Startup companies and small and medium enterprises (SMEs) might feel the excitement when launching their business for the first time. Finally putting a business out to be exposed to the world is incredible and gives proprietors a sense of fulfilment. However, many entrepreneurs who invest in their startups often never make it to a full-scale company, often due to financial preparation failures.

Running a company is more than just driving returns on investments and pushing for growth; it entails plenty of work on the money side of things. One thing that can save most startups is investing in small business accounting services to tackle taxation, budgeting, financial audit processes, and other related matters. Here are some startup tips that SMEs can use based on what professional accountants believe are the most important for growth:

Find Out Your Business Structure Straight Away

Many options must be considered when investing your time and resources into a startup, starting primarily with how the business will operate. First off, you’ll have to consider what business structure you plan to implement, whether it is a sole proprietorship, company, trust, or partnership. These will generate different results towards your future business goals, so consider the way your company will operate to get the best results. Many small business accounting professionals can often help startups decide which method best suits their model. 

Consult Professional Services Before Setting Up

Various startups often launch without considering the bigger picture of business management and operations. It takes a particular degree of preparation to ensure that all documents and registration files are in place, ensuring that no issues arise throughout each year. Tax consultants can help with the annual bookkeeping and records for duties to be paid, while other accountants can provide business plans and growth strategies to push a startup into a good position. 

Budgeting Matters Off the Bat

Many SMEs fail to consider their budgeting blueprint from the get-go, which often leads to cash flow issues and finances in the future. All businesses run on money, and every local enterprise has to pay taxes annually to continue operations. However, when you don’t prioritise budgeting, you can easily lose money, and the whole business structure will collapse. Investing in a tax professional’s services can help structure a financial plan to help small businesses with various investments. 

Create a Financial Management System

Using software and other tools, tax consultants and professionals can effectively manage a company’s books. By implementing a personal financial management system for a business, you’ll save plenty of time and remove the stresses of dealing with money matters. Payroll, tax document management, and financial audit processes can be done quickly using software that automates and removes the manual procedures that can cause costly mistakes. 

Build Connections With Other Business Entities and Owners

Startups can make it big with a broader range of connections. Knowing people and having a good network of friends and business partners can help with business growth. It also builds good habits and strengthens proprietors’ mindsets knowing that business is a constant learning field. Having the right people around and building connections with others will help your startup grow past the initial stages. You can even run B2B marketing to work together and strengthen your presence on the market. 

Conclusion

Startups are the lifeblood of the modern business market, as some of the best companies come from the minds of individuals that are dead-set on making it in the world. With various startups filling gaps that people need to complete tasks, it is also just as essential to ensure that businesses survive past the initial phases of life. 

SMB Accounting is a small business accounting firm home to various tax professionals and other entities ready to help startups succeed past their growing phases. If you need financial audit procedures or different strategies, get in touch with us to learn more about finances and business operations. 

 

Small business accounting can often be challenging because most of these companies aren’t well-staffed enough to handle their own financial duties. It often becomes the proprietor’s duty to file all monetary transactions and run taxes and salaries monthly. It isn’t uncommon for things to be left out and confusing, which is why an audit process is necessary for most small and medium enterprises. 

Beginner business owners might not be well-versed in financial matters, as it is definitely tricky, especially if the company kicks off quite well. They might miss out on things, which can be costly when it comes to yearly taxation and other investor relations. A financial audit will help your business by generating more confidence from various people working for and with you. 

Why Invest in a Financial Audit Process

There are plenty of benefits of outsourcing financial services to a professional accountant, especially those who conduct small business accounting for a living. Regularly running audits can be great to show accountability and better business practices, so here are some reasons why a financial audit will be a lifesaver:

  • An Overview Statement Is Invaluable

Auditors that have completed their findings will report to you and give you an overview of your finances. This document will show how well your business is performing. Without the small mistakes and the errors, you’ll be able to make more informed decisions about where to invest your money next. 

  • Your Credit Rating Improves

A steadily expanding business requires you to let all financial entities know about the growth. Regularly running an audit process will give stakeholders and investors a nice update on where their money is going, giving your business a more trustworthy image. If the banks and lenders know their money is going to the right things, they will be more likely to close deals on future loans because everything is listed down correctly. 

