1 July 2024. Stage 3 radically simplifies the tax brackets by collapsing the 32.5% and 37% rates into a single 30% rate for those earning between $45,001 and $200,000. Mr Albanese told Sky News, “People are entitled to have that certainty of the tax cuts that have been legislated… We won’t be changing them. What we want going forward is that certainty.”

Where will the money come from?

It is unclear at this stage how the Government intends to tackle the $1.2 trillion deficit. The general commentary from Finance Minister Katy Gallagher is that Treasury and Finance have been tasked with working through the Budget line by line to, “…see where there are areas where we can make sensible savings and return that money back to the Budget.”

Multinationals

Multinationals paying their fair share of tax was a go-to target during the election campaign. The plan for multinationals implements elements of the OECD’s two-pillar framework to reform international taxation rules and ensure Multinational Enterprises (MNEs) are subject to a minimum 15% tax rate from 2023. Australia and 129 other countries and jurisdictions, representing more than 90% of global GDP, are signatories to the framework.

The Government’s multinational policy supports the OECD framework by:

Limiting debt-related deductions by multinationals at 30% of profits, consistent with the OECD’s recommended approach, while maintaining the arm’s length test and the worldwide gearing ratio.
Limiting the ability for multinationals to abuse Australia’s tax treaties when holding intellectual property in tax havens from 1 July 2023. A tax deduction would be denied for payments for the use of intellectual property when they are paid to a jurisdiction where they don’t pay sufficient tax.
Introducing transparency measures including reporting requirements on tax information, beneficial ownership, tax haven exposure and in relation to government tenders.

The reforms will follow consultation and are not anticipated to take effect until 2023.

No change to SG rate and rate increase

No change to the legislated superannuation guarantee rate increase. The SG rate will increase to 10.5% on 1 July 2022 and steadily increase by 0.5% each year until it reaches 12% on 1 July 2025.

What’s changing on 1 July 2022?

Tue, 10 May 2022 05:56:38 GMT

A series of reforms and changes will commence on 1 July 2022. Here’s what is coming up:

For Business

Superannuation guarantee increase to 10.5%

The Superannuation Guarantee (SG) rate will rise from 10% to 10.5% on 1 July 2022 and will continue to increase by 0.5% each year until it reaches 12% on 1 July 2025.

If you have employees, what this will mean depends on your employment agreements. If the employment agreement states the employee is paid on a ‘total remuneration’ basis (base plus SG and any other allowances), then their take home pay might be reduced by 0.5%. That is, a greater percentage of their total remuneration will be directed to their superannuation fund. For employees paid a rate plus superannuation, then their take home pay will remain the same and the 0.5% increase will be added to their SG payments.

$450 super guarantee threshold removed

From 1 July 2022, the $450 threshold test will be removed and all employees aged 18 or over will need to be paid superannuation guarantee regardless of how much they earn. It is important to ensure that your payroll system accommodates this change so you do not inadvertently underpay superannuation.

For employees under the age of 18, super guarantee is only paid if the employee works more than 30 hours per week.

Profits of professional services firms

The ATO has been concerned for some time about how many professional services firms are structured – specifically, professional practices such as lawyers, accountants, architects, medical practices, engineers, architects etc., operating through trusts, companies and partnerships of discretionary trusts and how the profits from these practices are being taxed.

New ATO guidance that comes into effect from 1 July 2022, takes a strong stance on structures designed to divert income in a way that results in principal practitioners receiving relatively small amounts of income personally for their work and reducing their taxable income. Where these structures appear to be in place to divert income to create a tax benefit for the professional, Part IVA may apply. Part IVA is an integrity rule which allows the Tax Commissioner to remove any tax benefit received by a taxpayer where they entered into an arrangement in a contrived manner in order to obtain a tax benefit. Significant penalties can also apply when Part IVA is triggered.

A new method of assessing the level of risk associated with profits generated by a professional services firm and how they flow through to individual practitioners and their related parties, will come into effect from 1 July 2022. Professional firms will need to assess their structures to understand their risk rating, and if necessary, either make changes to reduce their risks level or ensure appropriate documentation is in place to justify their position.

Lowering tax instalments for small business – PAYG

PAYG instalments are regular prepayments made during the year of the tax on business and investment income. The actual amount owing is then reconciled at the end of the income year when the tax return is lodged.

Normally, GST and PAYG instalment amounts are adjusted using a GDP adjustment or uplift. For the 2022-23 income year, the Government has set this uplift factor at 2% instead of the 10% that would have applied. The 2% uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods for instalments for the 2022-23 income year:

Up to $10 million annual aggregated turnover for GST instalments, and
$50 million annual aggregated turnover for PAYG instalments

The effect of the change is that small businesses using this PAYG instalment method will have more cash during the year to utilise. However, the actual amount of tax owing on the tax return will not change, just the amount you need to contribute during the year.

Trust distributions to companies

The ATO recently released a draft tax determination dealing specifically with unpaid distributions owed by trusts to corporate beneficiaries. If the amount owed by the trust is deemed to be a loan then it can potentially fall within the scope of the integrity provisions in Division 7A. If certain steps are not taken, such as placing the unpaid amount under a complying loan agreement, these amounts can be treated as deemed unfranked dividends for tax purposes and taxable at the taxpayer’s marginal tax rate. The ATO guidance deals specifically with, and potentially changes, when an unpaid entitlement to trust income will start being treated as a loan depending on the wording of the resolution to pay a distribution. The new guidance applies to trust entitlements arising on or after 1 July 2022.

For you

Home loan guarantee scheme extended

The Home Guarantee Scheme guarantees part of an eligible buyer’s home loan, enabling people to buy a home with a smaller deposit and without the need for lenders mortgage insurance. An additional 25,000 guarantees will be available for eligible first home owners (35,000 per year), and 2,500 additional single parent family home guarantees (5,000 per year).

Your superannuation

Work-test repeal – enabling those under 75 to contribute to super

Currently, a work test applies to superannuation contributions made by people aged 67 or over. In general, the work test requires that you are gainfully employed for at least 40 hours over a 30 day period in the financial year.

From 1 July 2022, the work-test has been scrapped and individuals aged younger than 75 years will be able to make or receive non-concessional (including under the bring-forward rule) or salary sacrifice superannuation contributions without meeting the work test, subject to existing contribution caps.

The work test will still apply to personal deductible contributions.

This change will also see those aged under 75 be able to access the ‘bring forward rule’ if your total superannuation balance allows. The bring forward rule enables you to contribute up to three years’ worth of non-concessional contributions to your super in one year.

Downsizer contributions from age 60

From 1 July 2022, eligible individuals aged 60 years or older can choose to make a ‘downsizer contribution’ into their superannuation of up to $300,000 per person ($600,000 per couple) from the proceeds of selling their home. Currently, you need to be 65 years or older to utilise downsizer contributions.

Downsizer contributions can be made from the sale of your principal residence that you have owned for the past ten or more years. These contributions are excluded from the age test, work test and your total superannuation balance (but not exempt from your transfer balance cap).

First home saver scheme – using super to save for a first home

The First Home Super Saver Scheme enables first home buyers to withdraw voluntary contributions they have made to superannuation and any associated earnings, to put toward the cost of a first home. At present, the maximum amount of voluntary contributions you can make and withdraw is $30,000. From 1 July 2022, the maximum amount will increase to $50,000. The benefit of this scheme is the concessional tax treatment of superannuation.

Fuel Tax Credit Changes

Tue, 10 May 2022 04:18:54 GMT

The Government temporarily halved the excise and excise equivalent customs duty rates for petrol, diesel and all other petroleum-based products (except aviation fuels) for 6 months from 30 March 2022 until 28 September 2022. This has caused a reduction in fuel tax credit rates.

During this 6 month period, businesses using fuel in heavy vehicles for travelling on public roads won’t be able to claim fuel tax credits for fuel used for this purpose. This is because the road user charge exceeds the excise duty payable, and this reduces the fuel tax credit rate to nil.

You can find the ATO’s updated fuel tax credit rates that apply for the period from 30 March 2022 to 30 June 2022 here. The ATO’s fuel tax credit calculator has been updated to apply the current rates.

ATO ramps up heat on directors

Tue, 10 May 2022 04:17:01 GMT

Throughout March, the ATO sent letters to directors who are potentially in breach of their obligations to ensure that the company they represent has met its PAYG withholding, superannuation guarantee charge, or GST obligations.

These letters are a warning shot and should not be ignored.

The director penalty regime ensures that directors are personally liable for certain debts of the company if the debts are not actively managed. The liability applies to both current and former directors.

To recover this debt, the ATO will issue a director penalty notice to the individual directors. The ATO can then take action to recover the unpaid amount, including:

By issuing garnishee notices,
By offsetting tax credits owed to the director against the penalty, or
By initiating legal recovery proceedings against the director.

In some cases it is possible for the penalty to be remitted but this depends on when the PAYGW, GST or SGC amounts are reported to the ATO. For example, in some cases the penalty can be remitted if an administrator or small business restructuring practitioner is appointed to the company, or the company begins to be wound up. However, this is normally only possible for PAYGW and GST amounts if they are reported to the ATO within 3 months of the due date. For SGC amounts this is only possible if the unpaid amount is reported by the due date of the SGC statement.

If the unpaid amounts are not reported to the ATO by the relevant deadline then the only way for the penalty to be remitted is for the debt to be paid in full. Winding up the company at this stage will not make the liability of the directors go away.

If you have received a warning letter from the ATO or a director penalty notice then please contact us immediately.

Changes to Pandemic Leave Disaster Payment Rules

Tue, 08 Feb 2022 04:21:34 GMT

The rules for the Pandemic Leave Disaster Payment, the payment accessible to those who have lost work because they have had to self-isolate with COVID-19, or are caring for someone who contracted it, changed on 18 January 2022.

The new rules change the definition of a close contact in line with the harmonised national definition. The payment is now accessible if you are a close contact because you either usually live with the person who has tested positive with COVID-19, or have stayed in the same household for more than 4 hours with the person who has tested positive with COVID-19 during their infectious period.

The payment provides:

$450 if you lost at least 8 hours or a full day’s work, and less than 20 hours of work
$750 if you lost 20 hours or more of work.

To claim the payment, you will need to be an Australian citizen, permanent visa holder (or temporary visa holder with a right to work) or a New Zealand passport holder. The payment is also subject to means testing with a $10,000 illiquid assets test.

If Santa was an Australian Tax Resident

Mon, 13 Dec 2021 05:33:43 GMT

A lighter look at the complexity of Australian taxation laws and the year that has been.

Dear Mr Claus,

Thank you for the opportunity to provide strategic business, tax and compliance advice for your operation. We’re pleased you have initiated this advice as the Australian Taxation Office (ATO) has instigated a number or reviews that may impact on your operations and your team, and its relationship to contractors. Some of these issues have been exacerbated by the pandemic.

We have identified a number of areas of concern as a starting point for further discussions. These include:

Western Australia border closures and ‘elf’ contractors

We understand that the hard border closure in Western Australia has created a series of logistical challenges for your delivery schedule. The very specific timing and nature of the gift delivery mean that, while existing vaccinated team members can enter Western Australia on a G2G pass, it is not possible to fulfil the 14 day quarantine requirements. To manage the Christmas Eve requirements, you have instigated a relationship with a local contractor.

We have several concerns about this relationship. Leaving aside our capacity to verify the existence of the elf in question, the elf appears to be an individual and not operating as a logistics specialist – no ABN is on record. Based on the information you have provided to us it appears that the elf is likely to be considered an employee of yours regardless of what your performance contract specifies. As such, you will be liable for superannuation guarantee and tax will need to be withheld from any payment to them. We refer you to the ATO’s contractor checklist.

The nature of the payment to the elf is also of concern. “Goodwill to all men” is an intangible asset and as such, we may need to bring in a specialist valuer. This asset has been a globally scare commodity over the last few years and while supply has improved dramatically since January 2021 and spikes in December each year, the normalised value is likely to be significant.

Business Structure Viability

The fact that you run a global enterprise that generates no income or profit but ‘gifts’ millions of toys each year produced by your offshore factory, has significant brand value, is represented extensively in merchandise, your spokespeople are employed by shopping centres all around the world, but you have never lodged a tax return or paid tax in Australia, is likely to trigger an ATO investigation. There is also a risk that the Serious Financial Crime Taskforce might become involved.

As discussed, we do not believe that the “it’s magic” argument will suffice in the event of an investigation. The argument has been tested previously with the ATO to no avail.

Your enterprise’s lack of structure also means that you are missing out on significant benefits. For example, tax deductions might be available for expenses you incur. A number of significant changes were made in recent years enabling businesses to immediately deduct the cost of assets used to produce income.

Expenses Incurred

Your flying reindeers are likely to be considered beasts of burden and as such can be depreciated as plant. However, a deduction is only available to the extent that the reindeer are used to produce income that is taxable in Australia.

At present, you do not make any claim for expenses incurred during your Christmas Eve deliveries. While we understand food – cookies, reindeer food, glasses of milk and the occasional tipple of scotch – is provided free by the world’s children, there are likely to be other expenses that you incur. The cost of your uniform, dry-cleaning (removing chimney soot), and postage, to name a few.

Research & Development

We understand that the ‘flying sleigh’ was developed in your workshop and the technology has developed markedly over the years. In addition, your purpose built ‘naughty or nice’ technology system is unique (we note our concerns about potential privacy breaches and a lack of an opt in/opt out system; I know you have been watching the detrimental brand impact on several social media outlets). If incorporated, there is a potential to access the R&D tax incentive that provides entities with a turnover of less than $20m a refundable tax credit of your corporate tax rate plus 18.5%. The value of the tax offset is lower for companies with a turnover of $20m or more.

The technology developed in your workshop, if patented and commercialised, could revolutionise logistics and put a whole new meaning to same day delivery. We are certain that Australia Post in particular, would be very interested in entering into discussions with you.

Global Taxation

There have been significant shifts over recent years to ensure that multinational enterprises pay tax in the country where they generate their income. The increase of digitalisation has only exacerbated the issue. While not earning an income, your enterprise operates globally with a workshop located in the North Pole and delivers to clients across the globe.

Representation in a particular country may also be enough to make your operation subject to local tax laws. You appear to have local agents – several thousand Santa representatives – with authority to operate on your behalf in shopping centres across Australia. These agents commit the operation with the promise of toys to millions of children. A local agent acting with authority may expose you to local tax laws. This is an issue that may extend well beyond Australia and requires urgent assessment.

As discussed, there are currently no provisions within Australian tax law to allow the Commissioner the discretion to ignore your tax liabilities as a goodwill gesture. Please contact us urgently regarding these issues.

Thank you.

ATO Guidance: Working From Home Shortcut

Wed, 27 Oct 2021 06:15:53 GMT

The Australian Taxation Office has extended the working from home (WFH) shortcut method to 30 June 2022.

The temporary shortcut method has been available for employees who worked from home and incurred some additional running expenses as a result.

It allows them to easily work out their WFH expenses from 1 March 2020 to 30 June 2020, and the whole of the 2020–21 income year.

Its extension — due to the continued extenuating circumstances of COVID-19 and continued lockdowns since 1 July 2021 — means that the 80 cents per hour method is now also available for the whole of the 2021–22 income year.

Employees may continue to use either of the alternative methods:

▪️ Fixed-rate method (52 cents per hour); or
▪️ Actual cost method.

These two methods will be the only options for claiming deductions for WFH expenses after 30 June 2022.

It is important that employees keep an accurate record of the number of hours they have WFH, such as a timesheet, roster or diary. This will be needed back to 1 July 2021 for claims that include the period from the start of the 2021–22 income year until now, as well the remainder of this income year.

Further information is available here:

https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/Home-office-expenses/Shortcut-method/

For the 2022–23 income tax return, the ATO is looking to modernise the 52 cents per hour fixed rate method to make it easier and simpler to use, given that, increasingly, Australians will be WFH in the longer term. The ATO will provide further information on this later.

Tax Time 2021: Am I Taxed on an Insurance Payout?

Tue, 08 Jun 2021 00:50:43 GMT

Australia has had its fair share of disasters over the last few years –

Drought, bushfires and floods – that have ramped up the volume of insurance claims. Most people would assume that if and when they need to claim on their insurance, the insurance payout covers the damage and is not income assessed for tax purposes – but this is not always the case.

Insurance payouts for damaged or destroyed personal items are generally not taxed. For example, any insurance payout you receive for your family home won’t necessarily be taxed. But, the rules are different if you have used your home to produce an income, for example, you have used part of your home as a home business or you have rented out part of your home.

The rules are also different if the item is a personal asset costing more than $10,000 or if the asset is a collectible that cost more than $500. Where the insurance proceeds exceed the original cost of the asset, that is, the asset appreciated in value, then capital gains tax might apply.

And, if the asset damaged is related to a business or an income producing asset like a rental property, the rules are also different.

Business Premises, Trading Stock and Depreciating Assets

For businesses that have had trading stock damaged or destroyed, any insurance payout is taxable. For example, the payouts on claims coming through from the enforced lockdowns for spoiled perishable stock would need to be included in the business’s tax return. This is because the insurance premiums would have been claimed by the business as an expense. It is just a question of how the insurance is taxed.

If your business premises are damaged and the insurance covers repairs, then the amount you receive is generally taxed as income if you can claim a deduction for the repair costs. Where the premises are damaged or destroyed, then we’ll need to work with you to identify if you have made a taxable gain or loss.

When it comes to depreciating assets like machinery, then it starts getting more complex. In general, if the insurance payout exceeds the written down value, then the payout is included in the business’s assessable income, and if less, you can claim a deduction for the difference. However, there are also special rules for work cars, small businesses, and where a replacement item is purchased.

Rental Properties

A rental property is an income producing asset and, in most cases, the cost of insurance policies relating to the property would have been claimed as an expense. For example, if you receive a payout for your rental property as a result of a disaster, generally, you will need to include at least part of this amount as income in your tax return. This could include insurance payouts for loss of rental income, repairs, replacements of destroyed assets, or money received from a relief fund.

The treatment of the insurance proceeds depends on what the payout is for, how the insurance is used, and whether the rental property was vacant or in use.

A recent case before the Administrative Appeals Tribunal (AAT) shows how tricky this area of the tax rules can be. In this case, the taxpayer initially received insurance proceeds of $24,000 for lost rental income after their property sustained storm and flood damage. The taxpayer had declared this amount as income. All good so far.

Then, the taxpayer received an additional $250,000 from the insurer with the payment described as “in consideration of the taxpayer releasing the insurer from all liability past, present and future under the insurance policy”. The taxpayer did not believe this money was for him to repair his property so did not claim it in his tax return. But, he did claim a deduction for repair costs totalling $130,000 in two income years.

The ATO subsequently audited the taxpayer and issued an assessment for the full $250,000. The AAT agreed with the ATO even though the taxpayer had only claimed $130,000 in repairs. It’s possible this case will go to appeal but it serves as a warning that any lump sum payouts need to be very carefully assessed and dealt with.

If you have been impacted by a disaster and are uncertain of how any insurance proceeds will be taxed, please talk to us and we can work with you to help you understand your position.

SMSF: When Expenses and Investments Are Not at Arm’s-Length

Mon, 10 May 2021 02:09:40 GMT

We often get questions from clients about what they can and cannot do in their SMSF. Often the questions relate to related party transactions – that is, interactions between the SMSF, its assets, and its members (or relatives of members). We’ve set out some of the common questions and answers.

In general, all interactions between your SMSF and its members should be at arm’s length – that is, the terms of the transactions are the same as what would be entered into between independent parties, but there are circumstances where the interests of the fund and its members intersect. A transaction which is favourable to either party is deemed to be at non-arm’s length terms, which could create some taxation issues.

Can I Charge My SMSF For Work That I Do?

Let’s say your SMSF owns a residential rental property and the property needs a fence. You’re a builder and can build the fence. Can you charge the SMSF for the fence? The answer is maybe.

What you charge and how it is charged is critically important here.

If the fund acquires the fencing material, and is invoiced by the building business to construct the fence, and pays a market rate for the labour involved, then there is unlikely to be a problem as the charges are transparent and at market value. However, documentation is essential and you may also need to verify that the labour cost charged is the market rate.

However, if the business decides to install the fence for no charge, or alternatively charge an excessively high rate, then the transaction could be deemed to be non-arm’s length.

If the building business acquires the fencing material and then installs the fence at arm’s length rates for the SMSF, this could still cause in-house asset issues as the fund has acquired an asset from the member; the fencing material. It all gets very messy and it might just be easier to have someone else do it!

What happens if the building business either charges below market rates or does not charge the fund for labour cost? The rules have recently been extended to capture non-arm’s length expenses where a related party is acting in a capacity other than as trustee and a non-arm’s length expense was not charged. i.e., where the fund benefits from work performed by a member in a capacity other than trustee. The ATO sees these non-arm’s length expenses as potentially artificially inflating an SMSFs earnings.

The market value of the work performed might be treated as a contribution, or all of the income from the asset could be deemed to be non-arm’s length, which means the highest marginal tax rate will be charged on all income and capital gains derived from the asset.

This same scenario applies to any member of an SMSF (or relative of a member) who provides services to their SMSF – electricians, plumbers, accountants, real estate agents, etc.

The rule is, work that is done for the SMSF by a related party in their professional capacity must be equivalent to arm’s length market value, with no acquisition of materials. Free, below market value, above market value, may breach the superannuation rules. And, where work is performed by a related party at market value, it must be documented and provable.

If you are not a qualified professional you cannot undertake work on behalf of your fund unless you are fulfilling your duties as trustee.

Can I Charge For The Work I Do To Administer My Fund?

Trustees of an SMSF cannot be remunerated for the work that they do for the fund. The exception is where you are qualified to provide certain services to your fund and act in that professional capacity. For example, you are a real estate agent and are buying and selling property assets for the fund. In this case, you are not being paid for work you do in your capacity as trustee but as a professional providing a service at market value (see Can I charge my SMSF for work that I do? ).

Can My SMSF Purchase a Rental Property That I Own?

Your SMSF cannot acquire property from a related party of the fund unless the property (land and buildings) is used wholly and exclusively in a business (business real property).

Under these circumstances your SMSF could purchase the commercial premises used by a business you own and lease the property back on commercial terms.

If business real property is used in a primary production business such as a farm, it can still meet the test of being used wholly and exclusively in a business even if it contains a dwelling that is used for private or domestic purposes. But, the dwelling must be in an area of land no more than two hectares and the main use of the whole property can’t be for domestic or private purposes.

