Who are you getting your tax advice from?

The other day at kindy pick-up, I overheard a small business owner getting some backyard tax advice from someone who didn't know what they were talking about.

This person didn't want to ask their Accountant for advice. They were complaining that the Accountant was too expensive, particularly as they were getting billed in 10 minute increments, for every small email or 1 minute phone call question.

If you want to learn more about your own small business tax issues, the Australian Taxation Office (ATO) recently released a series of FREE tax webinars that you may find interesting. The webinars are great for people who are starting a new business, are thinking about starting a new business, or for those who just want to update their knowledge.

Webinar topics include income tax deductions, home-based business, motor-vehicle deductions, concessions for small business, activity statement essentials, goods and services tax, budgeting and record-keeping, small business assistance, employer obligations and issues for contractors.

Here's a link to the ATO's webinars: ato.gov.au/busreg

I always recommend that you seek an Accountant for tax advice. Getting advice from someone who doesn't know what they are talking about could cost you a lot more than an Accounting Fee.

If you're Accounting Fees are stacking up, it might be a good idea to look at your payment structure.

When starting my own accounting practice, I wanted to overcome the common issue of clients complaining about their fees. I knew from personal experience how quickly the bills can rack up when dealing with professional advisers.

I've found that offering a Fixed Fee Accounting Service encourages communication and strengthens my relationship with my clients - they're not busy worrying about how much each phone call, email, or meeting is costing them.

I like to think this gives my clients peace of mind - they're getting affordable advice (that's financially manageable) from a professional, not the neighbour's/uncle's/dad's budgie!


Miriam Clappis is a CPA and has completed a Bachelor of Laws (Honours), Bachelor of Commerce (Corporate Finance) and a Bachelor of Economics from The University of Adelaide. Miriam is due to complete a Masters of Taxation  in 2013 at Curtin University and has commenced a Masters of Laws at The University of Adelaide.

Follow Miriam (aka @theNumbers_Lady) on Twitter.

New Company Director Penalty Regime: must read for all directors and aspiring directors!!

Directors are now in the firing line. Changes have been recently made to the tax law to reduce the scope for companies to engage in fraudulent phoenix activity or to escape liabilities and payment of employee entitlements.

*'Phoenix activity' refers to a new company which has emerged from the collapse of another, but is set up to appear to customers as though it's "business as usual", trading in similar activities as the collapsed company. 

Directors are now personally liable for their company's PAYG obligations if they are not paid by the due date and any outstanding superannuation guarantee debts. For new directors, liability occurs 30 days after the directors appointment.

So what could this mean for you?

If you are an aspiring director - this is definitely more of a reason to do your due diligence and make sure the company is paying its PAYG and superannuation guarantee on time.

I often come across small businesses where the husband and wife are both co-directors. I rarely advise this type of business set-up. I am a strong advocate of having a risk and non-risk person in a family business.

If your business is constantly struggling to meet your PAYG and superannuation obligations than I recommend going back to basics - implementing a budget and business plan, putting in place an effective marketing strategy, carefully monitoring expenses and an efficient administration to be invoicing and collecting debtor payments swiftly. I am able to assist in all these areas at affordable prices.

If you feel you may need to review your exposure to any risks associated with being a director, feel free to contact me via email or on Twitter.

7 Tips on making the most of your Tax Refund!

Its not everyday that we get money from the Tax Office. Before you hit the shops, have a read through the tips below to see if you are getting the most out of your tax refund.

1. Pay off credit cards - Yes, this seems a bit boring, but if you have got credit card debt, its likely too be incurring excessive amounts of interest which would be costing you lots of money. It's also a great feeling to be able to get the debt down a considerable amount in one hit.

2. On the subject of debt - use the money to pay off your home loan. You'd be surprised at how much any additional payments off your home loan can save you interest and shorten the loan term in the long run!

3. Don't have a home? Well then consider putting it towards that house deposit if you're saving up for one.

4. Establish a "sleep well at night" savings account. If you have no credit card debt and your mortgage is under control, consider having a sleep well at night savings account. This type of account is great to have as a back-up in case of an unexpected large bill or a drop in income to help you get by in the short term.

5. Balance - without wanting my tips to sound "un-exciting", if you do feel the need to reward yourself with a little retail, consider balance. Can you allocate 50% of the refund to any of the above areas? Anything is better than nothing....

6. If you do want to allocate it to your mortgage or savings account, consider having the refund paid directly into that bank account, rather than your everyday account. It will be much less tempting to spend if you can't immediately access it for the shopping spree.

7. Not getting a tax refund? There could be a variety of reasons why you're not getting any money back from the ATO. I definitely encourage anyone who is concerned about this, to make sure you are going to a good (and affordable) accountant to help you navigate this area and claim all expenses you are entitled too.

