Your business structure can define the success of your business and each entity has its own per-requisites and impacts upon the business itself. The business structure you will select is also dependent on various elements such as the type of business, the number of people you will hire, partnerships in the business, and the long-term development plan of your business. When choosing your business structure it is recommended that you seek the advice of a professional accountant to ensure the saving of both time and money (during setup and afterward). Your accountant should understand Australian business economics and legal regulations deeply and can provide solutions/advice in selecting the best business structure. Below are the main business structures you will come across in Australia. Sole Trader Business Structure It is considered as one of the easiest forms of business structures in Australia. In sole trader structure, a person, alone is responsible for all business operations. Setting up this plan of business is also easier because it involves very limited legal and tax regulations. The income tax you receive on sole trader business structure is measured based on your personal tax rates. Although your personal liabilities will be unlimited but since you will not be considered as an employee under this structure, you are devoid of paying payroll tax or superannuation. This helps you immensely and as your business grows you can alter your business structure later on. However, you will need the assistance of accountant to help you out in the changing of your structure and income tax deductions. Trust Business Structure Unlike sole trader, trust business structure is a complex thing to set up and requires rigorous workout and regulation. In this setup, a person or company will become a trustee for the assets of a beneficiary. They will conduct and do business on the behalf of the beneficiary. There is a chance of maximising savings by proper distribution of profits, a process in which both parties can obtain several tax benefits. An accountant will be able to define the proper strategy to obtain maximum tax benefits, this is a crucial service for the better management of your economical taxation and accounting matters. Partnership Business Structure Like the name suggests, the partnership involves two or more people in managing and operating a single business together. For those eager entrepreneurs who specifically wants to raise their finances, this business structure is the best option. However, when a business is done in partnership, written agreements should also be done. Disagreements can happen when two or more people operating a business in making decisions. To avoid such hassles, a written agreement can benefit and constitute all within the partnership. Company Business Structure A company is considered as a legal entity under Australian business laws. When a person forms a company, it should be registered with ASIC ( Australian Securities & Investments Commission ) and this same government authority also regulates them. It is the costliest business structure to set up. The company must have shareholders or directors that are responsible for the operations of the company. The income tax that the owners receive is at per the tax rate of the company itself. The company owners can be eligible for tax deductions but it is important to get professional advice or assistance to help you set up and manage your business structure properly. With this overview explore the business structure you think would fit best with your circumstances. If you would like advice on what structure is best suited to your business, ND Accounting offer a 30 minute free consultation. Book online here .
Is your accountant working hard enough to reduce your taxable income? Does your accountant plan ahead and give advice? Are you starting out in business and looking for an accountant? Individuals and businesses find it hard to choose an accountant when starting out in business or some businesses have an accountant but have a misconception that by changing accountants it will be difficult and they will not know enough about their business and tax affairs. Nothing could be further from the truth. A good accountant should, in only a very short space of time, using the financial statements and tax returns prepared by your previous accountant, get a very clear picture of how a business operates and what the tax and financial issues are. Because your accountant should be a dependable business adviser, you need an accountant that you can trust, get along with and can provide a personalised service.
If you want to lodge a tax return in Australia you will need a tax file number (TFN) to do so.