  • A Fresh Set of Eyes Is Always Good

Crunching numbers and various statements is difficult for anyone. Doing this without much knowledge will often result in errors and overlooking important details. However, with a fresh set of eyes to conduct small business accounting, a financial audit will show things you might have missed while running your own processes. The auditor might also find any serious flaws in your system and make suggestions regarding fixing them. These moves might even be the difference between financial success in the future and bankruptcy. 

  • Reliability Ensues

If your company moves towards the business world’s upper echelons, regular audits in your earlier days will show the more prominent investors that you’ve always come prepared. A statement regarding finances is what the conglomerates want to see, making them more inclined to invest in your future endeavours. Reports like audits also show that you have been paying taxes and other duties, making you a more reliable partner they can deal with in various projects. 

  • You’ll Have a Clear Vision of the Road Ahead

Finances determine the success and failure of a business. If you’re preparing financial audit statements often, this means that you’re always being given a clear view of the playing field of the near future. With this knowledge, you can make more educated decisions on where to go and what to invest in for improved growth. Any business will benefit from the clarity given by an audit process, which is why you should invest in small business accounting services. 

Conclusion

Accounting is challenging for many people, so outsourcing things like bookkeeping and financial audits to small business accounting firms can greatly assist. Having a dedicated accountant can reduce the load on your shoulders as a proprietor and definitely promote accountability and trustworthiness. 

SMB Accounting is a small business accounting firm in Australia that helps clients with financial audits and other specialised money management needs. With a wide range of financial services, we can help your company through reports based on audits run for your business. Contact us to learn more about having an audit process conducted. 

If you’re one of the people who have a knack for envisioning long-term plans, including securing your future, then you can expect to benefit from a self-managed super fund (SMSF) leading up to your retirement. It’s a trust fund headed by the Australian financial system targeting employees unsure about what to do with their savings and are looking for the perfect way to invest their hard-earned money for a good cause.

You can distinguish an SMSF from other forms of retirement programs by merely taking note that the members of the program are known as trustees. As a trustee, it’s your duty to handle your SMSF in your own terms. 

At the same time, you should learn to adhere to the policies of your trust fund, such as following the rules of a particular residency period and become a certified candidate for addressing management requirements. Keep reading below to learn how to outline your future with the help of an SMSF. 

Things to Remember Before Applying for an SMSF

Since you are the trustee of your fund, before you learn how to set up an SMSF, you need to understand that your future is at stake. You have to double-check that you comply with the super and tax laws of Australia before setting your decision in stone.

After all, an SMSF involves your life-long finances, so you must be sure that you’re eligible to build your trust fund before pouring your efforts into securing your retirement once and for all. You can avoid making decisions you may end up regretting by consulting with a professional that can guide you in knowing similar financial options to an SMSF to see if you’re capable of pushing through with your plan after all.

When it comes to discovering the advantages of a self-managed super fund, you have to understand your role as a trustee and learn everything there is to know about your investment and your responsibility as a member. It includes being familiar with the rules and regulations and the insurance policies you’re prepared to handle.

Take note that an SMSF is only allowed to carry up to four members that are also called trustees, whereas other kinds of funds tend to have no limit regarding their members. Like your role, your co-trustees should comply with the policies to ensure they don’t break any laws, all while gaining the power to select the type of investment each of you wishes to hold.

How to Create a Self-Managed Super Fund

With the numerous benefits of an SMSF, you can expect the financial plan to be quite expensive than other trust funds, although some super funds tend to provide insurance at a fair price to members. If you want to make the most out of your investment, it would be best to hire a financial specialist to oversee your every move, due to how complicated SMSFs can become.

Each action you take must be one you won’t regret because it can be hard to bring back certain choices, especially if it involves a significant sum of money. While you can rely on experts to guide you, it’s still ultimately in your hands to know how to settle your taxes and other legal requirements as expected.

With every year that passes, it’s practically helpful to lean on an SMSF auditor that provides financial assistance regarding audit and tax works so that they can manage all things related to keeping track of your fund. That way, they can ensure that your trust is in order and there’s nothing to worry about.