Can I Lend Money To My SMSF?

Members of a fund can lend money to their SMSF in very limited circumstances, and usually to buy property, if the following conditions must be met:

It is a limited recourse loan to the SMSF and is appropriately documented, and
The SMSF is not charged higher than an arm’s-length rate of interest for borrowing, i.e., the loan is on commercial terms, there are ‘safe harbour’ guidelines provided around loan to value ratios, and repayment terms to ensure the loan is at arm’s-length.

Can My SMSF Lend Me Money?

No. Your SMSF cannot lend you or any of your related parties money. The superannuation rules specifically prohibit the fund providing financial assistance to members. This includes where a member takes money out of the SMSFs account for a short amount of time and replaces it in full. Just don’t do it.

Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

Hunter Headline – Local Business Excellence Awarded at Australian Small Business Champion Awards

Sat, 27 Mar 2021 04:38:02 GMT

A number of local businesses were recently recognised at the Australian Small Business Champion Awards, the only national recognition program dedicated to celebrating small businesses around Australia

The program aims to acknowledge outstanding Australian small businesses and encourage high standards of excellence in small business practice.

The long-awaited ceremony was held on Saturday 27 February at The ICC Sydney, with around 1,000 guests in attendance, and several local businesses were named winners on the evening.

Hunter-based businesses that were recognised include:

Newcastle and Hunter Community Health (Newcastle West) – Professional Medical Services Award;
The Garis Group (Hamilton) – Accounting Services Award;
Hunter Care Group (Cardiff) – Business Growth Award;
Ecoline (Tuggerah) – Specialised Small Business Award; and
SAGE Painting (Merewether) – Trade Services Award.

Each business received an award statuette, certificate and has gained national recognition as a leader in their industry.

Local winners, Newcastle and Hunter Community Health said it was such a thrilling surprise to be acknowledged nationally for their dedication, commitment, and hard work in the medical sector.

“We were extremely proud to be recognised as a finalist. To hear our business being called out as a winner is an experience we will never forget,” Managing Director, Alison McQueen recalls.

“Keeping in mind the safety of our team, and above all else the safety of our clients, has been our priority from day one – I believe it is this continuous commitment to quality care that see us standing today with this award.”

Managing Director of Precedent Productions and Founder of the Awards, Steve Loe said in a year that was plagued by a pandemic and saw many small businesses struggle, it was rewarding to celebrate those who overcame adversity to come out the other side.

“The Australian Small Business Champion Awards is a way to recognise the efforts of small business people whose efforts contribute to the prosperity and vitality of communities across Australia,” Steve said.

“As a small business owner myself, I know the vision and dedication to excellence required to succeed. These traits have been displayed in abundance by all of our 2020 Small Business Champions,” he concluded.

The Awards were presented by Precedent Productions, a small business in its own right, and supported by Major Sponsors, NOVA Employment, Castaway Forecasting and Big Clean.

ATO Eyes 80,000 Late SMSF Returns: ‘3 Strikes and You’re Out’

Mon, 22 Feb 2021 05:15:04 GMT

The ATO has launched a new compliance campaign aimed at driving the lodgement of SMSF annual returns as it chases 80,000 late returns.

Speaking at the SMSF Association National Conference 2021, ATO assistant commissioner, SMSF Segment, Justin Micale said that while the illegal release of super in SMSFs is a continued concern for the ATO, a stronger focus will be placed on the non-lodgement of SMSF annual returns.

Mr Micale revealed that even with the due date for lodgement of the 2019 SMSF annual return being deferred until the 30th of June 2020, the ATO is tracking around an 86 per cent lodgement rate.

“This means that there are still around 80,000 funds yet to lodge this, so we’ve still got some work to do in this area,” he said.

“We understand it’s been a difficult time and we want to help you where your clients have run into difficulties.

“Our message for this group is simple: if you are experiencing difficulties with lodging outstanding returns, contact us and we’ll help you get back on track.”

While there are many reasons for an SMSF to stop lodging, including people experiencing difficulties as a result of COVID-19, Mr Micale noted recent ATO data also showed that lapse lodgement is often an indicator of broader regulatory issues.

“We’ve found that where an SMSF has an unrectified regulatory contravention in a prior year, they often fail to meet their lodgement obligations in subsequent periods,” he said.

“In recent years, there’s also been an increase in the number of new SMSFs established that failed to lodge their first SMSF annual return.

“This is particularly concerning where we can see a subsequent rollover into this SMSF, as this is a strong indicator that an illegal early release may have occurred.

“Non-lodgement and illegal early release go hand in hand, so you can see why we have a strong focus in these two areas.”

Mr Micale said the ATO will ramp up its messaging about the importance of lodging on time and will be starting a communication campaign where a series of letters with escalating warnings will be issued.

“I suppose you could call it a three strikes and you’re out campaign,” he said.

“Our new approach is to firstly help and support trustees. Our initial blue letter will let them know they are required to take action and lodge their return.

“If we don’t get a response to this letter, we’ll issue an orange letter warning of the potential consequences of not lodging their return.

“This includes imposing failure to lodge penalties for all overdue years, raising default assessments for each year of non-lodgement with penalties of up to 75 per cent, issuing a notice of non-compliance and/or disqualifying the trustee.”

Mr Micale said if the ATO still doesn’t get a response, then it will issue the final red letter which is basically a show cause letter instructing the client to tell them why they shouldn’t be subject to any of the consequences as outlined in the previous letter.

“We’ll be reasonable in our approach to this. For instance, if trustees respond to the issuing of a notice of non-compliance by promptly lodging all over SARs and committing to lodging future SARs on time, we’ll consider a vote revoking this notice,” he said.

“It’s important for us to protect SMSFs that are doing the right thing, so we are very serious about getting on top of this lodgement issue.”

Article Source

ATO Reveals STP Reporting Options for Closely Held Payees

Mon, 15 Feb 2021 05:43:43 GMT

Employers with closely held payees will now have three options to report payments through Single Touch Payroll, following guidance from the ATO.

The ATO has confirmed that STP reporting for closely held payees will commence from 1 July, after it had granted these employers a one-year exemption in the midst of the pandemic last year.

Guidance released by the ATO on Monday has revealed that small employers can report payments to closely held payees through STP in three ways: reporting actual payments in real time, reporting actual payments quarterly or reporting a reasonable estimate quarterly.

The first option, reporting actual payments in real time, is in line with how employers would report information on their arm’s length employees through STP on or before each pay day.

The option to report actual payments on a quarterly basis will be due on or before the due date for quarterly business activity statements (BAS).

The final option to report a reasonable estimate quarterly will allow employers to report quarterly amounts that are equal to or greater than 25 per cent of the payee’s total gross payments and tax withheld from the previous finalised payment summary annual report (PSAR).

‘A Game Changer’

The Tax Institute’s senior advocate, Robyn Jacobson, said that while the option was welcomed, tax practitioners would need to carefully consider the implications for clients who commonly determine salaries, wages or directors’ fees after the end of the financial year.

“For those who have for many years ascertained salaries, wages or directors’ fees to closely held payees post-year-end and either amended their BAS or just dealt with the tax obligations upon lodgement of the individual tax return, this is a game changer,” Ms Jacobson told Accountants Daily.

“The ATO will not impose any failure to withhold penalties as long as you have complied with this reasonable quarterly estimate.

“There would, however, be general interest charge, and if you have not met your SG obligations, which in this case would be 28 July, then there would be SGC liabilities.

“What this does is allow a concessional approach to reporting the information through STP, and as far as PAYG withholding is concerned, you have got the ability to adjust post-year-end subject to the imposition of GIC.”

While a finalisation declaration for arm’s length employees is required by 14 July each year, the ATO will allow employers with closely held payees up to the due date of the payee’s income tax return to make a finalisation declaration.

The ATO also notes that STP reports will need to be lodged through an STP-enabled solution, and cannot be lodged through the ATO portals or through a BAS.

View the ATO’s guidance here .

Article Source

Small Business Support Centre Launches in Newcastle

Tue, 22 Sep 2020 09:34:13 GMT

The Business Centre will be able to help even more businesses struggling under COVID-19, via the Small Business Recovery Centre, which was launched earlier this month.

Thanks to the support of the City of Newcastle, The Small Business Support Centre for six months will offer much needed support to businesses wishing to bounce back.

CEO of the Business Centre, Steve Wait, is passionate about the project and the opportunity to be able to offer a huge range of help to businesses who have been blindsided by the pandemic.

“As businesses started to feel the full force of COVID we immediately saw an opportunity to use our experience in disruption to step in fast and help,” he said.

“We applied for and won an Industry Response Grant from the City of Newcastle and are thrilled to have been able to move quickly to get the Small Business Support Centre up and running and have formed a great project team led by our Project Coordinator, Kristin Hughes.

“We are already moving tenants into our heavily subsidised office space and are setting them appointments with our Business Advisors, Experts In Residence, and linking them with all our support partners who have come on board offering their professional services pro bono.”

The Small Business Support Centre will bring together government and non-government agencies, banks and financial service providers, mental health, and well-being providers, all with capability and capacity and good will to lean in and help with economic recovery.

“Providers will give support, information and services, that lead to sustainability and job creation, to small businesses during COVID-19 ,” he said.

“Essentially we are expanding our own capacity to deliver even more tailored services to this cohort that need it most.”

Steve said the Small Business Support Centre is a collaboration between The Business Centre, the City of Newcastle and the city’s Business Improvement Associations. Local businesses including, Enigma Communication and The Garis Group , are major contributors also offering practical business support services pro bono.

“This collaboration is about connecting established business owners with business experts and low-cost temporary office space, with the goal to protect and stabilise their business during the COVID-19 pandemic.”

“All business advice and support will be delivered by qualified and experienced individuals from over 20 local organisations.”

BIA Project Lead, Cornelia Schulze, and board member of Newcastle City Business Improvement Associations said the BIAs have reported adverse impacts of members from the COVID-19 pandemic that have ranged from medium to severe.

“The Business Improvement Associations believe that a collaboration with the Business Centre and the City of Newcastle will benefit business with logical and practical support services.

“Our hope is that it will create new ways for our region to help build a framework designed to create easy ways for our members and the wider business community to connect,” she said.

“Ultimately it is about making sure that people who are looking to create business have access to the right support to help them build a resilient and sustainable business.”

IMAGE | Peter Chapman of Enigma Communication, CEO of The Business Centre – Steve Wait, Jim Garis of The Garis Group, Brendan Swansborough of Enigma Communication and John Garis of The Garis Group, all of whom are supporters of and contributors to the Small Business Support Centre.

JobKeeper Alert

Fri, 04 Sep 2020 10:22:40 GMT

With the employee test date for JobKeeper moved to 1 July 2020, some additional employees might have become eligible for JobKeeper. The August JobKeeper monthly business declaration is due by 14 September and is different to the previous form as it covers three JobKeeper fortnights.

Employers need to ensure that they identify all additional employees who could be eligible for JobKeeper to ensure that they comply with the “one in, all in” principle and that they meet the nomination requirements.

The first round of JobKeeper ends on 27 September 2020. To receive JobKeeper from 28 September 2020, employers need to reassess their eligibility with reference to actual GST turnover for the September 2020 quarter (for JobKeeper payments between 28 September to 3 January 2021), and again for December 2020 quarter (for payments between 4 January 2021 to 28 March 2021). However, we are still waiting on the rules relating to these periods to be released.

From this date, the JobKeeper payment rate will reduce and split into a higher and lower rate based on the number of hours the employee worked.

Question of the month

My business received a grant from the State Government. Do I pay tax on it?

Short answer; probably.

Income tax 

Grants are likely to be taxable unless they are specifically excluded from tax.

If the grant relates to your continuing business activities, then it is likely to be included in assessable income for income tax purposes. The position can be different in cases where the payment is made so that the entity can commence a new business or cease carrying on a business.

GST

Government grants are not generally subject to GST unless the grant is for a supply of something. The ATO has indicated that the cashflow boost and JobKeeper payments are not subject to GST, this seems to be on the basis that they are not consideration for a supply.

Normally, we look at whether the entity has to do something to obtain the payment / grant. This could include entering into an agreement to do something or refrain from doing something. If not, there won’t generally be any GST because no supply is or has been made.

JobKeeper turnover calculations

If GST does not apply to the grant, then it should not be included in the decline in turnover test for the initial phase of JobKeeper or the GST turnover figures that are reported to the ATO on a monthly basis by entities that are participating in JobKeeper.

The exception is the university sector where core Commonwealth Government financial assistance provided is included in the JobKeeper turnover tests.

COVID-19 | Job Keeper Payment: Further Guidance for Sole Traders, Trusts, Partnerships & Companies

Fri, 17 Apr 2020 06:35:49 GMT

Guidance around JobKeeper eligibility for sole traders and businesses that operate in the form of a company, trust or partnership has now been updated by the ATO.

In an ATO update on Thursday, such entities will be eligible if they carried on a business in Australia on 1 March 2020; satisfied the fall in turnover test; had an ABN on 12 March; and lodged on or before 12 March either a 2018-19 income tax return, or an activity statement or GST return for any period that started after 1 July 2018 and ended before 12 March 2020.

These entities will then need to nominate an eligible business participant, who must not be employed by the entity, be actively engaged in the business, and be either a sole trader, a partner in a partnership, an adult beneficiary of the trust, or a shareholder or director in the company.

Importantly, the ATO notes that it is the entity, not the eligible business participant, that will receive the JobKeeper payment.

“The exception is a sole trader, who is both the business entity and an eligible business participant, and so receives the JobKeeper payment themselves,” said the ATO.

TaxBanter senior tax trainer Robyn Jacobson said the latest guidance sets out a key difference to the guidance issued to employers, who are required to pay out the minimum $1,500 per fortnight to eligible employees.

“While employers have a wage condition that must be met which requires them to pay a minimum of $1,500 per fortnight to their eligible employees, there is no equivalent condition that applies for the entities that are eligible based on business participation,” Ms Jacobson told Accountants Daily.

“The role of the nominated individual who is actively engaged in the business is to provide a basis for the entity to receive the payment of $1,500 per fortnight.

“The JobKeeper payment received from the ATO forms part of the assessable income of the entity. What the entity does with it after that is up to the entity. There’s no requirement to pay it out, or pay it to the nominated individual,” she added.

“There is no requirement for the entity to register for PAYG withholding, start reporting through Single Touch Payroll, or pay salaries and wages to the individual, which of course isn’t possible for a sole trader, or a partner in a partnership- you can’t pay them a wage from that structure. In the case of a company or a trust, if they’ve only ever made trust distributions or paid dividends, you don’t have to pay the JobKeeper payment as a salary or wage out to the individual.”

Enrolment for the JobKeeper payment will begin from 20 April through an online form that will be made available on the ATO’s website.

Entities that are eligible for payments for either the fortnights starting 30 March 2020 or 13 April 2020 will need to enrol by the end of April.

COVID-19 | ATO to Hold a ‘Strict Line’ on Granting PAYG Withholding Deferrals

Mon, 06 Apr 2020 08:51:53 GMT

The ATO will now only consider deferring PAYG withholding for large businesses where there is a genuine risk of insolvency, but directors have been warned of the significant risks in applying for the relief.

The Tax Office has now clarified its position on its discretion to defer the PAYG withholding, GST and excise obligations of large withholders, following reports that businesses were being allowed to use PAYG withheld to stay afloat amid the ongoing coronavirus crisis.

“The ATO has taken a position not to exercise the discretion to defer the PAYGW, GST and excise obligations of large withholders, except in circumstances where an insolvency event is imminent, and the large withholder can demonstrate that they don’t have access to other sources of funding (e.g. loan facilities, equity contributions from new or existing shareholders, realisation of liquid assets), and the granting of a deferral would result in the large withholder remaining a going concern,” the ATO said.

Gilbert + Tobin partner Muhunthan Kanagaratnam told Accountants Daily that the change in position comes after the ATO had recently granted some businesses a deferral of up to six months, in a bid to free up the withheld amounts for other purposes.

“What seems to have happened is that prior to the release of the JobKeeper wage subsidy, the ATO had been mindful of the impact on taxpayers and had granted some large withholders the ability to defer PAYG withholding, and also GST and excise,” Mr Kanagaratnam said.

“But once the government had come out with its wage subsidy measure, they seem to have taken the position that that is going to be enough and that they don’t need to provide the deferral except in a real solvency circumstance.”

While the law allows for the ATO to exercise discretion on PAYG withholding liabilities, Mr Kanagaratnam said he was unaware of the discretion being exercised on a wide scale.

The ATO said it would now hold a strict line on granting deferrals, with each case to be considered by a panel of senior executive officers.

Directors at risk

The ATO has also noted that a business’s ability to pay the tax at the deferred payment date would also factor in significantly in its approval process, with directors cautioned on their obligations under the Director Penalty Notice (DPN) regime.

“Even with the deferrals that have been granted, the Tax Office has been very mindful of the fact that if the taxpayer ultimately can’t meet its tax liabilities, it still has the normal recourse to put the company into liquidation, take action against the directors, and these are pretty serious consequences,” Mr Kanagaratnam said.

While the ATO’s concession generally applies to large withholders — or those that withheld more than $1 million in tax in the last financial year — Mr Kanagaratnam believes advisers should not be afraid to approach the ATO should the situation call for it.

“My recommendation, certainly to our clients has been, and this is what I would say to advisers as well, is that if you don’t have any other alternative, then you should definitely speak to the ATO,” he said.

“It is across the board, if your clients are having trouble, speak to the ATO, you might be able to get something out of it that they have not set out in their public information — a concession on a taxpayer-by-taxpayer basis.

“Now, they might still say no, but you need to have that conversation and not assume automatically that they will not give the deferral.

“I think the ATO would prefer in the long run that companies remain in business and get through this period.”

The Second $66.1 bn Stimulus Package: What You Need To Know

Mon, 23 Mar 2020 10:04:05 GMT

The Government yesterday released a second, far reaching $66.1 bn stimulus package that boosts income support payments, introduces targeted changes to the superannuation rules, provides cash flow support of up to $100,000 for small business employers, and relaxes corporate insolvency laws.

The stimulus measures are not yet legislated. Parliament will reconvene on Monday 23 March.

The Prime Minister has warned that there are no “quick solutions” and that business should prepare for 6 months of disruption.

In Summary

Business

Tax-free payments up to $100,000 for small business and not-for-profit employers . An increase in the previously announced initial tax-free payments for employers to a maximum of $50,000. In addition to this, a second round of payments will be made up to a maximum of $50,000, accessible from July 2020.
Solvency safety net – temporary 6 month increase to the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000, and an increase in the time companies have to respond from 21 days to 6 months. Directors also are provided with temporary relief from personal liability for trading while insolvent for 6 months.
Access to working capital – Introduction of a Coronavirus SME guarantee scheme protecting financial institutions by guaranteeing 50% of new loans to SMEs.
Sole traders and self-employed eligible for Jobseeker payment – the eligibility criteria to access income support relaxed for the self-employed and sole traders.
Temporary relief from some Corporations Act requirements

Individuals

Early release of superannuation – individuals in financial distress able to access up to $10,000 of their superannuation in 2019-20, and a further $10,000 in 2020-21. The withdrawals will be tax-free and will not affect Centrelink or Veterans’ Affairs payments.
Temporary reduction in minimum superannuation draw down rates – superannuation minimum drawdown requirements for account based pensions and similar products reduced by 50% in 2019-20 and 2020-21.
Deeming rates reduced – from 1 May, superannuation deeming rates reduced further to a lower rate of 0.25% and upper rate of 2.25%.
Supplements increased, access extended and eased – for 6 months from 27 April 2020:

A temporary coronavirus supplement of $550 will be paid to existing income support recipients (people will receive their normal payment plus $550 each fortnight for 6 months).
A second one-off stimulus payment of $750 will be paid automatically from 13 June 2020 to certain income support recipients (in addition to the payment made from 31 March 2020).
Eligibility for access to income support eased to include sole traders and the self-employed, and to those caring for someone infected or in isolation.
Waiting periods and assets tests temporarily waived.

Bankruptcy safety net – temporary 6 month increase to the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor from $5,000 to $20,000.

The Government has flagged that additional stimulus packages will be required.

In detail

Support for business

Tax-free payments up to $100,000 for employers

From: 28 April 2020
Eligibility: Small and medium business entity employers and not-for-profit entities, with an aggregated annual turnover under $50 million.

The Government has increased the previously announced measures to provide cash flow support to business.

Now, eligible businesses with a turnover of less than $50 million will initially be able to access tax-free cash flow support, with the minimum amount being increased to $10,000 and the maximum amount increased to $50,000 (previously $2,000 to $25,000). However, additional support will be provided in the July – October 2020 period so that eligible entities will receive total minimum support of $20,000 and up to $100,000.

In order for a business to qualify for this support it must have been established prior to 12 March 2020. The rules are more flexible for charities because the Government recognises that new charities might be established in response to the pandemic.

The cash flow support measures will be provided in the form of a credit in the activity statement system. The support will be provided in two phases.

The first phase ensures that eligible employers receive a credit equal to 100% of the PAYG amounts withheld from salary and wages paid to employees during the relevant period, up to the maximum amount of $50,000.
The second phase ensures that eligible employers receive another series of credits, equal to the credits that were received under the first phase. For example, if a business received $40,000 of credits in the first phase it will receive a further $40,000 of credits in the second phase. These additional credits will be spread over two or four activity statement periods, depending on whether the employer lodges on a quarterly or monthly basis.

If a business pays salary and wages to employees but is not required to withhold any tax then a minimum payment of $10,000 will be made in the first phase and a further payment of $10,000 will be made in the second phase.

The credits are automatically calculated by the ATO and employers will need to lodge an activity statement to trigger the entitlement. If the credit puts the business in a refund position the excess amount will be refunded by the ATO within 14 days.

Businesses that lodge activity statements on a quarterly basis will be eligible to receive credits in the first phase for the quarters ending March 2020 and June 2020. Credits in the second phase will be available for the quarters ending June 2020 and September 2020. The minimum $10,000 payment will be applied to the first lodgement.

Business that lodge on a monthly basis will be eligible for the credits in the first phase for the March 2020, April 2020, May 2020 and June 2020 lodgements. Credits in the second phase will be available for the June 2020, July 2020, August 2020 and September lodgments. The minimum $10,000 payment will be applied to the first lodgement.

Eligibility for the measure will be based on prior year turnover. We will have to wait for the legislation for the finer details.

