Training you – Solving Problems – Or We do your books for you! For Business owners and fellow bookkeepers!

Bookkeeping – Train Troubleshoot or we do it for you! MYOB Reckon Xero


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Business Tax Tip – Hobbies – How much can you sell before you need to declare the income like a proper business?

 

Hobby or Business?

Hobbies – How much can you sell before you need to declare the income like a proper business?

The ATO (Australian Tax Office) has guidance about how much can you sell before you need to declare the income like a proper business, that is whether an activity is a hobby or not. It is not simply based on turnover, but on the intention to make profit and indicators of formal set-up such as having a business plan etc.

From the ATO website – at “Am I in Business?” a series of questions are posed to help work out if the activity a business.

Quoted from the ATO site –

  1. Does your activity have a significant commercial purpose or character?
  2. Do you have more than just an intention to engage in business?
  3. Do you have a purpose of profit as well as a prospect of profit?
  4. Is there repetition and regularity to your activity?
  5. Is your activity carried on in a similar manner to other businesses in your industry?
  6. Is your activity planned, organised and carried on in a business-like manner?
  7. Does your activity have characteristics of size, scale and permanency?
  8. Would it be true to say your activity is really better described as a business, rather than a hobby, recreation or sporting activity?

Each time you answered yes to the questions above, it increases the probability that you are in business though no one indicator is decisive, they must be considered in combination and as a whole.

Why does it matter whether your activity is a business?

It matters because it may affect if:

  • Any money you receive from the activity is assessable income;
  • You are entitled to an Australian Business Number (ABN);
  • You can or must register for goods and services tax (GST).

How does the question of whether your activity is a business affect your tax?

There are numerous areas in which people carry out activities, often in a small way, which may constitute a business. These include, for example, gardeners, tradesmen, and couriers.

If you are carrying on a business:

  • Any money you earn from this activity is generally assessable for income tax;
  • You are generally entitled to claim tax deductions for any allowable expenses you incur in earning this income;
  • If your activity results in a loss, you may be entitled to offset this loss against other income or carry it forward to offset against future income, and therefore reduce the income tax you might have to pay in the future.

Common areas where people carry out activities which may be a hobby rather than a business include hobby farming, motor car/bike racing, and hobby ceramics.

If your activity constitutes a hobby or recreation:

  • Any money you earn from this activity is generally not assessable income;
  • You are not entitled to claim tax deductions for any expenses you incur in carrying out this activity;
  • If your activity results in a loss, you are not entitled to offset this loss against other income or carry the loss forward.

Do you need to apportion your expenses?

It may be necessary to consider whether your expenses were incurred solely for business purposes, or for a `dual purpose’ (for example, partly for business purposes and partly for private purposes).

Generally, if your expenses were not incurred purely for business purposes, it is necessary to apportion your expenses between the different purposes.

What evidence might you have to show that your activity is a business?

These are examples of questions that we may consider in determining if your activity constitutes a business:

  • Do you have a business plan?
  • Do you use specialised knowledge or skills?
  • Have you had prior experience in this area?
  • How much capital have you invested in the activity?
  • Have you done market research?
  • How much time do you spend on the activity?
  • Is the activity a part-time side-line or your main income earning activity?
  • Do you give quotes and supply invoices?
  • Do you advertise?

As well as guidance about how much can you sell before you need to declare the income like a proper business spend time and read other information about being in business – refer to Tax basics for small business and Starting a business essentials

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Survey Shows Small Business are Using Social Media Less in the Last Few Months

social media
Small Business are Using Social Media Less

Nett Better Business Advice reports:

According to research released by accounting firm MYOB, there has been a decline in small-to-medium businesses (SMBs) using online tools.

MYOB’s July 2012 Business Monitor surveyed 1,004 SMB owners and found that online business activity such as online transactions, email marketing, and social media has fallen.

The study also discovered that the proportion of those surveyed with a business website increased slightly. It is now up to 38% of respondents, from 36% back in March 2012.

Furthermore, those SMB owners surveyed with a website were more likely to see a rise in revenue in the past 12 months than those without, 23% in comparison to 15%.

“Last year, those with a business website were 53% more likely to experience a revenue increase,” said Tim Reid, CEO of MYOB.

“They also said positive business changes were more likely a result of having a website than using other promotional media, or a result of utilising both.” Read More

And Business IT reports:

We’ve sat through enough presentations on social media to know that it has the potential to do wonders for your sales and/or brand if you are a small struggling business. On the other side of the coin, you can spend a lot of time on it, with little return, if you don’t use it effectively.

With this in mind, we weren’t shocked to discover that although more small businesses are running their own websites, the MYOB Business Monitor found that online activity was down in July compared to previous months.

MYOB CEO Tim Reed said, “The decline in popularity of online business activities was completely unexpected, particularly that of online marketing and social media. Many of these tools, such as a basic LinkedIn page, are free and can be used to raise the profile of a business and to communicate with customers”.

