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On average, small business owners spend at least 10 hours each week recording, organizing, and processing financial transactions – everything from accounts receivable and payable, to employee payments, expense receipts and supplier invoices.
While the process may be time-consuming and seem tedious, effective bookkeeping is the foundation of sound financial management – which in turn, is the lifeblood of your business.

If you are frequently overwhelmed by mountains of paperwork and complex calculations, take note of these three bookkeeping basics which will help ensure a healthy financial future for your small business.

1 - TRACK EXPENSES WITHOUT DELAY
Accurate and consistent expense tracking is crucial for claiming tax deductions and lowering your overall tax bill. Plus, analyzing expenses can offer crucial insights into spending patterns and the overall profitability of your small business.
Small business owners should consider using a mobile app for simple, consistent expense tracking. Mobile phone apps like Xero help do away with manual data entry with automated functions, including:
• Receipt data capture via your smartphone's camera (no need to hold onto paper receipts, which can get lost or misfiled);
• Synchronization with your phone's GPS to track mileage of business travel; and
• Importing bank and credit card data, plus integration with accounting software.

2- CREATE SYSTEMS FOR INVOICING & FILING
Efficient invoicing is about more than ensuring you get paid in a timely fashion. An invoice is an official record of the terms of each transaction and must be completed accurately to avoid errors in your bookkeeping process.
Here are a few tips for professional invoicing:
• Ensure each invoice includes all the important details: contact information, a tracking number, a detailed list of products or services rendered, and a breakdown of the total amount due;
• Provide an electronic receipt to reduce waste and create a "paper trail" if there's ever a dispute; and
• Maintain an invoice-filing system that records when you sent the invoice, to whom, when payment was made, and any reminders sent out.
An online invoicing tool can streamline this aspect of your bookkeeping process and provide an efficient backup filing system.

3 - SAVE TIME WITH ACCOUNTING SOFTWARE
By law, every business is required to keep organized and timely financial records. However, manually posting income and expenses to ledgers and journals is time consuming – not to mention stressful for the math-averse.
Shave some time (and stress) off your weekly bookkeeping with an all-in-one accounting software solution like SageOne, Xero, QuickBooks, MYOB or CashFlow.

Online bookkeeping offers numerous advantages, such as:
• Instant reports and real time insights on profits and loss, customer accounts, payroll – and your overall financial "big picture";
• Simplified data entry so you can collate and print invoices, purchase orders, and payroll much faster than with manual methods; and
• Improved accuracy through automation (once data is entered, the software handles all subsequent calculations and processes – including invoicing).
When it comes to accounting, vigilance is the key to mitigating risk and ensuring the long term profitability of your small business. Be sure to set aside time each day, week, and month to update and review your books to catch any red flags and ensure your finances are on track.

Should you require any additional information or want to arrange to have our bookkeeper take care of your business please do not hesitate to contact us. #bookkeepers #recordkeeping #clarkemcewan #financialmanagement

 

 A focus on work-related clothing and laundry expenses this Tax Time will see the ATO "more closely examine taxpayers whose clothing claims don't suit them".

 

Do you need to wear a uniform to work? Or perhaps you need to wear industry specific clothing? 

You may be eligible to claim a deduction for work clothing or a uniform, but in order for your claim to be eligible it must fall into one of the following categories for which there are specific tax rulings.  These are: 

  1. a compulsory work uniform (for instance, clothing that identifies you as an employee of an organisation with a strictly enforced policy such as a flight attendant),
  2. a non-compulsory work uniform (a uniform that has an AusIndustry registered logo on the top, skirt or slacks and one that may not be worn as everyday clothing - which excludes black slacks or skirts),
  3. clothing specific to your occupation (such as a chef's checked pants), or
  4. protective clothing (like non-slip shoes for a nurse or steel capped boots for a labourer).   Items such as shoes, socks and stockings can never form part of a non-compulsory work uniform, and neither can a single item such as a jumper.

