Understanding Taxation for Property Investors

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Property investors are aware of the various specialised tax breaks they are entitled to, but are also liable for some taxes that the majority of non-investor property owners are not, including land tax and capital gains tax (CGT).

In this article, we will talk about allowable tax deductions, CGT and purchasing property using a self-managed superannuation fund (SMSF) to help property investors gain more knowledge of their taxation duties.

Maximising deductions

A wide range of rental property deductions can be claimed by property investors, that is, if they keep the correct documentation and invoices.  Here are some of the common expenses that you, as a property investor, can claim in relation to owning a rental property:

  • Advertising for tenants
  • Cleaning expenses
  • Council and water rates
  • Electricity and gas
  • Gardening expenses
  • Insurance (building, contents, etc.)
  • Interest on the investment loan
  • Land tax
  • Real estate management fees
  • Repairs and maintenance
  • Reasonable travel costs (for inspection of property)

You can claim the money you spent on things such as white goods, furniture and air conditioners, but they will still be covered by depreciation. The useful life of the item in question is to be utilised to claim the appropriate deduction over a period of years.

Building, construction and borrowing costs

Though not deductible, you can claim building and construction costs under the special building write-off guidelines. Generally, for a rental property constructed after 15 September 1987, a part of the construction costs that is still unclaimed at the date the property was purchased can be claimed.

You can write off the cost at 2.5% every year over 40 years. However, you have to determine the cost of the construction work and the date it was carried out. You can obtain this information from the previous owner, or you can have an estimate provided by a qualified expert, such as a quantity surveyor. If it is a new property, you can get the appropriate cost information from the builder or a quantity surveyor.

Also considered as allowable tax deductions are loan procurement fees and other borrowing costs. However, you can usually claim them over five years.

Non-deductible

Some expenses cannot be claimed as a deduction, but are allowed to be included as part of the cost base of a property if it is sold, for CGT purposes.

Together with the original purchase price, below are some items you can add to the cost base:

  • Stamp duty on purchase
  • Valuer’s fees on acquisition
  • Legal costs that are incurred on the purchase and sale of the property
  • Advertising expenses on sale
  • Auctioneer’s fee
  • Capital expenditure on improvements that escalate or maintain the asset’s value (e.g. building a new garage)

Deduction tips for property investors

When negatively gearing, you may want to get an interest-only loan for your rental home because this type of loan guarantees that interest expenses are kept at high levels while not decreasing the loan’s principal. This can benefit you as it will let you offset the interest against your total taxable income. But the decision to take this loan should be determined by your financial situation at the moment and in the future.

If you travel to your property to manage it, you may deduct the travel costs while checking out the property. This would only include, for example, the costs of airline tickets to inspect the property one day and going back home the next day. If you travel to you property and stay for a week-long holiday, tax rules will require you to allocate expenses between deductible and non-deductible items.

CGT and investment property

You need to remember that an investment property that was used in the past as your primary residence can still be considered as primary residence and thus remain CGT exempt for a maximum of six years after the house has ceased to be your family home, as long as you do not own any other primary residence.

Sale of investment property and CGT

You may have to pay CGT for selling a rental property, provided that asset was purchased on or after 19 September 1985.

There will be a capital gain from selling the property when the proceeds from the transaction are higher than the cost base of the property. You will incur a capital loss if the proceeds are lower than the cost base.

If there is a capital gain, you have to apply any capital losses from the present or past year. You may further reduce any remaining net capital gain by using the 50% CGT discount for individuals who have had the home for over 12 months. If the home has been owned for less than a year, the 50% CGT discount can’t be claimed and thus the entire net gain is treated as income and is taxable.

To help pay a possible large CGT tax, always put aside part of the sale proceeds from your rental property.

The effect of building depreciation claims on the cost base of a property

Capital works deductions may decrease the property’s cost base for CGT purposes, if such deductions have been claimed in relation to a rental property. Any depreciable buildings sold with property are subject to special rules.

Investing in property through SMSF

It is not recommended that an SMSF be set up for the simple reason of wanting to invest in property without properly weighing all the risks, benefits and related expenses involved.

Because of the high cost of property, the SMSF may be heavily invested in one type of asset. In this case, it is the duty of the SMSF trustees to consider diversification as one of their investment strategies. If one type of asset underperforms, you can limit your risks with diversification.

