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11CGT home exemption

When is a home exempt from CGT

CGT home exemption

Your home can be exempt from CGT providing it is your castle. You need to do a few things to make sure it meets the ATO

The ATO considers several factors when determining if a dwelling is considered a client’s main residence. Various tests in relation to different factors to determine to see if you meet this test as your home. This may vary depending on the circumstances and it may be several factors.

What makes a home regarded as your home and makes your home exempt from CGT?

The main residence test for a dwelling is based on facts and takes into factors such as:

▪ whether they / their family live there

▪ how long they have lived there

▪ their intention to occupy the dwelling

▪ is the mail delivered to your home?

▪ are your personal belongings there ie have you physically moved in

▪ is it your house address officially on the electoral roll,

 ▪ whether they have connected utilities such as electricity and gas etc

If you acquire a dwelling and move in ‘as soon as practicable, it will be treated as your main residence from the acquisition date.

Change of circumstances

Of course, if your circumstances change, you may nominate another dwelling or take advantage of the six-year absence rule in relation to your existing home. This can continue to make home exempt from CGT.

Many people often purchase a house move in and then find after several months that the mortgage repayments are impacted due to a change of circumstances. They rent out the property and then wonder if they will then have to pay CGT on their home?

The good news in certain circumstances your house will still remain exempt

To make sure you meet the six-year rule you need to ensure it is your main residence before it was used to produce assessable income; and that you haven’t nominated another property as your main residence for the same time period. 

After establishing the property as your main residence, it is possible to move out and rent the property out for up to six years.   

Per the ATO (summary)

Your property stops being your main residence when you stop living in it.

However, for CGT purposes you can continue treating the property as your main residence:

  • for up to 6 years if it is used to produce income, such as rent (sometimes called the ‘six-year rule’)
  • indefinitely if it is not used to produce income.

During the time that you treat the property as your main residence:

  • Your home continues to be exempt from CGT to the same extent that it was exempt when you stopped living in it, even if you start renting it out after you leave
  • you cannot treat any other property as your main residence (except for up to 6 months if you are moving house).
  • If you do not use your former home to produce income (for example, you leave it vacant or use it as a holiday house) you can treat it as your main residence for an unlimited period after you stop living in it.

The good news is if you move back into your home and then down the track you move back out the six-year rule is reset, and the exemption applies for another six years. Of course, if you only have one home and you leave it empty or for the kids to use it then as long as it does not earn an income it remains exempt indefinitely.

However, if you acquire a new home then the above exemption ceases. Make sure if you are renting your property out then please don’t hesitate to contact us and discuss your circumstances. We welcome you to contact us if you need some advice phone 95979966

11discounting in your trade business

Customer Discounting for a trade business leads to profit leaks

Customer Discounting in your trade business is a quick race to the Bottom

Some tradies will start customer discounting to land enough renovation or trade jobs to just survive in the current building market downward trend or to keep their sales pipeline busy. So right they have work, they will survive?

WRONG – don’t do customer discounting!

Right about the “just survive” bit because survival is all you derive when you discount.

Discounting really is a race to the Bottom. The bottom line and an empty bank account is what hits you with this stragey!

Geoff Gartly has been looking after small business trade clients for many years. He has seen what works and what doesn’t. We know that discounting is NOT a recommended business strategy.

Profit can be tight sometimes when you are quoting but don’t discount to get the job!

We got your back – our tips on how not to dig a hole with customer discounting!

So here are a few tips to help you quit discounting in your trade business.

Decide that you can’t afford to discount

Unless you have heaps of spare $$$ in the bank you can draw on to tide you over several years make the decision that you cannot afford to customer discount anymore.
It’s a bad habit to get into at the best of times. But, if you do it for too long, it can become a hard habit to break. Sure, you may need to adjust your prices to meet market conditions, but that is quite different from getting into a discount war against another builder or tradie. Do that, and you both lose?

We help our tradies get the pricing right so that the hourly rate allows for GP, admin , mistakes and anything else that can impact.

Re-evaluate your service.

Make a (long) list of all the things you provide for your customers and make customer discounting not one of them. List things that are not in a typical estimate. If you are a good builder or tradie, you actually provide your client with many things that they don’t pay for. So, increase the value of your estimate by letting them know all the other things you provide. Improve your sales delivery and your customers will feel like they are getting a fair price!

Determine to walk through the fear (of missing the sale).

