Hi Glenn, can you please provide some examples of the most common items that are being purchased by small businesses who are taking advantage of the $20,000 immediate tax deduction? Also, this amount applies to multiple purchases for the business…. not just one purchase per financial year correct?
The common items are office equipment, computers, small vehicles and items of machinery, all below the $20,000 limit.
If the items purchased make a set, then that set must be below the $20,000 limit.
You are not limited to one item though, multiple items may be purchased.
Can you tell me what the 4 or 5 most important financial numbers are that a business owner should be monitoring, and how regularly they should be checked?
There are a number of KPI’s that can be used.
However, generally speaking the key elements to look for in a small business are based around Debtor Ageing, Creditor Ageing, Current Asset Ratio.
Is there an extension for registering with a Super Clearing House for Small Businesses past 30/06/16?
There has been an extension granted by the ATO to 31/10/2016
Hi Glenn, what is the best way for businesses to prepare for EOFY? What things can be done by the owner/operator and what things are best left to a professional?
There are always the EOFY housekeeping items to be done.
This to some extent depends on whether the business is on a cash basis or accruals basis of accounting.
But some of the items regardless are:
Write off those bad debts, pay the staff superannuation – this is not deductible unless paid, regardless of method of accounting. All expenses that can be paid by 30 June should be if on a cash basis.
Put together your accounts and items on your professionals checklists ready to bring in to them. The professional will finalise the correct allocation of those expenses.
Hi Glenn, what would you say is the biggest financial misconception that small business owners have when it comes to their business?
The biggest for new business owners is around GST. Whether to register or not. This really should be discussed with your professional as it depends on individual circumstances.
There are obligations for Workcover if employing, PAYG withholding for their wages, Insurances for product liability, do you have insurances for personal injury.
Cash flow is another major consideration for small business. Preparing cash flow budgets is a good way to manage cash flow. You do need to match these to your actual income and review the budget accordingly.
Can you tell me where I could get business benchmarks for my business. The ATO have a few but they are quite limited?
There are a number of sources for Benchmarking.
Australian Bureau of Statistics, ATO, Industry Organisations & Private Organisations. The last is usually on a subscription basis.
The latest Benchmarking from the ATO was issued today. These Benchmarks relate to 2013/2014 Financial Year. Hope these are of some assistance.
Dr Herbert Hermens:
What can a business owner do throughout the year to reduce the workload during EOFY?
Hi Dr Hermens
To reduce EOFY workload, it pays to keep the business financials up to date during the year. Whilst for GST purposes many do this, some of the additional supporting documentation could be collated ready for the professionals. If you work with your professionals during the year, this may mean that work is attended to on a continual basis and therefore the work to put all this together already accomplished.
Small Business Sam:
A friend came to me the other day as he is looking at selling his business and doesn’t know what steps to take next … what should he do?
Small Business Sam.
This is an interesting question. A lot of people do not consider leaving their business until they decide they are leaving their business. As with starting a business, planning should be done before exiting a business. Generally, the longer lead time you have and the better the planning before exiting the business, the better the exit will be.
To create a better value on sale they may like to do some business development to increase sales and put more on the bottom line. The other areas of business development could also be internal things to lead to a “turn key operation” on sale.
Often the value that the seller perceives is not the value a buyer perceives. By reviewing and planning before selling/exiting, the value can often be enhanced.
Don’t be frightened to consult your professional consultants with regards to these matters.
If a business owner is looking at moving from a rented premises into buying their own, what should they consider first?
In purchasing a premises to operate your business you should first seek advice from your professional team. The things they will discuss with you will be which entity will own the premises. This structure is of great importance and will be part of your overall circumstances for which they will be best to advise. One thing you should never do though, is have the premises owned by the entity that you run your business through.
As a start up consultant I often get asked “I’ve only got a small business Sally, what can I claim for my car expenses?” …What do I tell people when they ask me this question?
Bye for now,
This really is a topical question as there are recent changes by the ATO on this matter.
There are now only two options for claiming motor vehicle expenses for small business.
The first option is Cents per Kilometre. Under this method you can claim up to 5000km at 66 cents per kilometre. You need to be able to substantiate the kilometres travelled. This can be by way of logbook or diary entry. Whilst some say they are other ways to substantiate, a written form is preferable.
The second and final method is a Log Book. You must keep the logbook for a minimum of 12 continual weeks. You do not need to put your private travel in the log book. You then calculate the business use percentage and then claim ALL costs associated with running the vehicle at this rate. So if the vehicle has been owned for a while, dig out that invoice for the cost and when you purchased it. You will need this to claim depreciation. The other item with the log book method, if your business use was to change by more than 10 percent you must keep a new log book. Log books are good for 5 years otherwise. You can even use it for another vehicle if the use and purpose of the vehicle remains the same.
And one more for you Glenn .. How do Accountants celebrate the end of one financial year and the start of a new one?
This would have to be one of the most important questions of the day……we love it when clients bring in wine!
It is often said that Accountants do their best work before 30 June.
Our work up to 30 June is where we add the most value to our clients in providing the best tax strategies to help minimize their tax liabilities.
At our firm, we like to wind down with a meal and a cordial or two, and ready ourselves for the new financial year.