Our accountants in Ballarat and Torquay are excited about this year. We have a brand-new office space in Ballarat, so that’s awesome, and our staff in Torquay are predicting an extended summer season which will see them going for a swim at the beach after work, well into April. Let’s hope so.

Lots of our Ballarat clients will be down at Torquay or other locations along the Surf Coast in January, on holidays. We hope you are all having a fantastic time.

New Years Resolutions

Did you make New Year’s Resolutions? Our accountants love New Year’s resolutions, because there’s so many delicious numbers to crunch.

From specifying numbers of days or weeks, or months for some scheme or other – to caps on how many drinks, muffins, or sausages – to kilogram, push-up and dollar goals: it’s all about the numbers; the lovely, friendly, unique numbers…

Seriously though, it could be a good time to make some positive plans or righteous resolutions for your finances in 2023. Particularly if you own and operate a small business (which is the majority of our clients). We list five suggestions below…

Set Out A Budget And Stick With It

Having a cleverly conceived budget is a great idea for small businesses. For many it is crucial actually. A budget should help you keep your head around the important things like cash flow and revenue – and hopefully assist you in finding the way forward to growing your business.

Your budget should help you to see around the corner – to anticipate what you’ll need further along in the year – and to prevent problems rather than having to put out fires later.

Smart budgets include targets and perhaps even KPIs. If you don’t achieve them, that’s ok; when you have a proper budget, you should be much better equipped with data and information to figure out why you didn’t kick every goal you wanted to.

From there you can work on implementing ways to address those issues and make improvements.

Be Master Of Your Cash Flow

Every three months we can get a bit of a shock, right, when it’s suddenly time to pay GST, PAYG and Super. It may be wise to have a separate account for these things, into which you automatically transfer the appropriate funds to cover these three, but otherwise don’t touch.

In this way you have your tax obligations under control and your cash flow is simplified. There are other ways to stay on top of your cash flow. Your trusted local accountants in Ballarat and Torquay can give you prudent advice; ask us today.

Automate Is Your Mate

There are lots of excellent packages for small business now which automate the day-to-day accounting. There are the well-known and widely used solutions such as Xero, as well as software packages which are more specifically tailored to different industries and businesses.

The majority of small businesses now use automated systems. If you don’t yet, get with the program and get one of these programs, people! You’ll wonder how you ever managed without one before. You’ll have access to all kinds of data around the clock, even from your phone.

Eliminate tiresome, time-consuming manual activities and focus on finessing the finer points of your business.

Keep Business And Pleasure Seperate

Well, hopefully it is quite often a pleasure to be running your own business, but not every day, hey. What we mean by this is, keep the accounting aspects apart. For instance, if you need to borrow money for your business – perhaps temporarily, in order to bolster cash flow.

Or for larger loans such as significant purchases, keep it separate from your personal finances. If you have personal debt, always ensure this is paid off before your business debt. You might need to look at re-structuring your business and private debt scenarios in order to advance your overall position. Ask us how.

Never Stop Learning

That’s why larger businesses and organisations have compulsory CPD (Continuing Professional Development). Some employees at these companies may see it as a bit of drag; as a box which requires a tick once a year. But for small business owner-operators, you should embrace any and all opportunities to enhance your knowledge, skills and experience.

This includes educating yourself about the numbers which are critical to your success. Our accountants love numbers.

Talk to them today and let us help you better understand your numbers and thereby make more informed decisions about your business’s strategy, operations and growth.

The post New Years Resolutions And Budget Tips – January 2023 appeared first on CGH Accounting.

This month in Ballarat the Christmas Tree will be erected in Sturt St in early December, and the Giant Bauble and Crystal Star will be installed too, so the town centre will be looking festive for sure. In Torquay in December there’s The Great Ocean Road Beach Volleyfest, which is actually a big event, so get down there if you’re a fan of this sport for the super-fit. Thousands of holiday makers will descend upon Torquay and the Surf Coast, so locals, get prepared. In both Ballarat and Torquay, we’re expecting to see lots of work end of year celebrations and people just might be partying like it’s 2019; more on that below. Merry Christmas and Happy Holidays from all of us, to you and yours!

DIRECTOR IDs

November 30 should have been marked in red in your diary, if you have not as yet attended to the matter of your Director ID. It should have been by done by November 30 – that was the official cut-off date. If you still haven’t sorted it out, you don’t need to panic yet, but get straight onto it. If you don’t, you will eventually find yourself in hot water. A quick reminder:

• if you are a director of a company, registered Australian body, registered foreign company or Aboriginal and Torres Strait Islander corporation, you need a Director Identification number
• Q: who exactly needs a Director ID? A: EVERYONE who is a company director!
• Q: how long does it last for? A: you keep it forever, even if/when you become a director of additional/different companies or corporations
• you have to do this yourself; no-one else can sort this one out on your behalf. It’s easy to do (on MyGov), but if you need help, contact us TODAY and we’ll steer you in the right direction. When it’s done, you can easily manage the details later on when required
• DON’T PUT THIS OFF ANY LONGER: GET YOUR DIRECTOR ID DONE NOW

BUDGET BRIEF

The main takeaway of the recent budget from the new Federal Government, from an accounting point of view, is that taxpayers who use tax practitioners (such as our lovely accountants at CGH Accounting Services) will actually get additional protection, and firms like ours will receive additional guidance from the government in terms of policy and advice, in order to better assist our clients. So that is all good news, we say, in an otherwise rather gloomy set of announcements.

SELF MANAGED SUPER FUNDS

It’s extremely important to get all the details correct when reporting on your self managed super fund’s performance. The ATO keeps a very close eye on this and comes down like a tonne of bricks on anyone who’s not doing the right thing. SMSFs need to be audited annually. Everything must be outlined accurately. This requirement has been there from the start in order to protect the integrity of the system, particularly with regards to people’s savings for their retirement, which is the main aim of the scheme. Looking after your SMSF is one of the important services our accountants perform at CGH. Talk to us today about making the most of your nest egg.