Want to correctly claim as many work-related expenses as possible?

Make sure you are claiming all work-related expenses you are entitled too by reading up on the ATO's occupation specific guides. If this means mumbo jumbo to you than definitely use a Tax Agent who can help you identify and maximise the expenses you can claim.


The ATO has developed three new occupation specific guides to help taxpayers correctly claim their work-related expenses. Below are the links for employee plumbers, IT professionals and Australian Defence Force members. Feel free to share this with a family member or friend that may fall into one of these professions .

• Plumber employees - claiming work-related expenses
• IT professionals - claiming work-related expenses
• Australian Defence Force members - claiming work-related expenses. 

If you have a different occupation to the above three, but are still interested in what expenses you can claim than refer to Industries and occupations.  You might find your occupation or a similar one to give you some guidance on work-related expenses you can claim.

Top 10 last minute tax planning tips to save you cash

It's not ideal to think about tax planning with less than 2 weeks until the End of Financial Year (30 June 2012), but my motto is "better late then never".

I've briefly summarised my top 10 last minute tax planning tips for the everyday worker. If you have any questions about any area or its application to your situation please feel free to contact me.

1. Donations - consider making any donations to registered charities before 30 June 2012.

2. Prepay private health insurance - from 1 July 2012, the 30% rebate will only apply for singles earning up to $84,000 and couples earning up to $168,000. A reduced rebate will apply for those earning between $84,000-$130,000 for singles, and between $168,000-$260,000 for couples. Those above these rates, don't get any rebate. If you fit into the category of no rebate or reduced rebate, you should consider prepaying your private health insurance before 1 July 2012 to continue the full 30% rebate (you can prepay up to 30 months in advance).

3. Quantity surveyor's report for investment property - You could be missing out on thousands of dollars of investment deductions (such as depreciation on plant, fixtures and buildings) if you haven't obtained one of these for your new or existing investment property. Order one before 30 June 2012 and you can also claim the cost of the report.

4. Work clothes and uniforms - if your corporate uniform needs replacing, your work overalls have seen a better day or your steel-cap boots are falling apart, consider purchasing these deductible expenses before 30 June 2012.

5. Bring forward medical expenses - if you've spent close to or more than $2,060 on out of pocket medical expenses, than consider purchasing any more prescriptions/pharmaceuticals/medical services before 30 June 2012. This will allow you to maximise the tax offset of 20% in excess of $2,060. The medical expenses offset will be means tested from 1 July 2012 and those with income above $84,000 (single) and $168,000 (couple) will only get 10% on out-of-pocket medical expenses in excess of $5,000.

6. Appoint a tax agent - Those that don't use a tax agent will have until the 31 October 2012 to lodge their 2012 tax return. Those who appoint a tax agent before the 31 October 2012 get an extension until March 2013 to lodge their 2012 tax return and don't incur any late fees.

7. Government Super Co-Contribution - if your income is less than $31,920 for the Financial Year, you'll receive a $1 for $1 benefit up to $1000, for any after-tax contribution you make into your super before the 30 June 2012. This means if you contribute $1,000 to your superannuation, the government will also contribute $1,000 to your superannuation. If your income is between $31,921 and $61,920 the government will still contribute a proportion of your after-tax super contribution. Below is a link to work out how much the government would contribute or alternatively, send me a private message if you are interested in maximising the benefit of a super co-contribution. Unfortunately, from 1 July 2012, the co-contribution is decreasing to a maximum $500 contribution for those only on incomes less than $46,920.

http://calculators.ato.gov.au/scripts/axos/axos.asp?CONTEXT=&KBS=superc_calc.xr4&go=ok

8. Tax Offset for contributing to spouse's superannuation - if your spouse's income is less than $10,800, then you could qualify for a maximum tax offset of $540 if you make an after-tax contribution of up to $3,000 before the 30 June 2012. For those whose spouse's income is up to $13,800, you will be still be eligible for an off-set.

9. Keep a four week diary of home-office use - if you are having to bring home work from the office regularly, keep a diary for four weeks detailing the hours spent working in you home-office and you will be entitled to claim 34 cents for every hour. Whilst, it's not the hugest tax deduction, every cent counts and it can make working outside of work hours that slightly more tolerating!

10. Purchase any work-related expenses on your debit or credit card - I recommend this to all my clients, as in the unfortunate event that you lose a receipt come tax time, it's still possible to substantiate the work expense with the credit card or bank statement.


Follow @TheNumbers_Lady on twitter.

What business structure is right for you?