There are several tax benefits from investing in property using an SMSF. First, you can claim a 15% maximum tax rate on net rental income when the SMSF is in accumulation mode and 0% while full pension mode. In addition, if the property is sold after being owned for over 12 months, any consequent capital gain will be subject to a maximum capital gains rate of 10% or 0% if in pension mode.

For any deductions for losses or expenses for a rental property acquired using an SMSF, the rate is a maximum of 15%.

For most investors, it may be more beneficial tax-wise to buy a rental property using other structures or under their own names rather than through an SMSF.

Common pitfalls to watch out for

It is common for investors to group different properties under one loan umbrella. For instance, one mortgage may have been taken to finance both the home and the rental property. In this situation, ensure that the loan is structured so that will make it easy for you (and the ATO in the event you’re audited) to identify what part of the loan is for the rental property. After this, you can identify which part of the interest you can claim as an outgoing against your rental income.

You also have to remember that you’re not entitled to a deduction for interest you pay or for any outgoing you gain after the property is no longer being rented, or the part of the loan utilised for private reasons.

Determine all qualified outgoings to be made part of the cost base of the property, because it could potentially cut down any capital gain and raise any capital loss that can be passed on indefinitely to be used against any capital gains incurred in the future.

PJS Accountants offer expertise in managing your tax affairs with a complete range of compliance, corporate and individual tax services. We serve large companies, SMEs, family businesses and individuals. The ever-changing tax laws and requirements could put businesses and individuals at risk. Putting nothing to chance! If you need tax advice or guidance, contact PJS Accountants.

What are the Signs that you Need a Bookkeeper?

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Many business owners may have had the time to oversee all aspects of their business when they were just starting out. But when their business begins to expand, it is time to weigh things up. Is outsourcing certain tasks the way to go?

It is more important that business owners concentrate more on the areas of the business that can benefit from their expertise – and assign other jobs to other experts.

One of the tasks that business owners can allocate to experts is the financial record keeping. Think about engaging the services of a good bookkeeper. However, when can you say it is the right time to hire one?

Here are 4 signs that you need a bookkeeper:

1. You are spending more time doing the books than managing your business.

It is time to hire yourself a bookkeeper if you find yourself spending a significant part of your day or week doing financial tasks such as keeping financial records of the business.

There are many tasks that a bookkeeper can take on, including pursuing customers with debts, checking vendor invoices, reviewing bank account balances and transactions and ordering stock. Having these tasks off your shoulders will allow you to pay more attention on other areas of your business.

2. You are failing to keep up to date with all business operations.

Growing paperwork and record keeping goes with a growing business.

Many business owners are pressed for time, resulting in them leaving the vital task of updating the records to the last minute – typically for tax time or BAS. If records are not kept updated and there are financial problems that are not seen early, you are in for major problem and you won’t even be aware of it.

Failing to keep up to date with records is definitely a sign that you need to hire a bookkeeper.

3. You doubt that you are keeping records properly.

It’s time to get yourself a bookkeeper if you are spending time checking your books and questioning whether the figures are accurate or correct.

You can save yourself a lot of hassle and give yourself more time to strengthen other aspects of the business by using the knowledge and experience of a good bookkeeper.

4. It is no longer simple doing your tax and/or other compliance.

Complying with rules and other requirements, such as accreditation, are very important for your business, but performing these responsibilities can take a lot of time.

You have to be up to date with regulatory changes and bring your business processes and records up to date to keep in step with those changes. A good bookkeeper can help your business remain compliant.

It’s not always easy telling when the right time is to enlist outside help for your business. When you see the first sign of trouble, make things easier yourself and hire a good bookkeeper.

PJS Accountants offer a full range of services, including tax planning and compliance, accounting and SMSF services, and bookkeeping. For enquiries, contact PJS Accountants.

The Receipts and Expense Records that you Must Keep

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The scene is the same every year, despite making a promise to be better organised; you find yourself dashing from room to room, looking into drawers and folders for receipts. Why are you even doing this? Your accountant and the tax agency never requests for them anyway, right? Well, a reputable accountant will always ask their clients to substantiate their expenses. In addition, if you ever become unlucky enough to be audited by the tax office, you’d wish that you kept those receipts.