HACKED? HELP IS AVAILABLE

What a major issue this has been in recent months. Many attacks seem to come out of Russia, which is not content with invading its neighbours but criminals there want to invade your privacy too. We have an organisation called the Australian Cyber Security Centre (ACSC) and they are here to help, if you are unlucky enough to be the victim of hackers. The ACSC has tools which are easy to use and assist people in preventing hackers and in responding as best as possible if it happens. The ACSC is endeavouring to protect all Australians in as many ways as possible from this dastardly crime. You should report any suspicious activity or cybercrimes to Report Cyber at cyber.gov.au/acsc/report or by calling 1300CYBER.

DO YOU OWE THE ATO?

Many people and businesses have tax debts. It’s nothing to be ashamed of, but it’s something to manage wisely and eventually reconcile. You need to have a payment plan that is demonstrable to the ATO. Your local accountants in Ballarat and Torquay can help you with this. If the tax office can see that you have a proper strategy for paying down the debt, they are unlikely to give you too much trouble. If it’s a large debt, you may expect that credit rating agencies will be notified, but this is not the end of the world and can be turned around at a later stage (we can also help you with that).

CHRISTMAS PARTY ADVICE

People are going to make up for lost time at work Christmas parties in 2022. If you are an employer, we have a few tips for you:

• Christmas party costs where the spend is less than $300 per head are exempt from Fringe Benefits Tax.
• the easiest thing to do is hold the event at your office and only invite employees, then all catering is FBT free
• if you want to have partners etc. (known as ‘associates’ in this context) then as long as the cost per head is less than $300, there’s no FBT.
• gifts for staff under $300 each are ok too
• you can’t claim the Christmas party as a tax deduction

The post CGH Accounting December Diary appeared first on CGH Accounting.

In Ballarat in November, we have the Ballarat Cup on Saturday 19 and our famous annual SpringFest Sunday Market at Lake Wendouree is held on Sunday 27. A great day out with the family. Down Surf Coast way the Aireys Inlet Fair is on during the early part of the month, and later in November the amazing Queenscliff Music Festival kicks off.

For this newsletter, we have prepared some short articles relating to finance and accounting. These are easy to follow, with handy information for you. We discuss a few topics related to property, BAS and also share advice in connection with the recent floods. We hope these items will prove useful. We wish all clients and readers the very best and we’ll be back with more news and tips in December.

RENTALS: AN INVESTORS MARKET

Right now is a painful time if you are looking to rent a house or apartment. If you already own an investment property and don’t have a large mortgage, you are sitting pretty. But perhaps you don’t closely follow developments in the sector and don’t communicate with the property manager very often? If so, you may not be aware that rents are currently continuing to rise steeply. The number of places for rent has shrunk, in both capital cities and regional areas as well. Demand far exceeds supply, and this looks guaranteed to become even more acute as foreign students start coming back to Australia and migration picks up again. Post pandemic, many people in these categories are looking at regional towns such as Ballarat and Torquay, rather than just Sydney and Melbourne. So now could be the time to follow it up with your property manager, in case it’s time to raise the rent in accordance with market conditions. If you are looking to purchase an investment property, now is a good time, because prices have either stagnated or in many cases gone down. However, the flip side of that coin is that interest rates have gone up and money is dearer.

BORROWING MONEY: BECOMING TRICKIER

In general, it is getting harder at the moment to borrow money. Your dream may be an investment property and prices look quite appealing right now, but unfortunately loan conditions have become tighter. Securing a loan has become more difficult and it’s a good idea to seek help from professionals. Your accountants can offer advice. Ask us today! Also, mortgage brokers can be a smart way to go, rather than trying to do it all yourself in a somewhat hostile environment. The Reserve Bank is saying now that every rate increase of 0.50 percentage points will reduce the maximum amount of a loan (for most borrowers) by around 5%. This means that for average borrowers, their capacity has dropped by about 25%. That’s a lot, and it’s all happened quite quickly. However, it’s not all bad news. There are a lot of options when it comes to lending entities, and it can be very surprising how differently they operate. Sometimes two lending institutions will be up to $100K out, in their estimation of the maximum amount an individual can borrow. Professionals such as mortgage brokers know how to navigate their way to the best deal for you, and they know just how to best present your application in the right light. Furthermore, in most cases, they get their commission from the lender; you don’t have to pay them fees. CGH Accounting offers professional advice in this area and/or can introduce our clients to trusted mortgage brokers.

FIRST HOME BUYERS: HANGING IN THERE

It’s quite interesting to look at how property buying cohorts behave during this time of upheavals. Despite activity around home loans having fallen, first home buyers have actually proven to be the most active property buyers in recent months. This may be because they have already saved up quite a lot, or are being helped out by family, or both. It may be because they see this period of prices falling as their best opportunity in a long time to get their foot in the door, and it may be because many first home buyers are looking at the more modestly priced properties anyway. There are also government incentives to encourage and assist first home buyers. The leading market analyst says that this is definitely a trend during downturns and that demand for finance from first home buyers traditionally remains resilient during such times. It’s an interesting fact. Quite the positive note amongst all the doom and gloom, we think. Go you young first home buyers!

FLOOD ASSISTANCE

Many parts of Australia’s east coast have been devastated by floods this year. This has been a very difficult time physically, mentally and financially for thousands of families, businesses and communities in Victoria, NSW, Queensland and Tasmania in 2022. The ATO knows this has been an extremely trying tax time this year for many people. Accordingly, they have made a number of allowances and concessions which are designed to make things easier for those who have been impacted by the floods. If this relates to you, talk to our accountants to find out more about what measures have been put in place, and how they might help you.

BAS HINTS

At CGH Accounting Services, our Ballarat and Torquay based accountants take care of quarterly Business Activity Statements (BAS) for many clients. We recommend having accountants look after this aspect of your business. Nevertheless, some clients still do it themselves. Either way, it definitely doesn’t hurt for all business owners to keep informed and up to date when it comes to BAS, whether they do it themselves or have their accountants attend to it. How should BAS be done these days?

• On-line. Doing BAS by paper and by post is starting to look incredibly old fashioned. We wonder if they’ll phase it out completely within a few years! Doing BAS on-line is the way to go.
• On-time. The ATO is cracking down on late submissions and payments.
• On-track. Is everything correct with your BAS? All BAS mistakes can be fixed, but this can start to get tricky. This is when having a friendly accountant do it for you might be your best bet!

The post CGH Accounting November Newsletter appeared first on CGH Accounting.

In October we finalise many of your tax returns, and some lucky ducks may even find they get a refund from the ATO… Happy Days!

