Category: Accounts

November 24, 2021 Accounts, BAS, Bookkeeping

Single Touch Payroll Phase 2 Starts in 2022

All employers have to report payments made to employees and closely held payees to the ATO using Single Touch Payroll reporting from July 2021.

Single Touch Payroll (STP) Phase 2 was initially planned for 1 July 2021 to align with the mandatory reporting for all employers, but it has been postponed to 1 January 2022. The ATO will allow employers until 31 March 2022 to start reporting if they don’t have an STP reporting solution in place yet. Some payroll software providers already have deferrals in place to allow a longer time for the transition to Phase 2 reporting.

The planned STP expansion has been extended because of COVID-19 impacts on business and accounting and payroll software providers.

STP Phase 2 will require additional information to be reported with each STP pay event.

Accounting and payroll software products will be upgraded to include broader reporting parameters and categories in line with the ATO requirements for Phase 2.

The Phase 2 expansion will allow employers to report information to multiple government agencies in the STP report. Standardised categorisation of income components will make it easier for employees to interact with Services Australia.

The changes will also include detailed income types, lump-sum payments, itemised allowances, child support and the ability to lodge tax file number declarations from within STP reporting. Employment separation certificates upon the termination of employment will no longer be needed, as Phase 2 reporting will include the reason an employee ceased employment.

If you’d like to review your payroll software and systems before STP Phase 2 starts, talk to us today.

Otherwise, there is nothing you need to change right now – we’ll keep you updated when the implementation is closer.

November 10, 2021 Accounts, Bookkeeping

How to Claim for Working from Home Expenses

Working from home is becoming the norm for many businesses, either due to lockdowns or greater employee flexibility. It’s important to think about the deductible expenses that you may be able to claim when working from home and make sure you include them in your tax return.

There are three ways of calculating your working from home expenses.

ATO Shortcut Method for Working from Home Expenses

For part of the 2020 financial year and all of the 2021 and 2022 financial years, there is a shortcut calculation for people who have had to work from home due to COVID-19 temporarily. This allows for a flat rate of 80 cents per hour for employed working time. The shortcut simplifies the calculation but doesn’t allow for any additional expense claims.

To use the shortcut method, you must keep a record of actual hours worked from home. The hours should align with timesheet records submitted to an employer. You don’t need to keep records of actual expenses for things like power or the internet.

To continue to claim deductions for working from home expenses in future financial years, you will need to use one of the established ATO methods of either fixed rate or actual costs.

ATO Home Office Fixed Rate Method

To use the fixed rate, you must have a dedicated work area or separate room used as an office and incur extra costs due to working from home. You will also need records of other expenses not covered by the fixed rate and the number of hours spent working for the whole financial year.

The fixed rate is 52 cents per working hour and includes running expenses for the decline in value of office furniture, electricity and gas, and cleaning. You can claim on top of the fixed rate for other work-related costs such as telephone, internet and office equipment.

You must keep records of hours worked and work-related expenses and a diary to show work usage for the internet and assets. You’ll also need to work out the percentage of floor space for your office against the entire dwelling.

ATO Home Office Actual Cost Method

To use the actual cost method, you must incur extra costs as a result of working from home and have records to prove work-related use of expenses and assets. As with the other methods, you’ll need to record the number of hours worked from home. You’ll also need bills showing actual amounts paid for expenses.

ATO Home Office Online Calculator

Use the ATO home office expenses calculator to check the allowable deductions. The online calculator allows you to choose either the fixed cost or the actual cost method. Once you have the deduction amount from the calculator, enter this on your tax return or give it to us to include. Keep the printout of the calculator result and remember to keep documents for all expenses.

Talk to us to make sure you’re claiming all the allowable working from home deductions to maximise your tax return.

November 4, 2021 Accounts, Bookkeeping, Planning, Software

Do You Have Direct Debits and Online Payments Set Up for Your Business?

Do you have direct debits and online payments set up for your business? Making it easy for your customers to pay you is vital to business success. Getting direct debits and alternative payment methods linked to your business is so easy these days there’s no excuse not to give your customers multiple ways of making payment.

