Amanda Palmer, Author at ASAP Solutions

Knowing the Differences Between a Sole Trader and a Company: Which One Fits Your Business?

10/11/2023 Amanda Palmer

If you are starting a business or thinking about restructuring how your business is organised, you might be juggling back and forth between the options of being a sole trader and forming a company. These two structures offer different advantages and disadvantages, and it is important to be familiar with these differences to make an informed decision. In this article, we’ll discuss the three key differences between a sole trader and a company, and help you identify which structure suits your business best.

Liability

One of the biggest differences between a sole trader and a company is liability. As a sole trader, you are personally liable for the debts and liabilities of your business, and you will be required to pay your creditors from your personal assets if your business cannot pay its debts. On the other hand, if you form a company, the company will be a separate legal entity that is responsible for its own debts and liabilities, and your personal assets will generally be protected from creditors of the company.

Taxation

Another major difference between a sole trader and a company is in taxation. As a sole trader, you and your business are considered one and the same for tax purposes, and you will be taxed on the business’s profits at your personal income tax rate. In contrast, a company is taxed separately from its owners, and it pays corporate tax on its profits. While the corporate tax rate is generally lower than personal income tax rates, you will need to pay additional tax if you pay dividends to yourself or your shareholders.

Ownership and Governance

Lastly, the ownership and governance of a business differ significantly between sole traders and companies. As a sole trader, you are the only owner and decision-maker of your business, and there are no formal legal requirements you are obligated to follow. In contrast, a company has directors who control how it is run, and shareholders who own the company.

There are also strict regulatory standards that companies need to comply with such as preparing annual financial reports, holding annual general meetings, and filing their tax returns promptly.

It is important to weigh the advantages and disadvantages of a sole trader and company depending on your business goals and resources. While a sole trader is more straightforward and less costly to set up, forming a company may offer more protection to your personal assets and establish more credibility with your clients and suppliers.

Whatever structure you choose, you’ll need to make sure that you are familiar with the legal and regulatory requirements for that structure. By understanding the differences between a sole trader and a company, you can make a well-informed decision and set your business up for success.

Business

What Small Business Owners Need to Know About New Superannuation Changes

01/10/2023 Amanda Palmer

From 1 July 2023, new changes to superannuation have come into effect. When you have looked at your recent financial reports for Q1 of the 23/24 financial year, you would have noticed that your super payments have increased compared to last quarter.

The new reforms carry an additional charge of 0.5%, a seemingly small figure that can make a significant difference in the overall financial outlook of your business. This is a good example of why you must be well-prepared for regulatory changes so you can ensure that your profit margins can withstand these increased resourcing costs.

In this article, we will delve into the reasons behind the increase in super and provide insights into what future rises are expected.

Changes in Super Contribution

In Australia, superannuation, often called ‘super’, is a mandatory retirement savings program funded by employers’ contributions; sometimes employees will make additional contributions. By law, employers must pay a percentage of an employee’s ordinary time earnings into a superfund. As of 1 July 2023, this super guarantee (SG) is set at 11%, marking an increase from the previous 10.5%. This percentage will incrementally rise until it reaches 12% by July 2025.

The responsibility of making super contributions primarily falls onto the employer. Employers are obligated to pay the super guarantee for employees who are 18 years or over and are earning $450 or more before tax in a month. It also applies to employees under 18 years if they work more than 30 hours per week. This super contribution is separate from an employee’s salary or wage; it is an additional cost to the business. Superfunds then invest these regular contributions to grow the employees’ retirement savings over time.

Engaging contractors also carries super responsibilities that small business owners must know. If you employ contractors who are paid primarily for their labour, you may be required to make super contributions on their behalf. This stipulation applies even if the contractor has an Australian Business Number (ABN) or invoices you for their work. The crucial factor is whether the contract is wholly or principally for labour. If more than half the value of the contract is for the contractor’s labour, then super contributions may be necessary.

Consequences of Not Meeting Super Obligations

Failure to meet superannuation obligations can lead to severe penalties for business owners. Incorrect, late, or non-payment of super can attract legal action, fines, and penalties from the Australian Tax Office (ATO). The financial ramifications of such oversights can be significant, not to mention the reputational damage these can inflict on businesses. All business owners must ensure they are making accurate and timely super contributions for their employees and eligible contractors to avoid such repercussions.

As your accountant, we make sure you are making the correct super payments based on employee earnings and that you are updated with any changes. However, it is still the business owner’s responsibility to ensure that payments are made punctually, as failure to do so can lead to significant penalties.

A common strategy many businesses adopt is to set aside a designated amount for super and business activity statement (BAS) payments in a separate account. This dedicated account acts as a financial buffer, ensuring that funds are always available for making these payments. This approach can help alleviate stress on business cash flow.

Why are Super Contributions Changing?

The superannuation system is changing to better address the increasing life expectancy and financial needs of Australia’s ageing population. As people live longer, the need for sustainable retirement income strategies is becoming more crucial. By increasing the super guarantee (SG) incrementally to 12% by 2025, the government aims to ensure individuals have sufficient funds to sustain a comfortable lifestyle during their retirement years. This approach is designed to alleviate some of the pressure on the public pension system as the proportion of working-age people decreases relative to those in retirement.

