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Tax Tip Tuesdays – Are client meetings tax deductible?

Tax tips, accounting, client meetings, tax deduction, bookkeeping, small business, nudge accounting, startups

Are client meetings tax deductible? We often get this question so we thought that some simple tips can help go a long way in working out whether you can claim a tax deduction. It often comes down to what is provided at the client meeting (i.e. food or drink). So what are some things you should you know:

  • What is the purpose of the event – if food or drink is being provided in a social setting, then the chances are that the client meeting would be classified as entertainment and not tax deductible
  • What is being provided in the meeting – is it a light meal provided at work or is it a set menu with matching wines. As the meal starts to become more elaborate, it starts to take the character of entertainment and is not tax deductible
  • When is the meeting being held – meals provided during work hours are less likely to be entertainment, however with this point it’s especially important to consider the purpose and whether it is social.
  • Where is the meeting being held – meetings held on your business premises (and meals consumed) are less likely to be entertainment. At a restaurant or cafe, it is more likely to be entertainment.

Are your client meetings tax deductible? Always make sure you consider these initial steps when looking at client meetings for your business.

And do you need more information on whether business lunches are tax deductible, read our article in Startup Daily here.

This Tax Tips Tuesday is brought to you with love by Nudge Accounting.

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.

Shoestring, Nudge, superannuation

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?

ShoeString Logo

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.

Startup Founders – How can I pay myself from my business?

ShoeString, Pay myself, Nudge Accounting

Writing in my monthly contribution to Shoestring, I put myself in the position of a startup founder and asked the question, “How can I pay myself from my business?”. There are different ways that a startup founder can pay themselves but it all depends on the type of business structure that they have:

1. Sole traders – the business money is your money

A sole trader is where an individual operates a business and there is no distinction between them and the business. And this means that all money made from your sole trader business is yours. You just need to be careful as this means that all money you make in your sole trader business is taxed in your personal tax return. And personal tax rates can get quite high. Up to 45% + the medicare levy of 1.5%.

2. Partnership – you take a share of the partnership profits

A partnership is similar in many respects to a sole trader. Except that you are working with others, called the Partners, and you share the profits with them based on your share of the Partnership. Although a Partner may want to pay themselves a salary, this is effectively the same as them receiving a share of the profits and that is how the ATO views it.

3. Company – how do I pay myself?

There are different ways you can pay yourself from your company. As the company is a separate entity to you, you need to ensure that you don’t draw down money from the company as if it is your personal bank account. Ways you can pay yourself include: Continue reading “Startup Founders – How can I pay myself from my business?”

Contractors vs Employees. What do I need to know for tax?

Contractors, Employees, Startups, Small Business, Shoe String

When it comes to hiring, a common area of confusion for startups and small businesses is whether their new hire is in fact a contractor or an employee.

To make things a bit clearer, I wrote an article this month for leading Startup publication, Shoestring about this very issue. It’s really important to get this right as hiring contractors and employees comes with different responsibilities with different outcomes. So, where do we start on this issue:

1. Is your new hire a contractor or an employee?

The ATO lists six factors which need to be considered in determining who is a contractor vs employee:

  • Is your hire able to sub-contract/delegate? A contractor is able to sub-contract/delegate and pay someone else to carry out the work, whereas an employee is not.
  • What is the basis of payment? A contractor is paid for achieving a result, whereas an employee is based on hours worked/commission/price per item.
  • Who provides the equipment, tools and other assets? A contractor provides the majority of the equipment, tools and other assets they use and doesn’t get paid an allowance for these. Whereas, an employee does not provide the majority of equipment, tools and other assets and in instances where the do, they are reimbursed for these costs. Continue reading “Contractors vs Employees. What do I need to know for tax?”

Worrying about tax & my startup

Tax, Startup, Shoe String

A big stress for startups we come across are all the different tax requirements they need to be on top of.

Last month, I wrote an article for leading startup magazine, Shoe String on some of the key requirements which startup founders need to worry about.

These include:

  1. Registering for GST – when do you need to start worrying about GST? You need to register for GST if your 12-month turnover or anticipated 12-month turnover is $75,000 or more
  2. Tax & Hiring staff – when it comes to hiring staff, you need to provide staff with a Tax File Number Declaration Form, as well as assessing whether to pay superannuation, how much superannuation to pay, and how much tax must be withheld from their wages.
  3. Superannuation – a mistake a lot of startups make is in thinking that superannuation is not payable for casual staff. This is not right. The same superannuation requirements apply for casuals and permanent employees. Continue reading “Worrying about tax & my startup”

Is my business lunch a tax deduction? Nudge in Shoestring

Tax deduction, business lunch

“Is my business lunch a tax deduction” was our article last month for leading Start-Up publication, Shoe String Why? Because it is one area which causes a lot of confusion and start-ups and small businesses want to understand whether meals (and coffees) can be claimed as a tax deduction.

It’s not a black and white area so we thought that some simple tips can help go a long way in working out whether you can claim a tax deduction. So what are the questions that you should ask (and that the ATO wants you to consider):

  1. Why is the food or drink being provided – i.e. what is its purpose of the event. If it is provided in a social setting, then the chances are that is is entertainment
  2. What food or drink is being provided – is it a light meal provided at work or is it a set menu with matching wines. As the meal starts to become more elaborate, it starts to take the character of entertainment
  3. When is the food or drink being provided – meals provided during work hours are less likely to be entertainment, however with this point it’s especially important to consider the purpose and whether it is social.
  4. Where is the food or drink being provided – meals consumed on your business premises are less likely to be entertainment. At a restaurant, it is difficult to say it isn’t.