In Ballarat this month there looks to be loads of events targeting foodies and wine lovers, taking advantage of Spring weather and fresh produce. There are some delicious treats to be had around Torquay in October as well, like at the Strawberry Affair at the Great Ocean Road Chocolaterie and Ice Creamery, where they are celebrating locally grown strawberries and locally produced chocolates. As we all know, that fruit and confection are one of the great pairings of all time!

Many of our clients in Ballarat and Torquay are small, family owned and operated businesses. In these monthly posts, we regularly include subject matter of interest for our customers who are running small businesses. In this October bulletin we discuss some pertinent points relating to small business succession plans.

ATO PERSPECTIVE – SMALL BUSINESSES

The Australian Taxation Office (ATO) basically wants small businesses to thrive and prosper, where possible, as the sector is one of its best sources of income – millions of small businesses across the country busily gathering up GST and sending it on to the ATO every day – it’s a pretty efficient revenue system for the tax office. They want your small business to keep on keeping on.

The ATO knows that small businesses are a vital part of the massive engine which is the national economy. They do a lot of behind the scenes work to protect small businesses from the various potential harms which can be perpetrated by organised crime syndicates. The office has a powerful arm which spends all its time and has a lot of resources at its disposal countering criminal activity which threatens the structures and finances and longevity of small businesses.

In recent years, particularly with advances in technology, the ATO has made business literacy and skills, accurate lodging and reporting more straight forward in many ways. They will continue to try to make the complex system easier for small business owners to understand and they do endeavour to assist as best as they can with small business succession planning.

SMALL BUSINESSES AND SUCCESSION PLANS

Do you currently run a small family business? If so, do you have a succession plan in place? No, that’s not a plan for success (though we certainly hope you have one of those and that it’s working out nicely for you!), but a succession plan, which involves arrangements for passing your business on to someone else – like your children, or a business partner or employee – or, handing over your role in the business perhaps, when you retire from working.

Naturally you want your small business to keep kicking goals well into the future, but you may not to wish be full-time hands-on forever. You’ve worked hard for years; perhaps you started the business from nothing and worked seven days a week for years building it into a great little enterprise. But now it’s time to step back and take more time out from work – you’ve earned it! You may have a number of options, including passing on the business to your children, having somebody else take the helm or selling your share to a business partner or to another person or corporate entity. There may even be other possibilities.

Whatever the case, the best thing is if you are able to control the timing and the way in which you hand over the reins. You should put careful arrangements in place – contracts. You will need to involve your accountants and most likely seek legal advice also, although many accountants are capable of dealing with the legal side of such planning. Passing on the baton of your small business is your succession plan, and if you take the time to organise it carefully and it all goes smoothly, the outcome should be immensely satisfying.

However, life’s not always as obliging as the above scenario, is it. What happens if suddenly, out of the blue, the person you always thought you’d hand over to becomes incapacitated or unavailable for some or other reason? The best intentions can be decimated in one fell swoop by fate, as we know.

The best thing to do is to have a detailed succession plan which allows for a number of possible exit scenarios (told you we like talking numbers). Cover your bases. Just as you should have a Will prepared by a professional, you should have professionals prepare a formal business succession plan.

What should you be taking into consideration when making such a plan? For most people, that will mainly involve the question of Who. Who do you really think will be the best person to run, own, operate the business which you have poured you heart and soul into for many years? Should you automatically pass on the baton to your children? Statistics show that many businesses fail when handed on to second and especially third generations in a family. Not that we’re trying to put you off that idea; there’s nothing more impressive than a successful business which has been in the same family for a century. But these cases are actually rare.

You need somebody who has the same passion and commitment as you, to drive the business into the future. They need the right skills to run it, or they are willing to learn. You want to pass your business on to someone who loves it, the way you do.
This will probably be the most difficult decision to make, but there are several other arrangements you’ll need to put in place when drawing up a business succession plan. It is strongly recommended that you complete a business succession plan earlier rather than later. Selling a business can take years, for example. Teaching the right person everything they need to know could take a long time.

So, get started now. Our accountants at CGH Accounting Services are well versed in business succession planning. Or, you might already have one, but it’s woefully out of date and in fact, wouldn’t work any longer. We can help you make the necessary updates and adjustments. Our business is helping your business to run smoothly, and when the time comes to step back and/or pass it on, we want that process to run smoothly too. So talk to us now about developing or finessing your business plans for the future.

The post CGH Accounting Services October Bulletin: Small Business Succession Plans appeared first on CGH Accounting.

We are often asked about audits: What happens if I am audited? Can I make sure it never happens to me? The reality is that there’s no 100% sure-fire way to way to prevent it from occurring, because you can be selected at random to be audited, though this is uncommon.

You can however, be sure that you’re not attracting undue attention or inadvertently putting up any red flags. We discuss below.

From everyone at CGH Accounting Services – best of luck if you’re shaping up to do some Spring cleaning – and we hope it’s a satisfying and successful season for all.

WHAT CAN ACTIVATE AN AUDIT?

The last thing anyone wants is to be audited by the Australian Taxation Office (ATO). Hopefully this will never happen to you, but there are certainly things you can do in order to ensure there’s no red flags flying at your place that could potentially trigger a tax audit.

OVERVIEW

Unfortunately, the trend seems to be that the ATO conducts more and more audits every year, although that could simply be due to population growth. It has been suggested though, that the ATO has been zeroing in on businesses which turnover between $1 million and $3 million per year. So that would be quite a few of our clients – hence this article. So please – you need to be on the ball. If you are uncertain about anything at all, come to us first before the ATO comes to you.

Generally, your first priority should be vigilance when it comes to accurately recording and reporting all your business transactions. If you do this methodically and meticulously, you should have nothing to worry about. It is true that your name could be drawn out of a hat for an audit, and that is some seriously bogus bad luck. But, if everything’s tickety-boo, it should be over and done with quickly and fairly painlessly – it may take a few weeks at most. However, if they find a problem, it may take a few years, and might be your worst nightmare.

The ATO these days has all sorts of very clever technology with which to gather and analyse data, which is largely how it determines who to target. It can cross reference with all manner of organisations and entities, from the Department of Transport to banks and super funds. The ATO has a very wide net. Some entities are audited due to a ‘tip off’. Nasty!

