There were a few exciting incentives proposed for small business in the Federal Budget released on 12 May 2015.
The most significant proposal relates to the $20,000 tax break on the purchase of equipment. If you are a registered small business with an annual turnover of under $2 million, you can claim immediate tax deductions for purchases of $20,000 and under.
Assuming the legislation is passed, this scheme comes into effect retrospectively from 7:30pm on budget night (12 May 2015) and ends 30 June 2017.
We will keep you posted about when, or if, this proposed incentive becomes law.
Most people agree there is very little government assistance provided to small businesses. There is however one significant concession the government provides, which relates to selling your small business.
The Capital Gains Tax (CGT) concessions provide options on how to reduce the Capital Gains Tax – sometimes to ‘nil’ – when or if you finally decide to sell.
Continue reading “#TaxTipTuesday: What Are The Small Business Concessions and When Can I Access Them?”
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?”
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?”
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?”
A common area of confusion for startups and small businesses, is whether or not their new hire is in fact a contractor or an employee. It is important that the difference between a contractor and an employee is clear, as they come with different outcomes and different responsibilities.
Determining whether your new hire is 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? An employee can not sub-contract/ delegate and pay someone else to carry out the work, whereas a contractor can.
- 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.
- Who takes the commercial risk? Contractors take on the commercial risks, being legally responsible for their work. An employee on the other hand does not take on the commercial risks which are borne by your business instead.
- Who has control over your hire’s work? Contractors, subject to the terms in your agreement with them, can exercise freedom in the way they carry out their work. Whereas, workers are more bound by the employment terms of your business. Contractors operate independently from your startup whereas employees are part of your business.
- Is there independence?
Continue reading “TaxTipTuesday: Contractors vs Employees. What do I need to know for tax?”