So, what records do you have to keep? Don’t throw away records showing work-related work spending, car costs, and work-related travel spending. You are obligated to hold on to them for five years.

What are work- or business-related costs? These are outgoings you incur in generating your business income or wages.

Here are records you need to keep:

Receipts and other written substantiation

The following must be found in the receipts:

  • The supplier’s name or business
  • The amount of the expense (shown in the currency of the country where it was incurred)
  • The type of the products or services
  • The date it was purchased
  • The date the receipt was created
  • Information about the GST charged

List of secondary costs

Cost per item should be $10 or less, and as much as $200 all in all. A diary or logbook should be used to record the expenses. Include the date you made the entry. No need to sign entries in the logbook.

Business or work use percentage

If you use a product or service for both business and personal purposes, the deduction you can claim is the portion used for work or business. This means you need to come up with a business use percentage, then pro rata the expenses. You can only claim the business usage percentage, not the personal usage percentage.

Motor vehicle expenses

Vehicle expenses can be claimed in four ways:

  1. Log book
  2. Set rate for each km
  3. One-third of expenses
  4. 12 per cent cost of the vehicle

The number of kilometres you travel for work or business determines the method you can use. Also, you have to satisfy the record keeping conditions for the method you use. For instance, for the log book method, you have to keep the log book itself for a minimum of 12 representative weeks to compute the business use percentage. The log book is valid for five years. In addition, you have to have receipts to prove all car maintenance costs.

For the set rate per kilometre method, the claim that you can make is limited to 5,000 kilometres. Keeping records of the car maintenance costs is not needed. However, you have to be able to prove that the car travel was made for income generating purposes.

You can use the one-third of actual expenses method if you travel over 5,000 kilometres. However, you have to maintain all records of car maintenance costs.

The 12% of the original cost method is also appropriate when you travel over 5,000 kilometres. You don’t have to record the running costs of the vehicle, but you have to prove that the car travel was made for income generating purposes.

Domestic or international travel

If you travel for over 5 nights, keep a diary and include the following details:

  • The type of activity
  • The date and time the activity happened
  • The length of time of the activity
  • The location where the activity happened

The $300 cap for employees

You don’t have to provide written evidence if the overall sum of employment related work spending is $300 or less. However, claims for travel allowance expenses and food allowance expenses are not included.

The following claims are excluded:

  • Taxi fares or similar expenses
  • Car expenses in respect of overseas travel
  • Phone, computer and internet expenses (pro rated based on employment related use)
  • Laundry expenses (You can claim up to $150 without written evidence.)
  • Depreciation of property owned and used (or installed and ready for use)
  • Home office (You can claim 45 cents per hour worked.)

The $300 cap excludes:

  • Travel allowance expenses
  • Reasonable overtime meal allowance expenses
  • Car expenses in Australia
  • Award transport expenses

The employee has to produce written evidence to get these claims.

If you file claims of over $300 in business related deductions, you have to substantiate all expenses with a receipt. If you can’t present the receipt if asked by the tax office, you will not be allowed to claim the deductions.

Enlist the help of professionals to help you on your tax affairs. PJS Accountants provides a full range of services including accounting, taxation, business improvement, superannuation, business valuations, asset protection, succession planning and bookkeeping. For enquiries, contact PJS Accountants.

ATO Targets Rental Property Deductions

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At the start of every year, it looks as if the Australian Taxation Office (ATO) declares its drive to zero in on a specific segment of taxation.

In 2015, the ATO has stated that it is stepping up its focus on rental property deductions. This could refer to many different kinds of deductions, but a major area of concern for income-generating property owners is tax depreciation deductions.

Some of the mistakes that are usually committed, according to the ATO, include neglecting to use a pro-rata method for deductions on a property that is only being rented for part of a year, or making a claim for deductions on properties that are not really being leased.

A significant number of property owners are willing to adhere to ATO rules, but keeping informed and understanding the various rules can be daunting.

Here are the common mistakes that property owners commit when claiming deductions – and how to avoid them:

1.  Making a claim for capital work assets as plant and equipment deductions.

There are two different categories of assets for which you can claim deductions: capital works and plant and equipment. Capital works make up the structural features of a building, such as fixed and removable assets. On the other hand, the value of plant and equipment assets decreases much faster per an effective life established by the ATO. The depreciation for each item is computed correspondingly.

