Are JobKeeper Contributions
masking concerning statistics in your business
I was on a recent webinar, with Employment Law Specialist, Danny King (Danny King Legal)
She spoke about the concerning statistics JobKeeper could be masking for your business.
Here’s what she said –
Just because you’re getting JobKeeper, doesn’t mean you should continue blindly into the JobKeeper sphere and not think about the consequences for your business as the pandemic continues.
It might be really important for you to have a good hard look at your resourcing of your business and whether you really need to restructure it, or not. This is a question of business survival, and the JobKeeper contributions might be masking some very concerning statistics within your business that you are either choosing not to see, or it just hasn’t really come up in your attention yet.
For those of you who are thinking, “Oh, that might be me”, these are the things to look for:
- Think about whether you have any reasonable prospect of coming back to a pre-COVID level of work within your business.
- Has the market for your product or service changed?
- Is there going to be the ability to actually use all of the people that you’ve currently got that are being supported through JobKeeper when the dust settles?
If the answer is no, the time to act is now.
Whilst JobKeeper continues to be paid into your business account that is helping fund the current liability to your employees for their wages; and you might have jumped through the hoops that you need to reduce the amount that you actually pay, the full-time entitlements continue to accrue. Every single day, you’re chipping out a little bit extra annual leave, long service leave, personal leave onto your long term liability; onto your balance sheet. And when it comes time to actually rip the band-aid off, if you have been complacent for six months, then that six months can be a very significant increase in termination entitlements at the end that might actually be the nail in the coffin for your business.
It is so important not to think, “Oh, it’s okay, I’ve got JobKeeper coming in and I can just cruise for a bit,” that is not the case at all, you need to be very focused on what your business needs you to do and jump through the hoops that you need to in order to do a restructure.
Why You Need Separate Bank Accounts For Your Personal And Business Finance
I was recently invited to speak at Dr. Ben Carvosso (The On Button ) Mentor Live Session.
One of the things we spoke about is having separate bank accounts for your personal and business finance.
You absolutely need to have separate bank accounts and if you don’t already have that, I’d be pretty surprised.
When we work with clients, normally a business will be structured as a company or a trust depending on the business owner and what’s more applicable to their family. And so, you actually need to set up separate bank accounts for it.
This has also helped with my relationship with my wife, Stevie. Really early on in our relationship, when we started combining our finances, it was actually quite tough to communicate about money because, especially as a new business owner, the money in the bank account went up and down and so did my emotions and our ability to spend money on things like a date night. One week, when there was $20,000 – $30,000 in the bank account, we’d go out to dinner, have a nice date night. Then the next week when Stevie was like, “Oh, let’s go out again.” I’d say, “No, we can’t because there’s hardly any money in the account.” That’s not a really functional way of communicating about money.
One of the big things we did as a result of that was consistency. Basically choosing a weekly amount that you pay yourself as a salary or depending on your structure, it could be as a drawing from your business.
Choose a weekly amount that’s consistent. If there’s money in the business bank account, don’t just say, “There’s $20,000 – $30,000 in there. I can take $20,000 of it.” You need a consistent amount that comes across from your business accounts into your personal and that’s what you work with. You’ve really got to separate the two in your mind.
The Easy Way To Save $500 Every Month
I’ll share a personal story from Stevie and I about coffee.
Stevie and I love a good coffee. We used to go out for coffee because we just can’t stand instant. Now a long black with a dash of milk costs $4.50 in Queensland (probably $6.50 in Melbourne) and there’s two of us. We usually had two a day. Even on Christmas Day we found a cafe to have a cuppa at. So $4.50 x 2 x 2 x 365 days a year equals a heap of money per year – $6,500.
I’ve got a rewards credit card for business expenses. One of the things we could buy was actually a Breville coffee machine at home. So it didn’t cost us any dollars. The only thing we need to do is fuel it. So 26 fortnights in a year times by a $40 bag of coffee equals $1,040. So our savings there is about $5,500 a year.
The key here is we didn’t really adjust our lifestyle. We still can have two coffees a day, every day a year. So, that’s just shy of $500 a month that we’re saving just from doing that.
What You Need To Consider When Setting Up A Family Trust
Number one is you. Our magic number is about $90,000 in how much we want to cap out at giving you. The reason is because the tax rate goes from 34.5% to 39%. We’re better off sending money to a bucket company after the $90,000 mark. However, we don’t want to rush straight to a bucket company because they cost money to set up and run from an accounting perspective. We’ve got to make sure it actually is saving you tax before we consider something like that.
The second one is your spouse. Some things to consider is other income that they might earn, HECS debt, working for someone else or have an investment income.
Number three is retired parents. For this to really work they need to be self-funded. What this means is that they’re not receiving a Centrelink old age pension, because if we distribute trust income to them, they’re going to lose or reduce the amount that they’re receiving. And usually, the costs in a lost pension, does not outweigh the benefits that you’ll get from a tax benefit.
Learn more register to our next SAVE TAX WORKSHOP https://info.inspire.business/wealthforlife
Do you have a seperate account for irregular bills to prevent financial strain?
Let’s say, if you don’t account for it, you’ve got two car rego’s and they all come in the same week, you’re probably not going to have enough money to pay that if you’re following the system in your living expenses account.