This is the hard part because it’s so personal. Yet it is an absolute requirement if you are going to rise above the discount mentality because facing fear head-on is the only way to overcome it. Sometimes you just need to talk to someone who has done it before to know it is OK

It takes courage to stick to your prices, but if it ensures you retain decent margins and make decent money, then it’s worth learning to do. Right?

To do it right, you need to add value to your trade business by marketing quality and service, not cheapness and discounting. Set your trade companies vision and start marketing this to your customers

11newsletter

Weekly Newsletter March 31st

The Federal Budget 2022


Here is our quick summary of the Federal Budget handed down on Tuesday. The Budget focused on keeping business and the economy going during uncertain times. It would be also be drafted with a focus on the following Federal Elellection due soon. Media reports indicate that if there is a change of Government, the ALP will publish a newly revised budget in July or August this year, which may not result in all initiatives etc., being fulfilled or modified.


Here are the critical points that we believe will impact our clients:
• 120 % tax deductions for small and medium business spending on Training and new technology
• No further extending the temporary full expensing of equipment investments
• $1.3 billion to businesses to fund apprenticeships
• ATO will be allocated more money to chase tax cheats
• PAYG system to better match a business trading result
• TPAR reporting changes to make it easier for businesses to report
• Super pension drawdown rates halved till the start of July 2023
• As previously announced before the Budget, the work-related COVID 19 test expenses incurred by individuals will be tax-deductible.


Small Business Full Expensing is finishing up!


The full expensing instant tax deduction has not been extended, meaning businesses will have to install or use the new equipment by June 30, 2023, to claim full expensing provisions.

In replacing full expensing, we have a New Technology & Training Tax Break


The new temporary tax break is for businesses that invest in either new technology or employee training and skills development.

Employee Training
As of Tuesday night, for every hundred dollars a small business spends on training their employees, they will get a $120 tax deduction,

Technology incentive

As of Tuesday night, every hundred dollars small businesses spend on digital technologies — such as cloud computing, e-invoicing, cyber security and web design — results in 120% tax deduction.
Limited to Investments of up to $100,000 per year will be supported by this new measure; however, if you are spending more, please see us as the existing immediate write off provisions still apply till 2023

How it works in real life, reducing the cost of Training or technology!


For example, Smith Co Pty Ltd has engaged an RTA business in Australia to provide Training staff to its employees online. The total cost of Training was $10,000. Smith & Co Pty Ltd will be able to claim 120% (i.e. $12,000, as a tax deduction concerning these expenses)

The True Cost of the Training from a cash point of view


Cost of training $10,000, payable now when you buy it
Claim tax deduction of $12,000 (still to be clarified – 2023 year )?
Real cash tax-saving @ company tax rate $ 3120
Net cost of training $6,880

A reminder that Loss carryback rules still apply for the next two years

Loss carryback provides a refundable tax offset that eligible corporate entities can claim:
• after the end of their 2020–21, 2021–22 and 2022–23 income years
• in their 2020–21, 2021–22 and 2022–23 company tax returns.
Eligible Companies can obtain the offset by choosing to carry back losses to earlier years in which there were income tax liabilities. The offset effectively represents the tax the eligible entity would save if it could deduct the loss in the earlier year using the loss year tax rate. As it is a refundable tax offset, it may result in a cash refund, a reduced tax liability or a reduction of a debt you owe us.
Loss carry back tax offset – Australian Taxation Office. https://www.ato.gov.au/Business/Loss-carry-back-tax-offset/?=redirected_losscarryback

Fuel costs temporary relief

Petrol and diesel excise will be reduced by half for six months, saving 22 cents for next six months. Hoping this is passed on to the small business at the petrol bowser

Tax Bonus when you lodge your 2022 return

Low Middle-income tax offset (LMITO) — in 2022 can put up to another $1,500 against your tax refund once you’ve done a tax return in 2022

Draw down rates for Self Funded Retiree Pensions – 50% reduction till June 2023

11Estate planning

Estate planning and documenting your future.

Estate planning for the living!

Many of us go through life not thinking about the end.

Many often think do I need a will? Many don’t bother! We start life naked with nothing and we end up leaving an imprint on this earth that others must follow.

Telling others how you want what you have accumulated in life is important

Wills establish wishes after death and are essential for estate planning

The chances are that you may have wishes about who gets the large loot of assets and possessions. These assets you have accumulated in your lifetime. Or you may have a young family and provision needs to be made to provide for their welfare and education.

No matter what your situation is you need a plan! A plan to look after your loved ones.

Start planning now for your estate wishes.