Knowing which assets are suited for which category can be difficult with no guidance from a professional. In some cases, a certain asset may appear to be suited for one category, but the ATO actually pre-determines the category.

A fine example is the TV antennas in homes. It may look like antennas will wear down much faster than other parts of a structure (which is reduced in value over four decades), but the ATO still classifies them as a capital works asset. In other words, if your antennas wear out in only five years, it will still be classified as capital works with deductions at 2.5% over 40 years. You are at risk of being caught by the ATO if you write this asset off at a shorter time period.

2.  Assessing an asset’s effective life span by yourself.

This one is somewhat similar from the one above, in the sense that it can be inviting to believe that you can self-assess the effective life of an asset. Your carpet, for example, may appear old and shabby, so you may think it only has a two-year effective life. But every single asset has a specific effective life assigned by the ATO. At present, the effective lifespan of carpets is 10 years.

There is a provision that allows self-assessment of an asset’s effective life, but you are in danger of setting off a review by the ATO. Many accountants believe self-assessing can prompt the ATO to launch a review of your claim, which can put property owners in danger of being found out. You can avoid this kind of trouble by enlisting a professional to help you determine the correct depreciation for your assets.

3.  Making a claim for capital improvements as repairs and maintenance.

Claims can be made by property owners on repairs and maintenance made to income-generating properties. Then again, what seems to be repairs and maintenance are actually deemed as capital improvements.

You may avoid getting caught by knowing the distinction between these two terminologies. ‘Repairs’ usually entails restoration, while ‘maintenance’ pertains to work that inhibits deterioration. The ATO says that the two have to pertain to wear and tear brought about by renting the property out.

Meanwhile, capital improvements relate to works that improve the property. Claiming deductions for this must be made at a gradual pace of capital works or as depreciation.

4.  Resorting to shortcuts.

Hiring the services of a professional quantity surveyor to create a tax depreciation schedule for you can help you avoid all of the above. You can even claim a tax deduction for the cost of having the schedule created. Then, your property will be paid a visit by qualified depreciation specialists to evaluate the correct assets that you are entitled to make a claim for. They will prepare a depreciation schedule that contains all likely deduction and they will make sure all calculations adhere entirely with ATO rules.

PJS Accountants offer expertise in managing your tax affairs with a complete range of compliance, corporate and individual tax services. We serve large companies, SMEs, family businesses and individuals. The ever-changing tax laws and requirements could put businesses and individuals at risk. Putting nothing to chance! If you need tax advice or guidance, contact PJS Accountants.

How can your Accountant Help Improve your Profit?

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If you are not satisfied with the profit that your business is generating, the first person should call is your accountant. They are your most reliable advisor and the foundation of the financial sector. The first person who you must contact to guide you in expanding your business, especially your profit, is your accountant.

Accountants can identify ways to increase your profit that you may overlook because you are in there battling it out for profit and growth every day. Your accountant can help you improve your bottom line through these ways:

Evaluate spending.

Your business operating costs can be evaluated by your accountant to find out which ones are too steep according to industry standards. Your business earns profit directly from the money saved by analysing your operating expenses.

Bargain for a better deal with your suppliers.

By scrutinising your material sources and evaluating your suppliers, your accountant can determine if you can bargain for better terms with your material suppliers.

Minimise disadvantageous debts.

Your accountant can make sure you don’t incur losses from bad debts by putting advising on a sound debt collection process. Your profits can easily be diminished by bad debts. You can revamp your current debt collection process and provisos of trade with suggestions for improvement from your accountant. Your cash flow and your profits could only improvement with these changes.

Remove loss-making goods or services.

The unprofitable products or services in your business can be reviewed by your accountant. The ones that have to be let go because they are costing your business money can be identified by your accountant.

Reorganise financing.

You can save interest on your business loans by considering finance restructuring. You will improve your profit by saving on interest.

Maximise the price levels of your products or services.

Your accountant can scrutinise your pricing systems covering all products and services to find out if your pricing is in accordance with market expectations. Perhaps it’s time to raise your prices, which would significantly increase your profits.

Analyse the cost of labour.

You can also find out if you can use your labour in a more efficient manner with the help of your accountant. Saving on wages and ongoing labour costs can improve your bottom line.

