Emma Petroulas , Online Accounting

#TaxTipTuesday: Are my Small Business IT Expenses Tax Deductible?

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If you are using the software or hardware for your small business, that generally speaking yes, it is a tax deduction. However depending on how much you paid, this will determine whether you can claim a tax deduction immediately or whether it must be claimed over a number of years (depreciated).

These rules apply not just to software, but to most other assets/equipment purchased for your small business.

What IT expenses are covered?

IT expenses that you incur for your small business can be claimed as a tax deduction. They can include ongoing expenses of your website in the year in which they are incurred. This may include maintenance, internet service provider fees, domain name costs and annual registration costs. Software can also include MYOB or Xero that you have purchased outright or on a subscription. If you have purchased this outwrite you may have to depreciate it. However with a subscription you can generally claim a tax deduction if you pay an annual or monthly fee. It is important to note that if software is purchased as part of a computer system then the total cost of the system would be depreciable. Continue reading “#TaxTipTuesday: Are my Small Business IT Expenses Tax Deductible?”

Is my Christmas party a tax deduction?

It’s almost December and you still haven’t decided what to do for the team Christmas party. You’re tossing with a few ideas and you want to understand the tax implications a little better. You understand that generally speaking, when you provide your employees with entertainment (such as a party), then you need to pay an extra tax known as fringe benefits tax (FBT). However you will also want to understand whether your Christmas party is tax deductible?

The ATO’s view is that the cost of a Christmas party is tax deductible only to the extent that it is subject to FBT. As a result, Christmas Party costs that are exempt from FBT (where the costs relate to exempt minor benefits and exempt property benefits) cannot be claimed as a tax deduction. Continue reading “Is my Christmas party a tax deduction?”

Startups leverage Xero: Nudge Accounting in Startup Daily

Xero, Nudge Accounting, Startup daily Startup Daily today interviewed Xero about how its customers use its accounting software. And Emma Petroulas from Nudge Accounting gave her views in the article on how accounting software, including Xero, can help startups and small businesses.

So what were some of the things that Emma had to say about Xero and accounting numbers for businesses:

“The thing about numbers is that they don’t lie,” she says. “What we generally find with startups is that they tend to overstate the financial health of their business, but when they have their numbers in front of them it forces them to make some difficult decisions.”
When a client knows their numbers, they can make the best decisions for their business. Nudge Accounting says that they use Xero to process clients’ numbers each month, which means that they have almost real time financials at their fingertips.
Many of our small business clients have found it difficult to use Xero payroll,” she says.“Setting up payroll in Xero is easy when clients have staff who are on annual salaries, but when our clients have lots of casual staff working different shifts or irregular hours, they find it hard to navigate their way around the different payroll calendars.” In saying this, Petroulas says that they still use Xero and “love it”.
This is a vital tool in the startup environment and could very well prove an early indicator for founders that things are going pear-shaped long before that ‘closing down’ sign rears its head. Based on the numbers in a management report, clients can recognise inefficiencies in their business and improve many parts of their operations process.
“Using the tracking function in Xero, they have also been able to isolate and understand the most profitable product lines of their business, and change their strategic direction based on this,” adds Petroulas.

Paying superannuation for my team – what do I need to know?

As part of our monthly blog post for Shoestring, we write about the superannuation requirements that employers need to meet for their team members.

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The key superannuation requirements that employers have to meet are as follows:

1. Relevant employees

(a) Full-time, part-time and casual employees

When it comes to superannuation contributions, you are required to pay contributions for employees if they are aged 18 years + and if they earn at least $450 or more in gross wages in a month.

b) Contractors

A common mistake we see startups make is that they assume that they are not required to make superannuation guarantee contribution payments for contractors. If an individual is paid mainly for their labour for hours worked under a contract, then you will have to pay contributions for them, irrespective of whether they are a contractor or an employee.

2. How much superannuation do you need to pay?

The current rate of superannuation is 9.25% and is scheduled to change to 9.5% from 1 July 2014.

This rate of superannuation must be applied to the Ordinary Time earnings of your employees. This includes payment for your employees’ ordinary hours and whilst it includes commissions and performance based bonuses, allowances and shift-loadings; it does not include overtime payments.

3. When is superannuation due?

Superannuation guarantee contribution payments for your team need to be paid by the 28th day of the month following end-of-quarter. i.e. for the June quarter, payment of superannuation payments is due 28th July.

4. What else is changing?

Apart from the proposed change in superannuation rates, the Government has confirmed that superannuation contributions must be paid electronically by employers into the future. The new system will be compulsory from 1 July 2015 for businesses with less than 20 employees.

Under the new ruling, superannuation payments must be made using a single Electronic Funds Transfer (EFT) to a registered superannuation clearing house. Many accounting software providers offer this function (such as Xero and QuickBooks Online). Alternatively, if you have less than 20 employees you can register to use the ATO’s Superannuation Clearing House.

You can read more in the article on Shoestring here

Is my startup eligible for the R&D Tax Incentive?

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In Emma’s monthly contribution to Shoestring, she writes about one of the key questions we get asked by startups:

Is my startup eligible for the R&D Tax Incentive?

To assist with understanding R&D Tax Incentives better, we interviewed Scott Warnock, a Director at PwC. Scott specialises in R&D Tax Incentives and and has worked with many startups around Australia assisting them in obtaining tax incentives and Government grants.

Without replicating the full interview here, we have included some of the main points that are useful for startups:

What is the R&D Tax Incentive opportunity?

Scott Warnock: The R&D Tax Incentive is the Australian Government’s key program to support R&D and innovation. It provides companies with up to 45 cents back for every eligible dollar, even in many cases where startup companies are not yet paying tax.

How does the claim process work?

Scott: It is a self-assessment program, which is different to most Government grants (these are typically competitive in nature). In short, companies can access the R&D Tax Incentive through a two-stage process that involves:

Registering: Register R&D activities with AusIndustry (on behalf of Innovation Australia) within 10 months after year end; and
Claiming: Claim the tax offset in the annual income tax return (which would include the ATO’s R&D Tax Incentive Schedule detailing the R&D expenditure incurred).

The deadline for 30 June 2013 year ends is quickly approaching! Companies must lodge an application with AusIndustry by 30 April 2014.

What types of costs can I claim?

Scott: A broad range of costs can potentially be claimed, including salaries, on-costs, contractors, rent, and other overheads. There are a number of areas such as legal costs (including patent costs) that need to be considered on a case by case basis – the eligibility of these costs tends to be very fact specific.

Want to find out more about R&D Tax Incentives? You can read the rest of the interview with Scott here at Shoestring.

If you don’t want to miss the boat to claim R&D tax incentives for 2013, get in touch with Scott Warnock at PwC or your friendly startup accountant at Nudge Accounting.

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