The Need for Proactive Business Planning

Businesses need to be proactive and factor in the annual, incremental increases in superannuation into their forecasts and budgets. These small changes can have a substantial compound effect on your business’s overall financial health. The key to managing this lies in proactive business planning.

It’s important to take into account changes to wages, super and tax while planning your annual budgets and forecasts. Doing so helps to minimise the impact when the super guarantee (SG) increase takes effect each July.

Should you have any questions or concerns about these changes to the superannuation system – or if you are interested in performing a comprehensive review of your budgets and forecasts – please do not hesitate to reach out.

Your Ultimate Guide to Tax and Your Small Business

01/09/2023 Amanda Palmer

The small business sector has been described as the engine room of the economy and the country’s biggest employer – and it’s not hard to see why.
So, it’s important to become familiar with the many possible tax benefits for small businesses. Typically, a small business is defined as having an annual turnover of less than $10 million. However, for the valuable small business CGT concessions, the turnover threshold is just $2 million. Don’t worry if your turnover is higher – you may still be eligible for certain concessions. To prevent businesses from exploiting the system by splitting activities to stay under the threshold, turnover must be calculated from aggregated amounts. This means considering your annual turnover (gross income, excluding GST) from all sources.

As a business owner, you can claim certain business expenses on your tax return to reduce your taxable income. From office supplies to travel expenses, there are various types of business expenses that may be eligible for deductions. While some deductions can be complex, like figuring out the percentage of computer use for work, others are 100% tax deductible. You can start maximising your tax savings by looking into which expenses you can claim.

How do tax deductions work?

Claiming work-related deductions on your tax return is your entitlement. To do so, you must meet the following criteria:

Keep records to prove your expenses.
Have spent the money yourself.
Not have been reimbursed for the cost.
Ensure the expense is related to your job.

If an expense is for both work and private purposes, you can only claim the work portion. Tax law requires records to be kept for five years and can include receipts, expense invoices, credit card statements, employee records, vehicle records, lists of debtors and creditors and asset purchases. Records can be kept on paper or electronically but should be easily retrieved. Rest assured that we will guide you through this process and help you maximise your deductions.

What are the different types of deductions you can claim?

Vehicle and travel expenses
The most important thing to remember when it comes to work-related vehicle and travel expenses is that you must keep records, which will make life a lot easier at tax time. Whether it’s your own vehicle expenses, or accommodation and transport expenses for airfares, train, tram, bus or taxi fares – all of these can be claimed. Keep in mind some fringe benefits tax may be incurred for some travel.

Work-related clothing and laundry expenses
Do you have to wear specific attire for your job? Whether it’s a suit, a uniform with a company logo, or clothes purchased from the store you work in, it’s important to understand your employer’s dress policy. But when it comes to tax deductions for work clothing, there are specific criteria that must be met. They must be specific to your occupation, protective clothing or footwear or a specific uniform.

Working from home deductions
Whether you work from a designated room or not, there are different methods to choose from when claiming tax deductions from home office expenses. Keep all your records and you can even deduct expenses for computers, phones, and other necessary devices. Plus, running costs for electricals are also deductible. Remember, you can claim up to $300 for home office equipment or a decline in value for pricier items. And don’t forget your phone bill if it’s used for work.

Professional associations, magazine subscriptions and trade union fees
As part of your profession, you might be a member of a professional association or a trade union, which fees are deductible. Magazine subscriptions that are aligned with your work, for example, an investor with financial publications are claimable.

Interest and investments
Deductions can be claimed for interest, dividends, or other investment income expenses. When it comes to interest on income expenses, account-keeping fees for investment purposes can be claimed. However, keep in mind that if you have a joint account, you can only claim your portion of the fees.
As for shares and dividends, you can deduct interest charged on borrowed money used to purchase shares. If the borrowed money was used for both private and income-producing purposes, it must be divided accordingly.

Income protection insurance
Including insurance premiums for loss of income in your deductions is a smart financial move. However, it’s important to note that not all insurance policies are eligible for deduction. Life insurance, critical care insurance, trauma insurance, and policies paid for out of your superannuation contributions do not qualify. Make sure to exclude these when claiming your deductions.

Self-education expenses
Claiming self-education expenses can be beneficial if your studies directly contribute to your work. To be eligible, the course you pursue must result in a formal qualification that meets the following criteria:

The course must maintain or enhance the skills and knowledge required in your current job.
The course should also lead to, or have the potential to lead to, an increase in your income.
It’s important to note that you cannot claim expenses for self-education that are not significantly connected to your current employment.

Here is a list of expenses that you can claim related to your self-education:

Accommodation and meals (if you are staying away from home overnight)
Computer consumables
Course or tuition fees
Depreciating assets with a cost exceeding $300 (or decline in value)
Equipment or technical instruments costing $300 or less
Equipment repairs
Fares
Home office running costs
Interest
Internet usage (excluding connection fees)
Parking fees (only for work-related claims)
Phone calls, postage and stationery
Student union fees
Student services and amenities fees
Textbooks
Travel to and from your place of education (only for work-related claims)

If an expense is both for your self-education and other purposes, you can only claim the portion that relates specifically to your self-education as a deduction.