 According to Assistant Commissioner Kath Anderson, around 6 million people claimed work-related clothing and laundry expenses last year, with total claims adding up to nearly $1.8 billion.

 Commissioner Anderson went on to say:  "While many of these claims will be legitimate, we don't think that half of all taxpayers would have been required to wear uniforms, protective clothing, or occupation-specific clothing."  With clothing claims up nearly 20% over the last five years, the ATO believes a lot of taxpayers are either making mistakes or deliberately over-claiming.  Common mistakes include people claiming ineligible clothing, claiming for something without having spent the money, and not being able to explain the basis for how the claim was calculated.

"Around a quarter of all clothing and laundry claims were exactly $150, which is the threshold that requires taxpayers to keep detailed records.  We are concerned that some taxpayers think they are entitled to claim $150 as a 'standard deduction' or a 'safe amount', even if they don't meet the clothing and laundry requirements," Ms Anderson said. 

 "Just to be clear, the $150 limit is there to reduce the record-keeping burden, but it is not an automatic entitlement for everyone.  While you don't need written evidence for claims under $150, you must have spent the money, it must have been for uniform, protective or occupation-specific clothing that you were required to wear to earn your income, and you must be able to show us how you calculated your claim."

 

Ms Anderson said the ATO also has conventional clothing in its sights this year. "Many taxpayers do wear uniforms, occupation-specific or protective clothing and have legitimate claims.  However, far too many are claiming for normal clothing, such as a suit or black pants.  Some people think they can claim normal clothes because their boss told them to wear a certain colour, or items from the latest fashion clothing line.  Others think they can claim normal clothes because they bought them just to wear to work.  Unfortunately they are all wrong – you can't claim a deduction for normal clothing, even if your employer requires you to wear it, or you only wear it to work". 

New restrictions have been imposed by the ATO on travel expenses and depreciation as part of the 2017-18 Budget relating to claims made by taxpayers owing residential rental property.

 

Travel

Travel undertaken in relation to a rental property is a legitimate expense and has been claimed by many property owners, however the Government is concerned that some taxpayers have not been correctly apportioning their travel expenses when the travel was combined with another activity, such as a holiday. As a result of this exploitation of the rules, new legislation will now disallow any travel related to visiting rental properties. 

Deductions such as the cost of repairs conducted while onsite may still be claimed, or a visit to the tax agent.  The Government also makes the point that inspection costs undertaken by third parties will be permissible, meaning that inspection costs are seen as legitimate, but only if genuinely incurred for pure inspection purposes.   

Depreciation 

Depreciating assets in a residential rental property, such as carpets, blinds, a hot water system, a cook top, an oven, furniture, were previously eligible for depreciation under Division 40 of the ITAA 1997.  These claims will no longer be deductible under new criteria.  Any deduction claim is essentially dependent upon the acquisition date of the relevant asset, and whether the asset is new or "previously used" i.e. second hand.

From 1 July 2017, the Government will limit plant and equipment depreciation deductions to outlays actually incurred by investors in residential real estate properties. Plant and equipment items are usually mechanical fixtures or those which can be 'easily' removed from a property such as dishwashers and ceiling fans. Investors who purchase plant and equipment for their residential investment property after 9 May 2017 will be able to claim a deduction over the effective life of the asset. However, subsequent owners of a property will be unable to claim deductions for plant and equipment purchased by a previous owner of that property.

Top 6 things you need to know about how the 2017 plant and equipment depreciation changes will affect you (Source: www.capitalproperties.com.au )

  1. If you've purchased a brand new residential construction, you're not affected by the changes to depreciation deductions on plant and equipment items.
  2. If you've purchased a commercial property, you are not affected by these changes.
  3. If you've bought a residential property after 9 May 2017, from a previous owner, you are affected by these changes. You can now only claim capital works related depreciation deductions.
  4. If you've bought a residential property after 9 May 2017, from a previous owner, and you've had to buy new fixtures and fittings, you'll be able to claim depreciation deductions on any fixtures and fittings you've bought yourself.
  5. If you've bought a residential property before 9 May 2017, from a previous owner, you are not affected by these changes.
  6. If you've bought a pre-1987 residential investment property after 9 May 2017, you can only claim capital works deductions on renovation work, not on the original structures.

