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Officeworks Blog: Small Business budgets in 2015

small business budgets, small business, startups, ato, nudge accounting, officeworks

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.

You can read the full article about small business budgets on the Officeworks blog here.

How does my Tax Return affect my PAYG Instalments?

Tax tips, accounting, PAYG Instalments, bookkeeping, small business, nudge accounting, startupsSo you have been organised this year and have prepared the Income Tax Return for your small business. Last year was a great year, which means that you are stuck with a tax bill. At first you think lets lodge it on the last day so I can defer paying the tax as late as possible.

What does this mean for the quarterly PAYG Instalments you have to pay?

Lets look at an example:
A small business works out the taxable income for the year ended 30 June 2014 is $100,000. Company income tax on this is $30,000.

The company has paid quarterly PAYG Instalment of $2,000 per quarter. The total PAYG Instalments is $8,000.

On this basis, the balance of the income tax payable when the return is lodged is $22,000.

Depending on when the income tax return is lodged, the small business will need to make a catch up PAYG Instalment in that quarter. What this means for the PAYG Instalments is as follows:

(a) If the income tax return is lodged in the September 2014 quarter, the quarterly PAYG Instalments going forward will be approximately $7,500 per quarter.

(b) If the income tax return is lodged in the December 2014 quarter, the quarterly PAYG Instalment for the December quarter will be approximately $13,000, then $7,500 for the following quarters.

(c) If the income tax return is lodged in the March 2015 quarter, the quarterly PAYG Instalment for the March quarter will be approximately $18,500, then $7,500 for the following quarter.

(d) If the income tax return is lodged in the June 2015 quarter, the quarterly PAYG Instalment
for the June quarter will be approximately $24,000.

Bear in mind for the above example that the quarterly instalments remain at $2,000 per quarter until the income tax return is lodged.

So in summary, once a return is lodged, the ATO will reassess the quarterly PAYG instalments. We just need to be aware of how this is calculated so business cash flow for the rest of the financial year is not so lumpy.

This Tax Tips Tuesday is brought to you with love by Nudge Accounting. You can read more about PAYG Instalments and other Tax Tips here.

Do I still benefit from deferring lodgement of my business tax return?

Tax tips, accounting, Business tax return, bookkeeping, small business, nudge accounting, startupsMost small business who are in touch with their financials will have an idea if they have a hefty income tax bill looming. Some of these guys will try to get in early with their accountants to find out exactly how much they need to pay in income tax, even though the business tax return might not be due until May of the following year. Once the balance of the income tax has been worked out, the general rule was “lets hold off lodging until the return is due”.

The problem that this creates is the surprise PAYG Instalment, which is also known as the “catch-up” PAYG Instalment.

Once the business tax return is lodged, the ATO will re-assess the quarterly PAYG Instalments the small business needs to make. If the lodgement of the income tax return is deferred until May (the last quarter of the financial year), then the “catch-up” payment will also fall into the last quarter, which means there would be a significant payment in July, which is when the June quarter activity statement is due. Continue reading “Do I still benefit from deferring lodgement of my business tax return?”

Small business tax concessions

Small business tax, nudge accounting, online accountingChanges to small business tax concessions are now in place with the Mineral Resources Rent Tax being abolished this week. And the Australian Financial Review interviewed the ATO as to what these changes mean for small businesses around Australia.

So what are the things you should be aware when considering these small business tax changes:

  • The instant tax write-off of assets under $6,500 cannot be claimed by Small Businesses from 1 January 2014. We wrote about this previously in our June tax update which means that assets can only be written off if they were purchased for under $1,000. “The Tax Office said it will only apply to assets acquired on or after January 1, 2014 “as such it will impact on the returns for the 2013-14 income year”, so if this $6,500 was claimed in your 2014 Income tax Return, an amendment will need to be processed.
  • Loss carry-back allowed companies to use a current-year loss against taxable income in previous years, resulting in a refund for all or part of the tax value of the loss. Under the changes that will now be repealed , businesses were able to carry-back up to $1 million in losses each year and get back a $300,000 refund in subsequent years. These changes which are expected to be prospective will remove this concession.

You can read more about this article in the AFR here.

Photo courtesy of the Australian Financial Review.

Tax Tip Tuesday: GST and Small Business Cashflow

Tax tips, accounting, GST, bookkeeping, small business, nudge accounting, startupsMost small business are required to pay GST on a quarterly basis. A problem we see a number of small businesses encounter, particularly startups, is that cashflow can been a little tight when the end of the quarter comes around.

An important issue to remember is that when charging customers, the additional 10% invoiced as GST shouldn’t be considered as income or money coming in. The reason is that it will end up being paid to the ATO at the end of the quarter. This is easy to forget, particularly when decisions need to be made about paying yourself or making investments for the business and you look at your bank balance to see what you can spend.