It’s important to consider these initial steps to help you work out whether you can claim a tax deduction on meals (and coffees).

And for more information on this, and the next steps we take at Nudge, you can read my article here.

Cheers
Emma

Budgets. The Story of your Business in Numbers! Nudge in Shoestring

Nudge

“Budgets and the story of your business in numbers” was our article this month for leading Start-Up publication, Shoe String. Why? Because so many start-ups and small businesses don’t have an effective budget in place. And to help me out, Aaron stepped into my shoes to talk about a presentation on budgets he gave to The Entourage’s Scalable and Saleable program.

Why do we think budgets are so important? Because they map out the strategy of your business into numbers. After all, that’s what drives your business to success.

So what are the reasons for start-ups and small businesses to have a budget:

  • You need to work out whether your start-up business can be sustainable / profitable
  • It helps you keep yourself accountable to the targets you have set
  • To help track your operations and the costs you have to meet

Continue reading “Budgets. The Story of your Business in Numbers! Nudge in Shoestring”

How can I take money out of my company? Nudge in ShoeString

ShoeString

“How can I take money out of my company” was my article this month in leading Start-Up publication, Shoe String. Why? Following up from last months post on the issues around moving a business from their own name to that of a company, I decided to follow up with a more detailed post about how to take money out of your company.

Normally I don’t talk in so much technical language but it’s a question that I keep getting asked and is something very relevant to start-ups and small businesses.

So, what were some of the key tips that you should know when taking money out of your company:

  • A Director is not considered to be any different to an employee when taking money out as a salary. So factor in PAYG tax and superannuation when thinking of these types of payments.
  • Dividends paid to you can gain the benefit of tax credits when done properly. So make sure you have taken the right steps when doing this.
  • Be careful if you borrow money from your own company. It’s not a bottomless pit and the ATO expects you to repay this loan, just like any other loan.

You can read the article here.

Cheers

Emma

But it is my company and my money! Nudge in ShoeString

But it is my company and my money! Nudge in Shoestring

“But it is my company and my money” was my article in this months leading Start-Up publication, Shoe String. Why? We often get questions about the issues start-ups and small businesses have to consider when moving a business from their own name to a company. And those questions are often about money.

When it comes to starting a company, you need to be aware that the company bank account shouldn’t be treated like your personal bank account. And what steps do you need to take when managing or taking money out of the business.

Some of the key tips that we thought were really useful are:

  • Separate business and personal expenses to help you track your business performance more effectively.
  • Be clear about what is the company’s and what is yours. Also make sure that any payments you take don’t get you into tax troubles.
  • If someone tells you that a company director can be a contractor, think again. Why? A company director should be acting for the benefit of the company, a contractor is someone who is independent.
  • If you have other owners in the company, make sure you are completely transparent with any money you take out.

We find that these steps are really important to help manage your business and to make better business decisions.

You can read the article here.

Cheers

Emma

We Are E.S.T. 2012

Who WE Are

At Nudge, we do it all for your small business: bookkeeping, accounting and tax. we can also help you with tax advice, company setups, personal tax, monthly performance summaries and specialist advice for small business owners. All work is completed by Aussie Accountants so you’ll never have to worry about compliance again.

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OUR COMPANY Quality

With the uprising of technology and the plethora of competition in the majority of industries, business owners tend to seek help and assistance in managing and tailoring their business to suit the era’s needs and expectations. The process of accounting provides reports that bring key financial indicators together. Understanding financial concepts and gearing clients to financial success is what we exceed at here at Nudge Accounting.Our expertise lingers throughout the field of online accounting and engulfs all financial cases. With years of extensive experience and a dedication for our clients success, we endeavour to evolve our existing methodologies, in order to transform into Australia’s leading online financial firm.

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A successful marriage between bookkeeping and accounting will contribute to the long-term financial success of any business. Nudge Accounting takes pride with their online bookkeeping and online accounting services that encompass all aspects and sectors of finance to ensure our clients receive the utmost finest service. Commitment is an attribute we stand for as client satisfaction is always key to evolution.Our reliability is second to none, as we ensure our clients are well organised and pursuit their financial tasks with accuracy and precision. Nudge Accounting propelled their excellence and with their dynamic team of online accounting professionals transcended competition and have cemented themselves as the leading online bookkeepers in Australia.

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Our software and technological client interface is meticulous and seldom do alternative online accounting companies acquire this quality of infrastructure. This is what portrays our excellence and gears Nudge Accounting towards success. We ensure client satisfaction, by going through all the details and explaining financial situations to our clients. Engaging the client is what makes us stand out!Online accounting software, combined with online accounting techniques is a much more effective procedure than filling out paperwork because half the work is already done for you! Nudge Accounting take pride in providing the utmost finest online accounting service across Australia, with a variety of small to medium businesses and accounting excellence, technology and Nudge go hand in hand, just like the glove fits the hand!

WE HELPING SMALL BUSINESSES

Nudge provide exceptional accounting service and support whilst remaining price competitive. All of our packages provide the same great features for your small business accounting needs, which includes:

  • Performance Management Reporting
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