The challenge for small businesses is to find a balance between working on the business and working in the business. Given that we are still operating in uncertain economic times it’s not surprising to see that time on activities such as social media is falling. Read More

How are you using Social Media for business? Leave a comment!


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Beginner – Getting your Books Organized

Getting your Books Organized

Getting your Books Organized

When you start a business, you will often have several roles to juggle including production or service, marketing, operations, sales, dispatch, invoicing, and bookkeeping of the accounts. These must all be done!

Starting Your Accounts Right (or Re-organizing Your Current Accounts)

Most business owners don’t like doing the books! But if you want to be in business then accept that the books and finances are one of your responsibilities and JUST DO IT or PAY SOMEONE to do it.

To keep accounts organised, you need a set of systems to ensure:

  • ALL sales and expenses are recorded and transactions aren’t forgotten (eg Cash receipts);
  • To keep all documents required by law easy to find them and neat and tidy;
  • Good records of conversations with customers or suppliers; and
  • At year end – a good set of all required data and reports so your accountant can complete your tax return quickly and efficiently.

Bank and Credit Cards

  • First, use a dedicated business bank account and credit card. Processing your records is much easier if you have these separate bank and card accounts (even if only a personal credit card in your name to start) that you only use for business transactions.
  • Secondly, request that all statements, including bank, debit card, credit card, and petrol accounts, are sent on a monthly basis. That’s because the key aspect of processing your financial documents is reconciling them on a monthly basis.

If you follow these suggestions, nearly all of your income and expenses will be captured in statements from both your bank account and credit card account and account keeping is much easier.

These are 6 steps to get your accounts off to the right start (or improve current systems).

Coming up next week we will look at some templates that can help you get organized and keep you and your accountant happy!

 


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Cash Flow Booster Tips – Invoice Promptly

 

Cash Flow

Cash Flow Booster Tips

Most small service business owners are uncomfortable about asking to be paid. If you run a business, and you don’t invoice promptly AND collect payment promptly (which might be part of the reason for a cash crisis in the first place), there are many consequences:

  1. Your clients can quickly forget that they owe you.
  2. The less likely it is they will remember how much they loved your work and pay you promptly.
  3. They may also conclude that you do not expect quick payment and will take their time in sending in their money.

Some ACTION solutions:

  1. If possible, present your invoices at the time services are delivered.
  2. Send your invoice by email speeds the process up even more.
  3. If issuing invoices immediately is not practical in your business, 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 this like clockwork – it will help to even out your cash flow over the long haul.
  5. Create the habit – invoice quickly and invoice often.


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Business Tax Tips – Tax invoices – receipts what do I need to keep especially if under $75?

(As well as the info below,

for an UPDATED VERSION of this post and the latest ATO info with updated links in Feb 2017, go HERE)

(Some links below have been removed by the ATO since writing)

Tax invoices are important documents for the operation of the GST system.

Reading the ATO website, we conclude however that in some circumstances taxinvoices are NOT required to be kept – you must have CASH receipts/invoices, but purchases under $75 ex GST ($82.50 inc GST) made on credit cards and bank statements can be legitimately claimed. This is how we determine this:

The ATO website explains (at Valid Tax Invoices and Credits):

  1. Tax invoices must contain certain information to be valid. These requirements are detailed (see What is a valid tax invoice?);
  2. You must issue a tax invoice for any taxable sales you make of more than $82.50 (including GST), where the purchaser requests it;
  3. If you make taxable purchases for business purposes, you can use the tax invoices you receive to claim the correct amount of GST credits for those purchases;
  4. You must also keep your tax invoices and other GST records for five years;
  5. Your supplier must be registered for GST before you can claim a GST credit on a purchase.

Then the ATO website gets tricky in the next page Claiming GST credits:

  • To claim a GST credit for purchases that cost more than $82.50 (including GST), you must be registered for GST and have a valid tax invoice or recipient created tax invoice (RCTI). If you use an incorrect or incomplete tax invoice to claim a GST credit, the GST credit may not be allowed.
  • To claim GST credits for purchases that cost $82.50 or less (including GST), you must keep documents such as cash register dockets, receipts or invoices to support your claims. (This seems to conflict with point 2 above.)

And further at How does the ATO deal with missing or invalid tax invoices? They go on:

“We issued a practice statement that explains when we will treat a document that is not a tax invoice as a valid tax invoice.

If you claim a GST credit without a tax invoice or with an invalid tax invoice, we may either:

  •   Treat your tax invoice as being valid;
  •   Treat some other document as a valid tax invoice.

Our decision to allow your claim will depend on the details you provide.”

The Practice Statement is PS LA 2004/11 and guides on the exercise of discretion that officers can use. At point 12 it states you cannot claim an input tax credit if you do not hold a tax invoice or adjustment note (refund) BUT several exceptions to the rule are listed.