Tools and equipment
You can claim a deduction for tools and equipment used for work purposes. If the items are also used for private expenses, you will need to divide the claim. For assets that cost $300 or less and are not part of a set, an immediate deduction can be claimed. For items over $300 or part of a set, you can claim a deduction based on their decline in value. Additionally, the cost of repairing and insuring tools and equipment can also be claimed if necessary.

Tax preparation fees and travel to see your accountant
Remember that you can claim your last year’s accountant fees and travel costs to and from these consultations.

Government Tax breaks for your small business

Although the Temporary Full Expensing scheme has now finished from 1 July 2023 the government has increased the instant asset write-off threshold to $20,000. This means that small businesses with an aggregated turnover of less than $10 million, will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that is first used or installed ready for use between 1 July 2023 and 30 June 2024. The $20,000 threshold will apply on a per-asset basis, so small businesses can instantly write off multiple assets.

Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year after that.

The Small Business Technology Investment Boost offers a generous 120% deduction to digitise its operations with digital assets and services. Eligible expenditure includes digital enabling items, digital media and marketing (such as webpage design), e-commerce (such as portable payment devices) and cyber security systems. The boost is applicable for expenses and depreciated assets from 29 March 2022 to 30 June 2023, with a maximum expenditure cap of $100,000. If the expenditure is on a depreciating asset, the asset must be first used or installed ready for use for a taxable purpose by 30 June 2023.

For small businesses, investing in the skills and training of their staff can be a key factor in success. To support this, the Small Business Skills and Training boost provides an extra tax deduction of 20% on eligible training courses provided by registered external organisations. This boost is available to businesses with an aggregated annual turnover of less than $50 million and runs from 29 March 2022 to 30 June 2024. It’s important to note that the training must be provided by a registered business within Australia and cannot be in-house or on-the-job training. If you’re a small business owner looking to invest in the growth and development of your staff, the Small Business Skills and Training boost provides a great opportunity to do so while also receiving a tax benefit.

When it comes to running a small business, keeping on top of your paperwork may be the last thing on your to-do list. So while you focus on running and growing your business, our team at ASAP Solutions can help with getting your records in order and discovering the right deductions.

To make the most of tax time and get your refund as fast as possible, contact us and lock in an appointment.

Advice NDIS Personal Tax

Fringe Benefits for Support Workers

09/08/2023 Amanda Palmer

Working as a support worker can be hugely rewarding. Whether you have worked in the profession for a long time or just starting out, it is important to know what extra benefits you may be eligible for. Beyond the many advantages of personal satisfaction, advancement opportunities and the development of interpersonal skills, there are a variety of fringe benefits that may be available.

So, what is a Fringe Benefit?

Fringe benefits are additional forms of compensation beyond regular salary or wages that employers offer to their employees. Examples of these benefits include health and dental insurance, life insurance, disability insurance, housing allowances, education assistance programs, childcare programs, employee discounts, and more. Employers provide fringe benefits as a means to attract and retain skilled employees and to enhance job satisfaction. These benefits also serve as a way for employers to express their gratitude for employees’ commitment and efforts, fostering loyalty and boosting morale within the workplace.

There are different types of fringe benefits, these include:

allowing an employee to use a work car for private purposes
providing car parking
paying an employee’s gym membership
providing entertainment by way of free tickets to concerts
reimbursing an expense incurred by an employee, such as school fees
giving an employee a discounted loan
giving benefits under a salary sacrifice arrangement with an employee.

The following are NOT fringe benefits:

salary and wages
employer contributions to complying super funds
shares or rights provided under approved employee share acquisition schemes
employment termination payments (including, for example, the gift or sale at a discount of a company car to an employee on termination)
payments deemed to be dividends under Division 7A
benefits provided to volunteers and contractors
exempt benefits, such as certain benefits provided by religious institutions to their religious practitioners.

What taxes have to be paid on Fringe Benefits?

In Australia, it is the employer’s responsibility to ensure that the correct amount of tax is paid on any fringe benefits provided. Employers are required to pay Fringe Benefits Tax (FBT) on certain benefits given to employees, their families, or other associates. This applies even if the benefit is provided by a third party under the employer’s arrangement. The amount of FBT to be paid is determined by the taxable value of the fringe benefit and must be self-assessed and reported through an FBT return for each financial year (April 1 to March 31).

Making the most of your salary

To unlock the full potential of your income as a disability, aged care support worker or not-for-profit employee using salary packaging has many benefits. This ATO-approved method allows you to minimise your tax obligations on specific expenses. If you work in the not-for-profit sector, you have the opportunity to salary package and enjoy savings on a wide variety of daily costs.

The main benefits include:

1. Saving on everyday living expenses

Want to enjoy tax savings on everyday living expenses such as mortgage, rent, bills or other everyday items? The great news is you may be eligible! You may be able to access salary packaging up to $15,900 every Fringe Benefits Tax (FBT) year (1 April – 31 March) for expenses like these.

2. Meal entertainment benefits

Did you know it’s possible to save money while enjoying a meal out? Via salary packaging meal entertainment benefits can provide the opportunity to enjoy tax-free savings and potentially save hundreds of dollars each Fringe Benefits Tax (FBT) year. With a salary package of up to $2,650 for meal entertainment expenses. Take advantage of this opportunity from 1 April to 31 March.