We’ve set up a separate account for irregular bills such as insurances, regos, rates, water bills, gas, all that stuff that’s not weekly. My context is weekly, yours might be fortnightly or monthly.
How often you get paid, you need to set aside money so that you’ve got enough cash in that account to pay that bill in full when it arrives.
How To Review Your Annual Leave Balances In Xero
Assuming your Xero is up to date and your payroll’s been done correctly, you can check where a team member is at if you’re considering restructuring your team or redundancy.
- Under Accounting, click on Reports
- Scroll down to Payroll Reports and select Leave Balances
- to effective date, put in today’s date then select update
This is where you can view what your leave balance is for your employees. It will also list out the types of leave they have e.g annual leave or personal/carer’s leave. You may want to group them by the leave type such as annual leave so you can view the hours and the dollar figure as well.
If you need to have a chat with an Accountant about your business – book in a free Strategy Chat with an Inspire Life Changing Accountant today – https://inspire.accountants/chat/
Asset Protection Options For Business Owners
If you’re a sole trader, you’ve got very limited options to protect your personal assets. If I was a sole trader it would literally be Ben Walker, trading as Inspire CA. If something were to go wrong in the business and someone sued me, then any assets that I own would be exposed.
Now if we look at companies and trusts and they’re set up correctly, they’re fantastic for asset protection. Set up wrong and it’s useless.
Finally, SMSF’s are fantastic for asset protection. And unless you’ve stashed a whole heap of cash in the super fund, knowing that something bad is going to happen or you’re being sued, then it’s protected even through bankruptcy – which is really great.
If you need to have a chat with an Accountant about your business – book in a free Strategy Chat with an Inspire Life Changing Accountant today – https://inspire.accountants/chat/
Set Up A System To Save Money On AutoPilot
“I’ve got 50 grand sitting there for a rainy day, and it’s a rainy day.”
From a cash flow management perspective, a lot of our clients say that they’re not number’s people and don’t do well with all the dollars. What’s human nature is our tendency to spend everything that’s in the account. Then you get these quarterly or annual tax bills that can often catch you off guard if you haven’t got systems set up in place.
One of the things we advocate for is setting up a system where you’ve got multiple different bank accounts with a direct debit setup. That way you’ve got a certain amount going out each week or month into these savings accounts for the purpose of tax or a rainy day fund.
We’ve got clients, who at the start of COVID-19, they rang us so grateful saying, “Hey, thank you for a year ago telling me to set up that bank account. I’ve got 50 grand sitting there for a rainy day, and it’s a rainy day.” That’s the difference between a happy client who is able to survive this easily versus someone who hasn’t got that cash buffer and almost in damage control trying to work out how to get through the next few months.
Some practical things to do is to pay yourself first, don’t pay yourself last, that sends the wrong signal to yourself. You’ve got your own family to provide for, but you’ve also got the families of the team members and you can’t do that without putting the oxygen on yourself first. You need to make sure you’re looked after.
Start with $100 a week going into an account or $1000 if you can afford it. Just start that behaviour and then dial that up slowly and slowly. You won’t notice that over time when you increase the cash flow going into those savings accounts.
Check out the full length of my episode on the Reimagining Healthcare podcast with Yianni Serpanos
Business is about numbers and Family is number one – Ben Walker
JobKeeper 2.0 Payment Changes You Need To Know About
After September, the payment amount is going to change.
You have to consider whether or not, before the 1st of March, on a four-week average period, did any of your employees work more than twenty hours? If they did, the payment drops down to $1,200 per fortnight for the September to December period. Then from January to the March period, it will drop to $1,000 per fortnight.
The second payment tier is, if your employees had worked less than twenty hours per fortnight, it will drop from $1,500 to $750 per fortnight and then down to $650 for the January to March period.
Now, they’re dropping these payments because what they saw in JobKeeper 1.0 was that it was also encouraging people not to get back to work. So when the restrictions are being reduced, they’re going to drop the JobKeeper to incentivise you to make a little bit more cash by actually putting in the hours.
If you need to have a chat with an Accountant about your business – book in a free Strategy Chat with an Inspire Life Changing Accountant today – https://inspire.accountants/chat/
How To Claim Tax Deductible Donations With Churches or Charities
There are two categories. With a charity, the way you know whether you can claim a tax deduction is to Google their ABN. They need to be what we call a DGR or a Deductible Gift Recipient.
You can do this by going to the Australian Business Register
(https://abr.business.gov.au/) and let’s say you want to give to St John’s Ambulance. Click on the details of the ABN and down the bottom you will see Deductible Gift Recipient or DGR status. This is how to check if you want to claim a tax deduction for a donation. Keeping in mind, you will also need a tax receipt or tax invoice as well.
Now with churches, you can only do this from a trust, but if you tithe or give to a church then you can do that from pre-tax money. How to check whether this can happen is to type in the church’s name in the Australian Business Register, go into their ABN, and look out for Charity Tax Concession Status – income tax exemption from the 1st of July, 2000. How this works is, your trust can distribute before tax to the church, and then the church doesn’t pay tax.
If you need to have a chat with an Accountant about your business – book in a free Strategy Chat with an Inspire Life Changing Accountant today – https://inspire.accountants/chat/
Get Cashed Up
