When starting a business, deciding on which bookkeeping method is best suited to your business may be confusing. Two methods that you can use are cash vs. accrual accounting.
What is Cash Accounting?
Cash accounting tracks the actual money that is coming in and out of your business. If you receive an invoice, you do not record the cost until you have actually paid the invoice. This also applies when you send an invoice to a customer, you do not record the sale until you have received your payment. An example of this would be if you sent an invoice on Wednesday, but didn’t receive the payment until the following Monday, you then record the income against Monday’s date.
Continue reading “Cash vs. Accrual Accounting – Which Method Do I Use?”
What is a Fringe Benefit (FB)?
Fringe Benefits is a tax payable by you (as the employer/ small business owner) on benefits which you provide to your employees. Even though the benefit is received by your employees, it is you who bears the expense of the fringe benefits tax. This is different to employees’ salary and wages, where it is the employees who bears the cost of the tax through PAYG Withholding Tax.
Fringe Benefits do not include salary and wages or bonuses. They are generally non-cash benefits and can include the following:
- Employee is provided a work car for use. However, the employee also uses this car for personal purposes (the personal component is subject to fringe benefits tax)
- Holidays and entertainment
- Payment of a non-work related expense incurred by an employee – e.g. school fees
- and many others…
Continue reading “#TaxTipTuesday: What is Fringe Benefits Tax?”
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!”
This tax tip is based on our recent article in Startup Daily.
If you are operating your business from your home, there is a chance that you may be able to claim a tax deduction on some or even all of your home office expenses in your tax return. These expenses include rent, equipment, furniture and more.
There are a few questions that you need to answer first in order to determine whether you can claim rent and other home office expenses. Continue reading “TaxTipTuesday: I run my business from home. Can I claim my home office as a tax deduction”
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?”
The due date for your tax return depends on how you answer these three questions:
- What type of tax return are you lodging – i.e. individual tax return, partnership, trust or company
- Do you have any tax returns outstanding, or have you been penalised in the past for lodging your tax return late
- Who is lodging your tax return – are you lodging your tax return yourself? or are you lodging your tax return through a tax agent (such as Nudge).
If you are lodging your tax return yourself
If you are lodging your tax return yourself, generally it is due by 31st October (for individuals and trusts) and 28th February (for companies). However, if a tax agent is preparing and lodging your tax return for you, then generally you will receive an extension. Continue reading “#TaxTipTuesday: When is My Tax Return Due?”
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.”
If you are selling a product or service online, for example Ebay or Etsy, you first need to be able to determine whether you are operating as a hobby or a business.
What is the Difference?
A hobby is considered a spare time activity pursued for pleasure. Whereas a business requires some form of investment and enough customers to whom you can sell your product to constantly, with the intention of making a profit. Once you are a business receiving income you are required to pay tax.
How do I know if I need to pay tax?
The following checklist (click here to access to access the checklist via the ATO website) will help to assist you in determining whether you are operating as a business that should be declaring income. Each time you answer ‘yes’, the more likely it is that you are in fact operating a business, however the questions should be considered collectively rather than in isolation. Continue reading “#TaxTipTuesday: Do I Need To Pay Tax On The Money I Earn From Ebay?”