Most if not all small business owners understandably say they work from home and want to claim home office deductions. So with this being the case, we have covered off some of the areas where small business owner may be able to claim a tax deduction for occupancy and/or running expenses.
- Occupancy expenses are expenses incurred in keeping or maintaining the premises and includes things like; rent, mortgage interest, rates, land taxes and house insurance premiums.
- Running expenses as those incurred in running the small business like; phone rental and business calls, internet fees, depreciation of office furniture and equipment and any additional heating, cooling, lighting and cleaning expenses.
First thing to make sure of is whether or not the home is a place of business and if an area has been set aside exclusively for business activities. If the home is a place of business and an area has been set aside exclusively for business activities, then a portion of both running and occupancy expenses can be claimed as a home office deduction.
Unfortunately if someone just does some work at home but have a business premises somewhere else as well, they cannot claim a deduction for Occupancy expenses.
The downside of claiming occupancy costs means that if the home owner ends up selling their home, they may need to pay capital gains tax upon sale on the portion that was business related. This really needs to be considered when claiming a deduction for Occupancy Costs.
Also a small business owner who derives Personal Services Income cannot claim Occupancy Costs.
This Tax Tips Tuesday is brought to you with love by Nudge Accounting.
Startup Daily today interviewed Xero about how its customers use its accounting software. And Emma Petroulas from Nudge Accounting gave her views in the article on how accounting software, including Xero, can help startups and small businesses.
So what were some of the things that Emma had to say about Xero and accounting numbers for businesses:
- “The thing about numbers is that they don’t lie,” she says. “What we generally find with startups is that they tend to overstate the financial health of their business, but when they have their numbers in front of them it forces them to make some difficult decisions.”
- When a client knows their numbers, they can make the best decisions for their business. Nudge Accounting says that they use Xero to process clients’ numbers each month, which means that they have almost real time financials at their fingertips.
- Many of our small business clients have found it difficult to use Xero payroll,” she says.“Setting up payroll in Xero is easy when clients have staff who are on annual salaries, but when our clients have lots of casual staff working different shifts or irregular hours, they find it hard to navigate their way around the different payroll calendars.” In saying this, Petroulas says that they still use Xero and “love it”.
- This is a vital tool in the startup environment and could very well prove an early indicator for founders that things are going pear-shaped long before that ‘closing down’ sign rears its head. Based on the numbers in a management report, clients can recognise inefficiencies in their business and improve many parts of their operations process.
- “Using the tracking function in Xero, they have also been able to isolate and understand the most profitable product lines of their business, and change their strategic direction based on this,” adds Petroulas.
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.
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).
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 one simple monthly fee, all of your accounting and compliance needs are taken care of, so you can focus on running your business.
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 Venuemob here or @venuemob
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!”
With Bitcoin use increasing in Australia, there has been little guidance to date from the ATO and other regulatory authorities about the accounting and tax treatment of this payment method. So Nudge Accounting has put together a list of some of the key accounting and tax questions you may have when using Bitcoin.
If I make a sale from my business and the customer pays using Bitcoin, do I need to record the GST on the sale?
We can break this down into two components:
- When you make a sale to a customer, you should be issuing a valid tax invoice that includes GST if you are registered for GST. You will be required to remit this amount to the ATO the next time you lodge a Business Activity Statement.
- If you are not registered for GST, you cannot include a GST component on the tax invoice and you are not required to remit any portion of this sale as GST to the ATO.
Outcome: Yes, you are required to record the GST on this sale if you are registered for GST.
If I buy something for my business using Bitcoin, can I claim GST on the purchase?
- When making a purchase for your business and the supplier provides you with a valid tax invoice that includes their ABN and a GST amount, you are entitled to claim the GST back if you are registered for GST. This is irrespective of the currency you purchase the goods in.
- If the supplier provides you with a valid tax invoice that includes their ABN and there is no GST on the invoice, you are not entitled to claim any GST, even if you are registered for GST.
Outcome: Yes, you should be able to claim GST on eligible business purchases if you receive a valid tax invoice that includes GST and you are entitled to claim the GST.
What is the difference between a bookkeeper and accountant?
I recently attended the launch of Jack Delosa’s new book, Unprofessional, in which he talks about his experiences as an entrepreneur and business owner.
I was immediately drawn to his chapter on Knowing your Numbers as a business owner and the great decisions you can make when you have them. At Nudge, we love it when business owners and clients know their numbers to make great business decisions!
Jack outlines from his perspective as a business owner and business educator the types of people you need to work with to manage the finances of your business. A bookkeeper and accountant were two key roles that he viewed as critical in any business, no matter the size. I have used extracts from his new book as it gives his perspective as a business owner on how he views the different roles.
What is a bookkeeper?
A bookkeeper is someone who does the administrative and operational tasks that relate to managing the finances of the business.
Continue reading “Do I need a bookkeeper or accountant or both?”
Tax deductions and your startup
As part of our ongoing support for the Startup community, we blog (and vlog) every second month for Microsoft BizSpark as part of our #nudgemoments initiative. #nudgemoments is all about giving startups the opportunity to ask a finance question and get an answer that helps them grow their startup and make better business decisions.
The #nudgemoments StartUp Question for January was: I’m spending a lot of money on my startup. I’m not sure what I can claim for tax? Please help!
So in response to this question, Emma from Nudge Accounting broke it down into some manageable bits:
1. Running expenses
Common expenses such as advertising and marketing, office rent, travel, phone and internet along with accounting fees are all generally considered as tax deductions for your startup.
2. Equipment and other asset expenses
When you buy something for your startup such as new office furniture or a new laptop, these generally cannot be considered as a tax deduction straight away but must be spread over several years. This is designed to you match the tax deduction to the life of the asset. There are new rules from the ATO in place that mean you can claim an immediate tax deductions for items purchased below $1,000 in value.