Leaving this earth without instructions to your executor can mean that you will leave headaches for others. Do I need a will? YES  Take time as to what instructions you would leave for things such as :

  • Your business – what is your desire and are others capable of taking it over? 
  • Your car 
  • Your children and wife from the first or second marriage
  • If you die with young kids who will look after them?
  • How will you deal with your superannuation?
  • Who gets what?
  • Is their tax and capital gains tax to be addressed?
  • Any favourite charities that are important to you
  • Have you documented your life achievements?
  • Passwords for eBay, Facebook and Instagram?

Leaving a will allows those you love can be financially rewarded or cared for. A Will that has been created well will address issues of taxation and division of property.

No will – dont leave a problem to someone else

Not leaving a Will can result in an executor being appointed that must follow the standard formula for those without a will.  When a person dies without leaving a valid will, their property, etc. must be distributed according to certain rules called the rules of intestacy. A person who dies without leaving a will is classified as an intestate person. You may need to apply for probate and if this is the case seek legal advice.

Many of our clients have businesses. If not dealt with a mess can be left and on some occasions, any value in the business is wittered away due to inaction after death.

Many fights start due to greed and expectations. Many of us will accumulate wealth during our lifetime but it is your wish as to how it will be distributed. We encourage clients to tell others so it should not be something of a complete surprise. Eliminate those self-focused beneficiaries who think that they have a sense of entitlement by controlling the conversation about why you are living.

It can pay to start dealing out assets early before death and enjoy the process. Some assets such as the property will have tax and stamp duty implications for you if sold early or transferred not under will. You can and you may enjoy giving cash away (as long as you are on no Government Benefits) and slowly depleting the estate. 

If you have lent others money, make sure it’s documented so your estate can recover if necessary or even out the distribution amongst family if needed. Finally, there are those who hide money in the walls and the garden. Make sure you let someone know what to look for. 

Make a confidential appointment if you wish to explore some of our discussion points. Best wishes Geoff

11

What is an initial repair for my rental property

An Initial repair occurs when you acquire a new rental property that has existing known repairs. The old house needs fixing before it can be rented. Initial repairs may include such things as plumbing, painting, new carpet or appliance repairs just to name a few

Initail Repairs must be capitalised!

Though Initial repairs are not able to be claimed outright in the first tax year there is some tax relief. These repairs should be treated as a capital expense. By treating them as a capital expense your will be adding them to the cost base of the property.

We are often asked what is the tax treatment of an initial property repair? Can you claim a tax deduction for a newly acquired rental property investment?

Why the ATO wont allow all repair claims to be treated as an expense.

What is the Government thinking around initial repairs? Why did they decide you just can’t claim the repair outright when you buy the property?

In looking at the intent of the legislation, the lawmakers simply said if you haven’t yet rented the property out yet there is no right to claim an expense on revenue account. Furthermore, the ability for some taxpayers to buy a rundown property and then claim all the expenses in fixing that property up would mean the ATO would be inundated with excessive claims. Hence the initial repairs must be capitalized.

A repair claim should be evaluated on merits. You may find it may not be classified as an” initial repair” simply because it’s the first repair made after you acquired rental your property. The ATO has designed a tool kit and it can be accessed here. Also, you can refer to taxation ruling TR 93/23 where you can read more. It states that A repair is not an ‘initial repair’ simply because it is the first repair made after the property is acquired. The ATO has numerous examples within these two resources.

Repairs that will not be claimed outright can be capitalized. The capitalized repairs are added to the cost base of the Asset. This will assist when calculating the capital gain upon sale as a cost. This means that you can reduce your capital gain at the sale of the property but not claim it against your tax when you acquire the property in the first year.

Here is an example of an ongoing repair that is tax-deductible!

If the dishwasher was working perfectly when you started renting the property but needed repairing a couple of months thereafter, then this would be considered an ongoing repair and tax-deductible.

Repair vs Improvement need help ?

Gartly Advisory looks after many happy clients who own rental properties. Plan carefully and do your homework. The ATO is looking closely at rental property claims as more Australians love to acquire property for investment purposes.

Not sure about what can be claimed upon purchasing your new rental property then reach out to us and we can assist!