Not-for-profit employers, including charities, with an aggregated turnover under $50 million will also be able to access the cash flow support.

See: Cash flow assistance for businesses

Solvency safety net

A safety net has been put in place to protect businesses in temporary financial distress as a result of the pandemic by lessening the threat of actions that could unnecessarily push them into insolvency and force the winding up of the business. These include:

A temporary 6 month increase to the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000.
The time a company has to respond to statutory demands will increase from 21 days to 6 months.
For 6 months, directors will be provided with temporary relief from personal liability for trading while insolvent.
See also bankruptcy safety net below

It will be more important than ever for business to stay on top of their debtors.

Debts incurred will still be payable by the business. Only those debts incurred in the ordinary course of the business will be subject to the safety net measures.

See: Temporary relief for financially distressed businesses

Access to working capital for SMEs – supporting lenders

The Government has announced a Coronavirus SME guarantee scheme that will guarantee 50% of new loans to SMEs up to $20 billion. These loans are new short-term unsecured loans to SMEs.

SMEs with a turnover of up to $50 million will be eligible to receive these loans.

The Government will provide eligible lenders with a guarantee for loans with the following terms:

Maximum total size of loans of $250,000 per borrower.
The loans will be up to three years, with an initial six month repayment holiday.
The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.

Loans will be subject to lenders’ credit assessment processes with the expectation that lenders will look

through the cycle to sensibly take into account the uncertainty of the current economic conditions.

This latest measure builds on the previous initiatives to ensure small business can access capital, including:

An exemption to the responsible lending obligations to enable financial institutions to provide new credit, credit limit increases, and credit variations and restructures,
$15bn to the Australian Office of Financial Management to invest in wholesale funding markets used by small banks and non-banks to enable these lenders to support SMEs, and
Australian Banking Association members will defer loan repayments for 6 months for small businesses (affected small businesses will need to apply for relief).

Sole traders and self-employed eligible for Jobseeker payment

The eligibility criteria to access income support payments will be relaxed to enable the self-employed and sole traders whose income has been reduced, to access support.

Income support for individuals
More financial support for coronavirus affected job seekers

Temporary relief from Corporations Act r equirements

The Treasurer has been given a temporary instrument-making power to amend the Corporations Act to provide relief or modifications to specific compliance obligations.

ASIC has announced measures for those companies with a 31 December financial year that need to hold their AGMs by 31 May 2020, providing a two month no action period and enabling hybrid virtual AGMs.

Individuals

Early release of superannuation

From mid-April, individuals in financial distress will be able to access up to $10,000 of their superannuation in 2019-20, and a further $10,000 in 2020-21. The withdrawals will be tax free and will not affect Centrelink or Veterans’ Affairs payments.

To be eligible to access your superannuation you need to meet the following requirements:

you are unemployed; or
you are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
on or after 1 January 2020:

you were made redundant; or
your working hours were reduced by 20% or more; or
if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20% or more.

For those eligible to access their superannuation, you can apply directly to the ATO through the myGov website from mid-April.

Early access to superannuation

Temporary reduction in minimum superannuation draw down rates

Superannuation minimum drawdown requirements for account-based pensions and similar products will be reduced by 50% in 2019-20 and 2020-21.

The upper and lower social security deeming rates will be reduced further. As of 1 May 2020, the upper deeming rate will be 2.25% and the lower deeming rate 0.25%.

More : Providing support for retirees

Time limited fortnightly $550 ‘coronavirus supplement’

For the next 6 months, the Government is introducing a new Coronavirus supplement to be paid at a rate of $550 per fortnight. This supplement will be paid to both existing and new recipients in the eligible payment categories.

The payment will be made to those receiving:

Jobseeker payment (and those transitioning to the jobseeker payment)
Youth allowance jobseeker
Parenting payment
Farm household allowance
Special benefits recipients

In addition, eligibility to income support payments will be expanded to:

Permanent employees who are stood down or lose their job
Casual workers
Sole traders
The self-employed
Contract workers who meet the income test

The Government notes that these criteria could include those required to care for someone affected by the Coronavirus.

Asset testing has also been reduced and will be waived for 6 months. Income testing will still apply.

The payment is not available if you have access to any employer entitlements such as annual or sick leave or income protection insurance.

Income support for individuals

Second $750 payment to households

The Government is now providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders residing in Australia (see the full list here). The payment will be exempt from taxation and will not count as income for the purposes of Social Security, Farm Household Allowance and Veteran payments.

Payment 1 from 31 March 2020 (previously announced on 12 March): Available to people who are eligible payment recipients and concession card holders at any time between 12 March 2020 to 13 April 2020;
Payment 2 from 13 July 2020 : Available to people who are eligible payment recipients and concession card holders on 10 July 2020.

The payments will be made automatically to those that meet the criteria.

Payments to support households

Bankruptcy safety net

A temporary 6 month increase to the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor will increase from $5,000 to $20,000. In addition, the time a debtor has to respond to a bankruptcy notice will be temporarily increased from 21 days to six months.

Where someone declares their intention to enter voluntary bankruptcy, the period of protection from unsecured creditors will be extended from 21 days to 6 months.

Temporary relief for financially distressed businesses

More information:

Joint media release with The Hon. Scott Morrison MP Prime Minister
Treasury: Support for Businesses
Treasury: Supporting Individuals and Households

The Garis Group will be sending out further announcements and alerts today. If you don’t already, we suggest following our social media accounts ( Instagram and Facebook ) for regular insights during this time.

How to Choose the Right Accountant

Tue, 03 Mar 2020 00:03:51 GMT

Choosing an accountant is like choosing a new business partner. The right accountant will become a trusted colleague you can depend on, who offers advice and guidance as your small business grows. So what are the top things you need to look out for?

Top tips for choosing an accountant

Once you’ve decided it’s time to hire an accountant, the next step is to choose which accountant to hire.

It’s important to take the time to do this carefully, and there are a few things you’ll want to consider first. You’ll need to think about issues such as the accountant’s location, the division of workload and the type of accounting software you’ll use. Consider how much you’ll have to pay the accountant, and whether they can help to reduce your business taxes.

It’s in your company’s best interests to have an experienced, capable person handling one of the most important areas of your business – your finances. The right person will save you time and money year after year. So here are some things you should consider when you’re choosing an accountant.

Ask yourself if location matters

It used to be important to have your company’s accountant located nearby. But today, more companies are collaborating online, using cloud-based technology to manage their business. This means that location is less of an issue. With cloud accounting , you and your accountant can view identical real-time data at the same time – no matter where you are.

The decision about where to find your accountant really comes down to what suits your company best. Depending on how you want to handle the finances, your accountant could really be based anywhere in the world. For example, if you’re happy to collaborate via email, phone calls, video-conferences, or secure accounting software, then you could be in New York and they could be in London. If your accountant can be anywhere in the world, you don’t need to make compromises based on their location. You can find someone who really understands the specifics of your business or industry.

On the other hand, you may prefer face-to-face contact and find it useful to have someone who’s able to go to business meetings with you. If this is the case, then you’ll need to limit your search to accountants who work nearby or are willing to travel to your premises from time to time.

Wherever they happen to be based, make sure they’re an expert in the tax laws that apply to your business.

“The right person will save you time and money year after year.”

Choose a certified accountant

In many countries, accountants are regulated by professional bodies which look after accounting qualifications and try to maintain high professional standards. Depending on the country you’re in, professional accountants may be called Certified Public Accountants or Chartered Accountants. Chartered Accountants (CAs) are highly qualified professionals who have completed degree-level study along with workplace experience and a professional competence program.

Given the greater experience and knowledge that a certified or chartered accountant has, they’ll be able to add value to your business right from the start. And if you expect your company to grow, it’s a good idea to hire a professional accountant at the beginning rather than later on.

Of course, it is possible to use accountants who aren’t certified, chartered or registered, but it might be an unwise business move. Tasks such as bookkeeping, tax preparation and general financial management might not require a certified or chartered accountant. But you will almost certainly need one if your company grows to the point when you need a loan, or if you’re ever audited.

Look for an accountant with relevant expertise

You’ll need someone with experience preparing tax returns and financial documents for companies of a similar size and revenue to yours. If your company uses cloud-based software for much of its business, you’ll probably want someone who’s savvy with cloud computing.

It’s even better if they’ve worked with companies in similar market sectors to yours, as that will help them understand the unique needs of your business. You might want to check to see if they have larger clients. If they do, it’s a good sign as you’ll know they should be able to handle your growing needs over time.

Talk to government and business associations

Small businesses are the lifeblood of many countries’ economies. Because of this, governments like to encourage their growth.

As a small business owner, take advantage of networks of business advisors available to help you make decisions like choosing the right accountant. There are often voluntary organisations and local chambers of commerce willing to advise you too. Make use of these, as they are there to help you and their advice is usually free.

They can also be useful places in which to network and talk to other business owners. Do this a few times, and you may find an accountant is recommended to you by other business owners. If nothing else, this could help you cut down the list of possible people to interview.

Tap into your social networks

When searching for an accountant, the ideal candidate might be right under your nose. Start by asking any friends or family members who own small businesses if they would recommend their accountant. If so, why? And if not, why not? The answers to both questions could prove useful at a later stage, when you come to interview candidates.

Bear in mind that choosing an accountant can be a personal decision, so what’s right for your best friend’s PR business might not suit your manufacturing company. Also take into account differences in business structure. The best accountant for a sole trader might not be the best fit for a company with ten employees.

Make use of your connections online

Although Facebook might not be the best place to post a request for accountant recommendations (though it’s not the worst, either), more business-oriented networks could be useful. LinkedIn is one of the largest globally, and if you already have a profile there, you could use it to search for accountants who’ve been recommended by others.

Decide how the accounting work will be divided

Accountants can handle every aspect of bookkeeping and small business accounting. In most cases, you can bundle up your bills and invoices, hand them all over, and they can do the rest. But this might not always be the best approach.

Accountants often charge by the hour, so making them do simple data-entry tasks is not the best use of their time – time that you’re paying for. So take charge and get more involved in the accounting process (if you can). This will give you a better grasp of expenses and revenues in real time and a heads-up on potential problems.

For example, you might choose to enter the basic accounts data in-house, then hand the work over to your accountant. Then they can handle the more involved tasks such as bank account reconciliation, filling out tax return forms, payroll and capital depreciation calculations.

Good quality accounting software will make it easy for you to take part in your accounting process. It will simplify tasks like invoicing, automatically sending the invoice and recording its contents at the same time. And if the accounting software is cloud-based, you can then give your accountant secure access to your accounts with the click of a button.

Get someone who’s proactive about saving you money

Some accountants will do little more than manage your accounts and complete your tax return forms, but the best accountants are more proactive. So before choosing an accountant, ask what they could suggest to save your business money.

For example, what proportion of your operating costs do they think you can offset against tax? If you’re a sole trader or consultant, can you offset a percentage of your phone bill, car costs, maybe even rent or mortgage payments? What are the implications of doing so? The accountant should warn you of any pitfalls. For example, using your home as business premises could result in a tax charge levied on the house when you sell it!

Always bear in mind that in most countries there is a big difference between tax avoidance (usually legal) and tax evasion (usually illegal). You need an accountant who knows the details of tax law so well that they’ll save you money in legal ways, but not one who takes things too far and risks causing your business to operate illegally.

Be very careful about this, because ultimately it’s you, the business owner, who’ll pay the penalty if the law is broken.

Find out what software the accountant uses

Accountants often have their own preferred accounting software. The chances are they’ll have been in business for many years and may have become used to one particular brand of software.

This can be a problem. If your company uses a different type of software there are potentially going to be issues sharing data. Although it might be possible to export and import data in a suitable format, it can be time-consuming and easily lead to errors. There’s also the risk of your highly sensitive financial information being read as you send the data back and forth, because email is about as secure as a postcard.

So try to find an accountant who’s using the same software as you. Or, failing that, one who’s willing to do so. There’s no reason why they can’t use more than one type of accounting software for different clients. That’s especially true if the software is easy to learn.

It’s best if you can agree to use market-leading accounting software that’s easy to use, and only exchange files that have been suitably encrypted. An even better option is to choose collaborative, cloud-based accounting software with encryption built in. This will mean you don’t have to worry about the risks involved in exchanging data back and forth.

Interview several candidates before you decide

As with anything else in life, don’t automatically accept the first offer you receive. Arrange things in such a way that you can compare a selection of accountants with each other. Then it will be easier to determine which one is best for your business.

An interview can be a powerful way to see how well you’re likely to be able to work with a person. And a series of interviews will not only help you better define the type of accountant you need, but also gain you valuable free advice. This may even help you determine your own business requirements more clearly.

Understand fee structure

There’s no single, universal method that accountants use to charge by. Some will charge by the hour, some might charge a monthly retainer, others could charge a percentage of your turnover. As a small business owner, negotiation should already be part of your skill-set. If it’s not, learn it and apply it here.

Make sure you get written quotations from all the accountants you interview, then go away and compare them carefully. Consider a range of scenarios – one fee structure may make sense while your business is small, but could become less attractive as it grows.

Nothing is set in stone. You could ask for a combined method of charging, or a sliding scale based on turnover, or any other of a wide variety of possibilities. The accountant might not agree to your proposed fee structure, but if you don’t ask you’ll never know.

Learn to use and trust your intuition

You’re running your own company, you have experience, and you’ve got a pretty good idea of what you’re doing. It’s also likely that you get along well with people, since that’s an important part of being successful in business.

So make use of those skills. Intuition is just another word for the unconscious processing that goes on in our minds. It’s not magic – it’s thought that takes place below our conscious level of awareness. Used in the right way it’s a powerful business tool in itself.

When you meet an accountant for the first time, consider your intuition. Alongside logical evaluations such as location, pricing, experience and references, ask yourself if you could trust this person with the intimate details of your business. If you think you could work with them for the foreseeable future then that’s great.

But if your gut feeling is saying no, you should probably walk away. Your unconscious mind may have picked up all sorts of cues (such as verbal stresses and body language) that it doesn’t like. Intuition isn’t always correct, but when it comes to choosing something as important as a business accountant, don’t ignore it.

Good accountants will help your company grow

If all of this sounds more like a marriage than a business relationship, there’s a good reason for that! Your accountant will become intimately involved with the operation of your company so it’s not a decision to be taken lightly. You will need one you can trust, who has the necessary experience and who will be there when you need them.

Good accountants help companies grow, by managing complex financial work and offering advice on practical business issues. This will be guaranteed to save you money in the short and long term. The best ones will be your partner in all but name – and as long as you choose wisely, you can’t go wrong.

Stage 3 personal income tax cuts redesigned

Thu, 06 Feb 2020 04:52:28 GMT

The personal income tax cuts legislated to commence on 1 July 2024 will be realigned and redistributed under a proposal released by the Federal Government.

After much speculation, the Prime Minister has announced that the Government will amend the legislated Stage 3 tax cuts scheduled to commence on 1 July 2024. Relative to the current Stage 3 plan, the proposed redesign will broaden the benefits of the tax cut by focussing on individuals with taxable income below $150,000. If enacted, an additional 2.9 million Australian taxpayers are estimated to take home more in their pay packet from 1 July.

It’s not how Stage 3 of the 5 year plan to restructure the personal income tax system was supposed to work, but a sharp escalation in the cost of living has reshaped community sentiment. As the Prime Minister said, “we are focussed on the here and now” and by default, not on long term structural change.

The redesign will increase Government revenues from personal income tax by an estimated $28 billion to 2034-35 as bracket creep takes its toll.

What will change?

The revised tax cuts redistribute the reforms to benefit lower income households that have been disproportionately impacted by cost of living pressures.

Under the proposed redesign, all resident taxpayers with taxable income under $146,486, who would actually have an income tax liability, will receive a larger tax cut compared with the existing Stage 3 plan. For example:

An individual with taxable income of $40,000 will receive a tax cut of $654, in contrast to receiving no tax cut under the current Stage 3 plan (but they are likely to have benefited from the tax cuts at Stage 1 and Stage 2).
An individual with taxable income of $100,000 would receive a tax cut of $2,179, which is $804 more than under the current Stage 3 plan.

However, an individual earning $200,000 will have the benefit of the Stage 3 plan slashed to around half of what was expected from $9,075 to $4,529. There is still a benefit compared with current tax rates, just not as much.

There is additional relief for low-income earners with the Medicare Levy low-income threshold increasing by 7.1% in line with inflation. It is expected that an individual will not start paying the Medicare Levy until their income reaches $26,000 and will not pay the full 2% until $32,500 (for singles).

While the proposed redesign is intended to be broadly revenue neutral compared with the existing budgeted Stage 3 plan, it will cost around $1bn more over the next four years before bracket creep starts to diminish the gains.

It’s not a sure thing yet!

The Government will need to quickly enact amending legislation to make the redesigned Stage 3 tax cuts a reality by 1 July 2024. This will involve garnering the support of the independents or minor parties to secure its passage through Parliament – Parliament sits from 6 February 2024.

How did we get here?

First announced in the 2018-19 Federal Budget, the personal income tax plan was designed to address the very real issue of ‘bracket creep’ – tax rates not keeping pace with growth in wages and increasing the tax paid by individuals over time. The three point plan sought to restructure the personal income tax rates by simplifying the tax thresholds and rates, reducing the tax burden on many individuals and bringing Australia into line with some of our neighbours (i.e., New Zealand’s top marginal tax rate is 39% applying to incomes above $180,000).

The three point plan introduced incremental changes from 1 July 2018 and 1 July 2020, with stage 3 legislated to take effect from 1 July 2024.

What now?

If you have any concerns about the impact of the proposed changes, please call us to discuss.

For tax planning purposes, for those with taxable income of $150,000 or more, the redesigned Stage 3 tax cuts offer less planning opportunity than the current plan. But, any change in the tax rates is an opportunity to review and reset to ensure you are taking advantage of the opportunities available, and not paying more than you need.

Tax Return Deadline 2024: What You Need To Know

Wed, 22 Jan 2020 04:50:57 GMT

Understanding the intricacies of tax filing is not just about compliance; it’s an opportunity to optimise your financial benefits and avoid the pitfalls of last-minute rushes. This blog aims to explore this process, providing you with insights and practical tips to navigate the 2024 tax season.

A Brief Look at Tax Return Deadlines

Tax return deadlines are a critical aspect of financial planning. They mark the end of a financial year and the need to account for income and expenses. These deadlines serve a dual purpose: compliance with tax laws and helping with financial planning and management.

Understanding the 2024 Tax Return Deadline

Here’s what you need to know:

Key Dates and Deadlines

Start of Tax Season: The Australian Taxation Office (ATO) opens the season for filing tax returns on July 1, marking the end of the financial year.
Final Deadline for Individuals: October 31 is the cutoff for individuals filing their own tax returns. However, if you’re using a registered tax agent, you might have an extended deadline.

Documentation and Preparation

Gather Financial Records: This includes all income statements, such as payment summaries, dividend statements and any other records of income earned.
Expense Records: Keep track of any potential deductions, including work-related expenses, charitable donations and education-related costs.
Investment Income: Details of any income from investments, rental properties or capital gains need to be reported.

What Happens If You Miss the Tax Return Deadline in 2024?

Missing the tax return deadline in 2024 can have several consequences. Firstly, a late fee may be imposed, adding an unnecessary financial burden. Additionally, interest on any taxes owed will start accruing, increasing the total amount payable. Beyond financial penalties, missing the deadline can also attract increased scrutiny and audits from tax authorities. This heightened attention can be time-consuming and stressful.

Process of Filing Your Tax Return Before the Deadline

Filing your tax return with the help of an accountant is a straightforward process.

Gather Your Documents

Collect all necessary financial statements, including income statements, bank statements and receipts, for any potential deductions.

Understand Your Deductions

Familiarise yourself with deductible expenses, which may reduce your taxable income. This can range from work-related expenses to specific investments. An accountant will help identify deductions you might have missed.

Consult with an Accountant

Accountants can provide personalised advice tailored to your financial situation. They understand the complexities of tax laws and can help you with filing a tax return.New Paragraph

Debunking Common Myths About Tax Returns and Deadlines

Misconceptions can lead to confusion and mistakes. Let’s clear up some of the most common myths.

“Filing a Tax Return is Only Necessary if You Owe Money”

This is a common misconception. Filing a tax return is required if your income exceeds a certain threshold.

“All Personal Expenses Can Be Claimed as Deductions”

Not all personal expenses are deductible. Typically, for an expense to be deductible, it must be directly related to earning your income.

Common Challenges in Meeting the Tax Return Deadline

If you’re facing challenges meeting the tax return deadline, consider these steps:

Plan Ahead: Begin your tax preparation well in advance. This gives you ample time to gather all necessary documents and reduces the risk of errors due to rushing.
Seek Professional Advice: A tax accountant can offer personalised advice, help identify possible deductions and assist in complex tax situations.

Contact Our Tax Accountants in Newcastle

If you’re in Newcastle and need assistance with your tax returns, reach out to our tax accountants at The Garis Group . Whether you’re puzzled about why your tax refund is less than expected or looking to avoid penalties on late tax returns, we’re here to provide guidance.

ATO’s ominous “data matching” letters, what to do if you get one!

Thu, 15 Aug 2019 03:45:10 GMT

Australian taxpayers unlucky enough to receive one of the ATO’s ominous “data matching” letters this year are being urged to act quickly or face being thousands of dollars worse off.

The tax man uses sophisticated technology to sift through mountains of data from third-party institutions such as banks to sniff out whether any information, such as sales of shares or property, has been left off a tax return — and the number of Aussies receiving these “please explain” letters is growing every year.

It’s all part of the ATO’s push to raise more than $1 billion in revenue by cracking down on dodgy claims, according to Etax, which warns that once you get the letter in the mail, the clock is ticking.

“What it means is the taxpayer has lodged a return either current or up to two years ago, and now the ATO has done some data-matching with third parties and decided that something on the return is incorrect so they send out a letter,” said Etax senior tax agent Liz Russell.

“Once you get that, quite often people can freak out or get concerned, they might stick it in their drawer and hope it goes away. But if you don’t address is within the time frame, usually 28 days, the ATO will raise an amended assessment based on the information they believe to be correct and in some cases, issue a penalty for overpaid refunds.”

Ms Russell said with more institutions now handing over information, the ATO has been going back through previous years’ tax returns for which data was previously not available. Typically the data relates to sale of capital assets.