To assist in dealing with this cashflow issue at the end of the quarter, some small businesses put the 10% aside into a separate bank account as soon as the income is received. By doing this, the funds are kept away from the general bank account.

At the end of the quarter, when the BAS is prepared, it is very likely that the GST put aside may be too much because it doesn’t account for the GST refundable on the expenses incurred. So rather being short on cash at the end of the quarter there would actually be a little extra, which has been saved in the separate account. This system works well with a number of small businesses and startups.

Other times, we see business who receive monthly performance summaries as part of a Nudge package look at what they owe the ATO at the end of each month and set that money aside.

Either way, these businesses are planning for the future by managing GST as part of their small business cashflow.

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

What numbers do I need to show an investor? The Entourage Blog

The Entourage, investors, nudge Writing as part of our new contribution to The Entourage Blog, we look at what numbers do businesses need to show investors.

The first step any company should have is an understanding of what your product is and who the market is you are selling to. This is an absolute must before you even start chatting to anyone else. But when you start these conversations, what are some questions you will get asked by investors?

How do you acquire the customer and how much does it cost?

When acquiring a new customer, there are a range of costs that you have to think about. Google AdWords, Facebook advertising etc. How much are you spending on acquiring this customer?

What’s the lifetime value of a customer?

How much you make from a customer over their lifetime is critical to understanding what your future prospects will look like. The value of the data about your customers spending habits helps you and potential investors understand what your customer lifetime value.

What are your overheads?

That is, what are the costs that you have that aren’t directly related to a product sale. Staffing, rent, utility bills, IT costs, they all give a great understanding not only on what your cost levels are but how you run your business.

Why is it important for you to be able to answer these questions? It comes down to you owning the business numbers. And by doing so, you give potential investors confidence that you know what you’re talking about and know where your business is at.

You can read more about numbers for investors here.

Tax Tips Tuesday – What is the 80 20 rule?

Tax tips, accounting, 80 20 rule, bookkeeping, small business, nudge accounting, startups

The 80 20 rule is something that we often get asked about by contractors and business owners? So what is it and where will you see it in business?

The 80 20 rule is one of several tests that fall under the ATO’s Personal Services Income provisions relating to income received by consultants and contractors. Personal Services Income is where the majority of the income is generated for the skills, knowledge, expertise or efforts of the person who performed the service.

Irrespective of what structure you operate under, if Personal Services Income applies in your situation, your deductions will be limited and income generated by you will be attributable solely to you, not your business. This means any perceived tax advantages associated with creating a corporate structure may be redundant under these rules.

So where does the 80 20 rule come into play? One of the ways in which the ATO determines whether you fall under the Personal Services Income rules is by looking at several tests. The 80 20 rule is one of these tests that looks at whether 80% or more of your income comes from one source (including related parties). If it does, then the Personal Services Income rules will apply which will require additional considerations when doing completing your Income Tax Return. If it doesn’t, than the Personal services Income rules will not apply and income will be considered business income.

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

Startup Spotlight with WeTeachMe

Nudge Accounting, startup spotlight, small business, startups, weteachme

At Nudge, we think accounting should be simple. Our online accounting packages provide an affordable end-to-end solution for small businesses and start ups. With efficient online systems, cloud storage and a dedicated client success manager, our team of Chartered Accountants ensure your finances are in good hands.

For more information about Nudge Accounting’s work with startups around Australia or our Startup Spotlight series, get in touch or find out more at @nudgeaccounting. And you can see more about our fantastic client totWeTeachMe here or @WeTeachMe.

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.

How do I claim the R&D Tax Incentive?

Nudge Accounting, PWC, Startup daily, R&D tax
In this months contribution to Startup Daily, we talk about the R&D Tax Incentive with Scott Warnock from PwC. We have previously talked to Scott about eligibility for R&D tax incentives and how the incentive can benefit businesses around Australia.

We go through some of the key questions that businesses ask around the R&D tax incentive:

What is the R&D Tax Incentive opportunity?

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 start-up companies are not yet paying tax.

Why should I lodge my application so soon after year end?

The benefits can provide much needed funding for startups. Most startups are pre-revenue and therefore eligible for a cash refund up to 45 cents for every eligible dollar. The sooner you lodge your application and the company income tax return, the sooner you receive the refund (and cash in the bank)!

What is the minimum amount I can claim?

The minimum expenditure to be eligible for an R&D Tax Incentive claim is $20,000. In PwC’s experience in working with a large number of startups, the base level of expenditure to ‘justify’ an R&D claim is approximately $50,000.

You can read the article in full here or get in touch with Scott Warnock from PwC here.

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.

OUR COMPANY Commitment

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
  • Annual Tax Return Preparation and Lodgements
  • Annual Financial Statements
  • Financial Monthly Statements
  • QTR BAS Preparation and Lodgements
  • Monthly KPI's to Identify Improvement Areas
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