Notably: “If the value of the taxable supply is $75 or less or the amount of the decreasing adjustment is $50 or less”.

Conclusion?: This means tax invoices are NOT required to be kept in some circumstances– you must have CASH receipts/invoices, but purchases under $75 ex GST made on credit cards and bank statements could be legitimately claimed – so keep what you can and staple small receipts to an A4 sheet or put in a plastic A4 sleeve for ease of filing (say per month), but don’t worry about those you have misplaced.


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MYOB Premier – “Payroll Incomplete..load your tax tables” 19.7 Compliance update and Tax Tables from earlier versions 19.5 or earlier

For the latest up-to-date post on tax tables – go here

You keep getting the following message – “You must install the compliance update to change your version to v19.7 before you can load the new tax tables.”  Please go to the Help Menu > About Account Right screen.  If this screen doesn’t say 19.7, then you need to update immediately to be able to process payroll correctly.

If you are using 19.5 or before you will have to upgrade to 19.6 before you can run the 19.7 update.  You can also download the full installer for 19.7 in a .zip file, however, you have to uninstall the previous V19 installation before installing 19.7.

You can download your update from one of the following 3 options:
1) Help menu > Updates > Register for Updates (need just your Serial Number – from: Set Up>Company Details) then again Help menu > Updates > Check for Updates, wait for a window to appear, see if you get the Compliance green message, tick it and click “Instal” in the lower part of the screen

2) Enter your serial number at https://my.myob.com/downloads

3) Log into the self service portal at http://my.myob.com.au/ and go to My Products > My Downloads to download the correct update or installer.

If after you installed Account Right premier v19.7 and load tax table, tax table revision is 1/07/2012 but the following message keeps displaying:

MYOB Quickbooks Bookkeeping - MYOB Premier – 19.7 Compliance update and Tax Tables from earlier versions 19.5 or earlier

MYOB v19.7 & Earlier Versions

Are you getting – “The setup for payroll is incomplete. The next step is to load your tax tables.” with Premier?

If you are receiving this message, it means 1 of two things:

1) Not all of your computers are using v19.7, please make sure that each computer has v19.7 showing in the Help menu > About Account Right screen.

2) That on at least one of your computers, the user does not have Full Access to the C:\Premier19\ folder, and all files contained inside of it.  Please ensure that all users of Premier have sufficient user privileges for the installation folder, or consult with your IT support person to have sufficient privileges added to the relevant accounts.

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MYOB – Upgrade and the New ATO Payroll Tax Tables for Year 2012-2013

MYOB Quickbooks Bookkeeping - MYOB Upgrade and the New ATO Payroll Tax Tables for Year 2012-2013

MYOB Upgrade tax tables

For the latest up-to-date post on tax tables – go here

New Payroll Tax TablesAccountRight Standard or Plus version 19 with MYOB Cover, you’ll have a choice at June 30 between upgrading to the new generation of AccountRight software, or simply installing new payroll tax tables. Look for the notice within the software, or register for notifications via the Help then Updates in your MYOB.

ATO Tax TablesATO website says the new tables will be available Monday 25 June. You can download, save a copy or get printed copies from ATO offices, or some newsagents.

No MYOB Cover? You won’t be able to purchase payroll tax tables separately from MYOB. However third party tables are available, which I have tested against the ATO tables and work perfectly for me and several of our clients. To get more details and purchase for $58 – find out HERE.

Premier Upgrade DelayThe software upgrade to the new generation of AccountRight Premier has been delayed again, due 2013.

Next MYOB Service PackIf you have already upgraded to the new generation of AccountRight Standard or Plus 2011, the new service pack 4 is out now, and deals with a few more bugs and speed improvements.

M-Powered Services M-Powered Services are still not available in the upgrade.

Thinking to upgrade?

Goodnews is that the service packs have increased the speed of AccountRight significantly, and dealt with many of the more bugs as well.

Badnews is that the speed is still slower than AccountRight version 19 – and indeed, because this is an SQL product, the new generation of AccountRight will probably always run a bit slower than version 19 used to.

Speed ImprovementsDepends primarily on the processing speed and RAM on your computer, but also on the size of your company file and how many transactions you record daily. If you’re using an old computer, I’d definitely give the upgrade a miss. If you’re using a relatively new computer with some grunt and you already subscribe to MYOB Cover, we advise you install the new software and test speed using the Clearwater demonstration file. Enter a couple of transactions, and if this works OK, upgrade your company file, and try the speed with a few transactions in your own file. If the speed is good, then continue. If you’re unhappy with the speed, even if you recorded a few transactions, close the upgrade and return to AccountRight version 19.

If you require assistance, give us a call! 0407 361 596 Aust (overseas drop 0 and add +61). We are here to help!