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How to claim motor vehicle deductions.
Do you ever need to use your car for work? A common questions we get asked is can someone claim travel to and from the office from home. Generally the answer is a NO.
Examples of when you can claim motor vehicle deductions include:
- Travelling between jobs
- Travelling from the office to alternative workplace (eg a client)
- Travelling to a client if you were working from home
- Attending conferences or meetings
- If you need to carry bulky tools or equipment (not a laptop or tablet but say a ladder or lawn mower)
Once you establish that you can claim motor vehicle deductions, there are different methods you can use depending on the number of kilometres you travel and how careful you are with your record-keeping:
- Log book method – log book needs to be kept for 12 weeks – source documents need to be kept
- 1/3 of actual cost – if there are more than 5,000 work related km’s travelled during the year – need to keep source documents
- 12% of original value – if there are more than 5,000 work related km’s travelled during the year
- Cents per km method – if there are less than 5,000 work related km’s travelled during the year – based on engine size
Generally the log book is the most inconvenient method for someone to follow, but it usually gives you the most accurate indication of your work hours.
This Tax Tip Tuesday brought to you with love by Nudge Accounting.
Understanding what small business tax terms apply to your business can be confusing and complicated. So we have put together a list of some terms that will help you better understand how to manage your small business tax:
Goods and Services Tax (GST)
GST is a broad based consumer tax of 10% that is applied to most supplies of goods and services in Australia. If a small business is registered for GST, they are required to submit a Business Activity Statement each quarter. Businesses registered for GST use this statement to report their business tax entitlements and obligations to the ATO.
A dividend is a distribution of the profits of a company to its shareholders. What is important to small business owners is that they can also claim franking credits when they pay a dividend. A franking credit is an income tax credit that a corporate tax entity can pass on to its shareholders. What this means is that when you pay a dividend with a franking credit, you can claim the franking credit in your personal income tax return to offset any tax payable on the dividend.
For more information on taking money out of a company, you can read our post here.
Australian Business Number (ABN)
All small businesses in Australia are required to register for an ABN. An ABN allows you to be identified with Government departments and it is a requirement that you include it on all tax invoices issued to customers.
Super guarantee contributions
A super contribution is the amount an employer must contribute to super on behalf of their eligible employees. The rate is currently equal to 9.5% of an employee’s ordinary time earnings.
For more information about superannuation for small business, read here.
On 1 July 2014, the superannuation rate for employees increased from 9.25% to 9.5%. Superannuation contributions form a key component of the pay that eligible employees receive as part of their normal salary and wages. You can read more about superannuation and eligibility of employees for superannuation here.
What impact does this superannuation rate increase have when running the payroll for your small business:
- If an employee receives a payroll package of say $50,000 including superannuation, more of this package will go to superannuation and employees will receive less cash in hand as part of their ongoing pay.
- If you are paying casual staff members, the superannuation rate increase will probably mean you are paying your staff members more each month as they are generally paid on an hourly basis plus superannuation.
- If you pay your employees fortnightly and the first pay day is 4 July 2014, you might be wondering if you need to use two different calculations for superannuation. According to the ATO, you only need to do one calculation and this would be using the new 9.5% superannuation rate.
- And don’t forget that superannuation is due by the latest 28 days after the end of each quarter.
Tax Tips Tuesdays is brought to you with love from Nudge Accounting.
Finding a small business bookkeeper is one of the most important decisions you can make in the management of your business. Why? They are helping you record and understand the financial performance of your business. We have written previously about what a bookkeeper does and the difference between a bookkeeper and accountant and you can find this information here. So what are some things that you should look out for when getting a small business bookkeeper:
1. Is your small business bookkeeper qualified?
It might seem a bit strange, but many small business bookkeepers do not have the necessary qualifications to do your bookkeeping effectively. Some things that you should look for are TAFE or industry qualifications, as well as ensuring that they are registered BAS Agents. Bookkeepers should be registered BAS agents if they help you calculate your GST or payroll liabilities. This pretty much means all small business bookkeepers. If they don’t have these qualifications, are you really getting a bookkeeper that can help you manage your small business finances?
2. Do they know how to use your accounting software?
Many small business bookkeepers advertise that they can use all types of accounting software. But this doesn’t mean they are experts in them. Always ask your bookkeeper what accounting software that they use the most? And if your choice of accounting software doesn’t fit into the top two, it might be best to look elsewhere.
At Nudge, we use only two types of accounting software, Xero and MYOB Essentials. Find out more we we use this software here. It ensures that we know exactly how they work and what you can do to make the most out of them.
3. If your bookkeeper can’t answer your question, who will?
As you deal with your bookkeeper a lot more frequently than your accountant, who do they turn to if they can’t answer your question. And what happens if they don’t know how to treat an accounting issue as they don’t have the knowledge or expertise? Does this mean that your numbers don’t make sense until you next see your accountant. Make sure that you know who to turn to if your bookkeeper doesn’t have the answers so you have up to date numbers in your business.
4. How do I avoid these issues?
Nudge does all the bookkeeping, accounting and tax for small businesses and startups. What this means is that you don’t need to worry about quality issues with your bookkeeper, as we have qualified accountants doing the bookkeeping for your small business. Using Nudge means you have up to date numbers you can have confidence in, plus we can answer all your accounting and tax questions as well.