If the ATO suspects an issue and decides to audit you, it could cost you personally, even if no punitive action is ultimately taken. This is because the process can become quite involved around presenting financial records going back for five years, and this can cost thousands of dollars in some situations.

RED FLAGS

Cashed up

Businesses such as groceries, restaurants, take away shops, small service providers and others who deal mainly or often in the folding currency are on the ATO’s radar – you can be assured of that. You are probably the most likely to be audited, out of the blue. If you haven’t accurately declared income and payments but your expenses, in proportion to revenue are high, this is a red flag.

Dobbed in

Believe it or not, the ATO actually receives thousands of complaints every year, and they take many of these absolutely seriously. With good reason in many cases, for instance when complaints involve businesses who have not been paying superannuation correctly to employees. Whatever you do, don’t let this particular mistake be yours. The ATO will come down on you like a ton of bricks. Tip offs can also come from disgruntled suppliers and competitors too, which is often just simple, old-fashioned malice – yikes! Again, if this happens to you and you get audited – as long as your affairs are all in order – you shouldn’t have anything to worry about. What is the state of affairs with your business affairs? If you have concerns, ask our accountants to have a look-see.

More or Less

The ATO has supercharged databases. They can analyse and compare all manner of businesses around performance, income, expense ratios and just about everything including the sink in your office kitchen. They have benchmarks: their software cross references businesses in the same sectors. If your operation sticks out for some reason, either significantly above or below these benchmarks, for your industry family and species of business, this can be a red flag. They may well suspect a tax compliance issue. Best not to stand out too much from the crowd, as far as the ATO is concerned.

Same-same but different

Is the information you’re putting in this year wildly different to last time? This sets off alarm bells – you know where! This typically triggers ATO anxiety. Especially if there are significant variances in your details around: income tax return and FBT return outlining employee benefit contributions; BAS and payment summaries explaining PAYG withholding and wages; income tax return and sales & expenses. Comprehensive reconciliation processes for returns can ensure that these sorts of discrepancies do not cause problems for your business. Our accountants can assist you with this.

Better late than never

Um, to an extent. But if you persist in tardy reporting with your BAS, tax returns, FBT returns etc., this can trigger an audit.

Other typical red flags include unusual data around company vehicles, consistent operating losses and large fluctuations in sales figures from year to year.

Audit armour

You can protect yourself with insurance – not from actually being audited – but at least from the unwanted associated costs. The premiums are not exorbitant, and you may consider taking out such a policy along with professional indemnity and public liability insurance. Talk to us about the options.

The post CGH Accounting September Newsletter appeared first on CGH Accounting.

Healthcare and social care

• If you’re required to wear a uniform as part of your role, the cost is deductible.
• You can also claim a deduction for the cost of clothing that you use at work to protect your ordinary clothes from soiling or damage, for example, laboratory coats and aprons.
• If you need protective clothing, such as non-slip shoes, they are deductible.
  Claim for conference expenses. As well as the cost of the conference itself, that can also include travel, meals and accommodation costs – even where the conference is overseas, though you might need to apportion the costs (and disallow the private bit) if you spent some downtime on the beach afterwards!
• Claim for professional subscriptions, whether to a professional body like the AMA or to a trade union.
• If you’re required to work overtime, you can claim for the cost of buying meals provided you have been paid an allowance by your employer.
• Agency costs: if you get your work through an agency, the cost is claimable.
• Many health care workers will need to use their own car as part of their job. That can include transporting patients, travelling between patient’s homes or travel from one medical facility to another; all such journeys are potentially claimable.

Retail workers

• If you’re required to wear a uniform at work, the cost is deductible. If you wear conventional clothing, the cost isn’t deductible. Some retail workers in fashion stores are required to wear clothing from the particular store or brand they are employed by; but those garments are still classed as conventional clothing, so no deduction is available.
• If you spend time working from home – for instance preparing staff rosters at the weekend for the week ahead – you can claim a proportion of home running costs, either based on actual costs (in which case you’ll need receipts) or at a standard rate of 52 cents per hour.
• Claim a deduction for the cost of any work-related courses. That could include health and safety or first aid courses, management training or job related courses such as a Cert III in retail.
• If you travel between stores, you can claim the cost of travel from one work location to another. That could include any time you spend temporarily working from a different store to your regular workplace (perhaps providing holiday cover) as well as trips between stores delivering stock

Professional and admin workers

• The cost of a handbag or briefcase is claimable if you need it for work purposes, such as carrying paperwork or a laptop. Be careful though; the ATO may query whether a Gucci handbag is really required as part of your job!
• You can’t claim the cost of “conventional” clothing worn at work. That rules out suits and other business wear unfortunately. Clothing specific to the legal profession, such as the robes and wigs worn in court by barristers, are deductible.
• Annual practicing certificates for professionals such as lawyers can be claimed.
• If you work from home (at weekends or in the evenings for instance) you can claim a deduction for home office expenses. Either claim 52 cents per hour or claim a proportion of your actual costs, based on a diary of work use.
• If you travel as part of your work, such as plumbers, builders, electricians, sales, specialized services for example, you can claim the costs of your work-related journeys such as the cost of visiting clients or suppliers. If you use your own car, either claim 68 cents per kilometre up to a maximum 5,000 kms or keep a logbook and claim your actual expenses. You can also claim for parking, tolls and public transport if you don’t use your car.
• The cost of entertaining clients isn’t tax deductible.
• Sadly, you can’t claim the cost of club fees (such as the local golf or tennis club) even if you use your membership as a means of networking and meeting clients
• Your professional indemnity insurance costs are claimable

Education and training workers

• Annual teacher registration fees are deductible
• Claim the costs of references books or a professional library for the subject you teach
• Prizes that you purchase to reward the achievements of your students and encourage future performance are claimable
• Stationary, art materials, stopwatches and computer consumables including pens and toner cartridges are all deductible
• Depreciation on technology costing more than $300, like computers, laptops, tablets, mobile phones and printers
• Teacher aids
• Conferences and courses linked to your teaching can be claimed, including associated costs such as travel and textbooks
• If you mark homework or prepare lessons whilst at home, you can claim home office expenses such as a proportion of internet costs and the associated costs of any technology you use such as computers and printers as well as a portion of utility bills.
• If you pay for school excursions, such as sporting or camping trips, out of your own pocket and aren’t reimbursed, the costs are claimable. This can include meals, transport and accommodation costs.