Disclaimer

The purpose of this article is to provide a brief overview of how recent tax changes may affect residential property investors. It is not intended to be relied on instead of professional advice.  Contact us so that we can determine how these changes may affect your specific situation.

To Tick or Not To Tick

....that is the Question !

Simplified BAS makes lodging easier however there are still a few pitfalls to be aware of.  One of the more common errors we see relates to the selection required after Label G1 Total Sales.

The question prompt after label G1 is: Does this amount include GST?  at which point you either tick Yes or No.  We find that up to 50% of self-lodgers get this wrong.

 

To report this correctly, you need to consider your invoices. If your gross receipts are GST Free, the amount shown at G1 (Total Sales) does not include GST.  You select NO .  This will be consistent with the amount at 1A (GST owed to ATO) being zero.  That being the case correctly reported that the amount shown below:

 The converse is then true.  If your gross receipts are GST Inclusive, the amount shown at G1 (Total Sales) includes GST.  You select YES.  This will be consistent with there being an amount shown at 1A (GST owed to ATO)

Contact us if you need help with your activity statement.

 

SMSFs get inactive low-balance account concession

The bill enacting the 2018 federal budget proposal to have all inactive low-balance (under $6000) superannuation accounts transferred to the ATO has taken into account the concerns of SMSFs running deliberate multiple-fund strategies.

The measure had the potential to jeopardise SMSF trustees who strategically retain a small asset balance in a public offer fund to maintain the risk insurance cover they received via the larger fund.

Speaking at the 2018 SMSF Professionals Day, co-hosted by SuperConcepts and selfmanagedsuper, in Adelaide yesterday, SuperConcepts technical services and education general manager Peter Burgess told delegates: "The [Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018] that has now been introduced into Parliament had a new section inserted which said if the account is being used to maintain insurance cover, then that will not be considered to be an inactive low-balance account.

"That seems to have been inserted to get around the situation where we've got self-managed super fund members who have these low balances that they maintain in these APRA (Australian Prudential Regulation Authority) [regulated] funds to keep insurance."

Burgess did, however, point out SMSF trustees using this strategy still needed to perform one task to ensure their inactive low-balance account would be left alone.

"The one thing to note though is that in order to trigger this clause, SMSF members, if they've got these low-balance accounts in APRA funds, still need to opt in for insurance in that APRA fund," he said.

The onus for this procedure, though, was not entirely upon SMSF trustees, he noted.

"The way we understand it's going to work is in the lead-up to 1 July 2019, APRA funds will be writing to their members who have low-balance inactive accounts alerting them to the fact that they're going to need to opt in if they want insurance," he said.

#compliance #superannuation #insurancecover

Fee indexation - New fees now apply to ASIC documents

 

The statutory fees for some commonly lodged documents changed on 4 July 2018.

Annual Review fees from 4 Jul 2018 are now  $263 for a proprietary limited company and $53 for a Special purpose proprietary company.

Late penalties are now $79 for lodgement or payment up to one month late, and $329 for lodgement or payment over one month late.

From 14 July,  ASIC Registered Agents will be able to get company invoices for their registered clients online.

The fees ASIC charges for various regulatory services will change to reflect the actual cost to ASIC associated with the work. New industry funding laws that changed the way ASIC is funded took effect on 1 July 2017. Under the new arrangements, regulated entities will receive an invoice for ASIC's regulatory services delivered in the prior year.

While around 90% of ASIC's regulatory activities will be now be recovered in the form of industry funding levies, approximately 10% will be recovered via fees for service.

 

 

If you intend to claim a tax deduction for personal contributions you make to your superannuation, don't forget this one crucial step: 

You will need to advise your superannuation provider of your intention BEFORE lodging your 2018 tax return.