3. Car leasing

Salary packaging of a car, also known as a novated car lease, is one of the easiest and most cost-effective ways to buy and run a car. With a novated lease, you pay for your vehicle expenses using a combination of your pre and post-tax salary. This could reduce your taxable income and the amount of tax you pay.

Fringe benefits play a pivotal role in creating a supportive and attractive work environment for support workers. They not only supplement the basic salary but also enhance the overall remuneration package, making a position more appealing. Additionally, these benefits contribute to improved employee well-being, job satisfaction, and loyalty. For those who often work in demanding conditions, fringe benefits like health insurance, education assistance, and childcare programs can significantly improve their work-life balance. Employers providing these benefits demonstrate a deep respect and appreciation for their employees’ commitment and hard work, fostering a positive and productive workplace.

If you need assistance with your tax or have any queries regarding fringe benefits, get in contact with Amanda today and book a chat.

This blog post is intended for informational and educational purposes only. The information provided in this blog post should not be taken as professional accounting advice or recommendations.

Liability limited by a scheme approved under Professional Standards Legislation.

Advice Business Education Strategy Tax

How To Reduce the Impact of the Minimum Wage Increase on Your Business

10/07/2023 Amanda Palmer

Raising the minimum wage has many benefits for workers – providing them with a higher gross income, increased buying power, improved standard of living, and greater disposable earnings. However, it’s important to acknowledge the challenges that small business owners face with mandatory increases. Payroll is one of the biggest financial commitments for any business, and a sudden jump in minimum wage can significantly impact profit margins. From 1 July 2023, these include:

Australia’s minimum wage will increase by 8.6 per cent, and award workers will get a 5.75 per cent pay boost
The new national minimum wage will be $23.23 per hour, and $882.80 per week, based on a 38-hour week
Super guarantee rate increases to 11%

Despite these challenges, it’s crucial to recognise that minimum wage increases can actually enhance productivity within a business. Higher wages attract a more stable and experienced workforce which leads to reduced staff turnover and improved efficiency and effectiveness. While navigating the effects of raising the minimum wage can undoubtedly be challenging, the long-term benefits of a more satisfied and loyal workforce can ultimately outweigh the initial financial strain.

What can you do as a small business owner?

1. Operational efficiencies

Transform your business into a cost-saving machine by taking active measures to eliminate inefficiencies and unnecessary expenses. Streamlining processes, adopting automation technologies, and optimising staffing levels can all minimise the impact on the overall cost structure. Exploring how the supply chain may be optimised can also be a useful investigation.

Looking to invest in employee training and upskilling can lead to a more productive workforce. This can result in maximising the value derived from the increased wages. It may include a strategic view on modern award minimum wages and hours worked.

2. Budgetary adjustments

As business owners, it’s important to be proactive when it comes to managing increased labour costs. In order to cope with these changes, comprehensive budget adjustments must be made. This process involves taking a closer look at financial plans and making necessary revisions to accommodate new wage structures. Reassessing pricing strategies, re-negotiating contracts with suppliers, and exploring potential areas of cost reduction are all effective ways to offset the impact of higher wages. By confidently and strategically approaching these adjustments, business owners can maintain financial stability and continue to succeed in their industries.

3. Pricing and Revenue Strategies

With the higher labour costs, businesses must be strategic in re-evaluating their pricing strategies. While increasing prices may be necessary to maintain profitability, it is important to consider market dynamics and customer expectations. Conducting thorough market research, analysing competitor pricing, and assessing consumer sensitivity to changes in prices can assist in making informed decisions. There are also ways to counteract higher labour costs such as exploring alternative revenue streams, diversifying product offerings, or targeting new customer segments. By striking a careful balance between pricing and other business decisions, companies can stay competitive and profitable despite the pressures of rising labour costs.

4. Workforce Planning

Some options for business owners to consider when reassessing staffing needs and labour allocation is to look at the following:

Cross-training employees to handle multiple roles
Optimise schedules to ensure optimal coverage during peak hours
Evaluate the possibility of flexible or remote working arrangements

To lessen the impact of increased wages, owners can adjust their workforce to better suit the changing needs of their business.

5. Employee Engagement and Retention

Now is a golden opportunity for business owners to foster a positive work environment and boost employee morale. Recognising and rewarding employees for their hard work, offering additional benefits, and providing growth opportunities can go a long way in retaining valuable staff members. By investing in employee happiness, businesses can significantly reduce the costs associated with turnover and training. Happier employees also tend to be more productive, engaged, and invested in the success of the business, making it a win-win situation for all parties involved. Ultimately, the minimum wage increase can be a powerful tool for creating a thriving and successful workplace.

6. Collaboration and Industry Support

As a business owner, you need to know that you are not alone in navigating the challenges of the minimum wage increase. Seeking support and collaboration within your industry can go a long way in helping you overcome this hurdle. Trade associations, chambers of commerce, and networking groups offer a unique opportunity to connect with like-minded entrepreneurs and gain access to resources, insights, and best practices. Through these channels, you can share experiences and brainstorm innovative solutions.