Construction & Manufacturing workers

• You can claim the cost of any tools or other work-related equipment that you’re required to buy for your job. You can claim an immediate deduction for any tools costing up to $300.
• You can also claim a tax deduction for the cost of insuring tools and interest charged on finance taken out to buy tools and equipment.
• You may be able to deduct your expenses for buying and maintaining your uniform if you’re required to wear one and it has the business logo on it. “Ordinary” items of clothing like a plain khaki shirt that you could wear at another job or outside work would not qualify. A khaki shirt emblazoned with your employer’s name would qualify. The cost or protective items such as helmets, ear muffs safety goggles, sunglasses, sun hats and sunscreen can also be claimed
• Trade union fees can be deducted.
• The cost of renewing any professional licences, registrations or subscriptions are claimable
• The cost of self-education courses run by a University or TAFE (such as an apprenticeship course at a technical college), provided the course relates to your current job.
• You can claim for overtime meal expenses up to the amount actually spent where you have received a genuine overtime meal allowance under an industrial law, award or agreement.

And finally:

Keep records! It doesn’t matter what you’ve spent; if you can’t prove that you spent it, you can’t claim it. So, gather together all those receipts and invoices. If you’ve lost a receipt, try to get a copy from the retailer. If that fails, a bank or credit card statement might do if you can clearly identify the item. Don’t try to claim if you don’t have the paperwork; you’re leaving yourself open to an ATO audit.

The post Tax Tips for 5 Major Industries 2020 appeared first on CGH Accounting.

Every year, the ATO looks closely at tax claims which relate to holiday homes to ensure that people aren’t over-claiming tax deductions. The boom in holiday home ownership throws up particular challenges for the taxman, both in making sure that they know exactly who owns what and also in making sure that taxpayers aren’t rorting the system.

As part of that process, the ATO stated last year that it will write to property investors who own properties in popular holiday areas to remind them to claim only the deductions to which they are entitled.

So what do you need to know to get it right?

Declare rental returns as income

If you rent out your holiday home during the period you’re not using it, you need to declare the rental returns as income.

Renting out the holiday home

You can only claim deductions for the periods the property is rented out or is genuinely available for rent. Periods of personal use can’t be claimed. This is particularly important for holiday homes, where the ATO regularly finds evidence of home-owners claiming deductions for their holiday pad on the grounds that it is being rented out, when in reality the only people using it are the owners, their family and friends, often rent-free.

Claiming the costs of repairs and renovations

The costs to repair damage and defects existing at the time of purchase or the costs of renovation cannot be claimed immediately. These costs are deductible instead over a number of years. Expect to see the ATO checking such claims and pushing back against claims which do not stack up.

Splitting income and deductions between owners

The ATO is concerned that husbands and wives are in some cases splitting income and deductions so that the bulk of the tax benefit goes to the higher earning spouse, even though the property is actually owned 50:50. Make sure that if you jointly acquire a property with your spouse, everything – income and deductions – needs to be split equally.

What you can’t claim as a deduction

There are also a number of costs which you can’t deduct, including costs associated with:

• acquiring and disposing of the property, including conveyancing costs, advertising costs and stamp duty. These costs would normally be of a capital nature and would be added to the cost base of the property
• expenses you don’t actually incur as the owner of the property, for example costs in relation to the property which the person renting the property pays
• expenses not related to the rental of the property, for example interest on a loan which might originally have related to the property but where additional funds have been drawn down to fund private activities
• there are other expenses which, whilst not immediately deductible, can be claimed over a number of years. These include borrowing expenses (ie, those costs linked to the financing of the property such as title search fees, loan establishment fees, stamp duty on the mortgage, etc), depreciation costs on assets used in the building (such as air conditioners, hot water systems, etc) and capital works deductions (such as costs spent on altering, improving or extending the structure of the building). But remember, you can only claim the proportion of costs which relate to periods the property was available for rent.

Importantly, the ATO now has access to numerous sources of third party data, including access to popular rental listing sites for both long term and holiday rentals, so it is relatively easy for them to establish whether a claim that a property was ‘available for rent’ is correct.

Will I Pay Tax If I Sell My Family Home?

Typically, when you sell an asset you must pay capital gains tax (CGT) on any profit made on the sale. For most of us, the most valuable asset we own is our family home and with house prices heading upwards across large parts of the country, many of us stand to make a large profit if we sell.
Does that mean that you have to pay CGT when you sell your house?
Fortunately, in most cases, the answer is no. The tax law provides an automatic exemption for any capital gain (or loss) that arises from the sale of a taxpayer’s main residence. However, this isn’t a blanket exemption. There remain situations where some or all of the gain arising on disposal of your main residence may be liable for CGT.

WHAT IS MY MAIN RESIDENCE?

In short, it’s your home. The ATO has set out some of the factors that determine whether the property you have disposed of is your main residence. These include whether:

• You and your family live there
• You have moved your personal belongings into the home
• This is the address to which your mail is delivered
• This is your address on the electoral roll
• The property is connected to services and utilities (for example, phone, gas, or electricity)
• You show your intention in occupying the dwelling.

There is no minimum time that you have to live in a home before it can be considered to be your main residence. Even if you only own a house for a short period – six months, say – provided you tick all the boxes above, the property will be your main residence.

If you live on a large block, the CGT exemption normally only applies on land adjacent to the dwelling up to a maximum of two hectares. The main residence exemption also only applies to a property that includes a dwelling, which is anything used wholly or mainly for residential accommodation.

Examples of a dwelling are:

• A house or cottage
• An apartment or flat
• A strata title unit
• A unit in a retirement village
• A caravan, houseboat or other mobile home.

Simply owning land isn’t enough to claim the exemption, even if you intend to build a dwelling at a later date. However, you can choose to treat land as your main residence for up to four years before a dwelling is constructed in certain circumstances. You can choose to have this exemption apply if you acquire land and you:

• Build a dwelling on the land
• Repair or renovate an existing dwelling on the land, or
• Finish a partly constructed dwelling on the land.

