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#TaxTipTuesday: I have my own business. How can I pay myself?

Tax tips, tax, business, bookkeeper, ato, startups, small business,

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.

Sole Trader

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?”

Startup CEO’s should outsource accounting

Nudge accounting, online accountants, small business, xero, outsource accounting

A client sent me an interesting link the other day. It was about outsourcing and the tasks that startup CEO’s should outsource. And one of the key points was to outsource accounting.

I love it how they have talked about the things to outsource including HR, office decorations etc. But that part about outsourcing accounting made it for me so I have reproduced the section below:

“In fact, spending time on financial anxieties or exhilarations brings along huge opportunity costs, especially for a skilled CEO, whose time is infinitely valuable to their startup’s success. If you’re tempted to tinker – or even if you aren’t – limit yourself to P&L check-ins. Your one big goal is growth, right? Feed it one big metric to match. Continue reading “Startup CEO’s should outsource accounting”

Paying superannuation for my team – what do I need to know?

As part of our monthly blog post for Shoestring, we write about the superannuation requirements that employers need to meet for their team members.

Shoestring, Nudge, superannuation

The key superannuation requirements that employers have to meet are as follows:

1. Relevant employees

(a) Full-time, part-time and casual employees

When it comes to superannuation contributions, you are required to pay contributions for employees if they are aged 18 years + and if they earn at least $450 or more in gross wages in a month.

b) Contractors

A common mistake we see startups make is that they assume that they are not required to make superannuation guarantee contribution payments for contractors. If an individual is paid mainly for their labour for hours worked under a contract, then you will have to pay contributions for them, irrespective of whether they are a contractor or an employee.

2. How much superannuation do you need to pay?

The current rate of superannuation is 9.25% and is scheduled to change to 9.5% from 1 July 2014.

This rate of superannuation must be applied to the Ordinary Time earnings of your employees. This includes payment for your employees’ ordinary hours and whilst it includes commissions and performance based bonuses, allowances and shift-loadings; it does not include overtime payments.

3. When is superannuation due?

Superannuation guarantee contribution payments for your team need to be paid by the 28th day of the month following end-of-quarter. i.e. for the June quarter, payment of superannuation payments is due 28th July.

4. What else is changing?

Apart from the proposed change in superannuation rates, the Government has confirmed that superannuation contributions must be paid electronically by employers into the future. The new system will be compulsory from 1 July 2015 for businesses with less than 20 employees.

Under the new ruling, superannuation payments must be made using a single Electronic Funds Transfer (EFT) to a registered superannuation clearing house. Many accounting software providers offer this function (such as Xero and QuickBooks Online). Alternatively, if you have less than 20 employees you can register to use the ATO’s Superannuation Clearing House.

You can read more in the article on Shoestring here

Nudge talking about accounting essentials for startups

Accounting essentials for startups

Nudge presented to over 70 startups and founders at the Melbourne University Accelerator Program (MAP) about key accounting essentials to manage their startup. The presentation was recorded by MAP as part of their Masterclass series designed to give startups applying or going through the MAP program the best possible chances for success.

The presentation covered off many of the basics around accounting that all business owners should understand. One key slide of interest that related to both a startups operations and also investors covered off many of the key questions that startups need to ask including:

accounting, startups, nudgeThe slide asks some really important questions around the viability of a startups business model and whether it can generate sustained returns in the future. These questions ultimately come back to what potential investors are looking for and the future you are working towards with your startup.

While many startups are looking at the solution to a particular problem, these questions continually come back to the ‘how’ of your startups operations. Without answering the ‘how’ in your business, a vital link between the startup strategy and operations / finances is missing.

Sean Moynihan from PwC was also presenting and talked about the R&D tax incentive and how it applies to startups through the MAP program

What is the superannuation rate for my small business employees?

Superannuation rates

Managing superannuation contributions for your small business employees can often be a difficult and tedious task. So we have created an easy guide to help you understand what some of your obligations are as small business owners.

What is the superannuation rate for my small business employees?

You’re required to make super guarantee contributions to employees if they’re 18 years or over and paid $450 or more gross salary in a month. The table below shows the key superannuation rates in 2013 and beyond:

Period Superannuation rate

1 July 2013 – 30 June 2014 9.25%

1 July 2014 – 30 June 2015 9.5%

1 July 2015 – 30 June 2016 10%

1 July 2016 – 30 June 2017 10.5%

Continue reading “What is the superannuation rate for my small business employees?”

Is my startup eligible for the R&D Tax Incentive?

ShoeString Logo

In Emma’s monthly contribution to Shoestring, she writes about one of the key questions we get asked by startups:

Is my startup eligible for the R&D Tax Incentive?

To assist with understanding R&D Tax Incentives better, we interviewed Scott Warnock, a Director at PwC. Scott specialises in R&D Tax Incentives and and has worked with many startups around Australia assisting them in obtaining tax incentives and Government grants.

