This week, Business owners around Australia are getting smashed with BAS & PAYG Tax Bills. While there’s no way to avoid paying tax (other than earning no profit or doing something dodgy / illegal) here’s 5 ways you can experience some Small Business Tax Relief …
>> PAY IT <<
No one likes paying Tax but did you realise paying tax is actually a good thing! You pay tax on profits you make so a Tax bill is actually a measure of success. Our philosphy is to pay your fair share in tax, just, NOT A CENT MORE! So step 1, Pay Your Tax Bill, knowing your making a good profit.
>> VARY IT <<
Business is tough. There are good times & bad times. Many ups & downs. Now a PAYG Instalment notice for example is a pre-payment of tax NOW based on a snapshot of your PAST business performance. So if you’re having a tough year (compared to last) there’s a chance your BAS or even PAYG Installment can be ‘varied down’, which can equal major cashflow relief.
>> PLAN IT <<
The golden standard of Financial Control is to be able to pay every tax bill, in full & on time. The way to achieve this is knowing either 1) what percentage of every dollar you earn, needs to be put aside into a Tax War Chest or 2) what amount every week / month needs to be deposited into your Tax War Chest. Having a healthy amount of money set aside for profit, a rainy day and especially tax, can be the difference between stress & success in business.
>> ARRANGE IT <<
The ATO will occasionally allow a payment arrangements if you aren’t able to pay a bill in full and on time. Please use this option as a last resort .. but be aware that this should be a powerful reminder that you urgently need improved financial controls.
>> QUERY IT <<
If your tax bill is too high or you received the right bill too late, then in might be time to Change Accountants. Most business owners pay too much tax, because their current Accountant is a dinosaur. Here’s 10 signs they … Charge by Hour – Not proactive – Surprise bills – Slow to respond – Just do tax – Not tech savvy – You push them – Not entrepreneurial – $$ to ask questions – No Tax Savings.
If you think it might be time to change Accountants or you want to ask some questions about these 5 steps, let’s book in a time for a Cashed Up Strategy Call – https://inspire.business/chat/
>> BONUS PROFIT STRATEGY <<
Many business owners ask us, ‘How much Profit should I pay myself?’ Well, What if for every dollar in tax you paid to the tax man, you paid yourself a dollar in profit as the founder? Imagine if every time you got a tax bill – say for $20,000 – it felt like a great because it was also a trigger to pay yourself a Profit Bill! See if you’re not paying yourself in Profit AT LEAST as much as you’re paying the Tax Man, then Barnaby Joyce is making more money from your business then you are.
So if you just got blindsided by an unexpected Tax Bill, there’s 5 things you can do – Pay It, Vary It, Plan It, Arrange It & Query It. Good luck & talk soon – https://inspire.business/chat/
The Federal Budget for 2019-2020 is in. Liberal and Labor have put forward their economic and fiscal outlook, including expenditure and changes to tax and super. In this article, we’ll outline the key elements of both parties budgets, and how the changes will affect you. Please note, the views in this article are our opinion only.
We’ve broken down the LNP’s budget changes to address the effects on individuals, business, superannuation, and finally, we run through Labor’s proposed changes that have raised a few eyebrows.
Has the Budget taken affect already?
The budget is not law yet. It’s also an election budget, so you don’t need to worry about any changes affecting you yet. However, the changes will affect you depending on which party holds power after the election, so it’s important to know what each party is proposing.
The budget wasn’t groundbreaking, and there are no enormous changes. That being said, we are concerned about the election due to proposed changes from Labor’s strategy. We’ll give our opinion based on what we know today and what Labor has outlined. It’s worth noting that We ARE biased towards families, businesses, and economic growth. We believe that’s worth backing.
How will the Budget affect Individuals?
Middle-income earners will be taxed slightly less. The 19% tax bracket will increase from $18,201 – $37,000 to $18,201 – $45,000.
The low-to-middle income offset will also increase, from $530 to $1,080. This is good news for individuals who earn between $48,000 and $90,000. Those earners will now receive up to a $1,080 tax offset. With 4.5 million taxpayers falling into the $48,000 to $90,000 range, it’s a handy tax break for a lot of people.
How will the Budget affect Businesses?
The budget proposes an enhanced instant asset write-off. The amount for individual assets costing less than $25,000 will increase to $30,000, an added incentive for businesses to purchase more assets.
The turnover requirements for the instant asset write-off will also increase from $10 million per year to $50 million per year. That’s 22,000 additional businesses employing 1.7 million workers (almost 20% of Australia’s population) that will now have access to the instant asset write-off.