Make Changes to comply with new wage laws

Although the wage increase is intended to keep up with the rising cost of living, it poses a significant complexity for business owners. Planning ahead ensures your business remains sustainable and continues to thrive, using the introduction of strategies that work alongside the increasing labour costs. By doing so, you can effectively adapt to the new wage system. We can help you with your budget and ensure your payroll is updated before your next pay run. Contact Amanda today to book an appointment.

This blog post is intended for informational and educational purposes only. The information provided in this blog post should not be taken as professional accounting advice or recommendations.

Liability limited by a scheme approved under Professional Standards Legislation.

Advice NDIS Tax

Expenses & Your Tax – A Guide for NDIS Support Workers

23/05/2023 Amanda Palmer

It’s that time of the year again when we start thinking about preparing for the end of the financial year. As an NDIS Support Worker, the end of the financial year can be overwhelming. Especially for sole traders and micro businesses keeping track of expenses and collating receipts, it can a minefield.

But there are some ways you can minimise your tax. Not every strategy will work for you so it’s important that any tax planning considers your business or personal position and goals. Let’s break this down and look at some common considerations when it comes to tax planning.

Making effective superannuation contributions

To maximise the benefit received from the Australian government, there are two methods you can use to make your super contributions work the most effectively for you.

1. Superannuation concessional contributions

Self-employed contractors and freelancers are often responsible for their own retirement savings, unlike salaried or PAYG employees who typically have this taken care of. As a result, many delay their retirement planning and contributing to their super.

Contributing to your super through the concessional contribution can provide a tax benefit. This is because your super contributions are deducted from your pre-tax income and are taxed at a lower rate of 15%, with a limit of $27.5k per year. Utilising the concessional contribution can be a productive strategy for reducing your tax rate.

It’s important to know that you can make an additional contribution of up to $110k to your superannuation fund, in addition to the $27.5k concessional limit. However, you cannot claim a deduction for this amount as it comes out of your post-tax income. Contributing to your superannuation is a vital way of saving for your long-term future and is a worthwhile investment.

2. Superannuation co-contributions

The Super co-contribution scheme is an Australian Government initiative to help low and middle-income earners increase their superannuation contributions, by matching a certain number of contributions made into a superannuation fund up to a maximum of $500. So, if you meet the eligibility criteria and put $1000 into your superannuation scheme, the government will match you with an additional $500. This gets paid directly into your super scheme after you have lodged your tax return. However, if you make a personal contribution and claim an income tax deduction for this contribution, you will not qualify for the co-contribution scheme.

Claiming business deductions

It may be beneficial to pay certain business expenses before the end of the financial year, regardless of your income or level of expenditure so you can claim them as a tax offset. Just remember, that if you pay an expense such as a subscription up-front this year you will not be able to claim the deduction next year.

When claiming expenses as an NDIS Support Worker, it’s important to keep in mind a few golden rules:

All expenses must be for your business, not for personal use.
If the expense is a mix of business and personal use, only the business portion can be claimed.
All records and receipts must be up to date and able to prove the purchase.
Only what has been paid for out of pocket is claimable. Any employer reimbursements are no longer claimable.
Allowances are different, if you receive an allowance for an expense, you can claim it.

Knowing what you can and can’t claim

This can be difficult and sometimes frustrating to decipher so here is a list of some of the more common things you may be able to claim as a NDIS Support Worker.

Clothing

Clothing that is solely used for work purposes is deductible. These include:

Protective clothing such as gloves, shoes, scrubs, and masks
Compulsory uniforms that are specified in your employer’s uniform policy
Occupational-specific clothing that distinctly identifies a person associated with a particular occupation

Equipment

You may be able to claim work-related equipment, such as art supplies, computers, printers, and mobile phones, as a tax deduction. With government pandemic stimulus initiatives, more expensive items could qualify for accelerated depreciation (temporary full expensing). However, before making a big purchase, it’s best to speak with your tax agent for guidance.

Mobile phone bills

If you only use your mobile phone for business, you can claim deductions for both the phone’s cost and the monthly service fees, regardless of whether you have a prepaid or monthly plan. However, if you use the phone for both business and personal use, you can only claim a percentage of the expenses that correspond to the business usage.

Professional fees and subscriptions

There are a variety of professional fees and subscriptions that are claimable. These include annual subscriptions to an association for annual practising certificates, memberships, or accreditation. Union fees or any business-related software, magazines, or licensing fees.

Professional insurance

You can claim insurance expenses as business expenditures if you have professional indemnity insurance to protect your clients, public liability insurance to cover your business in case of an incident, or insurance for all your business assets.

Advertising

Promoting your business, whether its website costs, signs, digital advertising, printing, or newspaper advertising, can be claimed as a business deduction.

Professional development

If you spend money on courses, training, and development to improve or maintain the knowledge, capabilities or skills required for your current job and income, you can claim the expenses.

Travel expenses

Any travelling cost between your home and place of employment isn’t considered as a deduction but if you transport a client during a shift, travel from one workplace to another or any parking, tolls, or public transport you pay would be considered.

Key dates to remember

Besides all the possible deductions, one of the most important things is to remember that your tax obligations aren’t over at the end of June. There are a variety of dates to ensure you are all up to date and compliant with your taxes and obligations. These include:

1st July
The start of the new financial year and where all tax-related obligations centre around. On this date, you can begin applying for your tax refunds for the prior financial year.

31st October
With no extension or tax agent, you’ll have until this date to lodge a tax return.