Many service-based businesses choose direct debit arrangements with their clients to avoid late payment. If you’re often chasing overdue payments, consider implementing direct debit arrangements to reduce your administration time.

If you’re already using online accounting software, check the add-on solutions and choose one that integrates with your accounts. This means that the payment platform information feeds directly into your accounting software to be easily matched to customer transactions.

Make it Easy

You probably already have bank transfer information set up, but adding several other methods such as PayPal, debit cards and credit cards allows customers to choose the method most convenient for them at the time. Many customers appreciate the automation and simplicity of direct debits. Make sure your payment terms and conditions are clear on your website and invoices and don’t forget to include all your chosen payment methods for customers.

Worried About Costly Fees?

You have the option to choose whether you will absorb the cost of the payment gateway processing fees or whether you will add the cost to your invoice and charge the clients extra. Your accounting software will then allocate the funds accordingly to invoice payment and fees received.

Better Transaction Recording

When you integrate direct debits and online payment methods with your accounting system, you dramatically reduce errors in recording customer payments – which means less time spent on your accounts.

Not Sure Where to Start?

If you’d like to make it easier for customers to pay you, talk to us about which solutions are best for your business. We can discuss which platforms have the best and most secure integrations with the accounting software you use. We’ll help streamline your payment systems.

October 29, 2021 Accounts, Bookkeeping, Planning

Understanding the Basics of Capital Gains Tax

A capital gain (or loss) occurs when an asset is sold. The difference between the purchase price and the sale price is the gain or loss. Capital gains tax (CGT) applies to money you have made from selling an eligible asset.

Capital gains tax events occur when an asset is sold or other triggers arise, such as the loss, theft or destruction of an asset or creating contractual or other rights to an asset.

Not all assets are subject to CGT. Common exemptions include the main residence or family home, granny flats, cars and motorcycles, personal use assets such as boats, furniture, household items or loans to family and friends. Many types of lump sum payments are also not subject to CGT, and business sales may also be exempt depending on the circumstances.

Most property is subject to CGT including land, commercial premises, rental properties, holiday houses and hobby farms. CGT also applies to shares, investments, cryptocurrency, many collectables, foreign currency and intangible assets.

Visit the ATO for a list of CGT assets and exemptions here.

There are special rules for some specific situations, for example, inheriting assets, relationship breakdown, foreign residents, insurance or compensation payments.

How is the Tax Calculated?

Tax is calculated on the net gain of an asset sale. Tax is payable on the difference between the purchase price and sale price, less any discount allowed.

The type of CGT event affects how and when capital gains tax is calculated. For example, if an asset is destroyed in an accident, the CGT event occurs when the insurance payout is received.

Good record keeping is key to working out capital gains tax accurately. Make sure you keep all documents related to asset purchases, including contracts, expenses valuations and disposal.

CGT is calculated at the time of completing your individual, business or self-managed super fund tax return and is included in the income tax assessment.

Talk to us to ensure you’re claiming all you’re entitled to and not paying more tax than you should. We’ll make sure you’re receiving any exemptions, discounts or small business concessions allowed.

July 23, 2021 Accounts, Attitude, Mindset, Planning

Have You Changed Your Business Purpose?

Many businesses will have been through a tough and transformative period through 2020 and into 2021. In some cases, companies have had to update, change and pivot just to survive – and this means having to rethink the core mission behind your enterprise.

Journeying through the pandemic, your business is faced with a new kind of business reality. It’s a world where buying habits have changed, consumer expectations have evolved, online shopping has boomed and e-commerce is now a far more dominant force.

To cope with these changes it’s likely that your business has had to evolve. But do you know where you’re going and how it’s impacted on your underlying business mission?

Embracing the need to evolve and change

Being able to react to changing circumstances and to evolve your business is one of the key capabilities you need as an entrepreneur, business owner or CEO.

The ability to articulate your new business objective is a fundamental need. And having a clear outline of how you’re pivoting and why will help you to understand the evolution of your business and where you’re likely to go next.