Without replicating the full interview here, we have included some of the main points that are useful for startups:

What is the R&D Tax Incentive opportunity?

Scott Warnock: 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 startup companies are not yet paying tax.

How does the claim process work?

Scott: It is a self-assessment program, which is different to most Government grants (these are typically competitive in nature). In short, companies can access the R&D Tax Incentive through a two-stage process that involves:

  • Registering: Register R&D activities with AusIndustry (on behalf of Innovation Australia) within 10 months after year end; and
  • Claiming: Claim the tax offset in the annual income tax return (which would include the ATO’s R&D Tax Incentive Schedule detailing the R&D expenditure incurred).

The deadline for 30 June 2013 year ends is quickly approaching! Companies must lodge an application with AusIndustry by 30 April 2014.

What types of costs can I claim?

Scott: A broad range of costs can potentially be claimed, including salaries, on-costs, contractors, rent, and other overheads. There are a number of areas such as legal costs (including patent costs) that need to be considered on a case by case basis – the eligibility of these costs tends to be very fact specific.

Want to find out more about R&D Tax Incentives? You can read the rest of the interview with Scott here at Shoestring.

If you don’t want to miss the boat to claim R&D tax incentives for 2013, get in touch with Scott Warnock at PwC or your friendly startup accountant at Nudge Accounting.

Accounting and tax for Bitcoin in Australia

Nudge Accounting, Tax, GST, accounting, Bitcoin

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.

Continue reading “Accounting and tax for Bitcoin in Australia”

Startup Founders – How can I pay myself from my business?

ShoeString, Pay myself, Nudge Accounting

Writing in my monthly contribution to Shoestring, I put myself in the position of a startup founder and asked the question, “How can I pay myself from my business?”. There are different ways that a startup founder can pay themselves but it all depends on the type of business structure that they have:

1. Sole traders – the business money is your money

A sole trader is where an individual operates a business and there is no distinction between them and the business. And this means that all money made from your sole trader business is yours. You just need to be careful as this means that all money you make in your sole trader business is taxed in your personal tax return. And personal tax rates can get quite high. Up to 45% + the medicare levy of 1.5%.

2. Partnership – you take a share of the partnership profits

A partnership is similar in many respects to a sole trader. Except that you are working with others, called the Partners, and you share the profits with them based on your share of the Partnership. Although a Partner may want to pay themselves a salary, this is effectively the same as them receiving a share of the profits and that is how the ATO views it.

3. Company – how do I pay myself?

There are different ways you can pay yourself from your company. As the company is a separate entity to you, you need to ensure that you don’t draw down money from the company as if it is your personal bank account. Ways you can pay yourself include: Continue reading “Startup Founders – How can I pay myself from my business?”

Worrying about tax & my startup

Tax, Startup, Shoe String

A big stress for startups we come across are all the different tax requirements they need to be on top of.

Last month, I wrote an article for leading startup magazine, Shoe String on some of the key requirements which startup founders need to worry about.

These include:

  1. Registering for GST – when do you need to start worrying about GST? You need to register for GST if your 12-month turnover or anticipated 12-month turnover is $75,000 or more
  2. Tax & Hiring staff – when it comes to hiring staff, you need to provide staff with a Tax File Number Declaration Form, as well as assessing whether to pay superannuation, how much superannuation to pay, and how much tax must be withheld from their wages.
  3. Superannuation – a mistake a lot of startups make is in thinking that superannuation is not payable for casual staff. This is not right. The same superannuation requirements apply for casuals and permanent employees. Continue reading “Worrying about tax & my startup”

Help! How do I prepare a budget for my StartUp?

Microsoft BizSpark

Nudge provides Accounting and Tax Services to a very large number of Clients located across Australia in a range of industry segments/sectors for example : On-Line Retail, Construction, Financial, Hospitality, Media, Medical and Professional Services.

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.

What was the question for this month?

#Nudgemoments StartUp Question: I’m applying for R&D grants and investor funding and I’ve been asked to put together a budget. Where do I start?

A budget tells the story of your startup’s journey and uses numbers to do so. So what steps do you need to take to start a budget:

  1. Know your strategy. What are you aiming to achieve and how will you get there?
  2. What are the key drivers of your business? i.e. customer visits to your website, customer conversions, sales per customer. How will these drivers lead to sales and money coming into your business?
  3. What are the costs that lead to a sale? Each product you sell has a cost so what are your product costs? Also don’t forget to include operational costs such as rent and travel. Ensure that costs are reasonable and sustainable, especially when you start out and are operating on a shoestring. Remember that when you grow, you will also need to spend more dollars on marketing and advertising so budget that in.

You can read the next steps and more in my article here.

Cheers

Emma

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
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  • QTR BAS Preparation and Lodgements
  • Monthly KPI's to Identify Improvement Areas
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