A case study of 2 small business owners: which one are you?

Most entrepreneurs go into small business with dreams of a better life for themselves and their families, but the reality can often be far from this. Below I examine two real small family businesses with turnovers less than $1 million. Which one are you more like?

Mr and Mrs Burnt-out

They are a husband and wife team. They offer a fantastic product and service. They work 14 hour days, 7 days a week. They can't remember the last time they took a holiday. You can see the tiredness in their eyes. They do everything themselves in the business. They do the front-end, the marketing, the administration and the delivery of the product and service. The business revolves around them. They also do all the book work. They struggle to invoice out on time. They don't follow up debtors. Because they are running around doing everything and anything, their service standards and core business product is not as good as it used to be. Some of their loyal customers are becoming disillusioned. They are surviving week by week. They are burnt out from working in their business all the time, there is tension between the couple and one of them is having health problems.

Mr and Mrs Balanced

Another husband and wife team. They also offer a fantastic product and service. They work hard, but only work on weekends when necessary. The wife works part-time in the business. They recently went away to the snow for a week-long holiday. They are also going away to Europe next month for business and a holiday. Their business runs smoothly when they go away. They have clear systems in place. They do not do all the work themselves. They have key employees and also contract out the work that they are not good at, and choose to focus on the areas within the business that they excel at. Although cash flow is still tight, they are growing and know exactly where the business is at. They have an appropriate debtor management system in place. The quality of the product and service has remained consistent and they are attracting new clients and retaining existing clients. They have a business plan and budget which they monitor and review. The owners are now focused on working more on their business rather than in the business.

Do either of these scenarios sound like yours?

I don't want you to be too down on yourself if your business is more like Mr and Mrs Burn-outs. You're certainly not alone. There are many businesses that operate like this. Owners may feel like they have to do everything for a variety of reasons: there's not enough money to employ someone, no-one else can do the work as good as them, they want to keep control of everything... the list could go on.

But when you're working 7 days a week, at what cost does this come to you and your family? Your health, your time and your wellbeing? Is this really what you wanted when you first went into business?

I know from experience that my bookkeeping and accounting services have been worth every cent to businesses like Mr and Mrs Balanced. I like to think I'm helping them not just in dollar terms, but with their emotional wellbeing too - providing them with piece of mind that someone competent is assisting with an integral part of their business.

Smart business owners realise that their business is much more productive when they focus on their areas of strength, and they get others involved to provide assistance in areas of weakness. This then in turn produces far greater growth and success for their business and enables them to live a fulfilling life outside of their business.

Paid Parental Leave just for Dads - starting 2013!

Most people know about the Australian Government's 18 weeks paid parental leave scheme, but did you know that fathers and same sex partners can take two weeks pay at the minimum wage for babies born after 1 January 2013?

'Dad and Partner Pay' can be taken from 3 months before the birth or adoption of your child, and up to 12 months afterwards. It can be taken in addition to the mother taking 18 weeks paid parental leave.

I read this with glee when I first found out. I'm due with my third child in early January and I'll definitely need all the help I can get.

Whilst the 2 weeks parental pay is at minimum wage, it's definitely encouraging to see that the government is supportive in enabling fathers to be able to bond with their newborn (and give the new mother a break too)! The Family Assistance Office is in charge of administering this once-off payment, with the minimum weekly wage currently set at $606 per week before tax.

As expected, there are some conditions attached for the father to receive the 2 weeks paid parental leave. Eligibility includes full-time, part-time, casual, contract, seasonal and self-employed workers, as long as they are on unpaid leave and do not work during the two week period (excluding housework of course!). The father must have earned less than $150,000 in the previous financial year and have worked more than one day in a week in ten of the thirteen months before the birth or adoption of the child or at least 330 hours.

Having a child can put financial pressure on household budgets, so its definitely a good idea to plan and be prepared and know about all the entitlements you can access. If you run your own business or can control your wage to some extent, make sure you are aware of the thresholds that entitlements cut off at, and consider structuring finances in such a way to maximise entitlements, if at all possible.

So it looks like I won't be eating spicy curries, drinking castor oil or raspberry leaf tea, or partaking in any other midwives tales about bringing on birth. At least not until after the 31st December, to make sure my husband gets the 2 weeks parental leave!

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.


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