It’s an accountant and a financial advisor’s duty to aid individuals who are having trouble understanding their SMSFs to give them an easier time grasping the contents of their fund. While an account can create financial statements for you, a tax agent works to gather your records in preparation for filing your SMSF’s annual return and stand for you when you need to face the ATO for potential concerns.

Conclusion

The future can be intimidating, especially if you don’t have a firm plan in mind yet, and you have no idea how to handle your finances until your retirement. If you want to invest your savings into a trust fund that can secure you in the long run, it isn’t too late to start now. It’s helpful to consider setting up an SMSF with the help of a professional. Having someone to guide you through establishing a trust fund is vital, so you know where your money goes, and you receive numerous perks of being a certified member of a self-managed super fund. 

Are you looking for a tax professional in Australia to assist you with your finances? SMB Accounting offers help with individual tax returns, small business accounting, SMSF audits, and Xero accounting software services. Get in touch with us today so we can start organising your reports!

Managing your cash flow is a crucial part of running your business, but it’s an aspect that tends to overwhelm entrepreneurs. As a business owner, you’re laser-focused on bringing in more profit and scaling your company, but doing so during uncertain economic conditions means that you need to account for every cent you make. Any increase or reduction in your costs can affect how much profit you make, further highlighting the importance of cash flow management. 

However, tracking your expenses and working with accounting firms in the Sunshine Coast will help you boost profits and find other opportunities to cut down on business costs. Here are five possible ways you can save more money by economising your operations:

  • Switch to Technology 

Automating tasks has never been easier than it is today, as there are many tools and software you can use to improve your workflow. You can take advantage of project management software, for example, which will automate tasks necessary for running your business, saving you valuable time.

You can also invest in accounting tools to keep a close eye on your cash flow and financial reporting, as small business accounting is crucial to your business’s success. It will also help you keep track of your expenses, ensuring you’re well aware of every business transaction you make.

  • Consider Operating Your Business From Home

2020 has demonstrated how the work-from-home setup has been beneficial for many businesses all over the world, so it’s something you may want to consider for your own enterprise as well. Doing so will help you cut back on your office space expenses, business taxes, utilities, and even insurance. 

However, some companies still require an office to work more efficiently. If operating your business from your home isn’t feasible, consider moving to a smaller or less expensive space instead. You’ll enjoy much bigger savings that way.

  • Reduce Energy Usage

Energy, although necessary, tends to eat up a portion of a business’s income. Fortunately, you can optimise your energy usage by switching to energy-efficient appliances such as light bulbs and your heating or air conditioning system. You can also ask your local energy provider to perform an audit, as they can recommend ways to cut down on your energy usage. You can even invest in a solar panel system, which will reduce your impact on the environment while reducing your energy bills. 

  • Invest in Your Employees

While investing in your employees may seem like a way to spend more money instead of cutting back on your expenses, it can actually save you a lot of money in the long run. By assessing the skills and experience of your employees and analysing their potential, you can train them to refine new, useful skills that will be beneficial to your business. In the process, you won’t have to hire more people to take on roles that your employees have shown proficiency in, thereby reducing turnover. It’s important, however, to make sure that your employees don’t feel overwhelmed or burned out with the tasks you give them. 

  • Reduce Your Debts 

Asking your accountant to run a financial audit on your business will help you find ways to save more money and take care of your debts, which will save you hundreds of dollars in interest. They can create a plan that will help you pay off your debt early or on time, improving your credit score and avoiding a deficit. It will also help you make more informed financial decisions, which is crucial to your business’s success.

Conclusion

Running a business is exciting and rewarding, but it involves a lot of analysing and tracking to make sure you’re well aware of everything going in and out of your company. If you’re not careful, you may be spending more than you’re earning, which can quickly land you in hot water. With these five tips, you’ll enjoy much more savings and reduced business expenses, helping you achieve your earning goals. 

SMB Accounting is an accounting firm in the Sunshine Coast offering individual tax returns, small business accounting, financial reporting, and other services. We complete many types of audits, such as investigative reviews, self-managed super fund audits, trust account audits, and more. Contact us today to find out how we can help you!

One way that small business owners can strengthen and supplement their income is through self-managed super funds (SMSF). Though it might seem challenging, these obstacles are worth traversing, as SMSFs offer many benefits. Having an SMSF allows you to invest in commercial properties within your private super funds. This gives you the twofold benefit of increasing the value of your super fund and providing your organisation with valuable assets. 