“I’ve seen them go back four years,” she said. “It doesn’t have a lot to do with deductions because deductions aren’t things they can data match. It’s things like dividends, shares, sale of rental properties, missing PAYG summaries.”

Above is an example of an ATO data-matching letter.

Ms Russell said she had seen “a whole pile recently where people disposed of shares but didn’t declare it on their return” for that year. The danger for taxpayers is if they don’t provide the full picture to the ATO, it will assume the entire sale price was a profit.

“If I sold them for $5000, the ATO is going to assess me on $5000, even if I bought them for $6000 and made a loss,” she said. “Sticking your head in the sand or sticking the letter in the drawer is the worst thing to do.”

If the taxpayer is unable to substantiate the flagged income or deduction claims, the ATO will determine whether or not to impose a financial penalty based on whether it thinks the taxpayer took reasonable care when completing their original tax return.

Penalties are calculated depending on the severity of the mistake. Failure to take reasonable care results in a penalty of 25 per cent of the amount owed, recklessness is a penalty of 50 per cent of the amount owed, and intentional disregard is a penalty of 75 per cent of the amount owed.

Ms Russell said often very minor mistakes wouldn’t incur a penalty, but if it resulted in a higher refund than the taxpayer was entitled to they may be required to pay back the excess amount and potentially interest.

An ATO spokeswoman said all individual income tax returns were “automatically risk assessed” and that more than 99,000 tax returns had already been adjusted due to “simple errors and omissions” since July 1.

“Where there is significant risk, or an error or omission is identified, the return is stopped and where appropriate the return may be adjusted to avoid an incorrect refund being paid to a client that may have resulted in future debt,” she said.

“For example, where we have third-party data reported to the ATO that does not match what was declared in the tax return we will correct the return before issuing the refund for the client.”

In addition to these adjustments, “our audit program continues throughout the year, meaning that whilst we may not review all claims in detail at tax time, where we identify claims that are outside the norm, the ATO will contact people later to review the claims made and request substantiation where necessary”.

“Our strategies focus on claims that appear high, for example claims that are high in comparison to other people in the same profession at the same income level,” she said.

“For taxpayers who have a legitimate claim, the best approach is to ensure they keep records to support their claim. The myDeductions tool in the ATO app makes it easy to store a photo of receipts so that it’s easy to have on hand when needed.”

The ATO has received more than 5.9 million lodgements, an 18 per cent increase — more than 800,000 — compared with this time last year.

“We have issued over 3.9 million individual 2019 income tax refunds with a total value of over $9.7 billion,” the spokeswoman said.

Article: TCM

Tip Tuesday | Hospitality tax deductions: Are you claiming everything you’re entitled to?

Tue, 13 Aug 2019 05:12:28 GMT

Hospitality tax deductions can put a big chunk of your hard earned cash back in your pocket – but too often we hear of individuals in this industry say “I didn’t know i could claim that?”

Whether you’re a waitress, event manager, barista or mixologist, hospitality is not an easy field to work in. Endless nights, complaints, wrong orders, rude customers and the dreaded mop up after a cut off…so it’s time to get a decent refund of your hard earned cash back from the ATO.

Below we talk about the most common tax deductions and point out a few common mistakes to ensure you have peace of mind when it comes to lodging your tax return this financial year!

Hospitality tax deductions include expenses from various areas of your job including:

Clothing

Claim purchase costs, laundering and repair of:

Uniforms (with logo or if an item forms part of a compulsory uniform)
Protective clothing (aprons, protective boots, aprons, gloves and hair nets)
Work specific clothing (chef’s pants and hats)

Please note: You can’t claim conventional clothing such as a plain white shirt or black shoes as the wearing of these items is not limited to your workplace.

Tools and equipment

Purchase costs of equipment used in your job (up to $300) (chef’s knives, cooking utensils, tablet, computers, cocktail mixers, tools etc.)
Depreciation of equipment costing over $300
Repair and maintenance costs of work related equipment
Leasing costs of equipment used in your job
Interest on loans taken out to purchase work related equipment

Car expenses

If you need to use your own car for work purposes, such as deliveries or picking up equipment from another venue, you can claim your car expenses:

You can claim these in one of two ways:

Logbook method – Keep a record of work related mileage in a logbook for at least 12 weeks.
Cents per kilometre method – You can claim 66 cents per kilometre – up to 5000 kilometres per year.

Please note: You can’t claim for your trips to and from work

Travel expenses

If you travel to conferences or trade fairs, or are required to travel for training or as part of your job you can claim your out of pocket expenses.

Taxi, train and bus fares
Flights
Car hire
Tolls
Overnight accommodation
Meals (when staying overnight)

Your employer may give you an allowance to cover the costs of any work related travel you do within Australia. This will be included as income on your Payment Summary at the end of each financial year and you should include this in your tax return. In this case, you don’t need to substantiate your expenses – as long as the amount you claim is deemed a reasonable amount by the ATO.

Home office running expenses

If you need to work from home for part of the time you may be able to claim:

The cost of using a designated home home office space (power costs for heating, cooling and lighting)
Home office equipment, such as computers as printers (up to $300)
Decline in value of plant and equipment (computer, printer, scanner etc.) costing more that $300)
The decline in value of furniture and furnishings (Tables, chairs, curtains/blinds, floor coverings, light fittings etc.)
Cost of repairs to furniture and furnishing used for your work
Cleaning costs

You claim home office running expenses in one of two ways:

“The amount of actual expense incurred through an established pattern of use.” – In other words keep a diary and records of all expenses and the time and days your used the office space.
Or at a flat rate of 45 cents per hour

Self-education expenses

Self-education that is directly related to your current position.

These expenses can include:

Tuition/tuition fees
Books and equipment purchased for the study (test books, software etc.)
Travel costs
Associated phone and internet fees
accommodation and meals (if away from home overnight)

Note: You cannot claim self-education expenses if your intention is to get:

a different job, or
money from a new income-earning activity (a new job or a business)

Miscellaneous hospitality tax deductions

And then there are all the other tax deductions you can claim that lots of people miss out on.

Tax agent fees for preparing your prior year’s tax return
Work related phone calls and the work percentage of phone expenses (excluding connection costs)
Cost of renewing a gaming license and some other work related licenses/certificates (Check with your tax agent
Journals and publications relating to your position
Renewal of union and professional association fees
Charity donations to registered charities
Work bags
Sunglasses and sunscreen – if you are required to work in open air functions
Income protection insurance

Download our Hospitality Tax Checklist

Use this checklist to maximise your deductions and ensure that you collect together all the tax documentation you need to complete your tax return this financial year!

Hospitality Tax Deduction Checklist – 2019

If you would like peace of mind when it comes to lodging your tax return this financial year, make an appointment to see one of our tax professionals by contacting our office on 02 4969 4699 or book an appointment online !

Tip Tuesday | Bookkeeping To Grow Your Business!

Tue, 21 May 2019 06:27:22 GMT

Accountants help keep your finances in order but bookkeepers play an important role too. So what’s the difference between a bookkeeper and an accountant? And how can a bookkeeper help you run your business?

Bookkeepers and accountants are not the same

If you’re a small business owner, you’ll be familiar with juggling several tasks at once. As well as keeping things running, you need to generate income, keep your customers happy and look after financial information. Tracking the financials can be a chore though, and one of the biggest questions you might have is who you get to help with your accounts. Do you need an accountant, a bookkeeper or both? Let’s demystify things.

Accountants and bookkeepers have different jobs and responsibilities. An accountant’s main focus is:

the preparation and lodgment of statutory returns
advising on legal entity structures
giving general business and financial advice.

Accountants are usually members of a statutory association. Qualified and registered accountants might call themselves CPAs (Certified Public Accountants), CAs (Chartered Accountants) or other titles, depending on the country they’re working in.

Bookkeepers can manage lots of different responsibilities within a small business. But the main focus is the organisation, recording and reporting of financial transactions as part of the operational life of a small business. In more recent times, some bookkeepers have extended their range of duties to include:

training clients to use accounting software
implementation of document management and inventory control processes to create efficiencies within the business
implementation of POS (point of sale) systems that capture the daily transactions in a retail environment.
develop, implement, maintain and review internal business processes.

You will often find that a bookkeeper has an area of specialisation and it’s a great idea to ask them more about this when you are looking at hiring them for services.

What do bookkeepers do?

Here are some of the tasks of bookkeeper that will help to keep your business running smoothly:

Keeping track of daily transactions
A bookkeeper can handle the recording of day-to-day bank transactions. If the accounting software you use has daily automatic bank feeds, this is a great tool for your bookkeeper to use. When your bank statement lines are fed into your accounting software, it’s much easier to keep an eye on cash flow and it also saves on data entry time.
Sending out invoices and managing the accounts receivable ledger
Preparing invoices and sending them to clients is usually the bookkeeper’s responsibility. Managing the accounts receivable ledger – and chasing late payment – is also likely to be done by a bookkeeper.
Handling the accounts payable ledger
Up to a certain dollar amount, it’s usually bookkeepers who will make payments on behalf of the business. This includes payment of supplier invoices, expenses and petty cash.
Keeping an eye on cash flow
One of the most important tasks for a bookkeeper is making sure the company doesn’t run out of day-to-day money. They can do this by watching the balance of revenues to expenses. Then they can take action or offer advice if it looks like the company needs more ready cash.
Preparing the books for the accountant
It’s the bookkeeper’s job to ensure that the accounts are valid and up to date when the accountant needs them. This allows the accountant to use their skills and knowledge to make business recommendations, report to the board and complete company tax returns.

In summary, it’s the bookkeeper who does the day-to-day work so that the accountant can concentrate on strategic financial operations. So bookkeepers play an important role – without them, accountants can’t do their jobs.

“One of the most important tasks for a bookkeeper is making sure the company doesn’t run out of day-to-day money.”

Bookkeepers and accountants working together

A well-run business is likely to make use of both accountants and bookkeepers. The division of labour is important. Here’s how it might work:

Company formation
You should use an accountant to help you set up your business. Accountants can help you create your business plan and set up a company structure that best suits your business.
Accounting systems
An accountant or bookkeeper can also help you choose the right accounting software and set it up so that it works well for you and your employees – especially your bookkeeper.
Bookkeeping work
After completing the above tasks and keeping a bookkeeper can focus on keeping your company’s accounts up to date on a daily basis.
Accounts reconciliation
The accountant and bookkeeper will get together regularly, perhaps once a month. They might meet in person or they might work remotely, using cloud accounting software with shared access. Either way, the accountant will look at the figures in the accounts and the bookkeeper will explain any numbers and decisions that aren’t clear.
Reporting
The accountant will report to the business owner and the board members. The accountant will report on the state of the accounts so that the board and owner have a clear picture of the financial health of the business. A bookkeeper can also provide reporting, but in a less formal way on a more regular basis with what is called management accounts. These reports are often used by the business owner as checkpoints to see where the business is going often in a weekly basis.
Strategy
Armed with up-to-date figures, the accountant will make recommendations to the business owner and the board. The accountant will offer advice about any planned expansion and investment. They will also advise on whether the business can afford to move into new markets and other financial strategies.
Legal compliance
The accountant will use the information prepared by the bookkeeper to write the company reports. These reports will include information about income and expenses, net profit, assets, liabilities and tax. The accountant will also file the company tax return forms and arrange for tax payments to be made.

This is a sensible way of sharing the workload. The accountant does the work that they have been trained to do, while the bookkeeper provides the necessary financial data.

Five ways that a bookkeeper can help your business

If your business is small, you might be the bookkeeper – at least until you can afford to hire someone to do the work for you. Once your business reaches a certain size, it makes sense to have someone do the bookkeeping for you. Here are five ways that a bookkeeper can help:

Concentrate on your business strategy
Bookkeeping involves tracking the fine detail and recording it in accounts software. Working with these numbers can sometimes make it hard to see the big picture. So it’s often better to have someone else do this work.
Reduce your accounting costs
Are you using an accountant to manage your daily transactions and run your monthly payroll? If so, you could save a lot of money by having a bookkeeper do this work instead.
Be an extra pair of eyes watching your cash flow
If you want to avoid running out of money suddenly, you need to keep an eye on your cash flow. It helps to have someone else checking the numbers here, making sure your cash keeps flowing. A bookkeeper can do that.
Get quick access to vital figures
Having an accountant manage your monthly business reconciliation and reporting is important. But what if you need some financial information part-way through the month? Bookkeepers can give you the information you need quickly, without you having to wait for your accountant to respond.
Keep control of your financial data
Few small businesses can afford to hire their own accountant, so most accountants work on a part-time basis for their clients. If they use quality online accounting software to manage your financials, it makes collaboration much easier. Quality software means that your bookkeeper can work on the same set of data as the accountant. They can both work together to give you the best outcome and help your business grow.

Bookkeeping helps your business run smoothly

Bookkeeping is a vital job in any business. This is true whether you do the work yourself or hire someone to do it for you.

Without proper bookkeeping, your accounts will not be accurate. That means your accountant won’t get a clear picture of your company’s finances and you can’t make strategic business decisions.

Just as importantly, your business has a legal obligation to accurately record its accounts and file company reports to the tax office. So it pays to get this right.

Bookkeeping will help you do all of this – and will also provide you with useful insights into the financial health of your business.

Tip Tuesday | Small Business Bookeeping for Beginners

Tue, 30 Apr 2019 08:34:17 GMT

Bookkeeping lets you know how your small business is doing, and it helps keep you onside with the tax office. So what does it involve and how do you make it less boring? We break down bookkeeping for beginners.

What is bookkeeping?

Bookkeeping involves recording and classifying all the financial transactions in your business. It’s keeping track of what your business spends and what your business receives.

These tasks used to be managed using books and ledgers, hence the name ‘bookkeeping’. Originally the transactions would be recorded in daybooks, cashbooks, or journals and then transferred to a ledger.

Bookkeeping software has now pretty much replaced the need for physical books.

Why do small businesses need bookkeeping?

An accurate, well-kept set of books is a great start to running a successful business. Here’s why:

You can check that you’re making more money than you’re spending.
You’ll have reliable financial information for planning and budgeting decisions.
You can see if a cash crunch is coming and take steps to avoid it, by watching when you need to pay suppliers, and when you can expect payment from customers.
You’re more likely to find incorrect payments (or even fraud) that might cost you money.
You can complete accurate tax returns.
Having your financial information organised makes it easier for you to work with other parties such as lenders, investors, and accountants.

How to do bookkeeping

The two most important tasks in accurate small business bookkeeping are recording and reconciliation. Let’s break them down.

Recording every transaction
Record your sales. This was traditionally done by writing them into a cashbook or punching them into a spreadsh eet. Business owners are now more likely to download sales data directly into their books from point-of-sale or invoicing software.

Record your transactions. Every business-related purchase needs to be noted. You should also hold onto the proof of purchase if you plan to claim that expense as a tax deduction. Again, you can write these details into a book or spreadsheet. Or you can automate the task so all the debits from your business bank account stream into your bookkeeping software.

You can record income and expenses at different times depending on whether you do cash or accrual accounting.

Reconciling every transaction
Reconciliation involves regularly cross-referencing your business books against your bank statements to check that the transactions and balances match – and identifying the reasons if they don’t. Often bank fees, interest payments, deposits, and payments th at haven’t yet hit your bank accounts will need to be accounted for.

You might do bank reconciliation daily, weekly, monthly, or less often, depending on the number of transactions going through your business. However, you will probably be required to reconcile your books before submitting tax returns at the very least.

The sooner you reconcile transactions, the sooner errors can be found and corrected. It’s better to do it often – even daily – so the work doesn’t pile up. You can learn more in our guide on how to do bank reconciliation.

Other small business bookkeeping duties
If you’re acting as bookkeeper for a small business, you may also be responsible for:

accounts receivable (issuing invoices and making sure they’re paid)
accounts payable (paying bills on time)
payroll (paying employees)

Professional bookkeepers also provide other services, like helping with financial reports (profit-and-loss, balance sheet, cash flow report), and measuring business performance. Bookkeepers are also often BAS agents and can help file your taxes.

How software can help

Many small businesses use online bookkeeping software to speed up these jobs, and cut down the chances for human data-entry errors. These tools can:

pull transaction data straight from point-of-sale (POS) system, invoicing software, and banks
dramatically speed up bank reconciliation
automatically pay bills
send automated invoice reminders to people who owe you money
tell you when sales invoices have been paid
allow you to check cash flow from your phone

Outsourcing small business bookkeeping

If you’re too busy to do the bookkeeping for your small business , then you can find someone to do it for you. Bookkeepers often allow you to choose different service levels depending on your budget. That means you can start out with basic bookkeeping at a modest cost and ladder up to more advanced services as your business grows.

Tip Tuesday | The Best Inventory Management Software for Small Business

Tue, 16 Apr 2019 06:12:06 GMT

There’s more to inventory management than keeping track of your products. When to order stock, how much to order, and how much to sell it for can feel like trial and error. But inventory management software can remove the guesswork and give you greater control of your business.

Why you need inventory management software

In retail, an accurate understanding of your inventory can make or break your business. So learning how to manage that inventory is vital.

When will an item will sell out? When’s the best time to restock your best selling products? How much does it cost to store products that aren’t selling? You probably can’t answer these questions off the top of your head – but this information is vital to the success of your business. That’s why you need inventory management software.

Spreadsheets can’t handle the demands of modern inventory management

You might be tempted to manage your inventory using spreadsheets – but they weren’t really designed for that.

Spreadsheets leave you vulnerable to a number of problems, because they:

take a lot of time and effort to manage
are especially prone to errors (90% of spreadsheets contain mistakes)
don’t scale with your business, becoming large and complex as you grow
can’t talk to your other systems, such as accounting or point of sale (POS) software
are slow to update, which means the data is almost always old
don’t give you an overview of how your products are performing

Dedicated inventory management software doesn’t have these problems.

4 reasons your retail business should use cloud inventory management software

Accurately tracking and controlling your inventory is one of the most important aspects of running a retail business. It’s worth making an investment to get it right.

1. Inventory management should scale with your business

Your retail business might be small today, but your inventory will get larger and more diverse as you grow.

You might want to open another store, add new product lines, or start selling online. Modern inventory management software makes it easy to add products or sales channels. Plus they allow you to compare sales data from right across your business.

2. The cloud lets you sync with other retail software

Traditional inventory management is a complex web of ordering and receiving stock from suppliers, storing and tracking that stock, and monitoring sales. This means a lot of manual data entry into a number of systems.

When you integrate cloud inventory management software with other online products, the data can flow automatically from one system to another. So when something’s sold, your POS system (or online shop) tells your:

accounting software , which records the revenue and tax
inventory management software, which can automatically re-order if you’re getting low
business performance dashboard, which shows store profitability live on your mobile

You can also plug in other analytics and reporting tools to get a greater understanding of all the moving parts in your business.

An automated and integrated suite of systems like this is updated in real time. It’s also free from manual data entry errors and gives you the tools to understand and improve every part of your business. You can also share the data with your partners and financial advisor to get their feedback and suggestions.

3. Up-to-date data helps you make important decisions

To get the most out of a retail business, you need to know your products inside out. It’s not enough to know which of your products sell the most. You need to know who is most likely to purchase them, when you should order more, and how much you should keep in stock.

Cloud based inventory management systems can surface this information in real time and display it at the touch of a button. The best systems will offer analytical tools that tell you everything you need to know about your business:

Get the data: Access accurate, real-time sales data across all your sales channels.
See the detail: Drill down into customer groups, product types and individual orders.
Find your star products: Identify your best and worst-selling products, so you can order the right items, in the right quantities, at the right time.
Run cost comparisons: See which suppliers are offering the best deal.
Create reorders: Simplify stock control by automatically reordering popular products.

Inventory analytics tools can provide you the insights to make faster – and better – decisions. Proper reporting can identify opportunities to reduce costs and improve your marketing.

4. Manage your inventory on the go

With cloud based inventory management software, you can access your inventory data from anywhere, at any time – all you need is an internet connection. Having mobile access to your inventory is crucial if you want to expand your retail business. You can receive notifications, check stock levels, and reorder products from the road.

As your business grows, you might look at opening new stores. This means new inventory management challenges – you’ll have to monitor the inventories of multiple stores and online sales channels. But with the right software, managing the inventory for five stores is much the same as managing the inventory for one.

Finding inventory management software

For cloud-based inventory management software that integrates with accounting software and other apps – such as POS, staff management and analytics tools – check out the app marketplace.

Let software handle the boring stuff

As the owner of a retail operation, your time is wasted if you’re distracted by entering numbers into spreadsheets to manually track your inventory. Cloud based inventory management software can do all of this for you, leaving you free to concentrate on growing and marketing your business.

With the right inventory management system in place, you can focus on what’s important. Automated inventory control leaves you free to do what you’re best at – building your business and delighting your customers.

Blog | Paying Land Tax On Property You Own

Fri, 22 Mar 2019 23:24:50 GMT

It’s land tax time of year!

Whether you need to pay land tax on your property depends on:

the type of land
what it’s used for, and
its total value as at midnight on 31 December each year
whether you meet the definition of a foreign person for land tax purposes.

Exemptions and concessions

In general, you do not have to pay land tax on:

your home, known as your principal place of residence
your farm, known as primary production land
any of your land if the total taxable value is below the land tax threshold .

Read more about land tax exemptions and concessions .

When land tax does apply

Land tax applies to other property you own if the total taxable value of your land is above the land tax threshold. You may have to pay land tax if you own, or jointly own:

vacant land, including vacant rural land
land where a house, residential unit or flat has been built
a holiday home
an investment property or properties
company title units
residential, commercial or industrial units, including car spaces
commercial properties, including factories, shops and warehouses
land leased from state or local government.

Land tax applies regardless of whether income is earned from the land.

Land tax assessment

Rates and thresholds

Land tax is calculated on the total value of all your taxable land above the land tax threshold.

The threshold for the land value changes each year and is applied as follows.

General threshold: $100 plus 1.6% of land value above the threshold, up to the premium threshold.
Premium threshold: 2% of land value above the threshold.
The threshold is published by the Valuer General(new window) in October each year and applied to land holdings on 31 December each year.
Land tax is applied for the full year following the taxing date of 31 December and no pro-rata calculation applies.

How land tax is calculated

You pay tax based on the combined value of all taxable land you own, not on each individual property. If the combined value of your land does not exceed the threshold, no land tax is payable.

If the value is above the land tax threshold, you will only need to pay tax for the amount over the threshold, plus a base tax of $100.

