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Business Finance 101– 5 End of Financial Year tax tips 2018

Business Finance 101– 5 End of Financial Year tax tips 2018

5 End of Financial Year tax tips 2018

Time to plan for a good finish for EOFY and here are 5 tips to get started and prepare for 30 June.

1. Consider the ideal timing for asset sales

If you are thinking of selling a profitable asset this financial year, but are likely to earn a lower income in the next year, it may be worth postponing the sale until after 30 June, as the sale is income, less the original cost. However, if you expect an income windfall from 1 July, it may be worth bringing the sale forward. As always, your decisions depend on your expectations for future asset prices, so don’t postpone a sale for tax purposes if you are expecting your investment to fall in value!

2. Pre-pay investment loan interest 

If you have (or are considering establishing) a geared investment portfolio, you can pre-pay 12 months’ interest on your investment loan and claim the cost as a tax deduction in the current financial year.  This can assist to manage cashflow more efficiently, and potentially reduce your income tax liability this financial year.

3. Pre-pay income protection premiums 

If you are employed or self-employed, income protection insurance provides peace of mind about the security of your income in the event you are unable to work due to illness or injury. Premiums for this insurance are generally tax deductible; prepaying your annual premium prior to 30 June will allow you to claim a full year of cover in advance as a tax deduction.

4. Review your debtors and creditors

Review your accounts receivable / trade debtors – who is taking the longest to pay – is debt-collection failing – consider if it is simplest to write off (reverse) the sale and move on with more Profitable clients and prospects. Likewise – who do you owe? Can you pay them by end of year to tidy up your accounts – or if you are struggling – can you negotiate longer terms to keep things open with suppliers and keep the relationship going?

5. Offset capital gains with capital losses 

Generally, if you have incurred capital losses on your investments, you are able to offset these capital losses against any capital gains you have made. You can also use losses you have carried forward from previous years. Remember, income losses can only be offset against income; capital losses can only be offset against capital gains.

DOWNLOAD a FREE “Bookkeeping Quarter Checklist” to get organised! CLICK HERE

Or ask a question – Email info@accountkeepingplus.com.au or call 0407 361 596 Australia

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Case Study – Let down by accountant and then a bookkeeper – They needed the books up to date and accurate!

Case Study – Let down by accountant and then a bookkeeper - They needed the books up to date and accurate!

Case Study – Let down by accountant and then a bookkeeper – They needed the books up to date and accurate!

Disappointment was clear when she told me how let down she felt of the promises by an accountant to have the books and year-end tax return all handled  but the accounts were months behind! Then she appointed a bookkeeper who was a little new to the Xero software, but the bookkeeper still had the main Bank and Merchant payments with unreconciled transactions dating back 8 months to July!!! And communication with both was frustrating!

She needed a plan of action!

(There are 5 easy steps to planning anything – start where you are at, decide what outcome/state you want to have, what that state/position will cost in money (budget to maintain) what you need to outlay set-up and get to that state, and what action we need to take now to get there.)

WHERE it was at –

She had set up the bank feed, and started to learn how to do the entries in the Xero accounts. But it was slow learning this new software, and she wasn’t sure if she was entering the transactions correctly. The expenses she paid personally, were entered, but they came out of the business bank account – was that correct? The customer payments were simple. To keep up to date with who had paid, she entered them also, but some paid by direct transfer, others by EFT and she didn’t realise only the TOTAL for the day settled to the business bank account.

When we reviewed the company file, the bank  had half the transactions with notes “What is this for?” since back in July 8 months ago!!! The customer payments to the bank didn’t match many deposits, as the Square Credit Card Merchant takes its % fee out before on-sending the balance – so the software can’t match them! There was a family loan to the business to assist with taking on a new shared office with another professional. Most of all, like many small business owners, she didn’t know how much the books can help her improve the business, nor how powerful a One-Page Business Plan and quarterly checklist for the accounts can be!

WANT to have –

She was sure the books could be up to date every month. And communication could be responsive and helpful – YES!