What is an SMSF?

An SMSF is a superannuation trust structure that provides benefits to its members upon retirement. Its main difference from other super funds is that SMSF members are also the trustees of the fund, and they can amount to a maximum of four members. This allows a level of control when it comes to tailoring the funds to each trustee’s needs. 

SMSFs come with their our Tax File Number (TFN), Australian Business Number (ABN), and transactional bank account. This bank account will allow trustees to receive contributions and rollovers, make investments, and pay out lump sums and pensions. As mentioned before, the fund is controlled by trustees, which can take two forms:

  • The Corporate Trustee. A company can act as the trustee with each member as a director. This can allow simpler registration of assets, more efficient management, and flexibility in membership. 
  • The Individual Trustee. In this case, each member is appointed as a trustee with a  minimum of two trustees required. 

While setting up an SMSF requires compliance with the trustees of the fund, there are quite a few major advantages it can offer. Here are some of these advantages:

1. It can reduce the capital gains tax

A small business owner can transfer their commercial properties into the fund. The superannuation law might prevent individuals from transferring their residential properties to a fund, commercial properties are exempt. Business offices, buildings, and industrial locations can be held in your SMSF.

Including commercial properties in your SMSF reduces the capital gains tax amount on the sale of these properties, boosting the super fund as well. Consult your accountant about which funds you can and cannot write off in this manner.

2. It can give provide tax deductions for business expenses

Once a property has been transferred to the SMSF, you will have to enter a lease agreement with the fund to rent the property on commercial terms. This can be written off as a tax deduction for the business, as any rent paid toward using the property would now be a business expense. 

Repairs, maintenance, renovations, improvements, and other property management fees are also now claimed in the fund.

3. The fund earns money for tax deductions

Any earnings on investments held in an SMSF are taxed at 15%—including commercial properties. That means rent will be taxed at the standard rate. We’ve mentioned before that small business owners like you can claim a tax deduction for the business on rent paid to the SMSF, but the SMSF itself will only end up paying this reduced tax. This serves the purpose of allowing businesses to make significant tax deductions while making significant contributions to its retirement fund. 

Final thoughts

Not all businesses and business structures can fit with every business. For the right enterprises, however, it can help manage the commercial properties of a business while growing out its retirement fund. An SMSF can offer options and benefits you otherwise would not have had. 

If you are looking to set up an SMSF for your business along the Sunshine Coast, QLD, you will need the help of an accountant. Send us at SMB Accounting a message so we can help you through this process. 

A self-managed super fund (SMSF) trustee is obliged to designate an SMSF auditor approved by the Australian Taxation Office (ATO) on or before forty days before filing their SMSF annual return. In a nutshell, an SMSF auditor is a financial expert who works to evaluate if your company’s finances comply with the superannuation law.

Besides that, they also monitor your fund’s financial statements. If you’re thinking of hiring an SMSF auditor, then you must get someone that requires only minimal supervision so that you can focus on reaping the benefits of your trust while they handle your financial records. Aside from that, a major rule about hiring SMSF auditors is that they aren’t allowed by law to audit a fund that they have a financial interest in, nor have an intimate or professional relationship with the SMSF members or trustees involved.

Keep reading below to find out more about hiring an SMSF auditor.

The Importance of Having an SMSF Auditor 

Before you seek the assistance of an SMSF auditor, the person you select must be registered with the Australian Securities & Investments Commission. They should also have an SMSF auditor number which you will have to provide each time you submit your company’s annual return.

An SMSF auditor is knowledgeable at advising those in need regarding current assets in your SMSF and if your fund adheres to the rules and regulations listed down in the Superannuation Industry (Supervision) Act of 1993. Before they establish an audit of your fund, an SMSF auditor will create a Terms of Engagement Letter and submit it to the trustee of the fund.

What is a Terms of Engagement Letter?

The letter involves the duties and obligations of all parties linked to the audit, including the range of the audit. As a result, your existing accountant serves as an SMSF auditor’s primary contact person and will be provided with a separate Terms of Engagement Letter.