There are a number of conditions you must satisfy before you can claim the exemption. You must first finish building, repairing or renovating the dwelling and then:

• Move into the dwelling as soon as practicable after it is finished, and
• Continue to live in the dwelling as your main residence for at least three months after it becomes your main residence.

CAN I HAVE MORE THAN ONE MAIN RESIDENCE?

You can only ever have one main residence at any given point in time. The exception is if you’re selling your old property and buying another. In this case you’re entitled to an overlap period of six months when both properties can be your main residence as long as:

• The new property will be your main residence after the sale of the old property
• You lived in the old property for at least three continuous months in the 12 months prior to sale, and
• The property wasn’t used to generate rental income in any part of the 12 month period that it wasn’t your main residence.

WHAT IF I CAN NO LONGER LIVE IN MY MAIN RESIDENCE?

The main residence exemption can also apply where the owner is no longer able to reside in the dwelling, because they have lost the ability to live independently and require full time care. This ensures property owners who spend an extended period in hospital, or must relocate to a residential care facility, or who relocate to live with a caregiver, can still access the main residence exemption when they sell the property to pay living and medical expenses.

CAN I EARN RENTAL INCOME FROM MY MAIN RESIDENCE?

You do not need to live in the dwelling for the entire period of ownership for it to continue to qualify for the exemption.

If you own a property which is currently your main residence you can move out of the property for up to six years and still get the exemption provided no other property becomes your main residence during the absence.

During that time you can earn rental income on the property and claim a tax deduction for expenditure as you would with a normal investment property. Providing you move back into the property before the end of the six year period and do not dispose of the property within the same financial year that the property was earning rental income you can still qualify for the full exemption.

DOES THE MAIN RESIDENCE APPLY TO PROPERTY RENOVATORS?

Yes, it does – provided you actually occupy the renovated property as your main residence, even if only for a short period.

If you purchase a property, occupy the dwelling while you are renovating it and then sell the property, any profit you make on the sale of the property is generally tax exempt, even if you then move into another property and repeat the process.

DOES IT MATTER IF I HAVE USED MY HOME TO EARN INCOME?

Some people use their home to produce income, either by renting out part or all of the property, or by running a business from home. If you tick one of those boxes, you may be forsaking part of your CGT exemption. This is because you can’t typically obtain a full main residence exemption if you used any part of your home to produce income during all or part of the period you owned it.

People who simply work from home as part of their job (such as teachers who might do some marking in the evening or anyone else who might do a bit of overtime away from the office) are not affected.

If you are impacted by the exemption, either you or your accountant will need to calculate how much of the profit on disposal of your house is taxable. In most cases, this is the proportion of the floor area of the home that is set aside to produce income and the period the home was used to produce income.

Here are some simple case studies to understand exactly how this works:

RUNNING A SMALL BUSINESS

Greg runs an IT consultancy from home as a sole trader, in addition to his day job working in IT for a major corporation. He undertakes projects working largely in the evenings and at weekends and converts a spare bedroom in his three bedroom house into an office where he runs his business.

He bought his house in 2006 for $500,000 and sells it in 2016 for $1,000,000. He estimates that approximately 10% of the floor area of the house is used in his home-based business. He commenced the business in 2011.

Ordinarily, the $500,000 profit on sale of his house will be exempt from CGT. However, for five years of the ownership period, he used 10% of the property to earn assessable income. This means that $500,000 x 10% x 50% of the gain ($25,000) will be taxable.

RENTING A ROOM THROUGH AIRBNB

Jill bought a three-bedroom apartment in Sydney in 2010 for $400,000. To help pay the bills, in 2014, she rented out one of the bedrooms through Airbnb. She estimates that including access to shared areas like the lounge and kitchen, 40% of the floor area is given over to earning assessable income through Airbnb. In 2016, she sells the apartment for $800,000.

Ordinarily, the $400,000 profit on sale of the apartment will be exempt from CGT. However for two years out of the six-year ownership period, she used 40% of the property to earn assessable income. This means that $400,000 x 40% x 33% of the gain ($52,800) of the gain will be taxable.

RENTING OUT THE WHOLE HOUSE WHILST TEMPORARILY WORKING AWAY FROM HOME

Bob bought a house in Perth for $500,000 in 2005. In 2012, he was employed to work in the mines in a remote area of Western Australia. He was provided with rental accommodation in that remote area by his employer. Whilst away, he rented out his whole house in Perth. In 2016, he sold the house for $1,000,000.

Ordinarily, the $500,000 profit on sale of the house will be exempt from CGT and that is indeed the case here. Tax law allows you live away from your home and earn assessable income from renting it out for up to six years (the six year absence rule) without losing the main residence exemption, provided you don’t acquire another main residence in the meantime. As Bob lived in rented accommodation whilst absent, he can take advantage of the six year rule and claim a full exemption from CGT on the sale.

RENTING OUT THE WHOLE HOUSE AND BUYING ANOTHER

Amy bought an apartment in Melbourne for $300,000 in 2010. In 2012, she took a job in London and moved overseas, renting out her Melbourne apartment. Shortly after moving to London, she bought a new flat in the city and has lived there ever since. She has no intention in the short term of moving back to Australia and accordingly, sells the Melbourne apartment in 2016 for $600,000.

Ordinarily the $300,000 profit on sale of the apartment will be exempt from CGT but that is not the case here. Amy cannot take advantage of the six-year rule since she acquired a new main residence (the fact that it was overseas is not relevant). Accordingly, she can claim the main residence exemption for the period she lived in the apartment (2010 to 2012) but not the period since she acquired the London apartment (2012 to 216). $200,000 of her profit will be liable for capital gains tax.

The post Tax Matters relating to Property appeared first on CGH Accounting.

One thing to bear in mind if you’re considering getting into crypto-currencies, or are already involved, is that there are tax implications to trading and investing in these new digital products. Here’s our guide to tax and bitcoin.

WHAT IS BITCOIN?

Bitcoin is a form of digital currency, created and held electronically. No one controls it. Bitcoins aren’t printed, like dollars or euros – they’re produced by people, and increasingly businesses, running computers all around the world, using software that solves mathematical problems.

It’s the biggest example of a growing category of money known as cryptocurrency.

There are three ways to get bitcoin – by mining them, buying them or providing good and services to earn them. Mining refers to the process by which bitcoins are created – a computer crunches through a set of difficult mathematical problems and success is rewarded with a bitcoin.