Some key questions:

  • Have you changed your business purpose? Did your company change direction and pivot to move into new markets or new products? If so, do you have a robust plan for pivoting and continuing this evolution? Do you have the resources needed to back up this change in direction?
  • What is your new purpose as a business? What is your updated vision for the business and what do you want to achieve? Do you have this formalised in an updated mission statement or business plan? If not, you need to get this written down and communicated to your executive board, your team and all other stakeholders.
  • Who are your new customer audience? If you’ve pivoted, it may be that your target customers have also changed. If your sales, business development and marketing activity is now focused on a new customer demographic you need to update this in your sales and marketing strategy. Think about who you’re selling to, what their needs may be and how you can service these needs.
  • Are any operational changes needed? Can you successfully pivot to this new purpose using your current systems, processes and resources, or do these resources need to be updated? If you’ve increased your e-commerce footprint, then your production, logistics and delivery operations need to scale up to cope with this increased demand.
  • Do you have the right team on board? Do you need new staff to help you meet your goals? Or are some employees no longer required? If your purpose has changed, it’s likely that your talent needs have also changed. Reassess your key human resourcing requirements and think about the people you need on board for this next chapter.
  • Do you have enough funding? Do you have enough working capital behind you? If changes in equipment, plant or premises are part of your pivot strategy, it’s likely that you’ll need additional finance to fund these changes. Think about approaching your bank manager, business adviser or funding provider of choice. NOTE: Talk to us about government-backed recovery funding.

Talk to us about planning your new business direction

Nothing stands still in business, so there’s always value in taking the time to step back and reassess your business direction. However you’re fairing in the Covid market, taking the time to review your business purpose and planning is time well spent.

Talk to us and we’ll help you to update your mission statement, amend your business plan and get all the operational and financial elements in line for the next stage in your success story.

June 3, 2021 Accounts, Bookkeeping, Planning

Six Reasons To Look at Your Financial Reports

Making time to look over your financial reports each month is an important task for any business owner. If you are not taking the time to do this, either because you’re too busy or perhaps you don’t really understand what you’re looking at and it doesn’t make sense to you, then here are six reasons we recommend that you should start to.

  1. Understand your business better – by looking at your Profit and Loss (“P&L”) report monthly you will get a good picture of how your business is performing month by month and it will provide a better understanding of what makes up your profit.  Looking at revenue and expenses clearly on one page in a monthly P&L or comparing periods, this will help to identify trends in your data and may also help to highlight anomalies in coding/categorising.
  2. Accurate information for lending purposes – if you are applying for a loan or an overdraft, the bank or financial institution will look closely at both your Profit and Loss report and the Balance Sheet as a lot can be learned about a business by looking at these reports together. If you are unsure what some of your balances are in your accounts, get in touch and we can explain them further.
  3. Get paid quicker and reduce bad debts – by looking at your Accounts Receivable Aged Summary each month you can follow up with overdue accounts promptly which often results in getting paid quicker. The longer an overdue amount is left unpaid the higher the risk of it not being paid at all, so it is important to keep on top of this.
  4. Better relationships with your suppliers – assuming you are entering your supplier bills into your accounting software (recommended for most businesses to get an accurate profitability figure) your Aged Payables report will alert you to any unpaid or overdue amounts. Supplier relationships are an important aspect of your business and paying on time is crucial to maintaining those relationships.
  5. Better cashflow – having an accurate understanding of how much money the business is owed and how much money the business owes, can help with cashflow planning to ensure that there is enough money when needed. Additionally, understanding the trends of your business, its profitability drivers, expenses, etc., can help to plan sales and marketing campaigns so that the revenue keeps coming in.
  6. Better business decision making – your financial reports tell the story of your business and it’s important that you understand the story that they are telling you. The better you understand what’s going on in your business the stronger position you will be in to make better business decisions that affect the profitability of your business and its financial viability.