There will also be a change to the ABN system. If you don’t lodge your tax returns, your ABN will be suspended on 1 July, 2021. There will also be an annual details check introduced – a simple confirmation that your details are correct.
How will the Budget affect Superannuation?
If you’re 65 or 66 years old, previously you couldn’t, but now you will now be able to:
Labor’s Proposal
So that’s about it for budget changes under a Liberal government, but we wanted to share some proposals that Labour has put forward. We’re actually quite concerned about the effect of some of these – and even the logic in them.
In our opinion, Labor has put forward some suggestions that will hurt low-to-middle income earners, businesses, and the economy. We’ve identified 6 ‘eyebrow raising’ suggestions that Labor has included in their proposed federal budget, and unpacked each one to explain how they will affect you.
Labor’s Eyebrow Raising Suggestion #1
Concept: Halving the Capital Gains Tax Discount from a 50% discount to only a 25% discount.
Impact: This means that you’ll pay twice the amount of tax on your capital gains. Despite this change, the Superannuation discount will remain at 33%. The overall affect of this change is that you will be paying twice as much tax on capital gains.
The purpose of the 50% discount was to provide another way to calculate your capital gains as a replacement to the index method. The index method said that if you bought your property for $400,00 back in 1990, it would be adjusted for CPI, for example, the equivalent of today’s money might be $600,000.
Labor’s Eyebrow Raising Suggestion #2
Concept: Limit negative gearing to new property only.
Impact: This change isn’t the end of the world, but it’s not great either. Some people have a loss making property for tax purposes. But the big benefits of negative gearing are seen with new property anyway, so the affect won’t be huge. The impact of this change is that new property developments will be encouraged for investors rather than buying existing property.
Labor’s Eyebrow Raising Suggestion #3
Concept: Remove the ‘refundable’ part of franking credits.
Impact: Firstly, what is a Franking Credit? When a company (big listed one or small business that’s structured as a company) pays tax, that tax is kept as a franking credit by the ATO. Shareholders can still access that ‘franking credit’ when you pay dividends out of your company.
When those dividends are paid to shareholders or investors, the investors are taxed on that dividend, and they get a credit for that 30% or 27.5% tax rate. So, if they’re a high income earner paying 47%, they get a 30% credit and only pay 17% ‘top up’ tax. If they earn nothing, the tax rate would be zero on the first $20,000 they earn, so they will receive the 30% franking credit as a refund.
This change will hurt low-income investors and self-funded retirees, taking money out of their pocket and increasing dependence on the government. Conversely, it will have no effect on the wealthy, they will still get the full benefit of the credit. Ultimately, it will encourage people to move money out of Australian companies, to offshore businesses or property or other investment classes, where they will get more bang for the buck, which we believe will ultimately hurt the Australian economy.
Labor’s Eyebrow Raising Suggestion #4
Concept: 30% minimum tax rate on discretionary trust distributions
Impact: This change will target ‘mum and dad’ businesses, effectively taxing trusts like companies and impacting people earning less than $37,000. The wealthy and mega-wealthy are already paying 30%, so it will have low or no effect on them. Instead, mum and dad businesses who might use their trust to distribute money to their children for University or living expenses will now be taxed at 30%.
Labor’s Eyebrow Raising Suggestion #5
Concept: Limit deductions for tax affairs/accounting fees to $3,000 per individual.
Impact: This is targeted at the 0.0000002875% of the population (69 Australians) who claimed a massive amount of accounting fees. This is ridiculous to bring in a change to tax law, and discourage professional advice, for such a small amount of the population.
Go and fix a real problem, Bill.
Labor’s Eyebrow Raising Suggestion #6
Concept: Changes proposed to Superannuation and SMSF.
Some of these changes, if effected, are going to have massive repercussions on the economy, and dependency on the government. These rules are going to hurt older Australians.
Removing this will discourage people from building their own wealth and saving for retirement, making them more dependent on the government in retirement.
Bringing this back in will affect semi-retired people who might earn more from investment than working. Just adds to the dependency problem we’ve pointed out above.
We struggle to see any positives of the proposed changes labour has suggested.
Vote with caution this election – it’s the first election I’ve actually been concerned with the result of, because the proposed changes will mean massive (negative) changes for business, families, superannuation and the economy in general.
This week’s Client Webinar is on Setting up Single Touch Payroll on Xero.
We explore a number of things around Single Touch Payroll, or ‘STP’:
– What is Single Touch Payroll?