“Fringe Benefits Tax (FBT) is the most misunderstood tax.” What is a fringe benefit? A fringe benefit is generally defined as a benefit not being salary, wage or other cash remuneration, derived from employment. The advantage of a fringe benefit arrangement is two-fold: it provides employers with a way to give employees an incentive without increasing wages; as employees can exclude fringe benefits from their taxable income and it is deductible to the employer as a business expense. What is the fringe benefit tax? Fringe benefits tax (FBT) is a tax payable by employers when they provide fringe benefits to employees. The FBT year runs from 1 April to 31 March. The current FBT rate ending 31 March 2018, 2019, 2020 and 2021 is 47%. The fringe benefits tax is separate to income tax and is calculated on the taxable value only of the fringe benefits provided. As an employer it is important that you determine whether there are any tax advantages in offering fringe benefits to your employees. Is your business liable for FBT? You may be providing a fringe benefit tax if your business is providing any of the following: Car and car parking benefits Entertainment benefits Expense payments In-house benefits (e.g: free or discounted goods produced by the employer) Is every fringe benefit subject to tax? It is important to note that mobile phones, laptops, iPads etc. are usually exempt from Fringe Benefit Tax. Below are some examples of benefits that are not considered for FBT. Computer and tools of trade Mobile phones. Calculators Briefcases Some taxi travel to or from the workplace Some car parking Some minor benefits that have a value of less than $300 How do I register for the Fringe Benefit Tax? It is recommend that you register for FBT once you have established that you are paying FBT. You can Register for FBT: Online – if you already have an ABN using the Australian Government Business Registration Service By phone – if you're an authorised contact for the business, phone on the business enquiries line Through your registered tax agent; or By lodging your annual FBT return. If you are providing your employees with additional benefits you can learn how to calculate your FBT via the ATO website here . How to submit a Fringe Benefit Tax? Fringe Benefits Tax (FBT) tax year runs from 1st of April to 31st of March. You must then lodge your return and pay the total FBT amount you owe by 21st of May. You can pay either annually or quarterly instalments with your (BAS), Business activity statement. However if the FBT you were liable to pay for the previous year was $3,000 or more, you must pay quarterly FBT instalments with your activity statement with your annual FBT return and any related liability due no later than 21 May. Keep track of your Fringe Benefit Tax records The ATO requires Fringe Benefit Tax records be kept for a period of five years from the date of the relevant transaction. The FBT records you need to keep show: The taxable value of each fringe benefit provided to each employee. Some examples of records you may need to keep are invoices, receipts, travel diaries, logbooks, odometer records and employee declarations The method you used to allocate the taxable value of a fringe benefit That 100% of the taxable value of the benefits has been allocated to employees. So what is the reportable fringe benefit? Although FBT is paid by the employer, the benefits received by the employee must also be reported by the employer on the employee’s PAYG payment summary (formerly known as group certificate) as reportable fringe benefits if the benefit exceeds $2,000. This is a ‘grossed up’ taxable value exceeding $2,000 in value in an FBT year. (1 April to 31 March) While employees do not pay income tax or Medicare levy on fringe benefits the amount of reportable fringe benefits is taken into account by the government and is included in means (income) testing. This can affect an individual’s liability/eligibility for a range of government charges/entitlements. Medicare levy surcharge (not the standard Medicare levy); Deduction for personal superannuation contributions; Government Super Co-contribution; Tax offset for eligible spouse superannuation contributions; Higher Education Contribution Scheme (HECS) and Higher Education Loan Program (HELP) repayments; Child support obligations; and Entitlement to certain income-tested government benefits (refer to Centrelink website for more information). Summary For additional information the tax office provides an FBT guide for employers, available on its website www.ato.gov.au . If you’re not sure if your business has a FBT liability or not contact us here and will be able to accurately advice on the fringe tax benefit, based on your circumstances.
Why was the superannuation guarantee set up?
When to register for GST and how does GST work and affect operations.
Small businesses take up 97 percent of all businesses in Australia. Running your own business has many advantages however the truth is according to the Australian Bureau of Statistics, more than 60 percent of small businesses cease operating within the first three years of starting. Below are some tax tips that will really benefit you if you own a small business or setting up a small businesses.
