What is payroll tax?
Often business owners get confused with payroll tax and PAYG Withholding Tax. Whilst they are both paid by employers and related to the staff they employ, they are two completely different taxes.
What is the difference between PAYG Withholding and Payroll tax?
PAYG Withholding is a tax on staff wages. It applies to businesses of all sizes, regardless of whether you have one staff member or 1,000 staff members. For more information, refer here.
Continue reading “#TaxTipTuesday: What is payroll tax and when do I need to pay it?”
A very important lesson was learnt on Sunday night’s episode of Shark Tank by a founder of Melbourne based startup WeTeachMe and that is, Know Your Numbers!
It is essential to track your numbers and know how your business is going, it is the best thing you can do for you business.
Why should I track my numbers?
- Do you want to be able to raise funds for your business? If so, you need to know what your revenue is and how much is coming in and out of the business.
- How can you keep yourself accountable if you aren’t actively measuring your performance? and further how can you be accountable to others (business partners)?
- How are you able to grow your business and make investments if you don’t even know whether you have any money available?
If you want to be a successful startup then these are the sorts of questions you should be able to answer straight away. Continue reading “Shark Tank – Why you need to Know your Numbers!”
A lot of confusion can occur amongst startups and whether or not they can claim their business lunches as a tax deduction. In order to help eliminate some of the confusion there are a few simple steps that you can follow in order to determine whether you these expenses are tax deductible or not.
The questions that you should ask yourself, are as follows;
- Why is the food or drink being provided? What is the purpose of the food and drink being provided, if it happens to be a social setting than the chances are this is entertainment.
- What food or drink is being provided? As your meal starts to take a more elaborate form, for example there is matching wines, its starts to take the form of entertainment.
- When is the food or drink being provided? If a meal is provided during work hours than the chances of it being classed as entertainment are less likely. You do need to consider though whether or not it is social.
- Where is the food or drink being provided? If you consume the meal on your premises than its not likely to be considered entertainment. However if you go to a restaurant it is difficult to say its not entertainment.
Continue reading “TaxTipTuesday: I am having a lunch with a client. Is it tax deductible?”
So you have a steady flow of income but you’re stuck on how to pay yourself? First it’s important to understand what structure your business is operating under, and this will impact how you can pay yourself.
In this tax tip, we will look at three of the common business structures, being; sole trader, partnership and company, and how you can pay yourself under each of these.
As a sole trader you are the individual operator and from the tax office’s viewpoint, there is no distinction between you and the sole trader – your sole trader is attached to your own personal tax file number. All the money that you make from your business (less tax) is yours. Continue reading “#TaxTipTuesday: I have my own business. How can I pay myself?”
Recently Emma was involved in a podcast for the website, So You Want To Be A Virtual Assistant. So You Want To Be A VA, has created a professional-quality course that will train you to become a successful, self employed virtual assistant.
Emma’s podcast focused on finances, business and you, and these are a few of the key questions which were covered;
What do Virtual Assistants need to consider when they get started?
There are two important things to consider before you start your business.
- Structure: Are you going to operate as a sole trader, partnership, company or trust.
- How are you going to keep your accounting records: It is important to have systems in place, so that they stay organised and know how much money they are making and spending
What is a common mistake when starting out?
Not being organised is one of the most common mistakes seen, people become really overwhelmed with everything they need to do and fall behind very quickly. When starting out you need to make sure you are aware of all aspects from your business – from marketing to customer service to the accounts. If you get a really good system in place you can avoid those sleepless nights. Continue reading “So You Want To Be A Virtual Assistant – Finances, Business and You.”
Writing for the Officeworks blog ‘The Office Space’ in our February blogpost, we look at setting up your small business budget for the 2015 year.
Some of the key things you should focus on with your small business budget are:
1. Understand what your budget is
A budget is a forecast of what your business income and expenses will be over a period of time.
2. What is the purpose of your small business budget
Like all goal setting, we set targets for what we want to achieve within a time frame. The purpose of your budget is to set the financial goals for the business and plan out how you will allocate resources to achieve these targets.
3. Is your budget just about the money?
Yes, and No. We set financial goals as we want to achieve certain targets in our business. However, one area we often see small businesses failing in is the disconnect between their business operations and their business finances. A budget allows you to allocate the resources that you need to achieve your financial goals. And the way that you do this is by looking at your operations and determining what is needed, when. Just remember, your finances are an output of the operational decisions you make in your business. Make sure that your budget has mapped out your operations and how you see your business running for financial success.