– Who is it for?
– When does it start?
– How do you do it?
We show you click by click how to set it up in Xero, starting at 18 minutes and 45 seconds into the recording.
Single Touch Payroll (STP) is a new way of reporting tax and super information to the ATO, and as of July 1, 2019, using STP will be made mandatory unless your employee headcount is zero.
While the ATO has stated that they will be lenient for the first 12 months as businesses adjust, it’s a good idea to get your head around the changes and adapt as soon as possible.
This article will explain everything you need to know about STP, show you how to set up STP in Xero, and answer frequently asked questions about the new system.
STP is real-time payroll reporting to ATO. Instead of reporting annually, you will now report each pay run. Pay run information is sent electronically to the ATO.
Businesses that have any number of employees. If there are two directors of a company (only 2 employees on the payroll) your headcount would be zero, as directors are not included.
The following are included in a business’s headcount:
The following are NOT included in a business’s headcount:
If you are the only person on your payroll and you’re the company director your payroll would be zero and you wouldn’t have to report to payroll. However, you would have to report at the end of the year with the payment summaries.
If you employ your spouse who isn’t a director, or another family member who isn’t a company director, then they would count towards headcount.
STP’s start date depends on how many employees are on your payroll. See the table below.
Number of employees | Reporting Start Date | Reporting Frequency |
20 and up (substantial employer) | 1 July 2018 | Every Pay run |
5-19(nonsubstantial employer) | 1 July 2019 | Every Pay run |
1-4 (micro employer) | 1 July 2019 | Every Pay run |
If you’re a substantial employer, don’t stress. The ATO will be lenient on start dates while the transition takes place.
STP reporting is included in all Xero subscriptions that include payroll. Xero also has a payroll only subscription if your software doesn’t support STP.
Before you start, it’s important to ensure that ALL employee details are up to date.
To implement STP using Xero, follow these steps (you’ll see this visually at 18 minutes and 45 seconds in the replay):
Make sure you are paying yourself the right amount and using the correct strategy – getting this wrong could cost you thousands in overpaid tax.
If you’ve made an error, such as underpayment, overpayment issues, etc. you can edit, lodge and amend pay runs on Xero.
If you’re a substantial employee and you haven’t yet implemented STP, you can apply for an extension until you get your pay roll system sorted.
No, IAS and BAS reporting remain the same.
In my opinion, the government is moving more towards the ability to take the PAYG tax out of Australian bank accounts because a lot of the ATO’s debt is small businesses who are paying BAS late, not paying Super. It’s my belief that the ATO eventually wants to implement an automated system that pays the ATO as quickly as possible – a similar system to what is done in the United States.
Click here for more information about Single Touch Payroll on the ATO’s website.
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Today on the show, it is a great privilege to chat with Paul Dunn. Paul is the man behind B1G1, a global business initiative on a mission to create a world full of giving. He is a 4-time TEDx Speaker, entrepreneur, and master presenter. Paul spearheaded the Business for Good Movement, which has inspired businesses across the world to give back to those in need.
I asked Paul to share his very first memory of wanting to do good for somebody else. Paul talks about how from the start of his life, giving back was always his passion. At a young age, he was able to share a table with people like David Packard and Bill Hewlett, Founders of The Hewlett -Packard Company. In their presence, he learned the two driving forces that pushed him to do what he does now; giving abundantly.
In the middle part of our conversation, Paul tells us that 84 businesses are being founded every hour. Why is this number so high? Why are so many people choosing to build a business? Is it for themselves or the greater good? He recalls a quote from a Richard Branson speech, where he said, “Businesses who do good, do better.” We discuss why developing and discovering a business’s purpose, passion, and values are so important.
When you listen to Paul talk about his purpose and passion in this episode, you’ll find yourself reflecting on your business and your life, asking the question: “Why do I do what I do?”
What You Will Discover in This Episode:
Resources:
ONE – Sharing the Joy of Giving by Masami Sato
Impact, Habit and Connection | Paul Dunn | TEDxStHelier
TEDxChCh – Paul Dunn – Wow and Woow
London Brand Accelerator – Paul Dunn – Buy1GIVE1
Connect with Paul
Paul’s Website: PAULDUNNONLINE.COM
B1G1 Website: B1G1.COM/BUSINESSFORGOOD
Are you enjoying the podcast? Listen to the episode here and leave us a review:
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Is it true that millennials don’t know how to handle money? Millennials are our future leaders, so if they lack financial education, what does that mean for our future? This education gap inspired our guest, Sarah Riegelhuth, to create a community called Wealth Enhancers – a Financial Planning and Advice Company for Gen Y’s and Millennials across Australia.
