5 Ways To Deal With An Unexpected Tax Bill

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/

How The 2019-2020 Proposed Federal Budget Will Affect Individuals, Businesses, & Superannuation – Client Webinar

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:

Make voluntary contributions without a work test. The work test is a rule that says you have to show that you’ve worked a certain amount before you can put super in as a tax deduction. Now, you can add super without showing that you’ve worked.
Access the Bring Forward Rule. After-tax money can be put into super as well as tax deductible money. However, the after tax money per year limit is $100,000 per person. The Bring Forward Rule says that you can bring forward up to 3 years of the $100,000 limit, and use it in one hit. It’s handy if you sell a business, get an inheritance, sell a house, or downsize, and want to put a larger amount into your Super fund.

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.

Remove rollover for $25,000/year concessional cap. Currently, you can put $25,000 into Super per year. If you don’t use it, you can roll it over to next year, for up to 5 years, giving you the ability to contribute $125,000 in in the 5th year. Labour is pushing to remove this ‘roll over’.

Removing this will discourage people from building their own wealth and saving for retirement, making them more dependent on the government in retirement.

Reduce non-concessional cap from $100k to $75k. Reducing the cap to $75k will discourage people from putting more money into super, again making them more dependent on the government in retirement.

Reestablish the 10% test for extra super contributions. The 10% test states that if your employment income is more than 10% of your total income, you can’t contribute extra money to super from your after tax money. They removed this rule a couple of financial years ago.

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.

Reduce Div293 tax to $200k income (currently $250k income). The Div293 tax is an extra tax on your super contributions if you’re a high income earner. Instead of taxing super contributions at 15%, as a higher income earner, your super contributions are taxed at 30%. Labor are looking at changing the definition of a high income earner from 250k to 200k to capture more people under the 30% tax rule. Further taxing the people paying the biggest share of tax.

Push super guarantee up from 9.5% to 12% ASAP. This change was probably going to come into effect eventually say over the next decade, but Labor wants to push it forward and bring it in as soon as possible. If you run a business, it means a 2.5% increase to your wage bill. It’s good for employees, but bad for business owners with a shorter lead time on finding that extra cash which we believe will hurt businesses, which are the backbone of the Australian economy.

Ban LRBA’s. LBRA stands for Limited Recourse Borrowing Arrangement. LRBA’s allow super funds to borrow money from banks or related parties. For example, you can lend your own money to your super fund, allowing you to purchase commercial property, transfer property from your own name into your SMSF, or even buy a business or shares. Banning LBRA’s will discourage people from putting their money into Super because it reduces their flexibility and makes super less accessible. It will have an impact on younger generations who will now lose the ability to invest and plan for their future.

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.

Setting Up Single Touch Payroll on Xero – Client Webinar

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 Update

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.

What is Single Touch Payroll?

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.

Who is Single Touch Payroll for?

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:

Full-time employees
Part-time employees (don’t apportion for ‘FTE’)
Casuals who worked in March or later
Overseas Employees (not ‘VA’s’)
Employees on leave

The following are NOT included in a business’s headcount:

Employees who stopped working before 1 April 2019
Independent contractors
People paid through labour hire
Religious practitioners
VA’s and contract workers

Are you a Company Director?

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.

When does Single Touch Payroll start?

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.

Setting up Single Touch Payroll using Xero

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):

Hover over Payroll and go to “Pay Runs”.
“Seamlesss reporting with STP”, Click “Get Started”.
Opt-in to STP screen. Currently, it is optional, but as of July 1, 2019, it is mandatory. Click “Opt-in”.
Review organisation details, click “Continue”.
Connect Xero to the ATO. 1) Contact ATO, or 2)Provide proof of ownership with AusKey.
Click confirmation box “I have contacted the ATO to connect my Xero account”, then click “Register”.
Pay Runs screen shows “STP Filing” shows whether your pay runs have been filed with ATO.
Once you’ve set up STP and added payslips, click “File” and it sends information to ATO. You need to do this for every single pay run. You need to file the pay run information on or before the payroll date.