When land tax is calculated

Your liability for each year is based on the value of all property you owned on 31 December in the previous year. Any changes to the land you own in the current year will only affect how much you pay next year.

If the ownership of any of your land changes, you’ll need to notify the NSW Government using Land tax online(new window) .

Sample land tax calculations for 2019

Basic land tax calculation

(A minus B) multiplied by C plus D = Land tax payable.

A is the total land value = $740,000
B is the land tax threshold for 2019 = $692,000
C is the land tax rate = 1.6%
D is the standard tax = $100
($740,000 minus $692,000) x 1.6 % + $100 = $868

Premium land tax calculation

(A minus B) multiplied by C plus D = Total premium land tax payable.

A is the total land value = $4,780,000
B is the premium land tax threshold for 2019 = $4,231,000
C is the land tax rate = 2%
D is the maximum basic land tax payable = $56,724
($4,780,000 – $4,231,000) x 2% + $56,724 = $67,704

Special trusts land tax calculation

A multiplied by B = total special trust land tax payable.

A is the total land value = $750,000
B is the land tax rate = 1.6%
$750,000 x 1.6% = $12,000

Note: A premium land tax marginal rate of 2% applies for special trusts on the total taxable land value above $4,231,000.

How land is valued for land tax

The Valuer General(new window) determines the value of all land in NSW annually.

Values are determined as at 1 July for the upcoming land tax year.
The value is based on the average value from the current year and the past two years.
Where the parcel of land was created less than three years ago (eg via subdivision or amalgamation) the Valuer General only takes into account the years after it was created.
If you are a foreign person who owns residential land in NSW, you must pay a land tax surcharge .

Example: how land is valued for land tax

Your average land value for land tax purposes in 2019 is $890,000.

Find out more about the method for valuing land(new window) .

You can also look up the average values in your local area(new window) or object to the valuation(new window) of your land.

Residential land

Residential land includes any of the following.

Residential land does not include land used for primary production that is exempt from land tax.

The surcharge applies if a building has both residential and commercial purposes. In this case, an apportionment factor is used to apportion the land value.

If you have any queries regarding this information, please contact our office on 02 4969 4699

Call for more Government Support by Australian Small Businesses

Thu, 21 Mar 2019 10:02:09 GMT

Over two-thirds (71 per cent) of small business owners say the federal government is not doing enough to support them, in a new study by accounting software provider Reckon (ASX:RKN). Government red tape is considered the biggest obstacle to creating a start-up in Australia, with over half (52 per cent) of SMBs agreeing.

The survey, which includes over 1,000 Australian SMB owners, reveals which policies would appeal to them in the run-up to the federal election. Small business tax concessions are the most in-demand, with over half (54 per cent) agreeing, followed by a reduction in tax process and compliance (41 per cent) and reduced electricity costs (32 per cent).

Small business grants (29 per cent), infrastructure spending (23 per cent) and legislation to stop late contractor payments (20 per cent) are the fourth, fifth and sixth most important factors.

Despite dissatisfaction with the current government, over four in ten SMB owners (43 per cent) place greater trust in the Liberal Party with the economy, compared to only one in nine that favour Labor. Close to half (49 per cent) trust neither major party.

Although current sentiment is low, over two-fifths (43 per cent) say their business was more successful in 2018 than 2017, compared to a quarter (24 per cent) that saw less success.

Sam Allert CEO of Reckon said, “Most SMBs have seen growth but remain frustrated by extensive compliance requirements. Regulation is important, but overly complex and time-consuming processes limit time for SMB owners to grow revenue. While we have seen many businesses automate processes and reduce their admin burden, further change is still needed in this regard.”

“SMBs are a powerful voting force, and parties are keen to win their support at the ballot box. Whichever party gets elected in the coming months, a focus on digitising and automating regulatory procedures will help make business activities easier.” he added.

Barriers to raising finance

Over two fifths (42 per cent) agree that access to finance is a barrier to doing business, and 63 per cent of those who took out a loan last year say the process is becoming more difficult. 68 per cent of respondents that sourced loans last year did so from traditional banks, while just 18 per cent used an online non-bank lender.

This comes as The Banking Royal Commission has seen banks tighten their lending checks. In 2019, only 56 per cent plan to source their loans from large banks.

37 per cent of SMB owners say the current fall in house prices could create a barrier to securing loans, while a further 33 per cent are undecided on how this may affect them. Over two-thirds (43 per cent) say the government is not doing enough to address the strain of tighter mortgage assessments imposed by banks.

Interestingly, personal credit cards are a more popular option for raising finance than non-bank lenders for the year ahead, with 14 per cent of respondents planning to use this method.

Allert continued, “Financial uncertainty has made securing loans increasingly difficult and led to prolonged approval times. Alternative lenders provide fast and reliable loans that can help rapidly fill unforeseen gaps in cashflow or quickly get a deal over the line. Government policies that help small businesses to raise finance would be welcomed in 2019.”

Cashless payments booming

The study also reveals how digital payments continue to overtake cash. 43 per cent of respondents say their receipt of cashless payments increased in 2018, and 47 per cent expect them to increase further in 2019. Six in ten businesses say over 90 per cent of their payments are now cashless.

Digital payment provider fees are the biggest barrier to accepting cashless payments for small businesses, with almost half (46 per cent) agreeing. Only a fifth say customer preferences for cash are a barrier to cashless payments, and just one tenth see the technology investment as a barrier.

Allert added: “Customers are increasingly moving from cash to more convenient digital payments. ATO stats show that only one in five Australians now prefer cash payments, meaning businesses that reject this trend could miss out on sales. Digital payment devices can now be used through a smartphone and point of sales systems can be set up easily. With the barriers to accepting digital payments being so low, it makes sense for businesses to accept them.”

Blog: Construction Accounting Basics

Thu, 31 Jan 2019 00:05:19 GMT

Construction is unlike any other business. Building projects can last for months or even years – and you might be both an employer and a contractor. So how do you learn the basics of construction accounting?

Why is construction accounting different?

If you work in the construction industry, you’ll know there’s rarely a fixed business structure. The site manager probably doesn’t employ the other people working on a project. They are likely to be a contractor – and so is everyone else. Contractors make up the bulk of the construction workforce. They may be working on several projects at the same time, spending a few hours or days on each. They might also employ their own subcontractors to help out. Temporary workers will come and go as required. And if you do have a formal payroll, it may change on a weekly basis. So compared with a conventional business, this is much more fluid and changeable.In this guide we’ll look at what you need to know about construction accounting. This will help you keep your business in the black and out of trouble.rt at the beginning

Like any other entrepreneur, if you’re starting a construction business it pays to do it properly – right from the start. That means getting your business and your accounts in order before you take on any work:

Incorporate your business
Incorporating as a small business gives you legal protection. This does depends on the type of company you set up, for example it could be set up as a limited liability company, partnership or sole trader.
Buy insurance
Construction can be dangerous, from both a physical and a legal perspective. Get specialist insurance to cover you in case things go wrong.
Hire an accountant or a bookkeeper – or both
Bookkeepers will help you manage your day-to-day accounts, processing expenses, bills and invoices. Accountants will help you with your business structure and advise on ways you can save tax. It makes sense to hire both. They will probably save you more than they cost.
Keep your skills up to date
Laws change, especially safety laws. Keep your certification up to date by going on training courses. This is important whether you’re a builder, electrician, plumber, carpenter or other worker. Your insurance may also depend on up-to-date certification – and you’ll probably get more work too.

Get the details right

Construction accounting regulations vary around the world. You may have choices about how you manage your accounts. This can be a complex topic. Talk to your accountant or bookkeeper, and also get to know the people at your local tax office. They will help you avoid expensive mistakes.

Market yourself

As a contractor or sole trader, you will be dependent on word-of-mouth marketing for much of your work. So take the time to build up a network of trusted contractors or subcontractors. For example, if you’re an electrician, get to know a reliable plumber. If you’re a builder, get to know a good carpenter.

A real-world social network will help you take on larger jobs, and you’ll be able to share work and refer each other to customers.

When you’re pitching for new business, make a good impression. Your estimates and quotations should look professional and be calculated properly. Good accounting software can help. It makes it easy to create documents, with comprehensive templates to impress your clients.

Make accounting part of your workflow

One of the most important things to know about construction accounting is that you have to do it regularly. That means you need to update your accounting software with expense reviews, your cashflow, updated employee information and generated invoices at least once a week. If you fall behind in your accounts, things can quickly get out of hand. It’s a fast-moving industry.

So it’s vital to build accounting into your workflow. Sign up to some good accounting software – and then make sure you use it.

This doesn’t have to be difficult. Modern accounting tools are cloud-based. This means that they are online, so you can access them from a smartphone or tablet even when you’re working on site.

Invoices can be sent, bills of material recorded, expenses tracked – all from your mobile device. Wherever you are, whatever the time of day or night, you always have the most recent view of your accounts.

By doing this, you’ll avoid undercharging due to missed expenses. You’ll also make the most of your business tax allowances. And you’ll reduce the risk of nasty surprises that could crop up if you were audited.

Beware of the cashflow trap

Construction accounting requires caution at times. Let’s say a client wants you to build a new warehouse. You pay for the necessary materials upfront, out of your own business capital.

Then, halfway through the project, the client goes bankrupt. You’re unlikely to receive more than a small percentage of what you’ve paid out for materials. Unless you have enough capital to ride out the storm, you’ll probably go bankrupt too.

This is why it’s important to keep your cashflow balanced. Big expenses should always be matched by big revenues. Invoice your client on a regular basis – and get payment upfront for major materials or labour expenses. If a client’s payments stop for any reason, so should your work.

Many small construction firms fail because of bad debts. If you manage your cashflow carefully, you won’t be one of them.

Build for the future

Strong foundations are vital to the stability of any building. They’re vital to the stability of your business too. So take the time to get your construction accounting organised – and keep them that way. It will save you a lot of trouble in the long run.

Max Brenner closes 20 out of 37 stores after announcing its financial collapse

Thu, 11 Oct 2018 23:11:00 GMT

Only days after the closure of the iconic Darby’s Pies, just days ago, Max Brenner said it would be “business as usual” after it was plunged into financial turmoil. On Monday 8th October, it was made clear that’s not the case.

When luxury chocolatier Max Brenner announced its financial collapse just days ago, the chain said it would still be “business as usual”.

But, today waffle and hot chocolate enthusiasts may have to go elsewhere to satisfy their sweet tooth because 20 of the company’s 37 Aussie stores are closing — despite the earlier claims.

Staff at the 20 locations will be made redundant as administrators try to sell or recapitalise the business and keep its remaining stores trading.

“The decision to close stores is always regrettable but in this case we were left with no choice following a store-by-store review of Max Brenner operations,” administrator Barry Kogan said in a statement.

Nine stores will remain open in NSW, four in Victoria, three in Queensland and one in the ACT.

The company is pulling out of Western Australia, South Australia and the Northern Territory entirely.

Max Brenner Australia cited “escalating costs and tighter retail trade” as the reasons for entering voluntary administration earlier in the week.

And as its Israeli parent company now says it is looking for a new franchisee to keep the Max Brenner brand alive in Australia, the chocolate chain’s former staff have spoken out about “toxic” working conditions and missed superannuation payments.

“All they cared about was how to make their pockets and egos bigger,” one former staff member wrote on Facebook, claiming the company had withheld her superannuation payments.

A major overhaul of the Max Brenner head office in Alexandria, Sydney was blamed for the company not paying staff superannuation for the last six months of 2016.

In a letter sent to staff in February 2017 and seen by Fairfax, the company said the multimillion-dollar renovations were “a major landmark” that “prepares us for the growth that lies ahead”.

“However, as a result of these investments, we are currently refinancing several areas of the business,” it read. “This process is unfortunately taking longer than originally planned and is having a temporary effect on cash flow.”

Max Brenner was founded in 1996 in Ra’anana, Israel by Max Fichtman and Oded Brenner who combined their names for the brand moniker.

In its early days, it was a small shop selling handmade chocolates.

In Australia, the chain — known for its fondue, crepes, milkshakes, waffles and hot chocolate — is owned and run by husband and wife team Tom and Lilly Haikin, who opened the first cafe in Sydney’s Paddington in 1999.

The pair, who made BRW’s Young Rich list in 2013 with a fortune of $40 million, branched out across the country soon after.

The chain’s success has seen it spread as far as the US, Japan, Singapore, Russia and China.

It appeared the spread was showing no signs of slowing down in January, when the company told Inside Retail Australia it aimed to open as many as seven new local stores this year.

However, it was clear all was not well with the Australian side of the business when Sunstate Ceilings — a Queensland business — filed a wind-up notice against Max Brenner on June 29.

The Australian Financial Review reported that Glenn Wein, the former head of the Packer family’s Consolidated Press Holdings, was looking to put together a “rescue” package to save the business, which owed about $50 million at the time.

McGrathNicol issued a statement saying it is working closely with Max Brenner’s management team to come up with a solution to the chain’s financial problems.

“All Max Brenner stores will operate on a ‘business as usual’ basis with minimum disruption whilst the administrators complete their urgent review of the operations,” it reads.

“We are assessing the prospects of completing a going concern sale of the business or a recapitalisation through the voluntary administration process.”

Business trends expert Dr Lauren Rosewarne from The University of Melbourne, said there may be many reasons for the confectionary brand’s Australian decline.

The success of small businesses in the Newcastle and Hunter regions is paramount and Small Businesses generally are vital to the NSW economy as well as playing an integral role within our community fabric.

This devastating closure raises the importance of regular financial interaction with your accountant to avoid a similar fate. Businesses within the Accommodation & Food Sector had the lowest survival rate – just 54.6% – of any industry in Australia last year. With over 93% of Hospitality outfits being small businesses, it is essential for any professional advice to be current, focussed on small business and with an understanding of the unique challenges of the industry.

If you want your small business to avoid a similar fate to Max Brenner, call us today for an obligation free appointment.

Article Source: news.com.au

END OF AN ERA AS DARBY’S PIES SHUTS UP SHOP

Wed, 03 Oct 2018 23:06:04 GMT

A Newcastle icon has closed its doors for the final time on Monday, 24th September 2018 as Darby’s Pies shut up shop at its 27 stores as well as its Gateshead bakery.

The closure leaves 120 staff out of a job, with the business now in the hands of liquidators.

Darby’s had become somewhat of a Newcastle icon, established in 1969 it became famous for selling $1 pies.

END OF AN ERA AS DARBY’S PIES SHUTS UP SHOP

Liquidators briefing Darby’s Pies employees made redundant after the business closed – Sam Burbury (@SamBurbury) September 24, 2018

If you want your small business to avoid a similar fate to Darby’s Pies, call us today on 02 49694699 or email reception@garis.com.au to arrange an obligation free appointment.

Business for Good: Our August Contribution

Wed, 08 Aug 2018 10:05:45 GMT

Hello Everyone!

As you may or may not know, The Garis Group are proud partners of B1G1-Business for Good.

B1G1 is a Social Enterprise and non-profit organisation with a mission to create a world that’s full of giving. Unlike conventional giving models, B1G1 helps small and medium sized businesses achieve more social impact by embedding giving activities in their everyday business operations to create unique Giving Stories. Every business transaction (and as a result, your everyday activity) can impact lives.

We believe that small businesses and small everyday transactions can change our world when we come together through the sense of giving and caring. Belonging to B1G1 puts the ‘WHY’ back into businesses and brings back a sense of greater meaning and purpose. B1G1 let’s you create that joy and share it…habitually.

Each month The Garis Group team choose a different project to support.

For the month of August, The Garis Group team chose to raise funds to provide safe drinking water to a family in Cambodia.

Project Description:

Access to safe drinking water is the foundation for the issues of health, education, food, and livelihood. This water is provided via the means of a Bio-Sand Water Filter that lasts up to two decades or more and is able to provide for an entire family. A Bio-Sand Filter (BSF) is a point-of-use water treatment system adapted from traditional slow sand filters. Cambodia has over 9,000,000 cases of diarrhoeal disease, costing the nation $448 million a year. One of the easiest ways to combat poverty and disease is to provide access to clean water sources.

We were proudly able to raise enough funds to provide 600 days of access to life-saving clean water to families!

Our Impact So Far…

Our contribution for September:

For the month of September, we have chosen to raise funds to provide access to clean water in the villages of Malawi!

Project Description:

Provide access to clean water for life by sponsoring a simple well and water pump. In the villages of Malawi, high infant and child mortality are caused by water and sanitation related diseases. These problems are made even worse by a lack of knowledge about proper hygiene. Your contribution of a well and water pump is all that is needed to let people live the fullest of lives.

We will let you all know how many lives we were able to impact through this project in our September Contribution post.

Be a part of something bigger:

If you would like your business to be a part of something bigger, click the image below to join!

Rental properties - claiming travel expenses deductions

Thu, 26 Jul 2018 22:37:32 GMT

From 1 July 2017, travel expenses relating to a residential investment property are not deductible.

A residential premise (property) is land or a building that is:

occupied as a residence or for residential accommodation
intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation.

Under the new legislation, you are no longer able to claim any deductions for the cost of travel you incur relating to a residential rental property unless you are carrying on a business of property investing or are an excluded entity.

As with prior years, the travel expenditure cannot be included in the cost base for calculating your capital gain or capital loss when you sell the property.

In the business of property investing

Generally, owning one or several rental properties will not be considered being in the business of rental properties.

The receipt of income by an individual from the letting of property to a tenant, or multiple tenants, will not typically amount to the carrying on of a business as such their activities are generally considered a form of investment rather than a business.

Excluded entities

An excluded entity is a:

corporate tax entity
superannuation plan that is not a self-managed superannuation fund
public unit trust
managed investment trust
unit trust or a partnership, all of the members of which are entities of a type listed above.

Example: An individual with residential investment property in 2017–18

Sarah rented out her residential rental property in 2017–18. She travelled to the property to repair damages caused by tenants during the year.

As the investment is a residential property, Sarah cannot claim travel expense.

End of example

Example: An excluded entity in 2017–18

Terry’s Tyres incurred travel expenses in 2017–18 when the property manager was tasked with inspecting a residential property investment that is currently tenanted. Terry’s Tyres is a corporate tax entity and can claim a deduction for rental travel costs.

End of Example

All other property travel expenses

You can continue to claim a deduction for the cost of travel you incurred to inspect or maintain rental properties or to collect rent if the expenses were incurred:

in 2016–17 and earlier years for residential rental properties
for commercial rental properties
by excluded entities
when carrying on a rental property business.

Travel expenses include:

preparing the property for new tenants (except for the first tenants)
inspecting the property during or at the end of tenancy
undertaking repairs, where those repairs are because of damage or wear and tear incurred while you rented out the property
maintaining the property, such as cleaning and gardening, while it is rented or genuinely available for rent
collecting the rent
visiting your agent to discuss your rental property

Travel expenses don’t include:

your personal use of the property or for purely private purposes
carrying out general maintenance of the property while it is not genuinely available for rent
undertaking repairs, where those repairs are not because of damage or wear and tear incurred while you rented out the property (for example, if you travel to undertake initial repairs before you rent the property for the first time, these are capital expenses and may be included as part of the cost base for capital gains tax calculation when the property is being sold later).

Where your travel expenses are partly for private purposes and partly related to the rental property, you can only claim the amount relating to the rental property.

Ownership

If you do not have an ownership interest in the rental property, you cannot claim travel expenses, even if you travel for the purposes of maintenance or inspections.

Example: Ownership interest

Kei is the sole owner of a rental property. Her husband, Bert, occasionally drives to the rental property in his own car to undertake maintenance. As he has no ownership interest in the property, Bert cannot claim travel expenses. Similarly, since Kei did not travel to the property to undertake the maintenance, she cannot claim a deduction.

If Kei and Bert co-owned the property, Bert could share his travel expenses with Kei in line with their legal interest in the property.

End of example

Car travel

If you use your own car to travel to inspect your rental property or to collect rent, you can use the same method to calculate your deductions as work-related travel.

Overnight travel

You can claim a deduction for travel expenses for travelling to your rental property if:

you own a rental property that is far away from where you live
it would be unreasonable to expect you not to stay near the rental property overnight when making an inspection
your main purpose in travelling was to inspect and maintain the rental property.

Where you stay overnight, you can claim meals and accommodation.

Where your trip is mainly for private purposes (for example, having a holiday) and inspecting the property is incidental to that main purpose, you cannot claim the costs of getting there or the return trip. You can only claim local expenses directly related to the property inspection such as taxi fares to the rental property and a proportion of accommodation expenses.

Example: Apportionment

Bill and Marli King are joint owners of a residential rental property in a resort town on the north coast of Queensland. In 2014–15, they spent $1,800 on airfares and $1,500 on accommodation when they travel from their home in Melbourne, mainly for the purpose of holidaying in the resort town, but also to inspect the property. They also spend $100 on taxi fares from the hotel to the rental property and back. The Kings spent:

one day (10% of their total time in Queensland) on matters relating to the rental property
nine days (90% of their total time in Queensland) swimming and sightseeing.

They cannot claim a deduction for any part of the $1,800 airfares because the main purpose of the trip is a holiday and the property inspection is incidental.

Since the travel expenses were incurred in the 2014–15 year, they can claim deductions for the $100 taxi fare and a reasonable apportionment of the accommodation expenses (that is $150 of the $1,500).

As the Kings jointly own the rental property, they can claim $125 each.

End of example

Example: Accommodation

Jabari is the sole owner of a rental property on the Gold Coast. In 2014–15, he travels from Sydney to the Gold Coast to undertake deductible repairs on his rental property but takes his spouse, Kym, with him for company and to share the driving. Jabari and Kym stay in a hotel where the cost of a:

single room is $55
double room is $70

A reasonable basis for apportionment of accommodation expenses in this instance is to claim the single room rate of $55 (rather than half the double room rate), as Jabari would have stayed in the single room if Kym had not travelled with him.

End of example

Overseas travel

If you are an Australian resident and own a rental property overseas, you may travel overseas on holiday and inspect your rental property at the same time.

If the main purpose of the trip is a holiday, you cannot claim the cost of getting there – you can only claim local expenses directly related to inspecting the property, such as taxi fares and part of your accommodation expenses.

You must be able to show your reason for visiting the rental property.

The records you keep, such as invoices for your accommodation or airline tickets, will help you do this.

Travel before you purchase

You cannot claim for travel to inspect a property before you buy it.

You cannot claim for travel to (or other costs for) rental seminars about helping you find a rental property to invest in.