Depending on the complexity of your business, at a bare minimum you should be looking at the following reports:

  • The Statement of Financial Performance, also known as the Profit and Loss report (P&L) or the Income Statement.  As the name suggests, it’s how your business is performing over a period of time, such as a month or a financial year. In broad terms it shows the revenue that your business has generated, less the expenses for that same period. In other words, it shows how profitable your business is.
  • The Statement of Financial Position, also known as the Balance Sheet.  This shows the value of the business’s Assets, Liabilities and Equity.
    • Assets include things like money in bank accounts, Plant and Equipment, Accounts Receivable balances
    • Liabilities include things like Bank loans and credit cards, Accounts Payable, and Hire Purchase balances
    • Equity is the difference between your Assets and Liabilities and includes Retained Earnings and Owner Funds Introduced
  • Accounts Receivable Ageing report (Aged Receivables) shows how much money is still owed to the business as at a certain date in time, and is usually segmented as to how overdue they are or sometimes by how far past the invoice date they are. Generally you will have Current, 30, 60 and 90 days columns.
  • Accounts Payable Ageing Report (Aged Payables) shows who the business owes money to as at a certain date in time and, like the Accounts Receivable Ageing report, is usually segmented by overdue period.

So why bother?

If you would like to know which reports are relevant to your business and you want to better understand what’s going on in your business, then get in touch so we can make a time to go through them with you.

Your business success is important to us and we are here to help you.

May 19, 2021 Accounts, End of Financial Year

Tax Tips for Property Investors

If you have income from investment properties, now is the time to start gathering your records and reviewing your expenses for the 2021 financial year.

Income to Declare

All income earned from each property must be declared. If you have multiple properties, keep the records for each property separate to make the tax return more efficient.

  • Rent received, whether paid directly to you or through an agent or through an online management platform. Rent includes recurring regular amounts as well as any lump sum amounts paid in advance.
  • Rental bonds returned (eg. if the tenant caused damage or defaulted on rent payment).
  • Insurance payouts received as compensation.
  • Expenses reimbursed by the tenant (eg. if they have caused damage and you have paid for the cost of fixing the damages, or if they have reimbursed you for water).
  • Extra fees received (eg. letting or booking fees).
  • Government rebates (eg. installation of solar utilities).

You will need statements or recipient created tax invoices from agents or management platforms and documents for all other payments received.

Tax Deductions

Deductible expenses for property are different for residential and commercial properties. Not all expenses related to owning a property are allowed as deductions, so it’s important to check what you can claim.

  • Advertising for tenants
  • Body corporate fees
  • Council rates
  • Water supply charges
  • Land tax
  • Cleaning, gardening, pest control and property maintenance
  • Insurance
  • Agent fees
  • Repairs and maintenance
  • Some legal expenses
  • Loan interest

Other Expenses

There are some expenses which need to be claimed over a longer period such as several years or decades. These can include borrowing expenses, capital expenditure, depreciation, initial repairs and capital works.

Some expenses cannot be claimed for. These include stamp duty, loans and repayments, some legal expenses and some insurance premiums.

Get Help to Simplify Your Property Records

Tax matters for property investors can be complex. The ATO keeps a close eye on tax returns that involve property investment, as it’s easy to make mistakes. There are other matters to consider such as the period of rental availability, private use of the property, capital gains tax, legal contracts and positive or negative gearing.

April 21, 2021 Accounts, Planning

The 10 Ways To Lift Your Margin

Improvements can always be made at the margin. Small tweaks to your processes or systems can make a massive difference to the end result. It’s the same with your business margin – a 1% increase in your gross margin on $500,000 of sales is an extra $5,000 on your bottom line.

The best part about improving your margin is that you increase your profit without needing to lift your sales.

Here are 10 strategies to lift your margin:

1. Negotiate better prices with your suppliers.
As they say, ‘the squeaky wheel gets the oil’, so if you don’t ask, you won’t get.

2. Update your pricing model.
Make sure you’re using the most recent supplier prices and that all costs are included in your price.

3. Back cost jobs regularly.
Review exactly what you spent on 2-3 jobs each month and compare the actual cost to what you anticipated the cost would be when you quoted the job.

4. Get rid of slow-moving items or work that has a poor return.
Selling old stock at cost will drop your margin, but if you replace those items or jobs with higher-margin items, you’ll achieve a higher return in the long run.