With the letter stating each party’s capabilities, it will serve as protection for you, your accountant, and the auditor to prevent any miscommunication from occurring. The Terms of Engagement Letter also stands to secure audit evidence prepared by your auditor in case of unwanted tampering and mishandling. 

SMSF auditors who don’t follow legal standards can be sued and face charges given by the Court. Besides that, the letter can also be considered a contract so that both parties remain accountable in the event of compliance breaches, such as reaching out to other auditors for second opinions. As a result, trustees may be audited by the ATO once they violate the policies stated in the Terms of Engagement Letter.

When is an SMSF Auditor Held Liable?

An SMSF auditor is usually tasked to give an honest and reliable opinion regarding your assets, proving that your fund exists and is being assessed as part of the requirement by the SIS Act. If you also require the guidance of an accounting firm, they will work hand-in-hand so that the auditor can confirm that your superannuation funds are appropriately handled and comply with all given conditions.

In the event that the SMSF auditor you hire does not stick to the given standards and, instead, prefers to take the situation into their own hands, they end up putting themselves at risk to potential lawsuits. Aside from that, they are also causing trouble with your company and your small business accounting service.

Conclusion

If you’re worried about relying on an SMSF auditor, it’s important to remember that they are tied by the law to accomplish their auditing responsibilities as professionally and lawfully as expected. A Terms of Engagement Letter exists to impose the rules and regulations for all parties present. So the secret to having an SMSF auditor is to take a closer look at how the audit is done and that everyone involved should make an effort to achieve their duties accordingly!

Are you looking for auditing and accounting services in Australia to handle your SMSF trust? SMB Accounting offers individual tax returns, small business accounting, SMSF audits, and Xero accounting software to our clients in need. Get in touch with us today to book an appointment!

 

Truth be told, paying taxes is not fun. It entails the stressful preparations you need to do to take into account all of your income. On top of that, it involves seeing a significant percentage of your earnings slip out of your hand. Nevertheless, paying taxes diligently and promptly is something that must be done.

The bright side is that there are actually smart strategies you can employ to legally reduce your tax liability. With these methods, you can lower your tax bracket and, consequently, shrink the portion of your income that can be taxed.

In the sections below, we will give you a run-through of three of the many ways you can minimise your tax:

 

  1. Use Discretionary Trusts for Your Investments

Discretionary trusts provide you with a flexible way to indirectly gift your assets, property and money to your beneficiaries. In this legal arrangement, you are giving your identified trustee ‘full discretion’ on when and what funds to give to your recipients.

One advantage of this is that it allows you to freely distribute your income and assets to other people. On that note, you can divide up your income among your beneficiaries in a way that lowers your tax bracket and reduces the overall tax you need to pay.

Take note, however, that the trustees are liable to tax on the income that they haven’t distributed yet.

 

  1. Sacrifice Some of Your Salary Into Your Super

Superannuation, or ‘super’, is one way you can save money for your retirement. In this arrangement, your employer is obliged by law to pay 9.5% of your salary into your super fund. This is essential because it helps you secure your financial stability when the time comes for you to retire from work.

On that note, you should know that you can ask your employer to pay some more of your salary into your super on top of the minimum percentage required. This enables you to not only reduce your taxable income but also build your super fund faster.

You should keep in mind, however, that you cannot withdraw this money easily. You can only take it out in certain circumstances, such as when you retire or turn 65 years old.

 

  1. Claim Deductions for Your Work-Related Car Expenses

This is a smart hack, especially if you use your own vehicle for business purposes.

There are basically two ways for you to claim deductions for your work-related expenses. You can either use the ‘cents per km’ method or claim the actual expenses through the logbook method.

In the former method, for the 20/21 year you can claim a flat 72 c/km for travels you’ve proved as business-related. However, there is a cap of 5,000 km; this gives you a maximum deduction of $3,600.

The latter method, on the other hand, lets you claim business-use percentage on itemised allowable expenses. This could be your petrol, oil, insurance, repairs, maintenance, registration and so on. Take note, however, that you must maintain a logbook of your actual expenses for 12 weeks to document and prove these expenses.

 

Conclusion

Computing your taxes and filing them are honestly not enjoyable activities, especially if you are about to let go of a large chunk of your income. Nevertheless, you should know that there are various legal ways for you to minimise your taxes. The three tips mentioned above are just some of the many methods you can employ to do this.

