Business Bulletin

New Years Bulletin 2015

Posted on Jan 2, 2015 in AFS Bookkeeping, Business Bulletin, Superannuation, Tax updates

New Years Bulletin 2015

Super & Business Owners By contributing to superannuation you can not only provide for your retirement but also enjoy concessional tax treatment whereby: Þ Investment earnings (such as dividends, interest, rent etc.) are taxed at just 15% (or 0% if your account is in pension mode) Þ Capital gains (on the sale of shares, property etc. held by your fund) are taxed at just 15% (or 10% if the asset is held for 12 months or more). By contrast, earnings outside superannuation are taxed at your marginal tax rate. Unless you earn below $18 200, your marginal tax rate will always be higher than the highest superannuation rate of tax (generally 15%). This means that the tax imposed on your investment earnings inside superannuation will always be less than the tax imposed on these earnings outside superannuation (unless you earn less than $18 200). The good news is that the tax system encourages business owners to make contributions to the concessionally taxed superannuation environment in at least two respects: Income Tax Deduction By contributing to superannuation as a business owner, you can not only provide for your retirement, but you may be able to reduce your income tax. Generally speaking, unless you are an employee of your business (e.g. company director or employed by your trust) you will likely be able to claim a tax deduction for the full amount of your personal after-tax contributions to superannuation. 10% Rule Specifically, you can claim a tax deduction for the entire amount of your contribution if less than 10% of your  (a) assessable income (b) your reportable fringe benefits and (c) your reportable employer contributions for the year is from being an employee. Therefore, for those of you not employed by your business (e.g. sole traders), this is a strategy worth considering. Having made the deductible contribution, you must notify your fund of your intent to claim a deduction before you lodge your tax return! For those of you employed by your own company or trust (and failing the 10% Rule); that entity may contribute on your behalf and claim an income tax deduction. Business Sale Proceeds Small business owners that sell their businesses may be eligible for generous capital gains tax relief. One of those capital gains tax breaks occurs when an amount is contributed to superannuation. When it comes time to sell your business or even part of your business, small business owners have a unique opportunity to build up their retirement savings. The sale proceeds of your business (or part thereof) may in certain circumstances be contributed to superannuation without counting against your standard contribution limits. A $540 000 non-concessional three-year contribution cap exists. If you sell your business and like many business owners seek to contribute the proceeds to superannuation, the non-concessional cap is often insufficient. Even where the $540 000 three-year cap is able to accommodate your desired level of contribution, your ability to make contributions in the subsequent two years may be restricted. For small business owners however, the CGT Cap Amount offers a special concession. Contributions of up to a lifetime limit of $1.355 million (the CGT Cap Amount) from the disposal of small business assets can be excluded from the non-concessional cap subject to certain conditions. With the sale proceeds safely inside your fund, you can then enjoy the concessional tax treatment exclusive to the superannuation environment (see earlier). Resolving Disputes Whether it be with Government, suppliers, landlords or customers, disputes are an uncomfortable but inevitable part of business. The good news is that now there is an interactive tool that can help....

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Business Bulletin | Spring 2014