COST to have that state – 

A monthly cost would need to be paid, as she was not enjoying the books, and wanted to do what she knew best – her service and products! She wanted to know if it could be done for $100 based on her current small business

NEED to spend to get there –

Getting it back on track was the key – what would it cost, and what would need to be done?

NOW what action to take –

After meeting Paul Humphreys of Account Keeping Plus, at a local council event 6 months ago, luckily she had kept his card (it stood out because it came with a chocolate attached!). He was easy to talk to and helpful – I’ll give him a call and see what he is like.

Well after several tips on ways to promote my business and market online, he explained how monitoring a few key indicators is so important to know where the business is going and if it’s achieving the goals I set. He explained how the different payments arrived in the bank and the need for clearing accounts and loan accounts for the family loan.

We arranged to meet, and I was given a complimentary Business Score –and later he emailed me the results that gave me a Business Plan On a Page – it really got me focused on the weak points!

He is now getting me up to date – finally! What a relief!

Need help? Not sure?

Call for FREE 30min advice / strategy session today!

0407 361 596 Aust– No obligation!

You also get FREE 30 min to assess the setup of your company in the software,

DOWNLOAD a FREEBookkeeping Quarter Checklist” to get organised! CLICK HERE

Email info@accountkeepingplus.com.au or call 0407 361 596 Australia


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Business Tax Tips – Can I claim Home Office Expenses?

Business Tax Tips - Can I claim Home Office Expenses?

Business Tax Tips – Can I claim Home Office Expenses?

Many clients ask “Can I claim Home Office Expenses?” There is great information on the ATO website, and links for more info and a cool expense calculator, as part-reproduced here –

If you are a sole trader and your home is also your place of business you can claim tax deductions for a portion of the costs of owning, maintaining and using your home for this purpose. When you sell your home you may be liable for capital gains tax.

If you operate a business at or from your home, you may be able to claim a deduction for some of the expenses relating to the area you use for business purposes.

These expenses can be divided into two broad categories:

  • Occupancy expenses (such as mortgage interest or rent, council rates, land taxes, house insurance premiums);
  • Running expenses (such as gas and electricity, phone, decline in value of plant and equipment, decline in value and cost of repairs to furniture and furnishings, cleaning).

As for motor vehicles, if you are carrying on a home-based business you can claim the cost of trips between your home and other places if the travel is for business purposes.

Generally, you can ignore a capital gain or loss you make when you sell your home, unless you have used any part of it for business purposes.

Next step:

Home office expenses calculator

Disclaimer:

  •  All outcomes provided by this calculator are based on the information you provide and the deduction rates available at the time of calculation. You should use the outcomes as an estimate and for guidance purposes only;
  • You need to self-assess your eligibility and entitlement to a deduction for home office expenses before using this calculator.

Warning – Capital Gains Tax on Sale of Home

Be aware that if you claim home expenses for business, then Capital Gains Tax may apply if you sell the home.

The ATO explains further (and gives examples there)  –

Generally, you can ignore a capital gain or loss you make when you sell your home. However, you may have to pay CGT when you sell your home if you have used any part of it for business purposes.

CGT will not apply if any of the following apply:

  • You operate your business from a rented home;
  • You do not have an area specifically set aside for your business activities;
  • You operate your business through a company or trust.

In most cases, the portion of any capital gain on your home that is taxable is the same as the portion for which you could claim a deduction for interest. Generally, this is based on the floor area of your home you have set aside for business, for example 10%.

You do not have to pay CGT for those periods you did not use your home for your business.

If you have a capital gain because you use your home for business purposes, you may be able to apply one or more of the small business CGT concessions to reduce your capital gain.

Get a FREE 30 min answer to your query, and FREE ongoing email or phone support – No-one offers as much!

DOWNLOAD a FREE “Bookkeeping Quarter Checklist” to get organised! CLICK HERE

Email info@accountkeepingplus.com.au or call 0407 361 596 Australia


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Cashflow Tips – A cool tool to see what affect changes make on Cashflow

Many run by gut or the bank balance early in running a business – but understanding your cash flow is critical to your business success, and a handy tool that bank NAB have created is an online cash flow improvement tool. Whether using MYOB, Reckon/Quickbooks or Xero for bookkeeping, Try it and see what you think! (Click icon to go to the page)

Cash Flow Imp CalcLet us know how you went…

For other NAB cool tools see Calculators and tools

Also see Cashflow Tips – 5 Ways to Keep Cash Flowing

Or Cashflow Tips – To Discount or ADD VALUE?