If you are running a business you will need an ABN, even if your business is not going to register for GST. However you must also register for GST if you are a business and your current/expected annual turnover is $75,000 or more (or $150,000 or more for a non-profit organisation) and/or you provide taxi travel (regardless of turnover). Click here it find out more about GST and business. What is an ABN? An Australian business number or ABN is a unique 11 digit number that identifies your business or organisation to the government and community. Why do I need an ABN? It helps people to see that you have an established business. For sole traders and partnerships, you need an ABN to register a domain for your website. The is the www.companyname.com.au If you want or need to register for GST, you must first get an ABN ABN is mandatory for certain dealings with some Government and non Government bodies. (For example you need an ABN to open a bank account for your new business which every new business should do.) You can’t lodge a tax return as a business without an ABN. What do I need to apply for an ABN? You can’t get your ABN until you have created the legal entity (ie the company), so you need to set up the company first and then do the ABN registration. For sole traders, the only information that you may need is your Tax file number, address, DOB and bank account details. You will also need to decide if you want a business name or need to be registered for GST. For a ‘partnership ABN registration’, you will need your partner’s details including address, DOB and TFN, Tax file number. For a ‘company ABN registration’, you will need the same details for each director. Three ways to apply for an ABN There are three ways to legally apply for an ABN through the Australian Business Register portal , in the same way that people can do their own tax returns, they can also do their own ABN registration using the services of a Registered Tax Agent – this is the simplest way to apply Considerations before registering for an ABN Business Structure Your business structure will define the success of your business in Australia since each module has its own pre-requisites and impacts upon the business itself. Registering your ABN as a sole trader is simpler and least expensive but that doesn’t make it a good reason. Multiple owners can set up as partnerships or companies. Brand How your business is going to be branded? Do you want a business name? If so, then its a good idea to check the availability of the name and domain before doing the ABN registration. GST Registration You need to decide on this when you do your ABN registration. TFN registration If you set up a new partnership or company, then you need a TFN and you might as well do it at the same time as getting your ABN rego. Business Plan A business plan should question the validity of your ideas, the product/service target markets and so on and then be regularly reviewed and updated. Read more here . For further assistance book an online obligation free 30 minute consultation here .
Many people dream of being their own bosses and starting their own business for a better lifestyle. The unfortunate reality is 90% of start-up businesses fail. Business plans are not just created if you’re seeking finance for your business, it’s a tool for understanding how your business is put together. A business plan should question the validity of your ideas, the product/service target markets and so on and then be regularly reviewed and updated.
Here is a link to the list of general expenses you can claim an immediate deduction on . You are also able to claim the following: Repairs and Maintenance Repairs are any works you carry out on your property to restore something to its original state or function. The ATO determines a repair as, such as replacing part of a damaged fence. The ATO determines maintenance as work completed to prevent damage or deterioration, such as oiling a deck. Here is a link to the Repairs, Maintenance & Capital Expenditure quick reference chart . Write-off or Scrapping when renovating If you remove an asset, you would be able to claim a deduction for the residual value of the removed asset. To take advantage of deduction for scrapping assets, you must obtain a depreciation schedule both before and after the renovations. This will ensure that you have evidence should the ATO wish to conduct an audit. Prepay Expenses Why not pre-pay your investment property expenses and bring forward the deduction? Borrowing Costs There are some borrowing expenses you can claim on your investment property. Some of these costs are: Broker Fees Legal fees and costs associated with preparing and filing of mortgage documents Title search fees charged by your lender Valuation fees required for loan approval Loan establishment fees Mortgage insurance Mortgage stamp duty Pay As You Go (PAYG) Variation Rather than waiting until you lodge your income tax return to receive a lump refund, you can submit a PAYG Variation application with the ATO, which will instruct your employer to vary or reduce the amount of PAYG withheld from your income paid each pay cycle. Here is the PAYG Withholding Variation Application Capital Works Deduction Tax deductions for capital works include building costs, the cost of altering or the cost of capital improvements to the surrounding property. This could include, major renovations, adding retaining walls, building extensions. The rate of deduction is generally 2.5% per year for 40 years following construction. You should engage the services of a qualified Quantity Surveyor such as BMT Quantity Surveyors or MCQ Quantity Surveyors to discuss the depreciation potential of your investment property(s). The depreciation schedule has a one-off fee which is 100% deductible.