Posted on Sep 19, 2014 in Blog, Business Bulletin

Business Bulletin | Spring 2014

SPRING BUSINESS BULLETIN Finances—Fixed or Variable?  With the Reserve Bank of Australia (RBA) cash rate at record lows, a number of banks have entered into the fixed rate battle with some very attractive loan packages.  Borrowers can now lock in a rate as low as 4.99% over a 5 year term; comfortable in the knowledge that their repayments will not increase over this quite lengthy period. In deciding whether to lock in your interest rate, the following factors need to be weighed: Whether variable rates are likely to fall further (and therefore put you at a disadvantage if you have chosen to fix your rate). On this question, with the RBA rate already at just 2.5%, many commentators believe there is little scope for rates to fall much further, while they may increase if the economy improves or inflation picks up. Fixed rates give you the ability to plan ahead with certainty. Variable rate loans are often more feature-rich. For instance most fixed rate loans do not offer an offset facility whereby you can place your income into an account and the balance of that account is offset against your loan balance resulting in a reduction of interest costs. If you pay out a fixed rate loan early (either by selling the property or refinancing) you may incur break costs. Depending on the amount of the loan, these charges can be significant. Of course, the choice is not necessarily either/or – many choose to fix just a portion of their loan, and on the remaining balance enjoy the flexibility and benefits of a variable product. In deciding which option is best for you, consult with your financial advisor. Tax Talk: Top 5 Audit Triggers!  ATO audits are something that every taxpayer and every business dreads. While you or your business can be selected at random by the ATO, often your conduct is the trigger for an audit. What are some common audit triggers?  Unpaid Superannuation Not paying superannuation on time and in full for your employees is a sure-fire way to attract ATO attention and potentially trigger a wider review into your affairs. Inconsistency Between BAS and Tax Return The income declared on your or your business’s year-end tax return should broadly align with the amount of income you have recorded throughout the year on your BASs. Large discrepancies invite and often result in ATO scrutiny. Falling Outside the ATO Small Business Benchmarks If your business falls outside the ATO’s Small Business Benchmarks (www.ato.gov.au/Business/Small-business-benchmarks) this will most likely lead to further ATO enquiry, and possibly an audit. In simple terms, the benchmarks are industry-specific financial ratios that the ATO has developed to assist in comparing your business against others in the same industry. If your business falls outside the benchmarks, the ATO will likely make contact and give you the opportunity to explain why. For instance, it may be that you have higher costs or lower selling prices than other similar businesses of the same size within your industry. Whatever the reason, it is important that you communicate it to the ATO if they ask. If the ATO is satisfied with your explanation, this may be the end of the matter…and a review or audit may be averted. Compliance History If you have outstanding debts or outstanding returns/BAS (or are consistently late in these areas) you are much more likely to be audited than businesses with a good compliance history. Company Car But No FBT If your business has purchased a motor vehicle but has not lodged an FBT return or at least included in its income tax return...

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Bookkeeping Bulletin Autumn 2014

Posted on Mar 10, 2014 in AFS Bookkeeping, Business Bulletin, HR, Tax updates

Bookkeeping Bulletin Autumn 2014

Two Things Your Business Can’t Live Without 1. Breakeven Point As a business owner, you’re in business to generate a profit! But before you make just a dollar of profit, have you calculated how much product/services you need to sell in order to keep the doors open, and just break even? The breakeven point is the point at which a business generates enough sales/revenue to simply cover its total costs and therefore break even. Many business owners do not understand fully the breakeven point and tend not to remain in business very long as a consequence. In simple terms the breakeven formula is: Fixed Costs divided by Gross Profit Percentage Fixed Costs are those costs that exist independently of sales; they are not proportional to nor caused by sales. Typically, fixed costs are constant in price and ongoing in nature, such as indirect labour, rent, loan repayments, payroll tax, insurance, etc. Gross Profit Percentage is the sales less variable costs expressed as a percentage of sales. Variable Costs are those costs that vary with output or sales. That is, these costs are typically caused by or are influenced by sales. These include direct labour, inventory, materials used in production, etc. Most advisors who deal with businesses are aware of the importance of the breakeven point and how it should be calculated. Breakeven analysis is a great tool for managing and controlling costs, as well as utilising it as a decision tool to assist in setting prices or determining what volumes of sales might be needed to break even. If you don’t know your breakeven point, it makes it more difficult to set prices for your products/services, or to determine the volumes of sales required to be profitable, and hence the chances of business failure increase significantly. 2. Cashflow Projection The old adage that “cash is king” still rings true. Whether it be suppliers, the Tax Office, employee wages, the landlord or insurance, you need cash on hand at all times in order to pay your bills. With many studies suggesting that cashflow is one of the leading causes of small business failure, it’s imperative to prepare with your accountant or bookkeeper a cashflow forecast. A cashflow forecast tracks the sources and amounts of cash coming into and out of your business over a given period. It allows you to foresee peaks and troughs, and therefore whether you have sufficient cash on hand to discharge your debts at a given time. This in turn alerts you to when you may need to take action – by discounting stock or getting an overdraft for example – to make certain that your business has sufficient cash to meet its needs. The forecast also allows you to foresee when you have large cash surpluses which may indicate you have borrowed too much or have money that ought to be ploughed back into your business. Approach your advisors and, in consultation with them, prepare a detailed cashflow forecast. Business Tip — 2014 Economic Conditions While 2014 has commenced with a range on negative news headlines on the business front (among them Toyota s manufacturing shutdown and the Federal Government announcing much bigger than expected Budget deficits in the years ahead unless significant cuts are made), there are many reasons to be optimistic about business conditions in the year ahead: · Despite the dire deficit forecasts contained in the Mid Year Economic and Fiscal Outlook (MYEFO), that document also predicts that economic growth will remain strong at 2.5%, and unemployment will fall to 6% (down from 6.5% which was predicted in the Pre Election Fiscal Outlook (PEFO)). Importantly, global economic growth is expected to rise to 4% in 2014 (up from 3% last year), powered in the main by recoveries in America and Europe. · The recently released National Australia Bank’s monthly business survey indicated businesses were enjoying the best trading conditions in 2 1/2...