DOWNLOAD a Free “Bookkeeping Quarter Checklist” to get organised! CLICK HERE

Need help? Not sure? Call for FREE 30min advice / strategy session today!

Email info@accountkeepingplus.com.au or call 0407 361 596 Australia


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Business Tips – Borrow or loan? Pay cash or finance / loan for stock or equipment?

Business Tips – Borrow or loan? Pay cash or finance / loan for stock or equipment?

Borrow or loan? Pay cash or finance / loan for stock or equipment?

At a local Meet-Up (www.meetup.com), we had an interesting discussion about mistakes we’ve made in business. For example: Whether to pay outright or borrow for stock/equipment.

The example one business gave was paying outright for equipment that would be sign-written to advertise another business (he organized advertising for businesses). The issue was that spending $10,000 on the equipment took all the spare money the business owner had, while the payment for the advert was monthly over a multi-year contract.

Hindsight showed that it would have been better to get a loan for the equipment, then add his mark-up for the advert and service on top of the monthly re-payments, and he would still have his $10,000 to use for cashflow and marketing.

Have you had a similar experience?

What Better Business Decisions can you share?

DOWNLOAD a FREE “Bookkeeping Quarter Checklist” to get organised! CLICK HERE

Need help? Not sure? Call for FREE 30min advice / strategy session today!

Email info@accountkeepingplus.com.au or call 0407 361 596 Australia


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Business Tax Tips – Beware – Claiming “I didn’t know” is no excuse with the ATO and can lead to fines!

Business Tax Tips – Beware – Claiming “I didn’t know” is no excuse with the ATO and can lead to fines!

Beware – Claiming “I didn’t know” is no excuse with the ATO and can lead to fines!

Beware of your liability as a small business owner for tax credits you have claimed, or not knowing what your bookkeeper/wife is reporting in your BAS and tax returns – ignorance is not an excuse with the ATO! As Terry Hayes relates in Smart Company about a carpenter in a recent Dispute with the ATO –

While it’s often said that lawyers and accountants are their own worst clients, or doctors are their own worst patients, taxpayers too can be their own worst clients when they represent themselves in disputes with the Tax Office.

This happened recently with a carpenter who represented himself before the Administrative Appeals Tribunal in a GST dispute with the Tax Commissioner.

In that case, the AAT upheld the Tax Commissioner’s decision to impose on the taxpayer a 50% administrative penalty on the basis of “recklessness” because he had over-claimed GST credits.

The taxpayer is a carpenter by trade, a sub-contractor in the building industry. He is a sole trader and has no employees. The Commissioner audited his Business Activity Statements for the period 1 January 2007 to 30 June 2010 and found he had over-claimed input tax credits. The BASs showed that claims for ITCs exceeded his GST payable in all but six out of the 42 BASs lodged in the relevant period. The tax shortfall amount was around $130,000 and the penalty imposed was some $65,000 based on 50% of the shortfall amount.

The taxpayer said that his wife prepared and lodged his BASs and that he never reviewed them or any of the supporting documents, including the invoices that he kept in a box in the linen closet which, as it transpired, did not substantiate his ITC claims. He also did not keep vehicle log books. Nor did he ever check any of his bank statements and so he was unaware that he was receiving GST refunds from the Commissioner over a lengthy period of time in the joint bank account that he had with his wife.

The taxpayer did not dispute the tax shortfall but argued he was not responsible for the penalty maintaining that it was the Commissioner who was mostly responsible for it. He alleged that Tax Officers had represented to his wife that he was entitled to claim ITCs for the purchase of his family home because he maintained a home office (although the AAT noted the settlement statement for the purchase of the home did not show any GST having been charged by the vendor to the taxpayer and his wife as the purchasers). Additionally, the taxpayer claimed it was the Commissioner that allowed the situation to go on for so long without him being audited.