For the best results, however, it’s still best to work with taxation experts. They can help you identify more opportunities to reduce your tax liability and complete your tax returns on time.

We are the authority when it comes to taxation in Australia. We look at innovative ways to complete your income tax returns on time and with minimum stress. If this sounds a lot like something you need, don’t hesitate to get in touch with us today!

 stephen@smbaccounting.com.au

 P 1300 854 159

TAX TIME IS NOW!

 

June 30 is fast approaching , so you should start thinking about any work-related and/or income-generating expenses you paid since last July 1, but also if you are planning on some expenditure n the near future to bring it forward before June 30

To recognise expenses that may be suitable as tax deductions, you should consider:

  • Was the expense related to your work or income-generating activity?
  • You have spent the money, and your employer didn’t reimburse you
  • You have an official record of the expense – e.g. receipt or bank statement?

Note: If the cost was for work and personal use (e.g. home internet) combined, you need to decide the percentage of the expense related to your work or income-generating activity.

To assist, we have recognised 8 tax deductions you may be able to claim on your tax return:

  1. Dry-cleaning, clothing and laundry expenses

You may be able to claim these costs, if you purchased clothing specific for your employment/business, protective clothing or work uniforms directly related to your job. There is also a claim for related cleaning costs, as work-related expenses.

Though, you’re unlikely to be able to claim costs for conventional clothing or non-compulsory work uniforms.

To claim these costs as tax deductions, you need to have written evidence of these costs, such as diary entries and receipts.

  1. Home office expenses

With the crisis of the virus affecting us all most of us have had to result in working from home, there are several home office expenses you may be able to claim as tax deductions.

These include:

  • Phone and Internet expenses
  • Computer consumables (e.g. printer paper and ink) and stationery
  • Home office equipment (e.g. computers, phones, printers, furniture and furnishings) – you may be able to claim either:- The full cost of the items, if it’s less than $300; or
    – The decline in value (also known as depreciation) for items over $300.

Most people won’t be able to claim:

  • Home expenses, like mortgage interest, rent and rates
  • Costs of general household items, like coffee, tea and milk

Please review the criteria’s before you consider on claiming an amount for home office expenses in your tax return.

For example, you should consider whether you can claim the temporary ATO-approved ‘shortcut method’ (of 80 cents per hour for all additional running expenses) for the period 1 March 2020 until 30 June 2020.

You should consider which method is best for you and the criteria you need to meet to claim a deduction.

  1. Education

If your studies were work-related and you enrolled in an eligible course, you may be able to claim a tax deduction.

  1. Industry-related deductions

You may also claim tax deductions for work-related expenses specifically related to your occupation and industry.

You can check the list of occupations and industries on the ATO website to see what industry-related tax deductions you can claim.

  1. Vehicle and travel expenses

While you generally can’t claim expenses for getting to and from your regular workplace, there are some work-related vehicle and travel expenses you may be able to claim.

These include:

  • Where your work requires you to attend multiple workplaces or locations
  • Car expenses where you need your car to perform your work duties
  • Accommodation expenses when you’re required to travel for work

 

  1. Other work-related expenses

Other  work-related expenses you may be able to include as tax-deductible expenses, depending on your work and individual circumstances. Expenses to consider include:

  • Overtime meals
  • Books, periodicals and digital information subscriptions
  • Safety goggles and protective sunglasses
  • Union fees, subscriptions to associations and bargaining agents fees
  1. Gifts and donations

If you gave a gift or donation to an organisation (e.g. your favourite charity), you may be able to claim a tax deduction. However, there are specific rules that apply.

Generally, you can claim any donation you made above $2 if it was to a ‘deductible gift recipient’. For gifts, different rules apply depending on the type of gift.

  1. Investment income

You may be able to claim investment income tax deductions if you’ve received:

  • Interest payments on your savings
  • Dividends from your investments in shares
  • Rental payments from an investment property
  • Another type of investment income

If you’ve received any of these, you could be entitled to claim for costs related to this income, such as interest charged on money borrowed to buy stocks or rental properties.

You may also be able to claim money you paid for investment advice.