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Summer 2014 Business Bulletin

Posted on Dec 9, 2013 in AFS Bookkeeping, Business Bulletin, Tax updates

Summer 2014 Business Bulletin

Summer 2014 New Government, New Announcements In recent months, the new Government has finalised the timing in relation to the following measures which may impact your business and require action. Asset Write-Offs – Act Now! The Government has confirmed the start date for the abolition of the following small business asset write-offs (which apply if your turnover is less than $2 million): · $6 500 Instant Asset Write-Off – This will be reduced to its old rate of $1 000. Assets costing more than $1 000 will be depreciated at 15% in the year of purchase, and 30% per year in subsequent years. · $5 000 Vehicle Write Off – This write-off, which allows small business to claim a bonus $5 000 write-off in the year a vehicle is purchased, will also be abolished. Vehicles will therefore be depreciated as per normal rules (i.e. 15% in the year of purchase, and 30% of the remaining value per year in subsequent years). Both of these measures will be abolished on 1 January 2014. Depreciating assets that are first used or installed ready for use prior to 1 January 2014 are subject to the higher $6 500 threshold. On the other hand, the $1 000 threshold will apply to assets that are first used or installed ready for use on or after this date. Likewise, the repeal of the $5 000 vehicle write-off will apply to vehicles that are first used or installed ready for use on or after 1 January 2014. With this deadline looming, if you are contemplating purchasing equipment or a motor vehicle, consider bringing the purchase forward to before 1 January 2014. Subsequently, you must use the asset or have it installed ready for use before this time. Loss Carry-Back – One Chance Only! Loss carry-back will be repealed from 1 July 2013. To recap, loss carry-back provides tax relief for companies by allowing them to carry back their tax losses and receive a refund against tax previously paid. Refunds of up to $300 000 are available. The 1 July repeal date means that: · Loss carry-back will only be available on 2012/2013 company tax returns · Only losses made in 2012/2013 will be eligible to be carried back, and · Any 2012/2013 loss will only be able to be carried back one year. In view of the 1 July repeal date, if you were contemplating not carrying back your 2012/2013 company loss on your 2012/2013 return (but rather carrying it back next year on your 2013/2014 return) you should reconsider this strategy as carry-back will no longer apply for 2013/2014 returns. To be clear, only losses made in 2012/2013 will be able to be carried back – and they can only be carried back one year (to 2011/2012). Superannuation Rate Frozen The Government will follow through on its pre-election announcement to freeze the current 9.25% Superannuation Guarantee for a further two and a half years. Under the current law which was introduced by the former Labor Government, the Superannuation Guarantee rate (currently 9.25%) was to increase to 9.5% on 1 July 2014, incrementally increasing to 12% by 1 July 2019. The new Government, however, has re-calibrated the gradual increase to 12% as follows:   Income Year Income Year Charge Percentage Under Existing Law New Proposed Law 2013/2014  9.25% 9.25% 2014/2015  9.5%  9.25% 2015/2016 10%  9.25% 2016/2017  10.5%  9.5% 2017/2018 11% 10% 2018/2019  11.5% 10.5% 2019/2020  12%  11% 2020/2021  12%  11.5% 2021/2022and future years  12%  12%   Unfair Dismissal The Fair Work Act provides that employees must not be “unfairly dismissed”. Where an employee is unfairly dismissed, they can apply to the Fair Work Commission for a remedy such as damages or reinstatement. To avoid an unfair dismissal claim employers should ensure that terminations are not “harsh, unjust or unreasonable”. In determining whether this is the case, the following will...

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