The taxpayer also alleged that a car salesman had represented to him that he could claim back the GST on the purchase of two vehicles, but he accepted before the AAT that he was given wrong information by the salesman.

The taxpayer also stated that he had lost a lot of information about his purchases when his old computer died and that many other receipts that he had stored had faded and were illegible. The taxpayer contended that the mistakes in his BASs “were not made intentionally by his wife and that he had always been honest with the Commissioner”.

The taxpayer was self-represented. The AAT did not accept what the taxpayer said his wife was told by the Tax Officers or what the taxpayer said he was told by the car salesman. It agreed with the Commissioner’s contention that the taxpayer had over-claimed ITCs “for a lengthy period of time in circumstances where he knew or should have known that he was not entitled to claim the ITCs”. The AAT said the taxpayer had conceded he was “indifferent as to whether the BASs were accurate”. It also noted the taxpayer “never checked any of the BASs or whether he had the supporting documentation for the ITC claims because he thought everything was fine”. The AAT was of the view that the taxpayer “chose to leave the preparation of his BASs in the hands of his wife who had no taxation expertise”.

In the Tribunal’s view, the taxpayer’s conduct amounted to recklessness because there were foreseeable risks as to a tax shortfall where his BASs included claims for ITCs to which he was not entitled. The AAT said a reasonable person in the taxpayer’s position should have known about those risks. The Tribunal said the taxpayer “displayed complete indifference to the high risk of non-compliance in his GST affairs”. Game, set and match to the Tax Office on this occasion.

The AAT held the taxpayer had failed to discharge the onus of proving that the penalty was excessive. It held the decision to impose an administrative penalty of 50% was correct and that it should not be remitted in the circumstances.

Taxpayers must exercise care in their taxation affairs. They have that responsibility, and while they may claim they have no intention of making mistakes, that does not unfortunately stack up. Leaving the preparation of BASs to a family member (even if they are well versed in this), be it a wife or someone else, does not absolve the taxpayer from his or her responsibilities.

Need help? Not sure? Call for FREE 30min advice / strategy session today!

DOWNLOAD a FREE “Bookkeeping Quarter Checklist” to get organised! CLICK HERE

Email info@accountkeepingplus.com.au or call 0407 361 596 Australia


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Cashflow Tips – Improving cashflow in small business – Tip – Invoice Promptly!

Cashflow Tips - Improving cashflow in small business – Tip – Invoice Promptly!

Cashflow Tips – Improving cashflow in small business – Tip – Invoice Promptly!

Small business owners are often uncomfortable about asking to be paid, yet the top way to improving your cashflow is by invoicing PROMPTLY!. When you run a business, (especially for service businesses) if you don’t invoice promptly as well as collect payment promptly (which causes a cash crisis in the first place), then consider the following consequences –

Consequences for your cashflow:

  1. Clients can quickly forget what they owe you;
  2. They are less likely to remember how much they loved your work and pay you promptly;
  3. They may conclude that you do not expect quick payment and will take their time in sending in their money.

Some ACTION steps:

  1. Where possible, issue invoices at the time services are delivered;
  2. Send your invoice by email to speed the process;
  3. If you can’t issue immediately, be sure to issue your invoices weekly, or at least twice per month on designated days, such as on the 15th and the last day of each month;
  4. Do it like clockwork – it will help to even out your cashflow.

Take-away message and case studyCreate the habit – invoice quickly and often!

Part of our service is assistance with cashflow budgets, debtor collection and reviewing supplier costs and terms. One of our clients said the business finance is now in the BEST shape it has ever been – for our 4-5 hrs work weekly involves managing the invoices, payment follow up unique method and now supplier payments! The owner now can catch up on quoting jobs and finalizing the sale to grow the business.

Could this assist you in your business and let you focus on your best skills and on running the business?

If you would like to speak with these clients, email me and I’ll supply contact details!

Get a FREE 30 min answer to your query, and FREE ongoing email or phone support – No-one offers as much! Call and you also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right!

Email info@accountkeepingplus.com.au or call 0407 361 596 Australia