Things to note

  • It’s important to remember that tax laws are complex, and you should ensure that you’ve confirmed you can claim an expense before including it in your tax return. Contact SMB Accounting for further clarification.
  • The Australian income year ends on 30 June. You have from 1 July to 31 October to lodge your tax return for the previous income year. If you use a registered tax agent to prepare and lodge your tax return, you may be able to lodge later than 31 October.
  • The information provided is of a general nature and doesn’t take into account your personal financial or business situation – we suggest contacting us at SMB Accounting if you need clarification.

 

Please feel free to share to any person you may think may benefit 😊

If you need any assistance, please get in contact with us at

 stephen@smbaccounting.com.au

 P 1300 854 159

 

TAX SAVING STRATEGIES

 

Even with the final day of the financial year to go, traditionally, year-end tax planning for small businesses is based around two simple concepts (i.e., Accelerating business deductions and deferring income).  Consideration will obviously also need to be given to the impact of the  COVID-19 pandemic on specific businesses as in itself has had the effect of reducing incomes and therefore tax payable.

Small Business Entities (‘SBEs’)  (i.e., Businesses with an aggregated turnover of less than $10 million) often have greater access to year-end tax planning due to particular concessions that only apply to them.  Taxpayers that qualify as an SBE can generally pick and choose which of the concessions they wish to use each year (although see below regarding the simplified depreciation rules).  The following are a number of areas that may be considered for all business taxpayers.

Maximising deductions for non-SBE taxpayers

Non-SBE business taxpayers should endeavour to maximise deductions by adopting one or more of the following strategies:

  • Prepayment strategies;
  • Accelerating expenditure; and
  • Accrued expenditure.

Prepayment strategies – non-SBE

Any part of an expense prepayment relating to the period up to 30 June is generally deductible.

In addition, non-SBE taxpayers may generally claim the following prepayments in full:

  • expenditure under $1,000;
  • expenditure made under a ‘contract of service’ (e.g., salary and wages); or
  • expenditure required to be incurred under law.

Note:  Prepayments can be a little confusing, so before you commit to making a payment please feel free to email SMB Accounting with any queries or assistance if required.

Accelerating expenditure – non-SBE

This is where a business taxpayer brings forward expenditure on regular, on-going deductible items.  Business taxpayers are generally entitled to deductions on an ‘incurred basis’.  Therefore, there is generally no requirement for the expense to be paid by 30 June 2020 (i.e., as long as the expense has genuinely been ‘incurred’).

Checklist

The following may act as a checklist of possible accelerated expenditure:

  • Depreciating assets – Non-SBEs that have an  aggregated annual turnover of less than $50 million can claim an immediate deduction for eligible assets costing less than $30,000 for any assets acquired and first used (or installed ready for use) from 7:30pm (AEDT) 2 April 2019 to before 12 March 2020.
    From 7:30pm (AEDT) on 2 April 2019 and first used (or installed ready for use) from 12 March 2020 to 30 June 2020 this has been increased to $150,000.
    Depreciating assets costing $100 or less can be written off in the year of purchase and depreciating assets costing less than $1,000 can be allocated to a low value pool and depreciated at 18.75% (which is half of the full rate of 37.5%) in their first year, regardless of the date of purchase.
    Finally, a 50% accelerated depreciation concession may apply for new eligible assets that start to be held and used (or installed ready for use) from 12 March 2020 to 30 June 2021.
  • Repairs.
  • Consumables/spare parts.
  • Advertising.
  • Superannuation – contributions to a complying superannuation fund, to the extent contributions are actually made (i.e., they cannot be accrued but must be paid by 30 June).

Accrued expenditure

Non-SBE taxpayers (and many SBE taxpayers – refer below) are entitled to a deduction for expenses incurred as at 30 June 2020, even if they have not yet been paid.

The following expenses may be accrued:

  • Salary or wages and bonuses – the accrued expense for the days that employees have worked but have not been paid as at 30 June 2020.
  • Interest – any accrued interest outstanding on a business loan that has not been paid.
  • Commissions – where employees or other external parties are owed commission payments.
  • Directors’ fees – where a company is definitively committed to the payment of a director’s fee as at 30 June 2020, it can be claimed as a tax deduction.