Seminars are only tax deductible if they relate to producing income from the property. So, when a seminar teaches you how to locate a suitable rental property to buy, you cannot claim a deduction against rental income for the cost of the seminar.

Some promoters have incorrectly told taxpayers that they can claim the cost of their travel to and from a property they may purchase. You cannot claim these costs, for properties within Australia or overseas.

Written evidence

If you travel over a considerable distance to inspect a rental property (for example, interstate), you need written evidence to show that you travelled and what expenses you incurred.

Written records can include:

a travel diary
receipts for

airline tickets
fuel
accommodation
other purchases while travelling
items you used for repairs and maintenance that you purchased when you travelled to or stayed near the rental property.

Note: If you spend six or more nights away from where you live, you must keep a travel diary or similar document that shows the nature of the activities, dates, places, times and duration of your activities and travel.

Example: Individual with a commercial investment property

In 2017–18, Greg purchased a shopfront and leased the property to Paul. Paul used the shopfront to operate a bakery and paid rent to Greg under a 12 month contract.

Greg travelled to the shopfront to inspect the property at the end of the tenancy agreement. As the property was used for commercial purposes, Greg can claim the travel expenses.

End of Example.

How to cash in on Direct Debit for Small Business

Tue, 03 Jul 2018 23:40:33 GMT

Technology has made direct debit for small business far easier and more affordable. Now you don’t have to wait for customers to approve and pay your invoice. Learn how it works.

What is direct debit?

When you set up a direct debit with a customer, you can collect payments straight from their bank. Of course you have to notify them ahead of time what you’re taking and when, but the customer doesn’t have to do anything to make the payment happen.

Benefits of direct debit for small business

While it takes 30 days or more for a customer to pay an invoice, direct debit is almost instant. Payment is triggered as soon as you send the bill.

It’s convenient, too. Customers don’t have to approve payments or remember to make payments, which simplifies their life. And you don’t have to spend as much time tracking invoices or chasing payments. Businesses that use direct debit to bill customers say they get back a day a week in admin time (this is an average, and would obviously change depending on size).

Direct debit is ideal for:

subscriptions for things like gym memberships or software
regular invoices such as monthly retainers (for fixed or variable amounts)
accepting instalments to help customers spread out their costs
collecting rent from tenants

How does direct debit work?

Your customer fills out a direct debit form (also known as a mandate) authorising you to take payments from their bank. When a payment is coming up, you send the customer a notice saying how much will be taken, and when. The customer doesn’t need to take any other action. When the due date comes, the payment is made automatically.

How long does a direct debit take?

Customer payments can take up to five working days to clear. The transfer isn’t quite as fast as other online payment methods because you’re pulling money from their account. That’s a slower process than if they push the money to yours.

What does a direct debit form look like?

A direct debit form can be filled out online or on paper. Here’s what they look like:

Direct debit collection options

You can take one of two approaches to direct debit.

Set it up directly through your bank
This can be easy or hard depending on where your customers reside. It’s a lengthy negotiation in some countries.
Use a direct debit provider
The levels of service and charges can vary a lot so shop around.

Easy direct debit for small business

Direct debit was first used by Unilever in the 1960s, but it was complex and expensive. And that’s the way it stayed for a long time. Online technologies have recently streamlined the process, making it affordable for smaller businesses.

As a result, you can now set up for free, and direct debit a customer for between 20 cents and $2 per transaction.

How to set up direct debit

If you’re a small business, you’re probably going to start with an off-the-shelf provider. Here’s how it works.

Choose your direct debit provider
Set up your account through their website (or through your online accounting software).
Add customers and invite them to pay through direct debit
They’ll be emailed a direct debit form. Once they fill it out, you can take payments from their bank.
Set up your payments
You can use it to collect recurring or one-off bills.
Your customer is automatically notified before a payment is collected
The notice period is regulated so make sure your provider complies.
Payment clears in your account – minus the provider’s fee
The fee will depend on the size of the bill but shouldn’t go higher than about $2.

Manage all your payments online

View and manage all of your direct debit accounts online. If you’ve chosen a system that talks to your accounting software, you can reconcile payments online too.

What about direct debit indemnity?

Customers have the right to cancel a direct debit transaction and receive a refund. The rules around this vary from market to market so, again, it depends where your customers are based. But it can be hard to avoid giving a refund when one is requested, even if you disagree with it. That’s why direct debit is not recommended for really big transactions

Fortunately, only about 1 in 500 direct debit transactions gets disputed.

Direct debit services for small businesses

While a lot of companies offer online payment services like credit card, debit card and automated clearing house (ACH), there aren’t as many doing direct debit for small business just yet. That is changing, however, and there are still well-trusted options out there.

GoCardless and Ezidebit are respected operators that integrate with popular online accounting software.

Tip Tuesday: Demystifying End Of Financial Year

Tue, 26 Jun 2018 23:50:02 GMT

End Of Financial Year for small business can be a stressful time, but it doesn’t have to be. Here’s what you need to get through it, and some tips on how to minimise the drama.

What is the Australian financial year?

The Australian financial year (also the Australian tax year) runs from 1 July to 30 June. At midnight on 30 June, the financial year ends, your business books are closed, and you report your financial situation to the government. They use this information to figure out how much tax you owe.

Tax return due date

The tax season starts on 1 July (the day after the Australian financial year ends) and runs through till 31 October. You can submit your tax return at anytime during tax season.

In theory, this makes 31 October the final tax deadline, but there are exceptions. Businesses with tax agents have until 31 March the following year, for example. And there are other special circumstances. To find your precise due date, see what the ATO says about lodging your tax return .

Important items for Australian financial year end

To assess your business’s tax obligations, the government relies on a range of documents. The two most important are your:

profit and loss (P&L) statement
balance sheet

Profit and loss (P&L) statement

In its simplest form, a P&L statement shows your income (or revenue) in one column, and your expenses (or costs) in another. Expenses are subtracted from income to show how profitable the business is.

Creating a P&L statement can be intense because it needs to reflect all of your business transactions for the year, including:

every sale, markup, and fee you charged, plus interest earned
every dollar spent on things like supplies, rent, energy, payroll and loan repayments

P&L statements can also be complex because costs include things like depreciation of assets.

Simplifying P&L statements for end of financial year

Your accountant needs a really comprehensive and accurate record of transactions to get P&L statements right for you. You can help them by:

using only business bank accounts to pay business bills
getting online accounting software that retrieves transaction data straight from your bank
staying on top of bank reconciliation so income and expenses are correctly classified

Balance sheet

A balance sheet summarises your assets and liabilities. Assets are things the business owns, like worktools, vehicles, and cash in the bank. An invoice that you’ve sent but which hasn’t yet been paid is also an asset. Liabilities include debts and bills that you’ve received but haven’t yet paid.

Figuring out your assets and liabilities can be tricky if you don’t know:

which invoices have or haven’t been fully paid
exactly how much money you owe to suppliers and lenders

Simplifying your balance sheet for end of financial year

It’s best to stay on top of your assets and liabilities throughout the year, rather than trying to catch up at financial year end.

Record new assets as soon as they come into the business, so nothing’s forgotten.
Make sure you record bills as soon as they’re received (not just when you pay them).
Use invoicing software that shows what has and hasn’t been paid.

You may need to do a stocktake

Unused inventory needs to be declared as an asset. You’ll need to count what you have and assign a value to each item.

If you carry a lot of inventory, consider getting an app to keep track of it. An inventory app allows you to record inventory as you buy it. It’ll also sync with your sales system, so items are subtracted from your inventory as they’re sold.

You need to account for every dollar that comes into, or goes out of your business. Try to avoid doing this work manually as it will take a heap of time.

Complete your tax paperwork

Once you’ve got the numbers together, you’re ready to lodge business tax returns. You’ll have more obligations if you have employees.

For employees:

Produce payment summaries.
You need to formally document the amount you paid each employee, and how much tax you paid on their behalf.
Pay super.
You need to make super contributions on behalf of all employees, including casual staff. Make sure you’re meeting your commitments with this ATO checklist.
Work out fringe benefits tax.
Non-cash benefits that you provide to your employees (such as a car) are taxed. You must pay it on your employee’s behalf.

For the business:

Fill out a business income return.
Declare how much profit the business earned. Do this even if you made pay-as-you-go instalment payments throughout the year.
Claim your deductions.
Some business expenses can be deducted from your taxable income. Check out the Australian Tax Office guidelines.
GST (for registered businesses).
Declare how much GST you collected and paid throughout the year. You can do an annual return, or pay quarterly and submit an annual report.

Underpaying tax can get you in legal trouble. Overpaying just doesn’t make sense. You need a lot of knowledge to get the balance right. Get a tax agent to help you but make sure they’re registered with the Tax Practitioners Board. You are personally responsible for everything that’s included in your return so it’s not worth taking a risk.

Simplifying tax

Tax is all about record-keeping. You need to account for every dollar that comes into, or goes out of your business. And you should have documents such as receipts and invoices to back up those records. Try to avoid doing this work manually as it will take a heap of time, which will make the end of financial year really stressful. Manual entry also leaves a lot of room for human error:

Use software to record business transactions automatically.
Get accounting and payroll software that calculates GST and income taxes as you go.
Photograph paper receipts – an app like Receipt Bank will create a digital record for you.

Healthcheck your business

You may dread the end of financial year but there are a lot of upsides. For many businesses, it’s the only time of the year that they have a complete set of accounts, meaning they can see:

how much money they’re making – and where it’s coming from
how much money they’re spending – and where it’s going
where the risks are in their business

It’s an ideal time to make strategic decisions that could save money, boost revenue, and make the business more profitable. It’s also a good time to check that the business has the right legal structure, and that it’s adequately insured.

How to have a better end of financial year

For the new financial year, try to set up systems that:

limit the amount of work you have to do at tax time
give you a running report of business performance (so you don’t have to wait till this time next year to find out how you’re doing)
create an automatic audit trail

Online accounting software automates data entry, so your books are always up to date. That’s great for end of financial year and the tax season, but it also means you can create a P&L statement or a balance sheet whenever you like – not just at tax time. And because you’ll have digital records of everything, there’s no need to fear an audit.

Also, ask your accountant to come up with a tax plan for the new year. They’re in a much better position to lower your tax bill if they can put a 12-month strategy in place.

Tip Tuesday - Mobile Technology Trends for Small Business

Tue, 19 Jun 2018 08:47:55 GMT

More of your customers than ever before are using smartphones and tablets to research a product or service. Your business can’t afford to ignore this trend and be left behind. So how do you keep up to date with the latest mobile technology trends?

Smartphones and tablets are changing everything

You probably own a portable device, such as a smartphone or a tablet – or perhaps both. Just like billions of people around the world, you use your mobile device every day, looking at products and services online.

This represents a great opportunity for your business to generate new sales. It also offers easier ways of managing your day-to-day operations.

Unfortunately, many small businesses are missing out. Some don’t understand the benefits. Others just can’t keep up with the fast pace of change.

So in this guide we’ll explain how this mobile revolution can help you produce new revenue. We’ll also look at how mobile technology trends are changing the way we all do business – forever.

Some facts and figures

The speed of change has been so fast that it’s almost impossible to comprehend. Since mobile devices were first introduced, costs have plummeted. That’s driven amazing growth, as these facts and figures show:

Forbes says the top 25 percent of SMEs (small and medium-sized enterprises) are seeing big gains from mobile. They’re recording twice the revenue growth and up to eight times more jobs being created.
In some parts of the world, more than 94 percent of SMEs use their smartphone to help manage their business.
Two-thirds of SMEs save over 150 hours a year by using mobile technology.
Data plan costs for portable devices have dropped by 99 percent in less than 10 years.
Mobile technology is the fastest-growing technology of all time.

What does this mean for your business?

It doesn’t matter what industry your business operates in. You could be in retail, manufacturing or services. Whatever your industry, mobile technology is changing your business.

Now your customers can:

find your location – and find out more about you – quickly and easily
compare your products or services with those from other companies
read glowing reviews from other customers – and complaints too
discuss your business and share their thoughts with each other
communicate with you directly – more so than ever before.

Many businesses have realised this, and started to take advantage of it. They know that their customers want a better, more personal service. Portable technology is delivering that service.

So it’s time to go mobile. Because if you don’t make the most of this new world of business, your competitors surely will.

Your website should display perfectly on all devices. It needs a responsive design that quickly takes people where they need to go.

Understanding the benefits

The benefits of mobile technology can be broken down into three simple categories:

Communication
From websites to apps, social media to instant messaging, smartphones and tablets enhance communication. They let potential customers contact you at any time, day or night. If you respond well, you’ll win new customers faster than ever before.
Knowledge
Portable technology gives your customers knowledge about you. But it also gives you knowledge about your customers. Analytics software will tell you where your customers came from, how they found you, and what they were looking for. It can also give you useful demographic information. All of this will help you improve your business by tailoring your products and services to suit your customers.
Responsiveness
You now have the tools to change your business fast. Cloud-based applications let you manage your business from anywhere at any time. That means you can respond to business opportunities quickly and efficiently.

Five practical steps you can take

We’ve looked at how mobile technology trends are changing business for the better. But how do you take advantage of those changes? Here are five practical steps.

Optimise your website
Smartphones and tablets have smaller screens than laptops and desktop computers. Your website should display perfectly on all devices. It needs a responsive design that quickly takes people where they need to go. Your web developer can help you get this right.
Step up your social media efforts
Are you actively promoting your business via Twitter, Facebook and other social networks? If not, now is the time to start. Mobile users love social media, especially during unproductive time such as when they’re commuting. Use social media alongside your existing email and text channels – those are still important.
Take advantage of the cloud
You can streamline your business operations too. Cloud-based applications can be run from any device with an internet connection. They store your data remotely and securely. From accounting software to retail POS and inventory management, it’s all available in the cloud.
Move your employees online
Make use of scheduling and calendar apps to keep your staff connected. Consider BYOD (bring your own device) if you don’t have the resources to give all your employees a tablet or smartphone.
Know your keywords and branding
Consistency is important. Your mobile ‘presence’ should reflect everything your business represents on other platforms too.

These five steps will get you started. Once you’re comfortable with your mobile business you might consider going further.

For example, you could create your own app (a computer program for Android or Apple devices). But that may be expensive, so you should run a financial forecast before deciding whether it’s worthwhile.

A tool for everyone

Smartphones and tablets are everywhere. Those small, glowing oblongs may not take up much space. But they’re making everybody’s lives more connected.

Consumers carry their mobile devices wherever they go, and they use them a lot. So your target audience is always available, ready to engage with your company.

Meanwhile, your employees can be empowered to fulfil their roles in an agile and flexible way – wherever they happen to be.

It’s all about speed

It’s clear that there are advantages and challenges when it comes to adapting to this new way of working. These are the same for every business – and those that adapt quickly will reap the rewards.

Above all, mobile technology trends are making business faster. They help you do whatever you’re doing in a shorter time-frame.

That means you can get more done – and sell more of your products or services. So go mobile now, and watch your business take off.

Article Source: Xero

Tip Tuesday - How to Grow the Family Business

Tue, 12 Jun 2018 08:27:09 GMT

Running a family business and working with family members presents unique advantages, and unique challenges. If you’ve built up your own business, now might be the time to bring in other family members. Here’s how to avoid some of the pitfalls.

The benefits of keeping it in the family

It’s unusual to see ‘Smith & Sons’ or similar business names these days. But that doesn’t mean the family business is a dying breed. On the contrary, family businesses are thriving. In a recent PwC report, three-quarters of family firms grew in the previous year. That’s much higher than the average for all business types.

Keeping your business in the family has obvious appeal, whether you work with siblings, parents or children.

Your family will stick with you through the hard times.
You know your family well.
You and your family often share common goals.
Working with family can be emotionally rewarding and satisfying.

But working with family can also get complicated. Family businesses can lead to emotional stress and arguments. They can even cause legal disputes.

So if you’re thinking of expanding your business while keeping it in the family, it pays to plan ahead.

Interviewing interested family members

You should always take the hiring process seriously. Interview each applicant – family and non-family – to find out what they can bring to your business. In particular, look for skills and experience that are different to your own. You’re less likely to argue if you have complementary abilities.

Make sure you create opportunities for people who have worked outside the family firm to contribute their fresh perspective and new ideas.

It’s important to be as objective as possible through all of this. Be honest with yourself. If you’re worried you could clash with a family member, don’t feel obliged to hire them. If you make the wrong decision, it could damage not just your business, but also your family ties.

Be fair to all your employees

Before you think about hiring more family members, spare a thought for those employees who are outside the family. As the business owner, you have a duty to be fair to all of your employees – not just your relatives.

Leave emotion out of your employment decisions.
Consider whether the family member will fit in well.
Don’t show favouritism to anyone.
Don’t pay family staff more than other employees in equivalent positions.
Promote your best people, whoever they are.
Treat all your employees equally and fairly.

This isn’t just an exercise in good moral behaviour. It’s important if you want to get the best out of all your employees. If you don’t treat your staff fairly, employees can become demotivated or leave, which will cost you money. Whether you’re related to your employees or not, treat everyone as members of your wider business family.

Set clear expectations with everyone

Imagine your cousin hasn’t worked for 10 years and asks to be employed at your family firm. Do you take a risk simply because they’re family? Or perhaps you’ve employed your nephew, but he’s careless and unpunctual. What do you do?

If you want your business to thrive, you need to be as strict with your family as you would be with any other employee. Regardless of the size of your family business, unproductive workers can hurt its efficiency and reputation. Act positively and keep your business lean and efficient.

As the business owner, you have a duty to be fair to all of your employees – not just your relatives.

Keep emotion out of the family business

A family firm is dominated by two strong forces: emotions and commerce. Unfortunately these can sometimes pull in opposite directions. You may find yourself on the other side of a business argument to someone you dearly love, which can be stressful and awkward.

Only you know whether being right is more important than risking a family feud. There’s no easy answer. But business decisions taken for emotional reasons rarely work out well.

Just as the boardroom should be free of emotional ties, so your family time should be free of business worries. Don’t take your work home with you, especially if you live with the people you work with.

Make an agreement with your family that you won’t talk about business at home. Or if you operate from your home, agree the hours that are work free. It may be hard to stick to this sometimes, but it’s vital for everyone’s happiness.

Stay firm on finances

A family business must be run with the same level of financial responsibility as any other. You may need to hold family members accountable for bringing in revenue or keeping expenses down. It can be difficult to do this with a close relative.

The best way to keep emotions from creeping in is to use hard data. Use charts and graphs that make trends clear – so there’s no argument over interpretation.

You’ll also need to decide how open the books are to members of the family. Once you’ve decided who sees what, stick to it. Use accounting software to set access levels for each staff member and lock them out of confidential information.

An accountant can help you manage finances in a family business. They will help you make impartial decisions, and can be trusted by family members as an independent voice.

Be fair to your children

Take the time to factor inheritance planning into your business strategy. Let’s say you have two children. One child is much more business-minded than the other, so you decide this child will inherit your business. But how will the other child feel? How will you compensate them fairly?

Poor inheritance planning causes resentment, not just between you and the child who feels left out, but also between the two of them. So talk to your accountant and lawyer for advice. Talk to your children too. Explain your thoughts and work together to find a fair solution.

Remember that your children may have a different perspective to you. You probably sweated and toiled to build up your business, but they may not feel the same level of commitment. They may not understand the finances or the difficulties involved, and will likely have less of an emotional connection to the family business.

By some estimates, around a third of businesses fail when handed down to the next generation. Plan carefully and communicate openly with your chosen successor to prevent that happening.

Make rules and stick to them

It’s easy to drift into uncomfortable or unprofessional situations when running a family business. You can reduce the risk by drawing up a list of rules.

Write down:

the business goals
each family member’s responsibilities
guidelines for appropriate communication

Make it clear that favouritism will be avoided and that emotional decision-making is unacceptable. Add any other rules necessary for the smooth running of the business. Maybe you’ll only hire family members who’ve worked outside the family business for at least five years, for instance.

Ask each person to sign a copy of the rules to show they accept them. Then they’ll know you’re serious about running the family firm in the best possible way.

A question of balance

Balancing family life with work pressures is hard at the best of times. Combining family and business is even harder. But it’s worth the effort.

Family firms are some of the strongest, most profitable and dynamic businesses of all. With good planning and the right attitude, you can grow your business and keep your family happy.

Article Source: Xero

Tax Deduction Claims for Technology to Rise, but Beware the ATO is Watching.

Tue, 17 Apr 2018 00:13:08 GMT

TECHNOLOGY and tax deductions are combining to deliver Australians a financial boost, but those who bend the rules are increasingly likely to get caught.

A surge in people working from home and using devices such as mobile phones and iPads for work-related tasks has opened the door to a new wave of tax deductions.

Claims for “other work-related expenses”, which include mobile phones and internet, climbed to a record $7.9 billion last year — up almost 50 per cent in a decade.

ATO assistant commissioner Adam Kendrick said an increase in workers using technology was a driver of this growth.

“Changes to technology and also to the labour market has led to employees taking on more costs,” he said.

However, only work-related use can be claimed, and records must be kept to separate this from private use.

NDA Law managing director Andrea Michaels said tax-deductible work-related technology expenses could include:

A portion of mobile phone purchase and usage costs;
Tablet computers and laptops used for work;
Accessories such as USB sticks and printers if used for work;
Part of home internet monthly costs;
Apps used in the course of doing your work.

“People are on their phones all the time or working from home, so they are legitimately using technology for work,” Ms Michaels said.

“But there are some people out there claiming more than they should.

“There are lots of good opportunities for claiming tax deductions for technology, but be reasonable and be able to substantiate it.”

Mr Kendrick said the ATO’s data matching technology and other systems enabled it to compare people’s claims with others in similar jobs and similar incomes.

“The ATO has more data available than ever and can access it to verify, for example, your telephone use.”

It also speaks with employers. “We had an example of one employer group with thousands of people claiming 100 per cent of their mobile phone bills,” Mr Kendrick said.

“When we went and spoke to the employer we found they weren’t allowed to use their mobile phone for OH & S reasons — with only a few exceptions for supervisors — because of the nature of what they were doing, they couldn’t risk sparks from the mobile phones blowing up the workplace.”

The workers had seen tax agents who were spruiking their ability to get higher deductions, but those deductions were wrong.

“We will allow you to claim up to $50 without keeping records for your mobile phone,” Mr Kendrick said.

“For the other items you need to keep records for a one-month period that’s representative of their use.”