5. Set budgets and targets with your team.
Give your team something to aim for. Celebrate success when the targets are achieved.

6. Report your results on a cloud-based, real-time system.
You can’t manage what you don’t measure! Regularly monitor your most important Key Performance Indicators on your dashboard.

7. Reduce wastage and re-work.
What processes need to be updated to help reduce wastage and re-work? Or, if the processes are correctly documented, what training do you need to provide to your team to ensure the processes are being followed to reduce wastage and re-work?

8. Review your sales process.
Does your sales team know which produces or services have the highest margin? Do they know how to upsell to those higher-margin products or services? Identify the sales skills gaps in your team and implement training.

9. Make a plan.
There are plenty of areas for improvement in your business. Unless you write them down, you’re unlikely to bring the correct focus to them. Make a plan to improve one area at a time.

10. Involve your accountant.
Not only to help you with idea generation and building a plan, but also to hold you accountable to do the things you need to do.

We can help you lift your margin – contact us today!

“To improve is to change; to be perfect is to change often.” – Winston Churchill

April 7, 2021 Accounts, Bookkeeping, End of Financial Year, Superannuation

Super Guarantee Rate is Set to Rise from July – Are You Prepared?

The superannuation guarantee statutory rate has remained at 9.5% since July 2014. However, plans have been in place for some years now to increase the rate to 12% incrementally.

In July 2021, the rate will rise to 10%. From then on the rate will increase by 0.5% each year until July 2025 when it will reach the legislated 12%.

Prior to the delayed 2020 federal budget there was discussion about the possibility of deferring the rate rise because of COVID-19. However, the rate rise had been postponed from 2018 to 2021, so the plans to start increasing the rate each year remain in place – at least for now.

Prepare Now for the July Rate Rise

  • Review your current superannuation costs for all employees, both hourly and salaried.
  • Review any salary packaging arrangements. Is the agreement inclusive of superannuation or is super paid on top of the agreed salary?
  • For salary packages inclusive of super, you will need to check the contract’s wording to make sure you apply the changes correctly. This change may also impact annualised salary arrangements.
  • Calculate your revised payroll costs from July, showing the current wages and superannuation expense compared to the new rate from July 2021. Highlight the increased amount per month or quarter, so you know precisely what the impact will be.
  • Discuss the super rate increase with your employees now. Let them know that this is the first year since 2014 that the rate has risen and that unless the law changes, there will be an increase of 0.5% each year from now until July 2025 when the statutory rate will reach 12%.
  • Remember – short payment or late payment of super can incur hefty penalties – plan now for higher payroll expenses from July, so you don’t get caught short.

If you’d like help reviewing payroll costs and employee agreements, talk to us now, and we’ll make sure you have accurate reports to make planning for the rate rise easy. Getting organised now means that you’ll be well prepared for your business’s increased costs when the first payment is due later this year.

March 18, 2021 Accounts, BAS, Bookkeeping

Can Your Business Claim the Loss Carry Back Tax Offset?

As part of the Federal Budget 2020-21 the government announced a loss carry back measure to encourage new investment and work with the temporary asset expensing measures also announced at the budget.

The new law started on 1 January 2021.

Eligible corporate entities that previously had an income tax liability in a relevant year and have subsequent losses can claim a refundable tax offset up to the amount of their previous liability.

The measure allows significant tax losses which may then be carried back to generate cash refunds for eligible businesses.

Who is Eligible?

  • Your business must be a company, corporate limited partnership or a public trading trust in the income year you want to claim the offset.
  • The business must have had an aggregated turnover of less than $5 billion.
  • The entity had an income tax liability for financial years 2019, 2020 or 2021.
  • The entity subsequently made a loss in financial years 2020, 2021 or 2022.
  • Your business is up to date with tax return lodgement obligations for the last five years.

There are specific guidelines about eligibility, integrity and tax offset calculation. We can talk to you about whether you can use the loss carry back measure to benefit your business.

You can only claim the tax loss once in either the 2021 or 2022 financial year so it’s important to get advice about how and when to apply this measure for your business. To claim the tax offset the ATO must be notified before lodging the company tax return that year.

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