Maximising deductions for SBE taxpayers

Deductions can be maximised for SBE business taxpayers by accelerating expenditure and  prepaying deductible business expenses.

Accelerating expenditure – SBE 

In addition to accelerating other expenditure items, SBE taxpayers can choose to write-off depreciating assets costing less than $30,000 (or potentially  $150,000) in the year of purchase.*

Assets costing more than the relevant immediate asset write-off threshold are allocated to an SBE general pool and depreciated at 15% (or potentially at 57.5% for eligible new assets subject to the 50% accelerated depreciation concession) in their first year.  Therefore, where appropriate, SBE business taxpayers should consider purchasing/installing these items by 30 June 2020.

(*) The immediate asset write-off threshold was originally increased to ‘less than $30,000’, for eligible assets first used or installed ready for use between 7:30pm (AEDT) 2 April 2019 and 30 June 2020. 

The threshold was subsequently increased to $150,000 for eligible assets first used or installed ready for use from 12 March 2020 to 30 June 2020 as a result of the Government’s response to the COVID-19 pandemic.

Prepayment strategies – SBE

SBE taxpayers making prepayments before 1 July 2020 can choose to claim a full deduction in the year of payment where they cover a period of no more than 12 months (ending before 1 July 2020).

Otherwise, the prepayment rules are the same as for non-SBE taxpayers.

The kinds of expenses that may be prepaid include:

  • Rent on business premises or equipment.
  • Lease payments on business items such as cars and office equipment.
  • Interest – check with your financier to determine if it’s possible to prepay up to 12 months interest in advance.
  • Business trips.
  • Training courses that run on or after 1 July 2020.
  • Business subscriptions.
  • Cleaning.

 

Information Required

This is some of the information we will need to help us prepare your income tax return:

  • Stock-take details as at 30 June 2020.
  • Debtors listing (including a list of bad debts written off) as at 30 June 2020.
  • Note: In order to claim a deduction, the debt must be written off on or before 30 June.
  • Creditors listing as at 30 June 2020.

 

Please feel free to share to any person you may think may benefit 😊

If you need any assistance, please get in contact with us at

 stephen@smbaccounting.com.au

 P 1300 854 159

JobKeeper Alternative Turnover Tests

The ATO has now determined alternative tests for various businesses in relation to the fall in turnover where there is not an appropriate relevant comparison period.

If your business satisfies the basic test, you do not need to go to any of the alternative tests as outlined.

The alternative tests can apply in the following circumstances:

1. the entity commenced business after the relevant comparison period (the business did not exist in that period)

2. the entity acquired or disposed of part of the business after the relevant comparison period (the business is not the same business in that period as it is now)

3. the entity undertook a restructure after the relevant comparison period (the business is not the same business in that period as it is now)

4. the entity’s turnover substantially increased by:

      • 50% or more in the 12 months immediately before the applicable turnover test period; or
      • 25% or more in the 6 months immediately before the applicable turnover test period, or
      • 12.5% or more in the 3 months immediately before the applicable turnover test period.

5. the entity was affected by drought or other declared natural disaster during the relevant comparison period

6. the entity has a large irregular variance in their turnover for the quarters ending in the 12 months before the applicable turnover test period, or

7. the entity is a sole trader or small partnership where sickness, injury or leave have impacted an individual’s ability to work which has affected turnover.

The Commissioner cannot determine an alternative decline in turnover test in all circumstances. It is only where there is an event or circumstance that is outside the usual business setting for entities of that class which results in the relevant comparison period in 2019 not being appropriate for measuring decline in turnover.

The Commissioner can also only determine a test for a class of entities and cannot make discretionary decisions for individual entities.

If you fall into more than one of the classes of entities covered by the alternative test, you can choose which alternative decline in turnover test to apply. You only need to satisfy one of the tests (it does not matter if you do not satisfy one of the other tests that applies to you).

We are providing calculation and enrollment into the JobKeeper system as a free complimentary service to our clients in order that those businesses survive these uncertain times.

DOWNLOAD ARTICLE – Jobkeeper Payment Alternate test – Update 4

 

Please feel free to share to any person you may think may benefit 😊

If you need any assistance, please get in contact with us at

 stephen@smbaccounting.com.au

 P 1300 854 159