The Tax Tips Tuesday topic this week is on how changes to the Medicare Levy will impact how much you pay your employees.
Did you know that the Medicare Levy has increased from 1 July 2014 from 1.5% to 2%? The Medicare levy is an amount most taxpayers pay to the Australian Government and is based on a percentage of their taxable income. It is used to help fund the Medicare scheme that gives access to healthcare in Australia.
This means that for all your staff members, especially those that are full time and are probably on a recurring payment from your bank, you will need to make an adjustment.
While the numbers may not be significant, now is a good time to get the calculation right before it all starts to add up. And it helps to use some good accounting software to calculate payroll for your employees such as Xero or MYOB Essentials.
Tax Tips Tuesdays is brought to you with love from Nudge Accounting.
When it comes to small business tax, there are often many areas that small business fall short. So in this blog post for SecurePay, a division of Australia Post, Emma Petroulas talks about some of the key things that small businesses should be aware of when doing their tax this financial year.
1. DO keep track of your figures
Numbers might not be your “thing”, but knowing exactly how your business is performing is vital and is the most important, year-round accounting habit for SMBs. You need to know how much comes in and how much has gone out as the more you know how the business is going, the better your decision-making will be.”
Plus, when it comes to submitting your tax returns to the Australian Taxation Office (ATO), business owners are responsible for their figures, even if an outsourced accounting company has prepared the return.
2. DO know what is tax deductible
If you think you can wine and dine your clients and simply claim those expenses as a tax deduction, think again.
Processing restaurant expenses though the business will attract a fringe benefit tax. It depends on what the expenses are, but you need to be very clear on who was at the meeting, what was discussed – and remember, alcohol is not tax deductible.
If it is a personal expense, don’t put it through the business as well. And if you have a motor vehicle, which is used for both business and personal reasons, only claim deductions for the business use. Continue reading “Tax dos and don’ts for small business”
Turn your Business Story into Numbers (+ A touch of tax tips for End of Financial Year)
Accounting Essentials for Small Businesses and Startups
Time: 04:00 pm
Location: The HUB Melbourne, 673 Bourke St Melbourne VIC 3000
As small business owners, we’ve all been told how important our numbers are. Some of us have spent hours trying to pull them together. Some of us have never understood where to start when it comes to the numbers. But when you turn your business story into numbers, it can really help set your business up for success.
Every small business has its own unique story, so the question is, how can you turn your business story into numbers?
If you are a small business owner who is number-phobic, this is a must attend event! We’ll help you love the numbers and understand how you can use them to make better business decisions.
Being end of June, we’ll also be chatting through our Nudge Essential End of Financial Year Tax tips for startups and small business owners.
During this interactive one hour session you will learn
- 3 reasons why numbers help you run a better business
- 6 key steps to preparing and forecasting your numbers
- How to make sense of your numbers
- Essential end of year tax tips for End of Financial Year
About the presenter
Mark Veran is co-founder and Head of Tax at Nudge Accounting. Nudge is all about giving small businesses their numbers each month so they can make better business decisions. A Chartered Accountant, Mark has 15 years’ experience in the accounting industry, his most recent as an Associate Partner at a Big 5 firm.
When Mark isn’t chatting to startups and small businesses, he can be found at his son’s soccer matches, or cheering on Liverpool Football Club (from home).
Tax planning for your small business is something you should always be thinking about. And don’t just think about tax planning as a way of claiming more tax deductions, it’s also a really effective way to clean up your business operations ready for a new financial year. And with financial year-end almost here, there are some really important questions that you should cover off.
1. Are you on top of your unpaid invoices?
It’s important to review your unpaid invoices (debtors list) as small businesses can claim a deduction for old debts which are not recoverable.
2. About to do some year-end invoices?
Unless you are a sole trader operating on a cash basis, generally income is assessable when an invoice is issued. This means you might want to hold off invoicing clients until July so that it is taxable in the next financial year.
3. Still have some old equipment on the books?
It’s important to review your list of assets as small businesses can claim a deduction for the remaining value of any asset which is no longer used.
4. Have you organised a stocktake?
If your business carries stock (for example if you are a retail business), then a stocktake is generally required to be done before year-end. During your stocktake, identify unsaleable and damaged stock as, if disposed or gifted to charities, these are able to be written-off and claimed as a tax deduction.
5. Need to update some of your equipment?
Small businesses can claim a deduction for the entire purchase price (up to $1,000), rather than having the deduction spread over several years. So purchasing new equipment now means you can get a tax deduction this financial year.
Continue reading “Tax planning for small business in 2014!”
Are you creating your small business budget for 2015? We have set out some of the key steps to help you achieve success as you map out the year ahead:
1. What is the purpose of your small business budget?
As a tool for goal setting and accountability, nothing beats having a budget. But what is the purpose of your budget? It really comes down to financial goals for the year ahead and how you will allocate resources within your business. It’s amazing what you can achieve if you know what you need to do to make things happen.
Know why you have a budget and how it will be used over the coming year. It means the effort you put into creating your small business budget will pay dividends.
2. Are you thinking of the money only?
The biggest reason we see small business budgets fall apart is that there is no connection between their business numbers and operations! Simple. Its easy to forecast what the numbers can look like in a perfect world. We all guilty of that in one way or another. But it is harder to play with the numbers when you need to think about your operations. So what does this actually mean?
Continue reading “Key steps to a powerful small business budget in 2015!”