FAQ & Important Information

How do you pay yourself – drawings or salary?

Make sure you are paying yourself the right amount and using the correct strategy – getting this wrong could cost you thousands in overpaid tax.

How do I fix up pay runs if I’ve made a mistake?

If you’ve made an error, such as underpayment, overpayment issues, etc. you can edit, lodge and amend pay runs on Xero.

What if I need an extension?

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.

Are there any changes to IAS or BAS reporting?

No, IAS and BAS reporting remain the same.

Why has the ATO implemented STP?

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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Paul Dunn: The 3 L’s That Determine Your Legacy, And How You Can Leverage it To Do Good

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:

The story behind Paul’s decision to create a movement that encouraged charitable giving.
The two driving forces that lead Paul to create B1G1.
The 3 L’s that determine your Legacy.
How business owners can leverage their legacy.
Paul sharing his passion for giving abundantly and why all entrepreneurs should follow suit.
Paul’s tipping point: How the 2006 tsunami made him realise that he has a bigger obligation to the world.
The mindset shift that business owners need to make to embrace the idea of doing business while giving back.
Paul explaining why business owners are in the best position to make the world a happier place.

Resources:
ONE – Sharing the Joy of Giving by Masami Sato

Interview with Simon Sinek

Impact, Habit and Connection | Paul Dunn | TEDxStHelier

TEDxSingapore – Paul Dunn

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:

iTunes: https://itunes.apple.com/au/podcast/inspiring-business-for-good/id1442173853?mt=2
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Spotify: https://open.spotify.com/show/2Gfg1nuJFEZpzRocWWWi2U?si=XpciZpKsTJSNTn17t34zyA
Google Podcast: https://bit.ly/2KkEZwU

Don’t forget to [subscribe on iTunes] to be notified when new episodes are released.

Sarah Riegelhuth On Helping Millennials Become Financially Free & How To Manage A Remote Team

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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:

How & why Wealth Enhancers serve the Millennial market.
How building businesses that give back can create a better world.
What B Corp is and why it’s important for entrepreneurs to have their certification.
How Sarah’s trip to Cambodia changed her life.
How to balance running a profitable business with giving back and doing good.
How Sarah developed an abundance mindset to get to where she is now.
A word of advice from Sarah on how to maintain a remote team that can deliver excellent work.
The strategies Sarah uses to ensure that Wealth Enhancers consistently delight their customers.

Resources:

Wealth Creation for Millennials – Free Course

Who by Geoff Smart

Connect with Sarah

Sarah’s Website: WWW.SARAHRIEGELHUTH.COM

Sarah’s Facebook

Sarah’s Instagram

Sarah’s LinkedIn

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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7 mistakes keeping business owners struggling for cash

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 –

earn less than $200,000 in revenue
cannot afford a team
are unprofitable
or don’t pay themselves a decent salary

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.

SAVE $500,000 TAX | Accounting that pays for itself

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.

Tax on Bitcoin and Cryptocurrency

I’d like to clarify some thoughts around the tax on Bitcoin and cryptocurrency profits.

Background of Bitcoin and Cryptocurrency

Bitcoin has sometimes been referred to as the ‘currency of the underworld’. But whatever your view, it is likely that the currencies of the future will be cryptocurrencies.

This topic is fairly controversial, especially in the last sort of four or five months when Bitcoin shot through the roof (December 2017). This has lead onto more focus in the media, and an increase of conversations that we’ve had with our clients about the subject.

Bitcoin has been around since January 2009, and is a type of virtual currency. You might have heard the word cryptocurrency, which Bitcoin is one example of. But there’s lots and lots of other cryptocurrencies as well now that have come out since Bitcoin. There’s literally hundreds of them, if not thousands, and more and more people are working on developing their own cryptocurrency.

Here’s a list of the top ones by market capital: coinmarketcap.com

There’s people on both sides of the fence: some saying, “You’re going to lose all your money.” But on the other hand, there’s people making millions of dollars.