This includes people who get their income from:

  • salary and wages
  • a personal business (for example, people who are self-employed contractors, or freelancers)
  • investments (including interest, dividends, rent and capital gains)
  • government pensions or allowances
  • super
  • partnership or trust distributions
  • a foreign source.

The contributions that you claim as a deduction will count towards your concessional contributions cap. When deciding whether to claim a deduction for super contributions, you should consider the super impacts that may arise from this, including whether:

  • you will exceed your contribution caps
  • Division 293 tax applies to you
  • you wish to split your contributions with your spouse
  • it will affect your super co-contribution eligibility.

If you exceed your cap, you will have to pay extra tax and any excess concessional contributions will count towards your non-concessional contributions cap.

Tax Health

What is Tax Planning?

Tax planning is a process we use toward the end of the financial year  to structure our clients business and personal  affairs to legally reduce tax liability and make savings. This is achieved by a review of the past 11 months of trading or earnings and by using deductions, exemptions and where practicable, using structures to reduce taxable income.

According to the Australian Taxation Office we all have the right to arrange our financial affairs to keep tax to a minimum – this is often referred to as tax planning, or tax-effective investing.

"Tax planning is legitimate when you do it within the letter and the spirit of the law." ATO

 

Who Can Benefit From Tax Planning?

It's simple - All taxpayers can benefit from tax planning and the savings that are created. search shows that 95% of taxpayers are paying more tax than they are legally required to.

Approximately 50% of Australian taxpayers use legal tax planning strategies to minimise their tax with the most popular strategies being negative gearing of residential properties (2.1 million taxpayers), and salary sacrificing super contributions (4 million taxpayers).

Need some end of financial year help?  Contact us.

Plenty of lucrative deductions available for investors

New legislation,  New opportunities for investors

Changes announced as part of the 9th of May 2017 federal budget have now been legislated after being passed by the Senate on the 15th of November 2017.

For many property investors the new rules, outlined in Treasury Laws Amendment (Housing Tax Integrity) Bill 2017, have made what was already a complex topic a little more difficult to understand.

The new rules do not affect capital works deductions at all. The amended legislation only restricts property investors from claiming depreciation deductions for the decline in value of 'previously used' depreciating assets (plant and equipment) within second-hand residential investment properties.

An incorrect assumption some property investors have made after hearing about the changes is that they are no longer eligible to make a claim.

***  It's important to note that the new legislation only applies to investors who exchange contracts on a second-hand residential property after  7:30 pm on the 9th of May 2017. Even in cases where investors are affected by the change, there are still thousands of dollars to be claimed, particularly as capital works deductions typically make up between 85 to 90 % of the total claim. The new legislation provides opportunities for investors in the following scenarios as it does not impact them:

Investors who purchase a brand-new residential property

Investors who exchanged contracts on a residential property prior to 7:30pm on the 9th of May 2017

Investors who add new plant and equipment assets to their property after purchase and directly incur the expense

Investors who purchase properties which are considered to have been substantially renovated by the previous owner

Non-residential and commercial properties

Any deductions that arise in the course of carrying on a business

Any residential property held in a superannuation plan (other than Self-Managed Super Funds)

Investors who hold residential property in corporate tax entities, including company entities

  Home owners who turned their primary place of residence into a rental property prior to the 1st of July 2017 ***

 For affected investors, it's important to note that the changes only impact the existing plant and equipment depreciation deductions found within a second-hand residential property.  These are the easily removable fixtures and fittings such as carpets, hot water systems and air conditioners. Any brand-new plant and equipment assets added to the property after purchase are depreciable.

The capital works allowance, which is the component investors can deduct for the building structure, is unchanged. Examples include walls, the roof, doors, kitchen cupboards and more. These deductions can be claimed at a rate of 2.5 per cent per year for a maximum of forty years for any property in which construction commenced after the 15th of September 1987.