The alternative is to create an ‘online wallet’, visit a bitcoin exchange system that puts sellers in touch with buyers and the buyers pay for bitcoins purchased by transferring money via online banking.

The third way is possible because bitcoin is becoming an increasingly accepted virtual currency used by businesses and individuals around the world, including in Australia.

As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment. According to research produced by Cambridge University in 2017, there are 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin.

HOW IS BITCOIN TAXED?

Using bitcoin to pay for personal transactions

Generally, there are no income tax or GST implications if you are not in business or carrying on an enterprise and you simply pay for goods or services in bitcoin (for example, acquiring personal goods or services on the internet using bitcoin).

Bitcoin is a regarded as a capital gains tax (CGT) asset so CGT potentially applies whenever an Australian resident sends a bitcoin to another person. However, transactions are exempt from capital gains tax if:

• bitcoins are used to pay for goods or services for personal use – e.g. Expedia hotel bookings, or at a café which accepts bitcoins, and
• the cost of the bitcoins used to pay for the transaction is less than $10,000 (this is the exemption for personal use assets).

If the cost of the bitcoins used in the transaction exceeds $10,000, the personal use exemption will not be available and CGT will apply. The capital gain is calculated as the increase in value of the bitcoins between the time they were acquired and the time they were disposed of.

USING BITCOIN TO BUY AND SELL GOODS AND SERVICES IN A BUSINESS

If you receive bitcoin for goods or services provided as part of a business, you will need to record the value of the bitcoins in Australian dollars as part of your ordinary income for tax purposes. The value in Australian dollars will be the fair market value which can be obtained from a reputable bitcoin exchange, for example.

Where you carry on a business and purchases business items (including trading stock) using bitcoin, you are entitled to a tax deduction based on the arm’s length value of the item acquired.

There may also be capital gains tax consequences where you dispose of bitcoin as part of carrying on a business. However, any capital gain is reduced by the amount that is included in assessable income as ordinary income (so you aren’t taxed twice on the same amount).

MINING BITCOIN

Where you are in the business of mining bitcoin, any income that is derived from the transfer of the mined bitcoin to someone else is included in assessable income.

Any expenses incurred in respect of the mining activity are allowed as a deduction.

Losses made from the mining activity may also be subject to the non-commercial loss provisions, so they won’t automatically be available to offset against other income (there are tests you’ll have to meet first)

Bitcoin held if you are carrying on a business of mining and selling bitcoin is considered to be trading stock. You’d need to bring into account any Bitcoin on hand at the end of each income year.

TAXPAYERS CONDUCTING A BITCOIN EXCHANGE (INCLUDING BITCOIN ATMS)

Where you are carrying on a business of buying and selling bitcoin as an exchange service, the proceeds derived from the sale of bitcoin are included in assessable income.

Any expenses incurred in respect of the exchange service, including the acquisition of bitcoin for sale, are deductible.

Bitcoin held by someone carrying on a bitcoin exchange is considered to be trading stock and you would be required to bring to account any bitcoin on hand at the end of each income year.

DISPOSING OF BITCOIN ACQUIRED FOR INVESTMENT

If you acquire bitcoin as an investment, any profits resulting from the sale are not assessable income and no deductions can be claimed.

Capital Gains Tax will apply although where the cost of the Bitcoin does not exceed $10,000 the personal use asset exemption may apply if you can demonstrate that the bitcoin was to fund personal consumption.

Where the cost of the Bitcoin exceeds $10,000, the personal use exemption will not be available and CGT will apply. The capital gain is calculated as the increase in value of the Bitcoins between the time they were acquired and the time they were disposed of.

If the transactions amount to a profit-making undertaking or plan then the profits on disposal of the Bitcoin will be assessable income since you will be regarded as a trader in bitcoin rather than an investor.

Note: the rules around trading Bitcoin for business or profit versus buying and selling Bitcoin as an investment are essentially the same as those applying to share traders versus investors. There are other factors to take into account but broadly, if you are holding the bitcoin with a view to long term gain, you are likely to be an investor and if you are buying and selling bitcoin over the short term with a view to making profits, you are likely to be a trader.

RECORD KEEPING

Everyone dealing with bitcoins need to keep the following records:

• the date of each transaction
• the amount in Australian dollars at the time of the transaction (which can be taken from a reputable online exchange)
• what the transaction was for, and
• details of the other party (the bitcoin public address is enough).

If you want to rely on the CGT personal use exemption, you’ll need to be able to demonstrate that you actually did use the bitcoin to buy goods and services or that you intended to.

The post Bitcoin and Tax: Beware the pitfalls appeared first on CGH Accounting.

PLAN AHEAD

Selling a business of any size requires careful planning and considerable action. But it’s not as simple as flicking a switch from running a business to selling one. To get yourself and your business prepared – planning ahead is crucial. Start by getting your books in order and making sure your cash-flow is healthy. If you notice any areas of your business that needs attention, you need to address them as they could be deal-breakers for potential buyers. Because the process of selling is time-consuming and can be a distraction from the day-to-day running of the business, putting processes in place can help with keeping the wheels in motion.

BOOKS IN ORDER

Your books are essentially the lifeline of your business and any small business owner can vouch that books don’t balance themselves. In all likelihood, a potential buyer will go straight to your financials to assess their risk. Books that haven’t been properly managed can be a red flag for a potential buyers, so before you even think about putting the business on the market – invest in bookkeeping. As part of the due diligence process, a potential buyer may want to see financial records such as:

• Profit and loss statements for the past 24 to 36 months
• Current balance sheet
• Any financial forecasts and business plans
• Any bank loans or line of credit loans
• Details of your business’ financial systems and processes
• A detailed breakdown of the outgoing costs

If you’re planning to sell, work with CGH Accounting to get your records in order.

THE RIGHT REPRESENTATIVE

Starting and running a business are very different skills to selling a business. While you may know your business and industry inside out, navigating the process of sale is an entirely different story. Bad advice can cost you, so always do your research and make sure you find the right person to represent your sale. Whether that’s a broker, advisor, accountant, lawyer or a combination of advisors, having the right person beside you can make or break the transaction. As much as you’re selling your physical business, there’s also an emotional element at play and letting go can be a difficult process. Having a neutral third party can help mitigate that and ensure the process starts on point and stays on track.