15 May
If you have a tax agent or accountant, you can submit your completed tax return by the last day of the next financial year.

28 October, 28 February, 28 April, 28 July

If you work for yourself as a GST-registered contractor, freelancer, independent consultant, or sole trader, you will likely have to submit a Business Activity Statement (BAS) or Instalment Activity Statement (IAS) every quarter. These are the dates for filing and paying your quarterly BAS if you fall into this category.

Don’t forget, your tax agent fees are also 100% claimable as a deduction! As Tax Accountants and NDIS Plan Managers, we understand the challenges of managing your expenses as a support worker and offer expert advice to minimise your tax bill and maximise your refund.

Make an appointment today to ensure that you can focus on looking after your clients without worrying about paying more at tax time.

This blog post is intended for informational and educational purposes only. The information provided in this blog post should not be taken as professional accounting advice or recommendations.

Liability limited by a scheme approved under Professional Standards Legislation.

Advice Business Personal Tax

Working from home and changes to tax deductions

17/05/2023 Amanda Palmer

Whether it’s to avoid peak hour traffic or parking hassles many Australians have embraced the flexibility of working from home. So, it’s important to know that the Australian Taxation Office (ATO) made changes regarding how to calculate tax deductions, starting from 1 July 2022. The Practical Compliance Guidelines (PCG 2023/1) were finalised this year and outlines the ATO’s post COVID-19 approach.

So, if you’re a business owner with staff working from home, or operate a small business yourself from home, make note of these changes which will come into effect for the 2022-23 financial year. Let’s unpack these changes now.

What are the new rules?

Currently, there are three methods for claiming deductions on working from home expenses. These are:

The fixed rate method
The actual cost method
Floor area (for sole traders and partnerships)

You can still use the actual cost method as per the previous tax year, or floor area if you’re a sole trader or partnership.

It is only the fixed rate method that is changing.

The fixed rate method is used when calculating claims for work expenses that are challenging to distinguish between home and work use. For instance, determining the exact amount of an employee’s home electricity used for work purposes. So, opting to claim based on the fixed rate method is a viable option.

Under the new rules:

The fixed rate for working from home has increased from 52 cents to 67 cents per hour.
The rate now includes phone and internet expenses.
You no longer need to have a separate home office or workspace to claim the fixed rate.
You can deduct up to $300 of additional expenses if they are not included in the fixed rate (such as home office furniture and equipment).
You are no longer able to deduct energy, internet usage, phone usage or stationery/computer consumables separately. This is included as part of the fixed rate option.
Any additional expenses over $300 are calculated as depreciating assets.

If you are a sole trader or partnership, these fixed rate method changes will affect you with occupancy expenses and depreciation but only if you choose to use it. The other operating cost options are available, such as floor area or the actual cost method.

New record-keeping requirements in a nutshell

From 1 March 2023, you’ll need to keep accurate and ongoing records of working from home hours.

Previously, it was acceptable to present a 4-week diary that exemplified your schedule and hours worked from home. This will no longer be acceptable.

You will need to:

Keep a timesheet, diary, log, spreadsheet or similar record of all hours worked at home for the entire income year, effective 1 March 2023.
Keep records such as phone, internet and electricity bills to provide evidence of each expense.
Keep receipts and invoices for your home-based work equipment (such as furniture or office equipment) including the supplier details, date purchased and the cost.

Which one is better – fixed rate or actual cost?

Although the fixed rate is more streamlined, it may not be the most suitable option for you. If you properly calculate your actual work-from-home expenses, you may receive more deductions and ultimately more money. However, choosing to claim actual costs could be a more complex and time-consuming process, and you may not end up with extra money after all the effort.

Keeping accurate records and receipts is your responsibility and will assist you in the long run when making claims.

As the 2022-23 financial year will be treated as a transitional year, with these changes it is advisable to contact a tax agent when filing your next income tax return.

We can help you with all the finer details to maximise your return, click here to book an appointment with Amanda today.

This blog post is intended for informational and educational purposes only. The information provided in this blog post should not be taken as professional accounting advice or recommendations.

Liability limited by a scheme approved under Professional Standards Legislation.

Pile of coins with a plant starting to grow through.

Advice Business Strategy

Super & Small Business: Your Obligations Explained

19/04/2023 Amanda Palmer

It can be difficult for small business owners to keep on top of the various compliance and legislative requirements, however, one important area that you should pay close attention to is your Superannuation obligations.

Superannuation plays a critical role in ensuring the future financial security of your employees, and non-compliance comes with serious consequences. Let’s look into how being mindful of your Superannuation responsibilities as an employer will help you protect yourself legally and financially, while also doing the right thing by your staff.

What is Super?

Superannuation (also called ‘Super’) is essentially funds to support your retirement, and to reduce the reliance on Government support (such as the pension), as the population ages. Australia has a compulsory system of Superannuation, which means the money for retirement comes mostly from compulsory super contributions that Employers pay into the nominated Super fund. Employees build up Super while they are working, it is a form of compulsory saving that typically can’t be touched until retirement.

By law, as a small business owner and employer, you must pay a specific percentage of each employee’s salary into a designated Superannuation fund or Retirement Savings Account (RSA). This is called the Superannuation Guarantee (SG).