In the end, there’s people out there making money and there’s people out there losing money. But that’s not the point of what we’re here to talk about – go and rant on Facebook about that.

We’re here to talk about the tax effects, and what you need to consider from a tax perspective.

Tax on Bitcoin and Cryptocurrencies

I might pre-empt this by mentioning I actually bought and sold some cryptocurrency. But in no way am I a trader and I’m making millions of dollars from this. I actually put some money into it, so I could see how the crypto-world works, and how you actually buy and sell these currencies, and transact in them.

Now the first thing to consider is the ATO haven’t been very public on their opinion and recommendations in great detail on cryptocurrency. The ATO have released some materials on it though. There’s forums that the ATO hosts where people have asked lots and lots of questions, and they haven’t really got great or any answers.

But they have set some guidelines to cryptocurrency that you do need to consider. If you ignore them, and you’re caught out, then there will be massive penalties and fines, because that could be seen as tax evasion, or tax avoidance. People end up in jail for that sort of thing. We’re not here to ignore the fact that you’re making profits in Bitcoin or cryptocurrency, and so we need to address it.

Bitcoin and cryptocurrency as a Capital Gains Tax Asset

Firstly, the ATO see cryptocurrency as a CGT asset, or Capital Gains Tax asset. That generally means that you’re buying an asset to sell it later for a gain. You’re not necessarily making a business of it let’s say.

It’s kind of similar the ATO seeing gold bars, an investment property or even shares held on the Australian Stock Exchange as capital gains tax assets.

If you buy, let’s say $50,000 worth of Commonwealth Bank shares, and you sell them 10 years later for $100,000, you make a $50,000 gain on them. That’s called a capital gain. The ATO wants their cut, called capital gains tax.

You may also know about the capital gains tax discount, where if you are in an asset for more than 12 months, then you receive a 50% discount on the tax payable on that gain.

Let’s go back to the CBA shares, where if you buy them for $50,000, 10 years later you sell them for $100,000, then instead of paying tax on $50,000, you’ll pay tax on a $25,000 discounted gain.

Now what the ATO has said about cryptocurrency, is yes, they might consider your investment as a capital gain, and be able to give you that 50% discount, if you bought it over a year ago before you sold it.

But you need to be very careful, because they’ve also said that people who actively trade in Bitcoin or cryptocurrencies will be taxed as if that income was business profits.

In that case, you won’t actually get a 50% discount, even if you own that currency for more than 12 months.

Now from the people I’ve spoken to, there’s kind of two types of crypto investors:

1. Tax for Passive Bitcoin and Cryptocurrency Investors

There’s ones who were lucky enough to buy, let’s say Bitcoin for a couple of cents, or a couple of dollars back in the very early days. Now their portfolios are worth tens of, or hundreds of thousands of dollars, or even millions of dollars.

But they would’ve whacked a few dollars on it years and years ago. They woke up all of a sudden, and bam they’ve got massive portfolio worth of Bitcoin.

Now had you not traded that stuff day-to-day, week to week, or even month to month, the ATO might actually consider you’re eligible for that 50% capital gains tax discount.

That’s the first type of investor, which is very passive, and you’re not too involved. You’re not logging in each day, and checking the price, and making regular decisions based on that.

But let’s say you are that person who, you might have got into it early. You might have even gotten into cryptocurrency recently, but you’re trading it quite actively. Read on…

2. Tax for Active Bitcoin and Cryptocurrency Traders

Trading it ‘actively’ could even be making a few trades every week or month.

Now what I’ve seen with most of the traders who go about this to make profit (and it might be literally a part-time, or even a full-time job they’re doing trading cryptocurrency) is that in my opinion, and even the ATO’s opinion, it is actually considered business income.

So it wouldn’t be seen as capital gains for those investors. They wouldn’t receive that 50% discount, even if it’s held more than 12 months.