In today’s episode, I sit down with Sarah, who is a serial entrepreneur and one of Australia’s leading finance experts. She is also the Author of ‘Get Rich Slow: Start Now, Start Small to Achieve Real Wealth.’ Sarah is passionate about personal finance and helping people, truly embodying her company’s purpose of enabling millennials to become financially free.
We kickstart this episode by asking Sarah about her passion for finance and her experience in the industry. She shares that with Wealth Enhancers, they built a community for high achieving millennials who want to be the best they can be. They believe that current and future leaders must have financial stability, so they can achieve their personal goals, live their values, and create a better world.
We also learn how Sarah has built Wealth Enhancers with a fully remote team, and discover the benefits and issues behind this strategy.
We talk about Sarah’s latest project – Wealth Creation for Millennials. It’s a Free 4-week personal finance course that covers everything millennials need to know about money. Tune in to gain insights on how to lead a remote team, financial tips for business owners, and how mindset has played a role in Sarah’s success.
What You Will Discover in This Episode:
Resources:
Wealth Creation for Millennials – Free Course
Connect with Sarah
Sarah’s Website: WWW.SARAHRIEGELHUTH.COM
Are you enjoying the podcast? Listen to the episode here and leave us a review:
iTunes: https://itunes.apple.com/au/podcast/sarah-riegelhuth-on-helping-millennials-become-financially/id1442173853?i=1000424016702&mt=2
Stitcher Radio: https://www.stitcher.com/podcast/inspiring-business-for-good/e/57248322?autoplay=true
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It’s always been our mission to help families pull more money, time and happiness from their business…
But if you look at the stats, not a lot of businesses are actually achieving this…
Of the almost 1.9 million small businesses around Australia, 60% either –
Worse still, ¾ took on debt, did so for survival.
In working with thousands of business owners over the last 7 years, we too have seen that the majority struggle for cash at some point during the Entrepreneur Journey.
Perhaps you can relate …
If there has ever been a time that you’ve wondered how you’re gonna make payroll, or pay the next BAS, then your primary job as a business owner is to get Cashed Up.
There are 7 mistakes that business owners make that are keeping them struggling for cash. Avoid them and you’re well on your way to getting Cashed Up.
P.s. Looking forward to seeing you at the Cashed Up book launch at our NEW offices in Fortitude Valley next Tues 24th at 5:30pm.
We are well known for a campaign we ran two years ago called Save $500,000 Tax. It was a bold and audacious target to save our clients half million dollars in tax by proactively implementing cutting edge tax saving strategies.
We didn’t think we’d actually get the $500,000 tax savings but we knew that we had to GO BIG or GO HOME.
We ended up saving our clients a huge $1.2M in tax in 12 short weeks and went on to be name Top 100 Companies in Australia and featured on many platforms including The DENT Podcast, Small Business Big Marketing, The Courier Mail and TEDx, to name a few.
Most importantly since that campaign we’ve now been able to help our clients save a total $2.35M dollars in tax or $18,000 each business which means our service pays for itself 3 – 4 times and our clients tell us they use to reinvest back into growing their businesses and taking their families on holiday.
We visited Aberdare Ranges Primary school on Day 2, then we drove up the road to the village which is where most of the children live.
We learned that much of the poverty and displacement was due to political violence in 2007. Due to an election, if you didn’t vote for the right person your house could be burned down and you could even be killed! Crazy stuff – but real. So it caused a lot of families to head out of the towns, and into the rural areas away from the violence.
But what was great to hear is after the political violence broke out, the Kenyan government gave each family around $100 USD to rebuild their lives.
Now there was an extremely entrepreneurial chief who suggested 1,000 families combine their $100 USD, and buy a big block of land.
From memory, this land was around 5 or 6 acres, and they got a town planner in to create roads, and blocks for each of the families to live on.
Each block has enough room for a very small house, but it was this coming together that created a community – that now 10 years on is thriving.
The kids are getting a great education only 20 minutes walk up the road, and this will mean the kids getting jobs, and bringing money back to this community.
The community even has its own medical centre, seeing 80 patients a day. All of this possible with that chief having his entrepreneurial thought process developing the land.
One of the more well known projects in B1G1 is the ‘Goat Project‘, which we visited on Day 6.
This project is the hardest one for me to talk about, type about, or even think about.