DON’T SKIMP ON LEGAL ADVICE

The process of selling a business is relatively complicated. With so many moving parts and decisions to be made, it can quickly become overwhelming. In addition to financial considerations, there are a lot of legal implications when selling a business, both from a compliance and financial perspective. When it comes to legal advice, the best advice one can receive is to never cut corners. Always seek professional, reputable advice from a commercial lawyer who understands the ins and outs of selling your business. Not only can the right advice help you get the best price but it can also save you from making a costly mistake once the deal is done.

DON’T RUSH DUE DILIGENCE

As painful as due diligence may be, it’s a valuable and necessary process for both parties. The potential buyer has an opportunity to dig a little deeper and understand your business and the opportunity. At the same time, you as the seller can get to know the potential buyer and scope out whether this is the right opportunity before entering into a contract. Both your lawyer and accountant can help with this process.

DON’T SELL TO THE WRONG BUYER

You’ve poured your blood, sweat and tears into your business so it’s easy to get carried away in cashing in on your efforts. Not all deals, no matter the price tag, will work in your favour so it pays to pick the right buyer. Your first offer may not be your best offer so before leaping at the opportunity, make sure you understand what your risks and rewards are. In some cases, business sales can turn sour when the new owner takes over which may leave you without a full payout. Always have a lawyer and accountant evaluate the offer to make sure you know where you stand legally, financially and from a taxation perspective.

The post The dos and don’ts of selling your small business appeared first on CGH Accounting.

CLAIM TOOLS AND EQUIPMENT

You probably use a variety of tools every day and the rule is that if you’ve paid for them and you use them as part of your job or business, you can claim them as a deduction against your tax.

Exactly how you do that depends on whether you run your own business or work for someone else.

If you run your own business, you can claim a deduction straight away for the cost of all tools costing less than $30,000 (if acquired after 2 April 2019, before that the cost limit was $20,000 up to 29 January 2019 and $25,000 between 29 January 2019 and 2 April 2019).

For most self-employed tradies, that means that pretty much all your tools can be written off straight away against your taxable income.

If you’re employed by someone else, the rules are less generous. You can claim a deduction straight away for tools costing $300 or less but if the cost is more than $300, you’ll need to write off the cost over the life of the tool, which could be several years. Take care if you purchase a set of tools – you can’t claim each tool individually so unless the cost of the set is less than $300, you’re looking at writing off the cost over a few years.

It’s not just tools you claim either – the same rules apply to items of equipment for the office like computers, phones and printers as well as mobile phones and tablets.

Just remember to only claim the work or business use part of the cost. If you use the tools or equipment for private use, you’ll need to apportion the cost.

VEHICLES

You can also claim the cost of a vehicle, such as a van or a ute, which you use in your business or for your job, provided you paid for the vehicle (so there’s no deduction for work-provided vehicles).

If you run a business, you can use the same $30,000 instant write-off tax break outlined above, provided of course the vehicle costs less than $30,000 (as many second-hand vehicles do). If it costs $30,000 or more, you’ll need to write it off over the life of the vehicle.

If you’re an employee, you can claim depreciation on the vehicle over its life, but only if you keep a logbook of your work/private use. Your logbook can also be used to work out your various other work-related vehicle deductions, such as the cost of fuel, servicing, etc.

Alternatively, if you travel less than 5000kms, you can simply claim a set 68c/km allowance for every business km travelled.

Remember, you can’t claim for the costs of traveling from home to work in your vehicle, unless your employer requires you to transport heavy tools which can’t be stored at work.

WORK-RELATED CLOTHING

If your work requires you to wear either a compulsory uniform or protective clothing to keep you safe (or to protect the normal clothing you wear underneath), the chances are you’ll be able to claim a tax deduction both for the cost of purchasing the item and the cost of getting it periodically laundered or dry cleaned.

Look out for the following commonly claimed items by tradies:

• protective clothing and footwear to protect you from the risk of illness or injury, or to prevent damage to your ordinary clothes, caused by your work or work environment. This type of clothing:
  • is made to cope with more rigorous conditions, where conventional clothing would be inadequate.
  • is designed to protect you – for example heavy duty shirts and trousers, distinct from ordinary cotton drill trousers, shorts and short sleeve shirts that you might think are work wear but do not adequately protect you from the risk of injury or illness
  • has a density of weave which gives a UV rating sufficient to protect you from the sun where your job requires you to work outdoors.

Amongst the things you could claim are:

• fire-resistant clothing
• safety-coloured vests
• steel-capped boots
• gloves
• hardhats
• overalls
• non-slip safety shoes
• heavy duty shirts and trousers such as rip proof items of clothing made with heavy duty mesh that are designed to protect you or items with reflective strips
• Compulsory work uniform branded with the employer’s logo.
• Sun protection costs including sunglasses and sunscreen if you work outdoors

LAUNDRY AND DRY-CLEANING

You can claim the costs of washing, drying and ironing eligible work clothes, or having them dry-cleaned.

If the total amount of your laundry expenses are $150 or less and your total work-related expenses are $300 or less, you don’t need to provide written evidence for your laundry expenses. Instead, for washing, drying and ironing you do yourself, the ATO allows you to use the following amounts to work out your laundry claim:

• $1 per load – this includes washing, drying and ironing – if the load is made up only of work-related clothing, and
• 50 cents per load if other laundry items are included.

CLEAR THE DECKS

If you’re in business and have any obsolete, damaged or unusable materials left on your site at the end of the year, write-off the cost before the end of the year in order to claim a tax deduction.

In addition, if you have customers who can’t or won’t pay and you have done everything possible to recoup the debt without success, write it off by 30 June in order to claim a bad debt deduction. Make sure to record the write-off in the form of a Board Minute or other similar record.

FINALLY…

Two tips for making your taxes easy:

• Keep good records, including invoices and receipts. It makes completing your tax return easier and ensures you can claim for everything you’re entitled to.
• Ensure you use a tax agent like CGH Accounting. Tax is complicated and an agent can ensure you get it right.

 

Please Note: This is general advice. To learn more about the possibilities of claiming a tax deduction, please contact CGH Accounting.

The post Tax Tips for Tradies 2019 appeared first on CGH Accounting.