Often older properties have been renovated and qualifying capital works completed by a previous owner can be claimed by the new owner for any years that remain in the forty year period.

The table below provides an example of common capital works items which the owner of a second-hand residential investment property could claim.

Capital works deductions

 

Item

Capital works rate

Remaining effective life (years)

First full financial year deduction

Five year cumulative deductions

Original structure and fixed items

2.50%

25

$6,250

$31,250

Kitchen cupboards

(replaced 5 years ago)

 

2.50%

 

35

 

$289

 

$1,445

Kitchen benchtop

(replaced 5 years ago)

 

2.50%

 

35

 

$72

 

$360

Outdoor pergola

(installed 7 years ago)

 

2.50%

 

33

 

$240

 

$1,200

Plumbing (updated 5 years ago)

2.50%

35

$68

$340

Tiling (updated 5 years ago)

2.50%

35

$130

$650

Total

$7,049

$35,245

 

In this scenario the investor exchanged contracts on a fifteen year old, four bedroom, two bathroom house after 7:30pm on the 9th of May 2017.

 

The previous owner of the property had completed renovations which included updating the kitchen through installing new cupboards and benchtops five years ago and adding an outdoor pergola seven years ago.

 

As the example shows, the investor would be eligible to claim $7,049 in capital works deductions in the first full financial year, or $35,245 in cumulative deductions over five years.

 

The investor would also be eligible to claim depreciation for any brand-new plant and equipment assets they chose to purchase and add to the property themselves.

 

Any plant and equipment assets that were installed by the previous owner can be excluded from the depreciation schedule and included in a capital loss schedule. This schedule can be used by the owner to offset any Capital Gains Tax liabilities should they choose to dispose of any assets or sell the property in future.

 

There are still substantial deductions available for any investors affected by the new legislation. It's always worthwhile consulting with a Quantity Surveyor to discuss what deductions can be claimed.

 

If you are venturing into the investment property mine-field, be sure to consult our practice for further advice.

 

 

 

Smart saving for your household

 Imagine always having spare income to add to your investment so that your money is constantly working harder for you? According to Simple Savings' Jackie Gower, it's not a pipe dream with these common sense tips for cutting expenses.

Curtailing your spending is no easy feat, especially if you have a family. But there are some simple ways to cut back that may mean a bigger investment portfolio.

Food

Usually the biggest bill in any household, but luckily, it's one of the easiest to diminish. As the TV chefs always say, cooking at home is the key. "We know of families who've reduced their weekly food bill by as much as 50% as a result of menu planning," Jackie reveals. Also, look beyond the supermarket. "Taking the time to shop around your local butcher and greengrocer can result in valuable savings.

Utilities

The answer to saving here, Jackie says, is to review and compare. Do your research and check out deals from different providers. This is not the most exciting task, but Jackie estimates one to two hours on the phone or online could save you several hundred dollars a year.

Petrol

Potentially another large household expense. "The best way to cut-back on petrol is not to use it. Walk, ride or use public transport whenever possible. Car-pooling is also a great cost-saver. Make a list of your errands over a fortnight and try to get them done in the same area at once.

Entertainment

Everyone automatically reaches for their wallet here, but fun can be reasonably priced, or even free. Check out exhibitions, markets, walks and local fairs. Host a movie or games night, or pack a picnic and head to the beach or a national park. And, instead of buying new toys, join the local library or toy bank if available. The kids can play with exciting 'new' toys as often as they like - for free," she adds.

More thrifty hints...

If you're terrible with money, downloading an app to track spending could be your salvation. "One tried-and-true app is Track My Spend" our expert says.

Finally, if you really struggle with self-control, many banks offer accounts with online-only access, or require you to go in to make a withdrawal. This can prevent you going on mad sprees with your EFTPOS or credit card.

The important thing is to take the first step, as Jackie affirms, "Aim as big or small as you like. Any saving is a good saving."

Disclaimer

Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.


Contact Clarke McEwan