Monitor the returns on advertising costs.

You can compute the rate of return of each dollar you spend on marketing and advertising your business through your accountant. This would allow you to determine if you are earning sufficient sales and more profit from this investment. A lot of business owners ignore how much they are financially getting from spending on marketing and advertising. They don’t know of the rate of return or whether it’s a profitable investment.

Create a business plan for profit.

You, with the guidance of your accountant, can come up with a business plan designed to improve profit. You must plan for your profit because it just doesn’t fall on your lap. Your business can benefit from having a flexible business plan that establishes important targets and plots a course of action towards profitability.

Know your important customers.

By reviewing customer database and figuring out how much profit each customer contributes to your business, you can identify which of your customers are most valuable. There are cases where your smallest customers are giving you less problems and the most profit, but they are being overlooked.

Seek the help of your accountant to improve your bottom line. You may have knowledge of the inner operations of your business, but your accountant has years of experience in helping other clients with their profitability. Use their knowledge and experience, and you will soon see your profits boom.

PJS Accountants offers expertise in helping improve your business and take it to the next level. We work to understand your business and its inner workings and how it can compete effectively in the present business environment. From this knowledge, we can come up with a custom plan to implement your business strategies and methodologies, boost profit and increase market shares. Contact PJS Accountants for enquiries.

Your Guide to Organised Accounting

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Keeping your accounting organised must be an attainable objective when running a business. However, the lack of discipline can sometimes result in problems later. So instead of getting into trouble in the future, here are some tips that can help you keep your accounting in order.

1. Separate your bank accounts.

You are courting disaster when you mix up corporate and private transactions in your bank accounts. Separate corporate bank accounts for your business transactions at all times, and keep your private bank accounts strictly for private transactions. It doesn’t cost much to open and maintain business bank accounts these days, so there’s no reason for you not to have one or more. Practice making frequent transfers of drawings from your corporate account to your private account.

2. Don’t use cash, if possible.

Avoid using cash for business transactions. In case you use it for an emergency, repay yourself with an appropriate expense claim, which evaluates the spending between spending categories. In this way, every business transactions are logged and the GST is securely captured.

3. Pay your credit card bills.

It is fine to use a credit card for your business, but pay your business credit card bills from your business bank account at all times. This would help you to easily track all business transactions and capture all GST. In the same manner, if you utilise the incorrect Eftpos card by error (like the one for your personal bank account), pay yourself utilising the correct expense claim.

4. Put a system for accounts receivable in place.

Implement a process for tracking whether your accounts receivable have been paid by your customers, clients or patients.

Similarly, record how long the accounts receivable have been left unpaid so you can ask for payment immediately. Your process must also log any special plans to pay over time or the reasons given for not paying. It need not be refined – it will be handled by your accounting software. If you are not utilising invoicing or accounting software to send invoices out, just note on the front of the invoice whether it has been paid or not, recording separately those that have been paid or those that are unpaid. You’d be surprised by how many business owners are not aware of who is indebted to them, which is crazy if you think how difficult it is to make money in the first place.

5. And don’t ignore accounts payable.

Likewise, put a process in place for your accounts payable. It is important to keep your accounts payable in order and pay your suppliers, etc. on the 20th of each month so that they are aware of when they are going to receive payment and you are aware when you are sending payment to them. According to study, the most successful enterprises are never late paying their bills.

6. Keep your paperwork in order and go digital where possible.

All your business paperwork should be kept in an organised manner. These days you can scan documents and store them electronically, either on your accounting software or in a basic electronic filing system utilising the date system so that all things are filed chronologically. Organise them in a separate e-folder for every month and year. If you are hesitant to adopt modern ways, you can store them in physical form. However, almost everything today is sent out digitally that it’s not smart to keep printing them out, wasting ink and paper.

You save time and money, as well as make your business a success, by keeping your accounting in an orderly fashion. Maybe, the more important thing is that it should prevent you from getting stressed.

PJS Accountants offers a full range of services including accounting, taxation, business improvement, superannuation, business valuations, asset protection, succession planning and bookkeeping. We have over 30 years’ experience with local businesses in Capalaba, Cleveland and the Redlands. Our team will be at your disposal, ready for your call to assist you to stay in charge of all aspects of your business. For enquiries, contact PJS Accountants.