Article Source: News.com

When is the Best Time of Year to Start Building?

Fri, 06 Apr 2018 00:00:38 GMT

For people building their dream home, one of the biggest questions is about timing. When is it best to start work? A recent article from Realestate.com has the answers your looking for.

The average Australian house can take anywhere from four to 12 months to build, depending on the builder, construction method, complexity of the design and numerous site factors, so knowing when to start building is vital.

Jarrod Sanfilippo, the managing director of volume builder Burbank Homes, which builds more than 2000 homes nationwide each year, says the weather is central to picking the right time.

“Naturally, when building a home it’s ideal to avoid temperamental weather that will delay the build process,” Sanfilippo says.

“Rains, high winds and extreme heat all slow down build times, as works are often halted during these periods,” he says.

In Victoria, where Burbank builds the bulk of its homes, Sanfilippo says there are two ideal times to start work: March and August.

“Towards the start of the year, around March, is a good time to avoid bad weather at the beginning of the build and to have it complete and ready to be lived in before Christmas,” he says.

“Another ideal time to attempt to avoid harsh weather conditions would be August, assuming you aren’t rushed to be in your home by Christmas, as you’ll miss the bulk of that unpredictable weather. Certainly in Melbourne it can be hard to avoid, though!” Sanfilippo says.

Other factors which impact the decision about timing include economics, such as the value of land and its expense, as well as interest rates and the delays and impact of public holidays and the festive season, he adds.

In short, you should avoid the chilly winter months and the Christmas festive season if possible. “If you avoid winter, it makes sense there will be fewer days missed on site,” Sanfilippo says.

“Similarly, if you go to site just before Christmas, there will be significant delays, as the industry virtually shuts down at the year’s close for a couple of weeks. As such, we wouldn’t recommend commencing a job too close to the end of the year,” he says.

Between December and February, people aren’t typically looking to begin a build anyway, “as it’s such a busy time of the year for other reasons”, he says.

If the build will run through winter, don’t panic. “Jobs certainly face delays in winter, however these are recurring each year in the colder months and are anticipated,” Sanfilippo says.

It's Not A Good Idea To Use A Mates ABN

Thu, 22 Mar 2018 09:53:52 GMT

Among the many changes introduced with the GST, one of the more far reaching income tax changes was the establishment of the Australian Business Number system . From July 1, 2000 strict regulations have required businesses to quote their ABN on official documentation, especially on invoices that they issue.

Like many things to do with the Australian taxation system, the responsibility has been put on business owners to comply with the ABN regulations, and if they breach these regulations the ATO can impose massive penalties.

When a business pays an expense, and the supplier has not quoted an ABN, they are required to deduct 46.5 per cent from the amount being paid. Businesses are also required to keep their ABN details up-to-date.

The penalties imposed by the ATO differ depending on the seriousness of the breach of the regulations. Penalties are imposed in penalty units, which for the 2018 financial year are $210. Penalties can range from five penalty units for not registering for PAYG withholding tax when required, 20 penalty units for not issuing a tax invoice when required, up to 60 penalty units for making a false or misleading statement when applying for an ABN.

In addition to the penalties, breaches of the PAYG withholding income tax regulations can result in a business paying the amount that should have been deducted to the ATO, plus an interest penalty.

Instant Money Transfers with New Banking Technology

Thu, 15 Mar 2018 08:41:48 GMT

Terry Millet, Chief executive office of Newcastle Permanent, advertised new payment services which launched earlier this year and will forever change how Australians make electronic payments and handle money.

You may not have heard much about these new services—Osko by BPAY and PayID—as not all financial institutions, including three of the four major banks, have fully launched these services to all their customers yet. However, Osko and PayID are part of a major multi-year infrastructure project of the Reserve Bank of Australia and Australia’s financial institutions and create a significant shift to how electronic payments are made.

Let me explain why Osko and PayID are so revolutionary.

Prior to the launch of Osko and PayID, if you wanted to transfer money to someone who doesn’t bank with the same financial institution as you, it could take up to three business days for the money to appear in their account. This is despite the fact the money was deducted from your own account the moment you made the payment.

Osko changes this.

Osko enables a payment to appear in the recipient’s account within a matter seconds, rather than days. No matter whom you transfer the money to, no matter which financial institution they bank with (provided they have Osko too), if you use Osko to make the payment, the money will appear in the recipient’s account almost instantly – 24-hours a day, seven days a week.

Think about those times when you would normally use cash to pay someone – splitting the bill for dinner, paying the babysitter, paying back a mate who bought your ticket to the concert, or even paying back the colleague who did the coffee run.

With Osko, you can pay them back in real-time without cash.

‘But wait,’ I hear you say. ‘I still have the hassle of getting their BSB and account number’.

This problem is solved by the companion feature for Osko that was also launched this week. It’s called PayID and it’s also a game-changer for payments.

PayID means you’ll never need to remember your BSB or account number again. PayID allows you to link an easy-to-remember alias, such as your mobile phone number or email address, to one of your eligible bank accounts. Newcastle Permanent customers can simply register for PayID through Internet Banking or using our Mobile Banking Apps.

Once you’ve registered your PayID, when someone wants to pay you, or you want to pay someone else, you simply share your PayID (your mobile phone number or email address) instead. Your friends will no longer be able to use the excuse that they didn’t pay you back because they didn’t have your account number!

Another very handy feature is the name of the person who owns the PayID will be shown to you before you approve the payment using Osko – giving you peace of mind that you’ve paid the right person.

Leading the charge with this technology, Newcastle Permanent was among the first financial institutions in the country to launch these two new services to all its customers, offering a simpler and faster way to send and receive payments via Internet Banking and Mobile Banking Apps.

This is an exciting development in the world of payments technology and I’m thrilled that Newcastle Permanent is able to offer these new, game-changing services to our customers.

Sir Richard Branson Wise Words from a taxi driver

Thu, 15 Feb 2018 00:18:37 GMT

Sir Richard Branson has shared a story of the wise words he received from a taxi driver on his recent trip to Mexico.

I was recently in Morocco having a chat with a taxi driver who said “you made money, not money made you”.

Humbled, I thought he also made a really interesting point. I have never chased money for money’s sake and I don’t think it is the most important thing when starting a business.

Rather, I have always believed that if you go into business to improve a product or a service and have a positive impact on people’s lives then success and money will follow. At Virgin, we’re in the business of changing business for good.

It is purpose, passion and drive that will take you over the finish line, not bundles of money. If you’re really interested in something, have done your research and have solid values then you have a great shot at success.

Changing business for good was my main motivation to start three airlines, a bank, and even a spaceline. When we started Virgin Atlantic we wanted to make it more special than the other airlines – for example, we were the first to offer in-flight entertainment as standard and an on-board bar.

I’ve always picked industries that are ripe for disruption as usually the status quo doesn’t benefit the consumer. Virgin Money has been making Everyone Better Off for 10 years – aiming to get the balance right so that we: offer good value to our customers; treat our team well; make a positive contribution to society; build positive relationships with our partners; and deliver sustainable profits to our shareholders.

Virgin is a purpose-led brand and this extends to all our Virgin companies and also the businesses we invest in and the non-profit projects we are a part of.

While in Morocco, I was staying at Virgin Limited Edition’s property Kasbah Tamadot , where the Eve Branson Foundation is helping the Berber community thrive. It was great to hear how some of the girls have taken up knitting and are crafting better futures for themselves by creating artisanal products.

It’s important to give back and we support many different initiatives through our foundation Virgin Unite. If money is your only motive, then you shouldn’t launch a company at all.

Small businesses and big spenders on ATO 2018 Hit List

Thu, 08 Feb 2018 08:37:23 GMT

In an interview with Acuity, Australian Tax Commissioner Chris Jordan FCA spells out his new agenda for 2018, where he sets small business and big spenders in his sights.

Australian Tax Commissioner Chris Jordan has revealed in detail the tax issues that the Australian Tax Office will target in 2018 as it moves its focus to individuals and small business.

The hit list for 2018 and beyond includes undeclared business income, wrongly-claimed non-business expenses and unpaid superannuation guarantee contributions.

In a frank interview with Acuity , Jordan confirms the ATO believes it can now gain more from these smaller targets than from large multinationals. Big businesses, from BHP Billiton to Google, have been the highest-profile ATO focus for most of Jordan’s time as commissioner.

Jordan told Acuity that the “tax gap” – the estimated gap between tax theoretical tax payable and the amount actually paid – is bigger for small taxpayers as a group than for its “large market” group of big businesses. The ATO estimates the large market tax gap at A$2.5 billion.

Next year’s hit list is based both on internal ATO work and on the work of the federal government’s Black Economy Task Force, says Jordan. The Task Force report is yet to be released.

Here the Tax Commissioner walks Acuity through the detail of the ATO’s 2018 list of target issues one by one:

Undeclared income: “If we look at cash businesses, for example, why today do people want to have a cash-only business?” Jordan asks. “People say to me: ‘it’s terrible – people steal the money, you’ve got to count it, you’ve got to reconcile it, you’ve got to have security around it, you’ve got to take it to the bank’ … There’s no compelling business reason to have cash only.” Cash-only businesses are often paying cash salaries, and that may mean employees are also failing to receive proper conditions and benefits.
Unexplained wealth or lifestyle: Jordan gives the example of a business-owning family which has reported parent incomes of $70,000 and $50,000, but has three children at private schools and has taken business class flights on overseas trips three times in the past two years. The ATO can source such information through feeds from the Department of Immigration, and even Facebook when the ATO risk filters throw up flags, he says.
Private expenses wrongly claimed: Salary and wage-earners are claiming expenses that they can’t prove are related directly to work. And there are “small businesses that are mingling some of their private expenses with their business expenses”. Jordan acknowledges expenses have long been an issue for the ATO, but he wants to “renew the discussion to highlight that we are going to be focusing on these areas”.
Unpaid superannuation guarantee contributions: Unlike cash wages, unpaid contributions create “a real loss” for the employee, he says, so there will be “a much greater focus” on the issue. The new single-touch payroll reporting system, which starts in July 2018, will provide the ATO with much better and earlier information on unpaid contributions.
Concentrations of cash-only businesses: The ATO has been making visits to businesses based on a data map of cash-only businesses and those which do not much use electronic payment facilities. Suburbs visited include Sydney’s Cabramatta and Haymarket. Some visits have been made in tandem with the Fair Work Commission or the Department of Immigration. “Often there are people there that are not supposed to be working, or they’ve overstayed visas,” he says.

He also repeats previous concerns that tax agents often fail to check that individual taxpayer clients have actually spent money before on “standard” claims for clothing, laundry and car expenses.

As commissioner, Jordan says he needed to previously address the tax failings of large businesses before he could turn his attention to smaller businesses and individuals.

He also criticises the attitudes of people who take a casual approach to paying their own tax but are outraged to hear of people abusing the welfare system. Cash payments facilitate welfare fraud, he notes. And he points out that undeclared income is one area where the ATO can use its data intelligence and analytics better.

Article Source| Acuity | D.Walker

STAR WARS: 10 LESSONS FOR SMALL BUSINESSES

Wed, 31 May 2017 00:25:46 GMT

As expected, the new Star Wars film, Star Wars: Episode VII–The Force Awakens proved to be big business at the box office. While the film series has been around for nearly 40 years and is a multi-million franchise, there are many lessons that small business owners can learn from it. Here are ten of them!

1. Have a Great Idea
George Lucas created a futuristic world that included knights, evil war lords, princesses and other Medieval themes. Star Wars introduced us to colorful characters that have endured for nearly four decades.

2. Embrace Technology
The use of visual effects in the original Star Wars film was groundbreaking. With each successive film in the series, the filmmaking became even more high tech. Embracing technology and continuing to innovate helped build a billion dollar franchise.

3. Learn from Mentors
Just as Luke Skywalker learned the ways of the Jedi from Obi-Wan Kenobi and Yoda, entrepreneurs should seek out older and wiser mentors who can lead them to a successful path.

4. Fathers and Sons May Clash in Family-Owned Businesses
Luke Skywalker and his father, Darth Vader, clashed throughout the original Star Wars films. Ultimately, they did not see eye-to-eye. Unless members of a family-owned business can get along, a rough ending could occur.

5. Spread into New Worlds

Encounter people from other lands and go into new markets. Staying domestic limits potential international (and intergalactic) growth. The new Star Wars film will reap big returns both here in the U.S. and in global movie markets.

6. Continue the Battle vs. Tough Competitors
The Star Wars rebels (the Jedi Warriors) did not fold in the face of a formidable foe (Darth Vader). At times, it may look like the odds are stacked against small business owners. Believing in their power within can help entrepreneurs overcome even the toughest competition.

7.Train Your Staff
Small business owners must invest in their staff and train them so that they are ready to battle against competitors. Leading by example is the best way to instill the values that make a company great. Incentivize them. The film producers offered a percentage of the box office take to entice Harrison Ford to reprise his role as Han Solo.

8. Marketing and Promotion Are Critical to Success
The trailer for Star Wars: Episode VII–The Force Awakens debuted months ago. Further, toys, T-shirts, Lego sets and other Star Wars-related became available on “Force Friday” during the summer. The hype machine has been non-stop for weeks, and now the key players (Harrison Ford and others) are doing interviews and pushing the film to members of the media eager to get a scoop on what could possibly be the biggest film of all time.

9. Secure Enough Funding
The Force Awakens reportedly cost more than $200 million to make, and that figure does not include advertising costs. However, the investment paid off big, as the film sold an estimated $100 million in advance tickets and set a weekend box office record of $238 million. The film will turn a profit within a month. Small business owners must realize that they have to spend money to make money. Making a $200 million is a big financial risk, but one that already seems to have paid off well.

10. Be Ready for a Sequel
Based on the success of the first Star Wars movie, which during its day became the top grossing film of all time, a series of record-setting sequels came to be. The same holds true for small businesses. If a first location proves to be successful, branch out elsewhere. Grow your business into the future!

NEW SUPERANNUATION RULES – DON’T MISS OUT ON POTENTIAL OPPORTUNITIES

Fri, 26 May 2017 09:24:24 GMT

Superannuation Contribution rules and limits are set to change on the 1st of July 2017 and with those changes there are still opportunities that you could take advantage of before the financial year ends.

Summary of the Super Cap changes:

Opportunities

Before tax (concessional) super contribution opportunities

There is an opportunity to contribute an additional $5,000 for those aged over 50 and $10,000 for those aged 50 or over in pre tax super contributions than what will be possible once the cap is reduced on 1st July 2017.

After tax (non concessional) super contributions opportunities

There is an opportunity to contribute $80,000 more in after tax super contributions prior to 30th June 2017 than what will be possible when the cap changes on 1st July 2017. Further if you are under 65, you could also bring forward 3 years worth of after tax contributions to a maximum of $540,000 i.e. an additional $240,000.

Another thing to note is that individuals with balances in excess of $1.6m or above, will not from 1st July 2017, be able to make any further after tax contributions. The year ended 30th June 2017 may be the last opportunity to make an after tax contribution.

Other things to be aware of

The amount of super you can move into pension phase after 1st July 2017 will be restricted to a maximum of $1.6m (excluding subsequent earnings). If there is already be pension balance above the sum of $1.6m, the excess must be placed back into the accumulation phase or taken out of super completely prior to 1st July 2017 to avoid potential penalties.

Transition to retirement income stream pensions will, after 1st July 2017, lose their tax free investment earnings status with such earnings to be subject to the maximum 15% tax rate.

From 1st July 2017, the government will increase the opportunity of contributing to their spouse’s super account by raising the lower income threshold for the receiving spouse from $10,800 to $37,000. This may benefit those wishing to make spouse contributions & receive the maximum tax offset of $540.

The government is projecting that Australians will live longer in the future and thus most will need to fund longer retirement periods. More super savings will be required to fund the longer retirement period which in turn provides an appropriate lifestyle in the years after you finish working.

We at The Garis Group are here to assist you with any queries regarding the changes to superannuation and how they may impact you. Call us on 0249694699 to make an appointment.

5 Ted Talks to Unlock Your Success in Business

Fri, 12 May 2017 08:59:51 GMT

Who doesn’t want to be successful? Exactly, and that’s our goal: to help you be personally and professionally, successful. To save your time and deliver on our promise, we’ve selected the best 5 TED talks on the subject. If you ‘successfully’ watch them all, we’re confident you’ll be a step closer to unlocking your full potential.

1. Elizabeth Gilbert – Success, failure and the drive to keep creating

Elizabeth Gilbert is a magazine writer and novelist, who’s work has been made into two movies so far. The first, ‘Coyote Ugly’, which was based on her experience of working at the famous New York bar, and the huge hit ‘Eat, Pray, Love,’ with Julia Roberts playing the part of Gilbert.

She was once a struggling and unpublished waitress, and despite her eventual success she still found herself identifying with her former self. In this great Ted talk, Gilbert reflects on why success can disorientate as much as a failure and offers a simple, though challenging, way to keep pushing forward regardless.

WATCH ELIZABETH GILBERTS TED TALK HERE!

2. Adam Grant – Are you a giver or a taker?

Adam Grant is Wharton’s top-rated professor and a leading expert on how you can find motivation and meaning, and live a more generous and creative life. He’s been recognised as one of the world’s 25 most influential management thinkers and placed in Fortune’s 40 under 40.

Grant argues that in your workplace, there are three types of people: givers, takers and matchers. In this talk, he defines these different personality types and explains which is most successful. He gives simple strategies to encourage a generous workplace culture and prevent self-serving employees from taking more than their fair share from others around them.

WATCH ADAM GRANT’S TED TALK HERE!

3. Alain de Botton – A kinder, gentler philosophy of success

Alain de Botton is a writer of books about the philosophy of life. He takes on some of our fundamental worries regarding happiness and relationships etc and has had several big hits including his essay titled ‘How Proust Can Change Your Life.’ In 2008, de Botton helped start the School of Life in London, a social enterprise with the aim to make learning and therapy relevant in modern society and to help people learn how to live wisely and well.

In this talk, he examines your ideas of success and failure and makes you question any underlying assumptions you have for these two judgments. Is success really always earned and likewise, is failure always your fault? He argues, very eloquently, the case to move beyond snobbery in an attempt to find greater pleasure in our work.

WATCH ALAIN DE BOTTON’S TED TALK HERE!

4. Angela Lee Duckworth – Grit: The power of passion and perseverance

Angela Duckworth is a distinguished Professor of Psychology at the University of Pennsylvania. She is a 2013 MacArthur “Genius” Fellow, and has advised the White House, the World Bank, NBA and NFL teams, and Fortune 500 CEOs.

In this video, she talks about how after taking a job teaching maths to youngsters at a New York school she quickly discovered that a high IQ wasn’t the only trait that stood out in successful students. She explains how her research shows that ‘grit’ is a better predictor of success than other more obvious factors such as IQ and family income.

WATCH ANGELA LEE DUCKWORTH’S TED TALK HERE!

5. Carol Dweck – The power of believing that you can improve

Carol S. Dweck, PhD is one of the leading researchers of motivation in the world and is a Professor of Psychology at Stanford University. Her research has focused on why people succeed and how to foster success. She has held professorships at Columbia and Harvard Universities, has lectured all over the world and has been elected to the American Academy of Arts and Sciences.

In this TED talk, she gives two ways to think about a problem that’s slightly too hard for you to solve. Are you not smart enough to solve it or have you just not solved it yet? She explains why development of this type of mindset is fundemental to your success.

WATCH CAROL DWEK’S TED TALK HERE!

If you and your business need help unlocking your full potential, call us today on 02 49694699 for a FREE consultation and take your first step towards creating a beautiful financial future.

How Small Businesses Can Compete With A Real Retail Goliath

Fri, 05 May 2017 09:51:04 GMT

Amazon’s arrival: How small businesses can compete with a real retail goliath!

There’s no doubt anymore about whether Amazon is coming to Australia. It’s coming. And yes, retailers should be worried Amazon brings with it phenomenal purchasing power, cutting edge technology, and the ability to sell and deliver just about any product to all Australians, cheaper and potentially faster than anyone.

How can small retailers compete with that?

Simply put, we can’t. But while Amazon will undoubtedly provide a greater cost-benefit to the Australian consumer, small businesses have something to offer that the retail behemoth cannot; true personalisation.

Of course, Amazon aims to be a customer-centric company, but its personalisation is based on software and algorithms. Can sophisticated software really compete with a small business owner who genuinely knows their customers?

We don’t think so. Savvy shoppers know the difference between a product suggestion based on previous purchases and a true connection with a business owner.

According to Deloitte’s 2015 Consumer Review, personalisation is more important than ever before. In fact, the majority of customers are willing to pay more for a customised product or service and almost half are willing to wait longer for that customised product or service. So, while price and speed will always be important to consumers, if we as small businesses can’t compete with Amazon on price or delivery, then we must compete on personalisation.

It’s our belief that as the need for personalisation grows, a consumer hunger will develop for niche marketplaces, micro-brands and tailored experiences; a trend that will allow smaller retailers to flourish as they set themselves apart by offering one-of-a-kind services and experiences.
Small businesses ultimately need to embrace the fact that customer experiences are becoming more important than ever, and tailor their strategies accordingly. Whether it’s one-off gifts, handwritten thank you notes, shout-outs on social media or personalised shopping experiences, small businesses have the advantage of being able to develop a much more intimate relationship with their customers; a genuine relationship that doesn’t rely on data gleaned from technology.

That’s not to say we should avoid personalisation or CRM software altogether it would be impossible to grow your businesses without implementing this kind of technology. But small businesses particularly very niche and micro businesses have the ability to really get to know our customers. And that’s what sets us apart from the retail giants.

So, if you’re a small retailer worried about what impact Amazon’s arrival will have on your business, ask yourself how well you know your customers. And if you don’t know them well, start. Start learning your customers’ names. Start learning about what they like and maybe send a few of them a one-off gifts to thank them for their support. Find them on social media and say hi. Be present, start engaging, and you’ll be surprised by how the smallest amount of genuine, personalised interaction will make your customers feel valued. And in the long term, this will result in a loyal customer base who’s less likely to be tempted away by discounted prices and speedy delivery.

If your business is in the retail space, here at The Garis Group we specialise in helping your business achieve great things!

We have more than 20 yrs experience working with retail businesses of all shapes and sizes, from your local 2nd hand furniture shop or boutique clothes store to your multinational department store outlets.

We use the world’s most innovative and efficient accounting software Xero in conjunction with Xero’s industry specific Add-On partners to help drive your retail business from middle of the road statistic to benchmark performing market leader!