Who do I need to pay Super to?

As a small business owner, it is your responsibility to pay Superannuation contributions for any employee you hire. This applies to all employees, whether they’re full-time, part-time or casual. However, some special provisions do apply to those aged under 18.

When it comes to defining what an employee is, the description can be broad – sometimes including those that would generally be regarded as contractors in other circumstances.

The ATO has a specific SG Eligibility Decision Tool to assist employers in working out their SG obligations. It is better to be safe then sorry, and it is recommended you seek professional advice if you are unsure if you are required to pay your contractors Super.

Where do I pay Super?

As an employer, you must offer eligible employees the right to choose their own fund or RSA via a standard choice form, issued by the ATO.

This form must be offered to an employee within 28 days if they are:

a new employee commences working for you
an existing employee requesting a form (unless you’ve already given them a form within the past 12 months)
now aware that a fund you have been contributing to can no longer receive your contributions
changing the fund you have selected as a ‘default fund’

Once employees have chosen their preferred fund, you have two months before all Super contributions must be paid into this account. If they are not, as an employer you run the risk of being penalised by the ATO.

To make it easier for small businesses to meet their obligations, eligible employers can pay their Superannuation contributions to the Small Business Superannuation Clearing House. The Clearing House is a free online Superannuation payments system that saves you time and money to pay super into multiple accounts. Employers can use the Clearing House if they have 19 or fewer employees, or annual aggregated turnover of less than $10 million.

To learn more about which employees are eligible and your own obligations as an employer, visit the Australian Taxation Office’s, Superannuation Guarantee Eligibility Decision tool.

How much super do I need to pay and when do I pay it?

Currently, all employers must pay a minimum of 10.5 percent of an eligible employee’s ordinary time earnings (OTE), which is the amount they are paid for their normal work hours (no overtime). This amount will increase in 0.5 percent increments until it reaches 12 percent on 1 July 2025. Your Accountant or Bookkeeper will let you know when the minimum Super amount changes. However, many employers offer above the minimum Super contribution as an incentive for employees.

Super contributions must be paid into an employee’s account at least every three months. Like BAS payments there are designated quarterly cut-off dates:

Quarter Cut-off date

1 July – 30 September 28 October

1 October – 31 December 28 January

1 January – 31 March 28 April

1 April – 30 June 28 July

What happens if I don’t meet my Super obligations?

A number of penalties may be imposed if you do not meet your Superannuation Guarantee obligations.

Penalties include:

Not paying employees the full amount of super they’re entitled to, also known as a Superannuation Guarantee shortfall
Not paying super to an employee’s fund of choice, referred to as choice liability
Not making payment by the quarterly cut-off date
Not handing out a choice of fund form to new employees when this is required

To avoid these issues and get yourself off on the right foot as a small business, have a chat with your accountant or bookkeeper to make sure you are paying these entitlements correctly. Using a payroll system like Xero may also assist you in accurately tracking what you’re paying and reduce errors.

If you are thinking of getting a first employee it is recommended to have a chat to us before they come on board to make sure you get your systems and processes right from the start. Click here to book an appointment with Amanda today.

This blog post is intended for informational and educational purposes only. The information provided in this blog post should not be taken as professional accounting advice or recommendations.

Liability limited by a scheme approved under Professional Standards Legislation.

Advice Budgeting Tax

Get a Head Start on Your Tax Planning with these Easy Ideas

14/03/2023 Amanda Palmer

Tax planning is the strategy to minimise the amount of tax you owe on your income, assets, and wealth. Having the right strategy enables you to successfully handle your tax liabilities by making use of tax credits and deductions that are available to you. Tax planning is not tax avoidance; which is the illegal practice of not reporting income in order to not pay taxes. Tax planning is making sure you are not paying more tax then you are obligated to.

What is the importance of tax planning?

There are many reasons to consider tax planning as an integral part of your overall business cashflow and financial plan. These can include saving money, preventing the overpayment of taxes, seeing your return on investment and enabling future financial growth. Although not a one-size-fits-all approach, the ultimate goal is to reduce your taxable income to minimise the tax that you need to pay and to maximise the amount of money you have in your pocket.

Who needs tax planning?

Tax planning for individuals gives you the power to take charge of your financial situation by making intelligent decisions to avoid unnecessary debt. Usually individuals with investment assets or who have received a lump-sum during the financial year will consider tax planning strategies.
For businesses, tax planning is a technique to ensure that the company is in the best possible position to make future decisions. Having a long-term plan to both lower your taxes and maintain commercial efficiency is a winning combination.

Here are some quick and easy strategies to help both businesses and individuals to plan for tax time. It’s best to chat to your Accountant or Financial Planner now to find out what other tax incentives are applicable to your personal circumstances.

1. Plan your cash flow

The ebb and flow of cash flow is a common challenge for many businesses, as bills have to be paid on time while employees are compensated and accounts receivables come in. Unfortunately, these large tax payments can take away from the resources needed elsewhere in both business operations and personal finances. By proactively forecasting your cash flow needs and planning out when taxes need to be paid, you’ll be able to sidestep any unexpected expenses or lack of funds.