I often get people telling me they want to start a business. This is an exciting time for any budding entrepreneur. I know all too well how tempting it is to just jump in and run, but it’s important that you give serious attention to the way you structure your business as well.

There are several different ways to set up your business structure, with a variety of tax and legal issues to consider.

I’ve decided I’m going to cover each structure in its own separate blog, in order to give each one the attention it deserves (and also not to bore you – I know that people don’t find business structures as exciting as I do!).

So let’s look at the ‘Sole Trader’ structure.

Sole Trader

A sole trader is essentially an individual with an Australian Business Number (ABN). There are a number of reasons why you may choose to start up as a sole trader. You may be only branching into the business world on a part-time basis, while you study or work another job. You could simply be looking for the quickest and easiest way to get started, avoiding the ‘red tape’ that comes from establishing a company structure.

Like anything, there are both advantages and disadvantages to taking this path. Here are some of the more significant ones to think about:

Advantages:

·       There are cheaper start-up establishment costs.

·       You have complete control of the business – you don’t have to worry about shareholders or director’s duties.

·       The financial reporting is less complicated, which also means lower accounting fees.

·       You are taxed at an individual tax rate – this means that if your profit from the business is less than $37,000 you will be taxed at a lower rate than the flat company tax rate of 30% on any profit.

·       You don’t have superannuation, workcover or payroll obligations (although I strongly recommend still contributing to your superannuation – it’s a business tax deduction and you don’t want to end up with no money in your super at say, 60 years of age).

·       In limited circumstances, you can offset your business losses against other income (such as employee income) or carry forward any business losses to offset future profits.

Disadvantages:

·       Because YOU are the business, you’re also personally liable for any debts of the business. You need to seriously consider all the risks involved, and factor in the value of your personal assets, such as the family house, and whether you would be prepared to lose those assets if something went wrong.

·       While not paying workcover might save you money, it also means that if you have an accident, you will not be able to access the benefits associated with it. It’s definitely worthwhile to consider taking out a sickness and accident insurance cover.

·       If your business starts going really well, your profits are still taxed at individual tax rates. This means that if you make $180,000 in profit, you’ll get taxed at 45% for any additional profit instead of a flat company tax rate of 30%.

So these are some things to consider before deciding to become a sole trader. Individuals will always have specific needs and it’s important that you always seek professional advice before setting up your business.

In my next blog, I’ll begin to explore the issues to consider when setting up a Pty Ltd company structure.

Got a question? Ask @thenumbers_lady on Twitter.

Can a bank account help you sleep?

Entrepreneurs dream of going into business because of the lifestyle it can afford them. But many often get trapped in the negative side of entrepreneurship without breaking through to the positive aspects. This is backed up by the alarming stat that approximately 50% of businesses don't make it past their fifth trading birthday.

Have you ever spent the night worrying about how to pay all the bills that keep piling up? Have you ever avoided returning phone calls from creditors because you don't have the money and are not sure when its coming in? Even if you haven't been in this situation, I've discovered a secret that one of the most successful business owners in the world has used to eliminate the worry.

While I believe there is no single magic wand solution to business cashflow issues, one great way to minimise stress could be to start up a "sleep well at night" bank account.

It's a concept that is certainly good enough for Warren Buffet. The world-leading business owner is a strong advocate of such a business account. He maintains his own "sleep well at night" bank account of approximately $20 billion dollars (this is what helped him sieze opportunities during the GFC, when most other companies had huge debt reserves instead of cash reserves). Okay, so this numbers a bit out of reach for the struggling small business owner. But to put this in some perspective, $20 billion is equivalent to two months revenue for Warren Buffet.

And I think two months revenue is a realistic goal for business owners to set aside in their "sleep well at night" bank account. Like anything, short-term targets can make it work. Over the next 6 months, you could aim to put one months revenue set aside. If that seems like a bridge too far, aim for two weeks revenue. A key way to do this could be to immediately transfer out a small percent of revenue each time it comes in. A business budget is also a must have to ensure the success of implementing a "sleep well at night" bank account.

One strategy that I've used for a client in the past involved setting up a high interest, no bank fee account with a separate smaller bank (smaller banks and credit unions can often give you better interest, but shop around) that wasn't automatically linked with their normal trading account. This made the money in that account that little bit harder to get back into the "black-hole" of the business cheque account. So its similar to a term deposit, but with funds that you can access if you need too.

This "sleep well at night" account strategy is great for a small business with relatively low debt levels. If you have high debt levels, than you may need to adopt a different strategy focusing more on debt reduction to sleep well at night. If you don't have any spare cash to think about a "sleep well at night" account, than you may need a complete business overhaul to get back to achieving the reasons why you wanted to go into business. I intend to touch on some of these issues in future blogs.