Call us today for a FREE Consultation on 02 4969 4699 and take your first step towards creating a beautiful financial future!

Creating a beautiful financial future

RENTAL PROPERTY INVESTORS, DO YOU KNOW WHAT IS DEDUCTIBLE AND WHAT IS NOT?

Fri, 14 Apr 2017 09:43:51 GMT

For many residential investment property investors, there are a range of outgoings that are deductible and some that are not. The Australian Taxation office has in recent years focused on income tax returns of property investors targeting taxpayers who have made incorrect claims.

Do you know what is deductible? If not, then the following should assist:

WHAT IS DEDUCTIBLE IMMEDIATELY

Advertising
Body corporate fees including special levies
Cleaning
Gardening
Pest control
Council & water rates
Land Tax
Property agents’ fees & sundry charges
Postage, stationery & telephone costs
All insurances relating to the property
Repairs & maintenance (but not improvements)
Travel expenses for inspections, maintenance or rental collections
Quantity surveyors report for depreciation allowances
Interest on borrowings to finance the purchase

WHAT IS DEDUCTIBLE OVER A NUMBER OF YEARS?

Borrowing expenses including loan application fees, lenders mortgage insurance & registration fees
Depreciation on plant & equipmentfrom quantity surveyors report
Depreciation on building constructionfrom quantity surveyors report

WHAT IS NOT DEDUCTIBLE?

Costs of purchase including stamp duty & legal conveyancing costs
Costs of sale including legal costs, advertising & agents’ fees
Renovations & repairs immediately after purchase
Pre-purchase expenses including travel to inspect a property & costs of pre-purchase reports
Any costs incurred while the property was not available for rent

The Garis Group are residential investment property specialists and can assist you with any enquiries that you may have regarding investment properties and income tax. Call us today on (02) 4969 4699 for a no obligation appointment or visit our website for further information garis.com.au.

Creating a beautiful financial future

Howards Storage World Collapses Into Voluntary Administration

Mon, 19 Dec 2016 00:29:37 GMT

In a recent article from The Sydney Morning Herald, it was announced that retail chain, Howards Storage World, has collapsed into voluntary administration just weeks before Christmas.

Administrators from Deloitte were appointed to the retailer on Friday, December 9, with Vaughan Strawbridge and David Lombe appointed to manage the administration of four entities within the Howards Storage World group.

The group operates 29 company-owned retail outlets in New South Wales, Queensland, South Australia and Victoria. The business also wholesales goods to a network of 30 franchised Howards Storage World stores, of which it is the franchisor.

The business is continuing to trade, according to reports from Fairfax, with the administrators expected to commence a sale campaign for the business, which was founded in Sydney in the 1970s with a single store called Stack and Store. The first franchised store opened in 1998.

Howards Storage World is the latest well-known retail chain hit financial trouble in recent weeks, with childrenswear retailer Pumpkin Patch and discount shoe chain Payless Shoes also recently calling in external managers.

Days of “functional everyday product” stores are numbered

The Retail Doctor Group’s Brian Walker says collapses like Howards Storage World, and Pumpkin Patch earlier this year, show how difficult it is to run a business in this retail climate if it doesn’t have a defined niche.

“The days of functional everyday products in shopping centre businesses are numbered,” Walker says.

While Howards was on an expansion path just a couple of years ago, it appears that the movement of discount retailers into the storage space has put pressure on the business a reminder that growth needs to meet the desires of the customers and provide a unique alternative to competitors.

“It’s not all about growth it’s about quality of growth it’s about an alignment of brand and offer to the current and future marketplace.”

“If we look at Pumpkin Patch, they might not be too dissimilar [to Howards],” Walker says.

“They grew fast it was exponential growth, they were a mid market offer, and they were easy to copy.”

Walker believes there may be news of similar businesses falling into trouble in the near future, with Australian retailers that are showing strength at the moment are those that are not easy to copy.

“I think we will [see more] unless a business has just absolute uniqueness. If we look at Cotton On briefly and how smart they are: even individual brands they have, they have a niche, have a following, they’re cool.”

“They have these brand attributes that make them quite unique.”

If you have or are thinking of starting your own business is in the retail space, here at The Garis Group we specialise in helping your business achieve great things!

How to take advantage of the upcoming holiday season for your retail business

Fri, 11 Nov 2016 10:31:37 GMT

It’s safe to say Christmas is coming and coming fast!. As a retailer, it’s important that you are well equipped to make the most of the marketing opportunities that come with the holiday season.

Develop a marketing strategy

We realize that not every small business owner has a marketing driven mindset, which is why we’ve put together these tips to help. It’s important to remember that a marketing plan doesn’t need to be highly technical. You just need to have simple yet strategic ways to connect with your customers in an genuine way around the holidays.

Take note of upcoming dates

The first step to formulating a simple plan is to take note of upcoming dates. Start with Halloween, Thanksgiving, Hanukkah, Christmas, New Years Eve and Chinese New Year. Don’t try and chase each holiday if it doesn’t make sense for your business. Pick the ones that resonate with you and your customers and then plan out what you are going to do to make the most of each of them.

Your cheapest and biggest billboard is your shop window. Theming your shop window around these upcoming celebrations will draw extra attention. There are plenty of ideas for window displays online!

If you already have a presence on a social media platform, there’s a lot of value in setting time aside to plan out some posts prior to the important dates, for example “5 days till Thanksgiving” or “10 sleeps till Christmas”. If you’re not on social media, this period of time could be your best opportunity to leverage on the hypes and trends and establish a following by posting eye capturing images. You could use trending hashtags alongside them to gain more exposure.

Get creative, be unique

It’s called the silly season for a reason! Why not change things up within store. Get creative. Running a promotion doesn’t need to be an expensive task. It could be as little as setting up an advent calendar in store for shoppers to open each day. It could offer different shopping incentives like 10% off or a ‘spend and save’. This will be far more enticing in terms of closing a sale, than a candy bar.

If you don’t already provide gift wrapping, having a complimentary service is a great way to differentiate yourself from competitors and help close the sale. It doesn’t need to be an expensive add on either. Buying wrapping paper in bulk is a great way to keep costs down. If you are worried about not getting through a whole roll, go for a neutral color, like white, and use Christmas themed ribbons to keep on theme, that way you can keep using any extra wrapping paper well into the new year.

The key with any holiday marketing is to be sure that it makes sense for your business. Offering gift wrapping when you sell motorcycles won’t make any sense. This is a time to genuinely connect to your customers. People are time poor around the holidays, you want to help solve their shopping problems while also giving them a great experience. If you approach it from the right angle, your holiday marketing will leave your customers smiling.

Can Melbourne Build 63,000 new dwellings p.a. over the next 35?

Thu, 15 Sep 2016 10:26:06 GMT

To quote an article by the Victorian Chief Executive of the Urban Development Institute of Australia, the state government’s latest population forecast, Victoria in Future 2016 , indicates Melbourne’s population is set to double within 15 years, with Melbourne’s inner and middle suburbs expected to grow by almost 1 million in that time. For investors looking at the southern capital, this is an important consideration. If Melbourne is to retain its standing as the world’s most liveable city, providing suitable housing options for that growing population is critical.

Businesses making sure they're paying their employees correctly!

Fri, 02 Sep 2016 10:46:31 GMT

This weeks blog follows the recent event where Mamak Malaysian restaurant fined almost $300,000 for short-changing workers!

The operators of Mamak Malaysian restaurant in Haymarket have been fined almost $300,000 for paying workers as little as $11 an hour.

Federal Circuit Court Judge Justin Smith found the Goulburn Street restaurant had deliberately ignored its workplace obligations “to maximise profit”.

An Ombudsman investigation found six employees at the popular inner Sydney restaurant were collectively underpaid more than $87,000. Photo: Supplied

The Fair Work Ombudsman took legal action against the popular inner Sydney restaurant which relied on informal market research to set wages.

An Ombudsman investigation found six employees, including five visa holders from non-English speaking backgrounds, were collectively underpaid more than $87,000. They were paid as little as $11 an hour between February 2012 and April 2015.

An Ombudsman investigation found six employees at the popular inner Sydney restaurant were collectively underpaid more than $87,000. Photo: Supplied

Restaurant owner-operators Joon Hoe Lee, Julian Lee and Alan Wing-Keung Au were each fined around $36,000. Their company Mamak Pty Ltd was penalised $184,960.

Judge Smith on Friday found the underpayments came from informal research based on what other restaurants were paying staff.

“They discovered that there were three approaches the first were the star-rated restaurants which paid according to the Award, the second were medium restaurants that followed the Award half the time and the third included small restaurants that just paid illegal rates,” Judge Smith said.

“Mamak took the third approach. The fact that there are many restaurants in the industry that do not comply with their legal obligations does not exculpate the respondents in any way.”

Mamak attracts large crowds, but has not escaped the attention of the Fair Work Ombudsman. Photo: Supplied

Judge Smith said the restaurant deliberately chose to ignore salary award rates to maximise profit.

“That approach, of course, was taken at the cost of the employees, who in reality, funded the success of the business,” he said.

People queuing up to enter Mamak restaurant in Haymarket. Photo: James Brickwood

“Not only did the respondents know that the employees were being paid less than their legal entitlements, but they also knew that their records were not kept in accordance with the law.”

The Haymarket restaurant and Mamak Malaysian restaurants in Chatswood and the Melbourne CBD and a food preparation factory at Marrickville will be audited until the end of the year.

Fair Work Ombudsman Natalie James said researching “black market wage rates in an industry is not the way to determine how to pay your staff”.

“Minimum wage rates apply to everyone in Australia including visa holders and they are not negotiable,” she said.

“While I understand there are cultural challenges and vastly different laws in other parts of the world, it is incumbent on all businesses operating in Australia to understand and apply Australian laws.”

The Glory Years of Newcastle's Music Scene.

Fri, 19 Aug 2016 10:58:53 GMT

ROCK GODS: Newcastle band A Rabbit performing at Nobbys Beach in January 1977. From left, Jim Porteus, David Hinds, Dave Evans and Barry Litten. Picture: Courtesy of David Hinds

THE pub rock scene in Newcastle during the 1970s and ’80s was a time far removed from the city’s current entertainment trends.

Across Newcastle and Lake Macquarie’s suburbs pubs and clubs rocked with music, in some cases, almost seven days a week.

One woman who was at the heart of the scene, former Timeworx and 7th Heaven vocalist Gaye Sheather, has released a book detailing the rise and decline of Newcastle’s supposed musical golden age. It outlines the sounds and flavours of the scene and the many bands it gave birth to such as The Heroes, DV8, A Rabbit and The Globes.

Rock This City: Live Music in Newcastle, 1970s-1980s was the result of countless hours of research and interviews dating back to 2005. Sheather initially used her research to complete a thesis through the University of Newcastle in 2013 on the city’s live music scene during the “Countdown years”. The professional historian and researcher then spent a year rewriting her thesis into a more compelling story for her publishing debut.

“In the Countdown years we knew pub rock was happening all over Australia,” Sheather said. “I was interested to know what was really going on in Newcastle at that time, when we were watching Countdown on television, and how it developed in Newcastle and why it did.

“The baby boomers were starting to turn 18. Whereas before they got their music from community halls and converted theatres, once they became of age they wanted to go to a pub and drink alcohol, but they were so used to having that live music they wanted that to be part of their entertainment as well.”

In the process of writing the book Sheather conducted 26 interviews with luminaries of Newcastle’s pub rock scene, including Mark Tinson (A Rabbit, The Heroes), Greg Bryce (DV8), Dana Soper (The Magic Bus) and former journalist and musician Leo Della Grotta. Sheather also paints a vivid picture of the city’s many forgotten musical haunts such as Kotara’s Bel-Air Hotel, The Ambassador, The Jolly Roger and the infamous Star Hotel.

Newcastle has maintained a reputation for live music. Venues like Lizotte’s and the Cambridge, Lass O’Gowrie, Stag and Hunter and Wickham Park Hotels book live acts weekly. However, Sheather said the frequency of shows and number of venues had diminished.

“People may have live music a little bit, but it’s not all live bands like it was back then and it’s certainly not every night of the week,” she said. “If you look in the gig guides you might get Friday and Saturday night, but it’s sprinkled with DJs as well. Back then it was basically six, and sometimes seven, nights a week. There were lots of bands and lots of venues.”

Source: Newcstle Herald August 2016

Pizza Chain Eagle Boys collapse into administration

Fri, 29 Jul 2016 10:55:36 GMT

Today’s blog comes from a recent event in the hospitality industry which involved the voluntry administration of Eagle Boys, the nation’s third largest pizza chain.

The pizza chain’s head office called in administrators SV Partners on Thursday, but insists its 120 or so franchisees will continue to trade while a potential sale is negotiated.

Eagle Boys franchise numbers have halved in Australia in recent years.

Documents filed with the corporate regulator show the company either could not pay its debts or thought it may soon be unable to do so.

“For Eagle Boys customers, franchisees, employees and suppliers it’s ‘business as usual’ while the Administrators’ review is underway,” Eagle Boys, founded in Albury NSW in 1987, said in a statement.

Private equity firm NBC Capital acquired an 85 per cent stake in Eagle Boys in 2007, and since then has been the subject of a string of controversies and shrinking market share.

Eagle Boys’ current footprint has more than halved from its peak of 340 Australian stores.

Store owners claim to have been driven to the wall by price wars with dominant chains Domino’s and Pizza Hut and hit by head office cutting back on advertising.

BusinessDay revealed last year that at least 30 Eagle Boys franchisees, many who had become insolvent or bankrupt, were mulling legal action against head office, with a class action on the cards.

The chain was at the time trying to raise up to $20 million in capital to pay down a “significant” amount of debt before an IPO in the next three to five years.

Eagle Boys has 4.6 per cent of the Australian pizza market, trailing behind Domino’s which has 25 per cent and Pizza Hut which has 10 per cent, according to IBIS World.

Retail Food Group, which owns Pizza Capers and Crust and has been floated as a potential Eagle Boys buyer, has 4 per cent of the market.

The 15 per cent of the company not owned by Eagle Boys is understood to be held by six former staff members.

Entrepreneurs' "My Biggest Mistake" - Where They Went Wrong

Fri, 22 Jul 2016 09:11:59 GMT

Today’s blog is a recent article from the Sydney Morning Herald, which reveals some of Australias best entrepreneurs biggest mistakes in business, but their mistakes make great advice for small business owners and people who are looking at starting their own business.

Melbourne-based billionaire Manny Stul’s Shopkins success see him awarded EY’s World Entrepreneur of the Year title in Monaco.

We asked five successful entrepreneurs to share their biggest mistake in business to date, and what they learnt from the experience.

Perhaps unsurprisingly, staffing issues come up time after time.

We fell for the hype…

Serial entrepreneur Martin Hosking now heads up Redbubble, a $140-million-a-year global marketplace for artists.

But he believes much of his current success is down to a spectacular rise and fall during the very early days of the internet.

Hosking was one of the three Melbourne founding members of LookSmart, a mid-1990s search engine that later moved to San Francisco and listed on the NASDAQ. At one stage it was worth more than Qantas.

The company’s shares were going ballistic, but there was only one problem: Hosking says the company was trying to be everything to everybody.

“LookSmart was very much a product of that dot com era. The wave around the hype of the internet and investors’ perspectives perhaps became much more important than the fundamentals of the business,” he says.

“The (early dot com) companies themselves were just being swept along by the hype with very little perspective and very little ability to say no.”

When the bubble began to burst in March 2001, LookSmart was hit hard. At one stage its shares had been worth $70 a pop, but they plummeted to 50 cents.

“You have a sense of loss, as it was actually going bust,” says Hosking. “The only thing that moderated it somewhat was that it was a little bit unreal. In that sense there was a sense of reality returning.”

Hosking, who moved back to Australia after the collapse, said he’d learnt plenty from the experience, including the importance of staying focused, being prepared to say no and subjecting business decisions to rigorous examination.

“I learned to have a much stronger sense of true north; where you’re going and why you’re going there.”

When RedBalloon founder and Shark Tank investor Naomi Simson was in the early days of her business, an incident with one of her staff members left her reeling.

“I had some absolute catastrophes when it came to people,” says Simson.

“I remember once when I was still working at home, I had eight employees including myself one of them was not living our values.” The staff member often started work late, and chose not to deal with certain customers, says Simson.

“So we had to have a pretty straight conversation and she said ‘if you sack me I will take everybody with me’.

“Now that’s pretty confronting and guess what, she did. So off they went … luckily enough for me six of them came back the next day, but in that moment I said this is never, ever happening again, I will never be so vulnerable. I’ve made customer commitments, promises, brand reputation I can never be so vulnerable.”

After that Simson decided the answer was to become the best employer possible not just to engage current employees but also so they would speak well of the company, and naturally attract more good people.

“We base our success on the number of unsolicited CVs we get,” she says.

Simson says managing staff is the biggest battle for most businesses, simply because they are human beings. “You could say I’ve got a problem with logistics, so you spend money and you fix it. People are never fixed.”

However she believes mistakes, particularly early on, are vital for any business.

“You know what I see with a lot of start-ups is that a little bit of success can actually do them in because they think they’ve got all the answers, whereas our business has had to pivot, I don’t know, six times,” says Simson. “I’m almost dizzy how much RedBalloon has had to change in 15 years.”

He’s the exuberant co-founder of Thankyou, a social enterprise that now sells 40 products including bottled water and muesli in more than 5000 outlets around Australia. The profits go to funding safe water, food and hygiene and sanitation services around the world.

But Daniel Flynn, now 27, says if he could wind back the clock, he “would be enjoying the process, celebrating the wins along the way”.

He admits that in the early years, worries over issues in the business and his relentless drive to push things forward probably had a negative effect on some of his team.

“We landed 7-Eleven which was a huge deal and that was in year three. Instead of celebrating that I said ‘we’ve really got to focus’,” says Flynn.

“I think in entrepreneurism and in business ownership, the great strength of that business mind is to keep on wanting the next thing and moving forward. The mistake is you burn out the people around you.

He says: “Ideas won’t be fostered when you suck all the life out of the room.”

A business mentor helped Flynn realise that he was not celebrating the small wins along the way with his staff, or even alone.

Now Thankyou has regular catch-ups, such as a fortnightly ‘team news time’ to share their wins and recognise staff that have performed well.

“(And) if we have a really big win as a team we’ll stop and celebrate, it could be just pizzas or whatever it is.”

Perhaps ironically, Gen George, who started the hugely successful online job platform OneShift at 21, reckons her biggest mistake early on was hiring the wrong people in her own company.

Now 25, and running a jobs powerhouse that’s racked up 630,000 jobseekers and more than 38,000 employers, George says she “made some horrible hiring choices”.

“Not knowing what we actually needed from a skillset point of view .. and not realising you’ve got to get the culture right and then you can train for skillsets.”

Failing to realise the importance of the business’ vision and values left her with teams of people with very different goals and values.

“Having a bunch of stray cats running in all sorts of different directions isn’t a good way to run things,” says George.

The entrepreneur says the company’s hiring processes evolved over time, with natural attrition helping OneShift to get back on track.

George says the company now asks potential employees: “Who are you, what do you want? Where are you going and what do you believe in? For instance do you want to change the recruitment world or are you just here for a job?”

However she says mistakes are an important part of business, and often lead you along a different, better path than you had originally imagined.

“Unless you make mistakes you’re not running fast enough and you’re not learning.”

When Le Ho decided to pour her energies into transforming a flailing waste management business, she figured it would be best to employ friends to help her.

“I thought it was easier as I knew them and know their experiences and thought it was easier this way than employing a stranger and having to get to know them,” says Ho.

But Ho, who transformed Capital City Waste Services into a $10 million-a-year operation, says employing mates was one of her biggest mistakes.

She says it proved almost impossible to separate personal and professional emotions.

“There are several friendships that I have lost by trying to employ friends, and utilise their skills and experiences into my business, however, I learnt quickly, that a friend can never take orders, directions, and criticisms without it becoming personal.”

Ho sold that business at the end of March, and has since started another venture, Sustainable Solutions Group. This time, she’s unlikely to be hiring any friends but if she does, they would be hired by, and report to, one of her managers.

The Rolling Stones: World’s greatest rock bands provides lessons and strategies for any CEO or entrepreneur

Fri, 27 May 2016 10:39:04 GMT

I have always been a fan of the Rolling Stones, a band that has, for the past 50 plus years, been the most dynamic, profitable and durable corporation in the world. What is even more interesting is that one of the world’s greatest rock bands provides lessons and strategies for any CEO or entrepreneur to keep in mind to maintain longevity in a competitive marketplace.

In a recent book by Rich Cohen “The Sun and the Moon and the Rolling Stones’ he outlines 5 lessons for business owners and entrepreneur to digest and apply.

1. Choose the right name. In the case of the Rolling Stones, they used names such a Little Blue Boy and the Blue Boys. It wasn’t until they discovered the name Rolling Stones that provided a name that told aficionados everything they need to know about where the band came from and the sort of music they played. Choosing the right name becomes the symbol of your brand.

2. Know what the market wants from you. In the early 1960’s when the band started the Beatles already had their first hit record ‘Love Me Do’. What the Beatles did was stake out the high ground as the cute, loveable, non threatening boys next door. Instead of trying to copy them as so many bands did, the Rolling Stones became their opposite, sleaze and sex!!! What they did was recognise a niche in the market and filled it.

3. Beg, borrow, steal. At a time when British pop charts where filled with bubble gum, the Rolling Stones turned to Chicago Blues. Rather than being a cover band, the Stones added steel and speed to songs they loved. They changed the lyrics to add a more hardnosed appeal. What they did was create uniqueness about the Stones which differentiated them from the others in the market.

4. Cut the anchor before it drags you down. The Stones were largely a creation of Brian Jones however by the late 1960’s Jones was in trouble with drugs which had an impact on his reliability and commitment to the band. The other band members fired him in 1969. The lesson here was to not be sentimental with those who aren’t committed to the cause. In other words remove those who don’t share the vision

5. Never stop reinventing. The Stones have gone through at least 5 stylistic changes that allowed them to adapt to new versions of themselves. The Stones have lived and died and been reborn again and again. Whilst the Beatles reinvented themselves a couple of times, the Stones have reinvented themselves so many times that they might as well be immortal.

Rich Cohen makes some interesting observations about the Rolling Stones and there are definite lessons for CEO’s and entrepreneurs.

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