Looking at the tax rate for your business is something many small businesses ask about. But it all depends on the type of business structure that you have. So lets get to the bottom of it:
What is Your Business Structure?
The structure of the business will determine the tax rate. The different structures include; Sole Trader (Individual), Partnership and a Company. You can read more about different business structures here.
1. What is a Sole Trader?
As a sole trader there is no separation in business ownership between yourself and the business. Therefore there is unlimited liability, so if your business can’t pay its creditors, your own personal assets could be up for sale.
2. What is a Partnership?
A partnership requires 2 or more people and like with a sole trader, the partners individually share in the business assets as well as its liabilities.
3. What is a Company?
A company has a director(s) as well as shareholder(s). The directors are responsible for the management of the company, whereas the shareholder(s) own the company. Continue reading “TaxTipTuesday: What’s The Tax Rate For My Business?”
A PAYG Instalment forms part of a small businesses BAS (Business Activity Statement). But what exactly is a PAYG Instalment? And when do you need to pay it for your business?
What is a PAYG Instalment?
A PAYG Instalment (or Pay As You Go Instalment) is the ATO’s way of making us prepay our income tax during the year for our Business.
When do you pay PAYG Instalments?
When you lodge your Income Tax Return for your small business, any PAYG Instalments paid during the year will be a credit against the Income Tax calculated. So by prepaying your tax it will help to reduce or avoid those lumpy tax payments at the end of the year, which no business wants!
A PAYG Instalment amount is calculated based on your previous tax return lodged. So, if you paid some tax last year for your business, it is likely that you will have to pay PAYG Instalments this year. However, if it is your first year of operation you won’t pay PAYG instalments, as you haven’t lodged your first tax return yet. Also, if your business was in a tax loss position last year, you will not pay tax instalments as the tax payable last year was nil. Continue reading “Tax Tip Tuesday: When do I pay PAYG Instalments for my Business?”
Workers compensation is something that business owners often think about but never get around to doing something about it. So let’s look at some of the key things to be aware of and when you need to register for Workers Compensation.
- Workers Compensation is a state based scheme that protects employees and employers in the event of a work related injury or disease. It provides a level of insurance so that injured workers can receive entitlements and / or medical assistance should they be injured in the workplace.
- The conditions associated with registration vary by state but for instance when looking at the NSW scheme, registration is required when:
- Salary & wages for the business are greater than $7,500. This includes Directors wages where Directors who are working in the business are also considered to be employees of the company
- Businesses that employ apprentices or trainees must register automatically.
The Workers Compensation registration must be for all employees and will cover both permanent and casual staff. It also pays to consider whether your contractors will be considered a worker under your state based Workers Compensation Scheme as certain contractors are included in this definition.
In this Tax Tip Tuesday, we look at a question many business owners and employees ask ‘Are my work clothes a tax deduction?’
The ATO allows a tax deduction for a cost of buying and cleaning occupation specific clothing, protective clothing and uniforms that are distinct to your place of work. So what does this mean:
1. Occupation specific clothing
If your occupation requires you to wear specific clothing, that clothing is not something that you wear everyday or in a casual setting, and the public can easily recognise your occupation from your clothing, you can claim a tax deduction for that clothing.
A classic example is a chef’s outfit including the checked pants that they wear. Not something you really want to wear out of hours!
2. Protective clothing
You can claim a tax deduction for worth clothes and footwear that protect you from illness of injury from your workplace or the environment you operate in. To be considered as protective clothing, it must significantly protect you from the risks present in your workplace. Some examples of protective clothing include:
- Safety vests, hard hats and steel capped boots worn on construction sites
- Sun-protection clothing for outdoor workplaces
- Non-slip shoes for nurses
While ordinary clothing may provide some protection, the ATO specially excludes a tax deduction for clothing that is required in your workplace but does not provide significant protection to you i.e. closed shoes.
3. Distinctive uniforms
You can claim a tax deduction for organisation specific clothing if the clothing has been designed and made only for that employer, it has the employers logo permanently attached and is not made available to the public.
If it is compulsory as part of your employment that you wear this uniform at work, you may also be entitled to claim items such as shoes and socks that form part of that uniform and their characteristics are specified in the employers uniform policy.
This Tax Tips Tuesday is brought to you with love by Nudge Accounting. You can read other Tax Tips here.