Now another point to mention is, I don’t believe not having access to the discount matters so much for these sort of traders, because they’re usually making trades and buying and selling on shorter than 12 month turnarounds anyway.

They might buy a coin for let’s say 1,000 bucks. Then a couple weeks, a couple of months later, they’ll sell all or some, to capture their profit.

Now even if that was capital gains, you would’ve paid tax on the full gain (without a discount).

But if we’re realising it as business profits, you’re still going to pay tax on the full amount anyway.

Using business structures to trade Bitcoin and Cryptocurrencies

Now that brings into consideration the ability to use business structures. Our biggest strategy to control how much tax you pay.

The first thing to consider is that the tax rate of each structure.

Sole Trader: If you buy and sell bitcoin or cryptocurrencies in your own name, you can be taxed at the highest marginal tax rate of 47% tax.
Companies: Or if you run your business through a company, you can pay tax at either 27.5% or 30% tax, depending on your turnover.
Trusts: if you structure it through a trust, you basically distribute profit from that trust to family members, or other entities (like other companies) in your family group.

Unfortunately, I think most people started out with cryptocurrency as a sole trader – a little bit of a thing they do on the side. It may have actually turned into a highly profitable business. Just watch you’re not going to forever give 47% of what you make to the tax man.

A big thing to consider is what business structure you trade through. Now if you’re thinking this, and you’ve already made a decent amount of money already through cryptocurrency, we can’t go and retrospectively implement these things. But I’d definitely consider changing your structure moving forward. Especially if you’re going to continue making those profits moving forward.

Now the difficulty we get is it’s actually quite hard to get a designated company or trust account with a lot of these cryptocurrency exchanges. (Where you buy the coins.)

One thing you need to do is consider, “Well, I might want to structure through a company or a trust, but how to actually do that, when I can only signup for these things in my own name?”

This is why I intentionally went through the process of buying coins, and signing up for stuff – and this is one of the brick walls I hit and have since overcome.

There may be ways to achieve by signing up in your own name, buy running the profits through a company or trust – where you act on behalf of the company or trust.

As an example, if you are successful in running your trading through a company, then on your profits you’ll be paying tax at a flat rate of 27.5%, instead of up to 47% tax that you’ll pay if you do it in your own name.

I’d encourage you to reach out to us so we can have a chat about your situation, and see whether one of these options would be available to you.

Record keeping of Bitcoin and Cryptocurrency trading

The other really important thing to keep in mind when you’re trading the cryptocurrency, or buying and selling, is make sure that you have records. Now, done a few trades, I’ve found it’s really, really difficult to keep track of it, given the prices change so much. You might be converting AUD -> BTC, then BTC -> some other random coin -> and so on.

There’s also no real central exchange or platform that you buy and sell coins from either. If you’re trading more than just Bitcoins, like Bitcoin and Ethereum, or whatever, some of the other big ones, there might not be just one exchange or place that you trade them.

But you might have signed up to three, four, five, or six exchanges and be buying and selling them from many different places. (Or even peer to peer trades with some of the smaller coins.)

The critical thing is to make sure you’ve got a way of systematically keeping a track of your profits. Now, I’d hope you’re doing this in any case to make sure you are making money, but on the other hand, the tax man will want to see how you come up with your calculations of profit.

Now, there are some websites that you can use to keep track of this for you. There’s been mixed feedback on them, but CoinTracking.info has a fairly decent way of reporting your trades and keeping track of your values.

If you’re making tens of trades a day, you probably want a way that automatically keeps track of your trades for you. I don’t know any at the moment, so if you know of any let me know in the comments below.

There’s a bit of background on tax on Bitcoin and cryptocurrency. I hope that’s been helpful, and please let me know if you have any other questions.

B1G1 Study Tour to Kenya

Property Development in Kenya

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.

A hand up, rather than a hand out

One of the more well known projects in B1G1 is the ‘Goat Project‘, which we visited on Day 6.

We think it’s about the meal we’re giving; but it’s so much more.

This project is the hardest one for me to talk about, type about, or even think about.