Tips to Avoid Payroll Errors

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One of the most crucial aspects of running a business is payroll. However, managing everything can be a little challenging for a lot of employers, particularly while in the middle of growing and expanding their business.

Payroll is an essential element of the business process, and employees cannot afford to commit blunders on this. Follow these important tips to avoid making payroll mistakes:

1. Make sure all employee details are correct.

Here are some employees details that you have to make sure are current and correct:

  • Tax file number
  • Full name
  • Employment start date, or termination date
  • Date of birth
  • Present address
  • Pay information including gross salary, allowances, hourly rate and period of employment

2. Review your reporting process.

Each state has different reporting requirements. Payroll tax, in general, is paid monthly. A monthly payroll tax form is required to be completed by the employer and filed with the state tax office.

An Annual Reconciliation Form must also be completed and lodged with the state annually. It must include the yearly taxable salaries and premiums received by the employee during the year. Employers can work out their tax amount, whether they still owe or if they are due a refund. If they have employees in multiple states, they must fill up Annual Reconciliation Form in those states.

You can prevent mistakes by reviewing these rules and processes.

3. Be updated with changes in payroll tax rules.

You can’t do your payroll and then just forget about it afterwards. Every year, tax rates vary, and so ensure that you are compliant with up to date tax rates from 1 July.

4. Don’t ignore payroll requirement deadlines.

You have to know when your deadlines are because you can’t afford to miss them. Three deadlines are important for you to remember:

  • PAYG withholding – This is the tax employers deduct from monies given to employees.
  • Payment summaries – The abridged details of the wages given to each employee over the year,
  • Superannuation reporting – Paying and reporting super payments have multiple deadlines. Don’t forget these dates and make sure you are up to date with the government’s SuperStream system for super contributions.

If you find doing payroll for your business a struggle, hire a good accountant. This prevents costly payroll mistakes and ensures you are compliant with constant tax rate changes.

If you want a business partner that will help you with your business, then you. Here are some of the services we offer: Tax planning and compliance, Accounting and other booking services, and Bookkeeping. Contact PJS Accountants for enquiries.

10 Important Questions to Ask your Potential Bookkeeper

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Your business can truly benefit from having a bookkeeper. Whether one works for you full time or part time, you still must make sure they are the right one and have the skills to meet the requirements of your business.

You can ensure they are the right fit for you by asking these 10 important questions:

1. What are your qualifications?

You have to make sure your bookkeeper is qualified. If you are hiring a bookkeeper to do your Business Activity Statement (BAS), then they must be either a registered tax agent or BAS agent.

2. Do you have any experience in my particular industry?

Make sure your bookkeeper has particular experience in your line of business or similar business because they would know how your business is run and would require less training specific to your industry.

3. What kinds of clients do they currently serve?

This would let you know if they are serving clients that are the same as you in industry, size and growth. You can even request to talk to a few of their clients to learn of their experience with your potential bookkeeper.

4. Are you at ease using my accounting software?

Choose a bookkeeper who is familiar with your accounting software and other added technology, like the point of sale systems.

5. What are the other services you offer?

A number of bookkeeper also offer support with technology, such as point of sale systems, scanning receipts and invoices straight to your accounting system, and software for online invoicing.

6. Can you offer assistance in growing my business?

The services offered by many bookkeepers go beyond bookkeeping. They can use your financial reports to offer guidance on how your business can perform better and also impart what they experience with other clients.

7. Are you a part of a bookkeeping organisation?

The right bookkeeper will make sure your business always conforms to laws. Thus, they have to be current with changes in rules. They are expected to have frequent trainings in these aspects, if they are a part of a legit bookkeeping organisation.

8. What are your fees and how do you charge fees?

Ask whether they charge hourly, monthly or for tasks accomplished. There are bookkeepers that offer packages that consist of accounting software and regular monthly services.

9. Will I get savings from my accounting bills?

Find out from the bookkeeper what jobs they can perform that your accountant is presently doing for you. You may save plenty of money on accounting fees if you pay a bookkeeper for some services.

10. Do you have a back-up plan if you get sick or injured?

If you intend to use your bookkeeper for only part of the time, find out what happens if they can’t do their task for whatever reason.