11newsletter

Weekly newsletter

Insolvency – Worrells Liquidation observations

Despite the last 2 years being a rocky road for small businesses in Australia, liquidations and actions by the ATO have been very low. Yesterday I attended the Worrells Solvency seminar on the current state of play. Here is a quick summary:

  • The ATO has been quiet over the last 2 years about debt recovery, but soon the sleeping giant will awake!
  • Jobkeeper forced many taxpayers  to get their lodgments up to date, so the ATO is aware of who owes what,
  • ATO debt is sitting at $61 billion outstanding. That’s a lot to collect expected that $20 Billion might never get collected
  • ATO has been kind regarding payment plans, but now it is likely that things will tighten up.
  • Last 2 years, there has been a drop off insolvency appointments, but soon the ATO will start,
  • The prediction is that corporate insolvency appointments will rise with higher interest rates, lack of supply and labour, and more excellent ATO activity.
  • Directors changes in terms of appointment and debt

Small Business needs to start managing their debt. To avoid becoming personally liable for ATO Debt in an insolvency situation, make sure you ensure that all returns are lodged on time or within three months of the date of lodgment.

If you need advice on how to manage your debt, please call us, and we can assist you in exploring your options

Like Real Estate, then listen to our client Sue

and her podcast Real Estate Right

The podcast is designed to educate, inform and better prepare the public with expert information about how to maximise their real estate transactions and dealings

PODCAST! – go to her website or search on Spotify etc

https://www.podbean.com/ew/pb-uupcs-11d0846

TOP EXPERTS TALK ABOUT HOW TO BUY, SELL, RENT AND INVEST… RIGHT!

New date for online “Freedom Discovery Workshop.”

Join us as we explore what business freedom means to you and your business

New date Monday, April 4th 7:30 pm online – rsvp admin@gartly advisory.com.au

https://www.eventbrite.com.au/e/276167834427

11car logbook

Car logbook and my car expenses deduction

You must only claim motor vehicle expenses relating to work travel and we recommend a logbook will substantiate your claim. To substantiate car expenses the ATO requires that you keep a car logbook or use the 20% statutory method. The car logbook is used to justify your motor vehicle claim.

Types of expenses Common types of motor vehicle expenses you can claim include:

  • fuel
  • repairs and servicing
  • interest on HP,
  • lease payments,
  • insurances or  VIC roads registration
  • and depreciation of your vehicle

Per ATO here is what you must do for the operating or logbook method

Logbook method You can claim the business-use percentage of each car expense, based on logbook records. You must record:

  • When the logbook period begins and ends
  • The car’s odometer reading at the start and end of the logbook period
  • Details of each journey including start date and finishing date. I.e odometer readings at the start and end, kilometres travelled, and reason for the journey.

You must keep the logbook for a period (at least 12 continuous weeks) . This must be a normal representative of your travel throughout the year.

You can then use this representative period to calculate your claim for five years if no change in use .

The Statutory Method

The other method is the Statutory method. The statutory method for car benefit FBT calculations is used when the operating cost method is not selected. Or if a car logbook hasn’t been kept . The other reason is if the formula provides a more favourable result.

The FBT benefit value is determined by multiplying the car’s cost by 20%. Then apportioning the amount for days of private use.

The Statutory Formula method applies a statutory fraction, currently, 20% regardless of kilometres travelled. Applied to the base value of a car to determine the FBT-taxable value of the car benefit.

Therefore you need to do a logbook. If you, don’t you may find in an ATO review or Audit they may not accept your motor vehicle claim a

Business % of expenses is claimed based on your logbook records once you keep it for 12 weeks. You don’t need to do it beyond this or do another logbook until your travel circumstances change. By change, this means your use of the vehicle changes from the previous usage. i.e you are no longer required to do lots of business travel

Don’t forget you can also only claim the business usage of the GST as well and must adjust for private %

What can I claim for my car expenses

So as a small business what can I claim?

  • Your car is used for business trips to visit customers pick up supplies and other business activities such as business travel etc document in your car logbook.
  • I work from home can I claim my car 100% – no you need to still justify your travel and ensure your home is your real base to start the travel
  • I drive to work and then take the company car so its 100% usage. Providing the logbook states that and its garaged at work then it may be claimable 100%
  • I drive to and from my place of business – this is considered private and not claimable
  • I pick up the mail around the corner after this is the rest of the trip to my business claimable – no there is a famous case about this.