2. Plan for payment dates

It’s important to remember that missing tax payments can cause serious issues, like fines and end up straining your cash flow. By carefully planning for your tax payments, you can avoid these unnecessary expenses. Scheduling ahead of time and budgeting well in advance, not only reduces anxiety but positions you for continuing success.

3. Pay Superannuation Liabilities

To minimise your tax bill, consider using your superannuation as a tax strategy. By making an early payment on your superannuation liabilities, you’ll be able to get the deduction a year earlier. This future projection gives you greater flexibility with both your budget and cash flow.

4. Bring Forward Other Expenses

Tax planning doesn’t have to be complicated. Like other strategies, you can reduce your current tax obligations by bringing forward other expenses. This way, you will get a deduction this year that would otherwise not be available until next year.

5. Be prepared for your tax instalments

By putting money aside every week or month, even in a secondary account so that when that tax bill comes in, you have the funds ready to cover your tax obligations. This strategy helps smooth out any rough patches with your cash flow that was not yours from earlier throughout the year and puts control back into your hands.

6. Make Additional Superannuation Contributions

As an individual, if you can afford to make additional superannuation contributions, this is a great strategy for reducing your taxes at the same time. With some minor adjustments, you’ll find that it’s easy to afford additional super contributions. You may miss the extra money at first, but as time progresses and your superannuation balance continues to rise, you won’t regret making this decision!

Taking charge of your finances and setting yourself up for success requires an annual tax planning meeting. This does not need to be hard; however, it should involve a balanced approach that evaluates your overall tax strategy in order to make the most of every dollar saved on taxes.

Click here to book an appointment with Amanda to find out more about tax planning.

This blog post is intended for informational and educational purposes only. The information provided in this blog post should not be taken as professional accounting advice or recommendations.

Liability limited by a scheme approved under Professional Standards Legislation.

Advice Budgeting Business Strategy Tax

Profit & Loss Statements Explained

02/02/2023 Amanda Palmer

Keeping track of your finances is essential if you’re a small business owner. But what is a profit and loss statement, and why do you need one?

A profit and loss statement is a document that shows your business’ income and expenses over a specific period of time. It can help determine whether your business is making a profit or not. You usually complete a profit and loss statement every month, quarter and financial year. In this article, we will explain what a Profit and Loss Statement is and how to create one for your small business.

How to create a profit and loss statement

Reviewing the financial state of your business regularly will help ensure your success and catch any areas of concern before they snowball. Creating a profit and loss statement is relatively easy, if you use an accounting platform such as Xero or Myob, you can create your reports with a click of a button under the reporting section.

If you are not using accounting software, there are many free templates available online to get you started. If you’re unsure about which template to use, search for one that is specific to small businesses to gain the most benefit from the information it provides. Completing these manually can be time-consuming and key information can get missed. When deciding whether to invest in accounting software, consider how much time you spend compiling reports instead of working in other areas of your business.

As your business grows, we recommend investing in an accounting platform so you can stay on top of your financial position across the entire year.

What information should be included in a profit and loss statement?

A profit and loss statement contains actual and sometimes forecasted figures related to sales, expenses, and profits. This statement provides a comprehensive overview of the business’s financial performance over a certain period.

Your line items will typically include the following:

Total revenue gained from sales
Any associated expenses to deliver those sales (cost of goods)
Expenses such as wages and taxes

It allows you to gain insight into the net profit produced and understand your expenses. Reviewing this information is key for small business owners so that you can remain aware of your current financial standing, where you are making a profit, what products or services are not profitable, and that you have a return on your expenses. At the end of the day, knowing your position means you can make informed decisions when planning for the future.

How often are profit and loss statements calculated?

An accurate and timely profit and loss statement is one of the most important financial components of any small business. We recommend that you review your income and expenses monthly, quarterly, and yearly.

Many small businesses calculate their profit or loss monthly, which is good for showing a snapshot of the details for each month. However, it is also beneficial to establish a quarterly review as staff illness or seasonal factors can affect your monthly numbers, where a quarterly review helps to take a step back and make sure that your numbers are improving, even if you have a slow month.

An annual review is typically undertaken at the beginning of the calendar year or financial year and helps to set your business goals and budgets as part of your yearly business plan.

Reviewing regularly allows you to compare over time and better plan for the future. With accurate monthly, quarterly, and annual statements, you can ensure that your business remains profitable long-term.

Tips for making the most of your profit and loss statement

To make sure you’re making the most of your profit and loss statement, it’s important to keep accurate records and review regularly to identify potential trends, check prices frequently against competitors, and plan for upcoming seasonal fluctuations and peak times. Additionally, be sure to identify expenditures that are necessary to the long-term success of your business. By taking proactive steps such as these, small business owners can learn how to manage their finances more effectively and ensure their overall success for years to come.

Creating a profit and loss statement can seem daunting for small business owners if you are starting out or haven’t done one before. But having this information at your fingertips (and understanding the report) is invaluable. By understanding how to create a statement, what information should be included, and updating it regularly, you can use it to make informed financial decisions. If you have any queries regarding Profit & Loss Statements or setting up an accounting platform, we are here to help. Just click here to book an appointment with Amanda.

This blog post is intended for informational and educational purposes only. The information provided in this blog post should not be taken as professional accounting advice or recommendations.

Liability limited by a scheme approved under Professional Standards Legislation.

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