Picking a suitable bookkeeper is similar to picking an employee, so use these questions to help you find the bookkeeper that fits your business.

PJS Accountants offer a full range of services, including tax planning and compliance, accounting and SMSF services, and bookkeeping. For enquiries, contact PJS Accountants.

Are Tradies at Risk with the ATO?

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Contractors, or tradies, in the building industry, are being targeted by the ATO (Australian Taxation Office) in an effort to recover undeclared income and unsettled GST. The Tax Office has always been focused on the cash economy, but with the introduction of a new reporting process in 2013, construction companies are now required to report all payments they make to contractors. The ATO hopes that this new rule will allow them to catch more contractors.

Thousands of contractors have been caught, to date…

Over 250,000 tradies with over $2.3 billion in tax liabilities for not paying their income tax and GST have been hit by the ATO. Contractors should heed the warning – the ATO is going after you!

Forget about fishing for a while and focus on catching up with your bookkeeping to keep the ATO off your back. Gather your receipts, invoices and records and input the figures into a good accounting software solution. This will take away your worry and you can think about visiting your favourite fishing spot.

Breathe easy

Make sure your accounting records are correct and all your lodgement obligations are up to date. If you do not have the time, then enlist the help of a bookkeeper.

Using accounting software offers many benefits:

  • You’ll gain better insight into the workings and performance of your business. You can record and save all accounting information in a single convenient location. You can print financial reports to know if your business is performing well or not with a press of a button.
  • It allows you to meet your tax requirements such as income tax and GST without any trouble.
  • You save time doing your tax every year because all information is already entered into the software during the year. You don’t have to be overwhelmed going through all the paperwork. This gives you more time to focus on making money instead of doing paperwork.
  • Better business decision-making is the result of having up to date information. Accounting information can be accessed anytime and this would help you to easily compare business performance over diverse periods of time.
  • It helps if you get audited by the ATO. You have all your accounting information on hand.
  • You can easily track the payments you make to your customers and suppliers, allowing you to organise your cash flow better.

With the ATO focusing more than ever on contractors, builders and tradies with regards to income tax and GST payments, be proactive.

For tax advice or guidance, contact PJS Accountants. We offer expertise in managing your tax affairs with a full range of compliance, corporate and individual tax services, whether you are a large company, SME, family business or individual. Tax laws and requirements change constantly, potentially putting you or your businesses at risk. Have a chat with one of our expert advisers now and ensure you are meeting your tax obligations.

The Difference Between Entrepreneurs Who Succeed and Those Who Fail

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“Fail fast and learn faster if you want to succeed,” this will often come out of the mouths of many entrepreneurs. The lessons from those failures are what make business owners better and what improved their chances of succeeding in business.

What makes a business more likely to succeed or fail?

There was a survey conducted of over 2,000 small business owners in the US and UK to find out what success is and what motivates them. It is interesting to note that half of those who experience failure were more likely to succeed in the future.

Today’s entrepreneurs are taking on a fascinating journey. Business owners don’t need to succeed the first time to be successful. What you need to do is: start the journey and follow your dreams.

Here are the characteristics of successful entrepreneurs, according to the study:

1. Possess a progressive attitude and at ease with failure.

Small business owners who are successful tend to view failure in a positive light, pick up lessons from their errors, and are not afraid to try again. A business has more strength the second time around, according to the research.

2. Seek the help of a big community, including relatives, mentors and advisors, a financial advisor, and an accountant.

Working with advisors and mentors keeps you on the right path. According to a third of successful business owners, they have enlisted the support of mentors. In comparison, there were only 14% of participants who operated businesses that had to shut down.

3. Talent for accessing and managing finances.

Almost 60% of successful business owners, said they were able to manage their finances by investing in technology. In comparison, just 14% of respondents had to close shop.

4. Turning to technology to improve productivity in finances, marketing and customer service.

Entrepreneurs who had made it invest in business software to do the difficult tasks. 86% of the successful entrepreneurs who were surveyed reported they adopted technology to enhance productivity.

5. Believe strongly in the importance of personal time.

Business owners who have achieved great success have an excellent work / life balance and set aside time for their family. Nearly 60% of respondents reported that spending time with loved ones is important in making them effective as an owner of a business, and 53% reported that keeping their weekends available for family is important to them.

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