Commercial vans and Utes above one tonne generally don’t need to have a logbook but check with us.  However, say you are a hairdresser and buy a one-tonne pickup, will this exempt me from the logbook requirements? Probably not as the car isn’t being used for the purposes of trade but rather for you to get to the salon

If you have a sedan and need to carry heavy tools you can sometimes justify a greater business use from home to work

Car in a Trust or Company

So my Trust or Company provides me with a car to use who pays the FBT

In this case, you must work out a private usage of the car and declare this as a contribution by the Trust. This offsets the private usage and ensures the Trust only claims the business usage

I am in a Company with joint shareholders. The Company pays my petrol can I claim the car expenses in my own name?  Again as a shareholder, you need to either reimburse the Company or the Company needs to pay FBT. You can offset the petrol costs against the employee FB contribution.

If you are reimbursed for car expenses the expenses cannot be claimed again.

It pays to keep a logbook and determine the right business usage and thereby ensuring you can claim the right amount for tax and keep the taxman happy.

11home business and cgt

Claiming occupancy expenses if your home business and cgt.

The implications of your home business and cgt needs to be considered if your home is regarded as a place of business.

Typically many small businesses operate their business out of the home. Especially since the onset of covid.

Occupancy expenses you can claim

In this case, then you are entitled to claim home occupancy expenses if you are running a business.

If you use some or all of your business from your home, you may be able to claim tax deductions for home-based business expenses in the following categories:

  • occupancy expenses (such as mortgage interest or rent, council rates, land taxes, house insurance premiums)
  • running expenses (such as electricity, phone, the decline in value of plant and equipment, furniture and furnishing repairs, cleaning)
  • the expenses of motor vehicle trip between your home and other locations, if the travel is for business purposes.

A home-based business is one where your home is also your principal place of business. That is, you run your business at or from home and have a room or space set aside exclusively for business activities.

Where you are renting a home, then there are no cgt implications

Where you are operating as a Trust or a Company, you cant directly claim the interest etc., on the house. However, you are entitled to charge your business rent.

Your claim is based on % of occupancy of your home. Make sure you do a mud map and work out the area allocated. Please don’t include your toilet or kitchen as the ATO considers this material and need it for private purposes.

However, your home will be subject to CGT on the proportion of use and time.

CGT implications upon sale of home if used for business

Selling your home from which you have run your business will make it subject to capital gains tax on the percentage set aside for business multiplied by the period. However, as a small business, you will be able to claim the small business capital gains concession. These concessions may considerably reduce or eliminate the gain.

Please discuss your options with us and keep adequate documentation if the ATO decides to review your claim.

11motel occupancy rates

What helps increase your motel occupancy rate and keeps your customers coming back to your accommodation business?

Motel Occupancy rates are a good indication of the profitability of your accommodation business. What brings back your customers? Why do some accommodation providers have high occupancy rates and some don’t?

In the seventies, it was “free colour tv ” now it is “free wifi” to add that little extra to attract the customer.

All small businesses need a point of difference to attract customers and retain their competitive edge. With the advent of online reviews and social media, it’s important to keep your accommodation business inviting at all times. A bad review impacts your online chances of securing a customer.

Your higher Motel Occupancy rates are driven by customer satisfaction

The occupancy rate should be monitored weekly. Its is an indication of how space is generating revenue

Traveller surveys show that customers want:

  • Cleanliness
  • Value for money
  • Happy welcome
  • Facilities that work
  • Quite and restful
  • Comfortable beds

It is not a lot to ask for but often one or two of these just doesn’t happen will make repeat business hard to sustain.

To see how Melbourne fairs when it comes to occupancy rates follow this link

Treat travellers how you would like to be treated

How often have you experienced a situation after a long drive and you are greeted with the owner is grumpy or unaccommodating of travellers needs? Rooms, where lights are broken or are so harsh with the lighting as they have inserted those energy-saving globes in that, save money but makes a dull night lighting.

It’s often the little things that can make or break an accommodation business. I was at a meeting in country SA and a fellow meeting attendee complained about her motel. Her story was one of amusement but handled badly by the owner.

She proceeded to tell us after a big day she retired to her room and bed only to find a pair of men’s pj’s under the pillow. It was late so she decided to sleep on top of the bed thinking the sheets had not been changed. She informed the owner the next day and he laughed saying it was probably the old guy who was going to stay before her but changed his mind moved on. The motel owner showed no empathy to the customer and hence she proceeded to warn others not to stay there.

Of course, not all motel owners are the same and many go out of their way to help you. In fact, if you are a regular many add that extra something to keep you coming back.

Look after your customers, keep your lodgings clean and tidy and customers will continue to make your hotel accommodation of choice. A low vacancy percentage is good. This means more revenue to your business and ultimately a higher value upon sale of the business leasehold or freehold, depending on how your business is structured.

Online Reviews help customers decide if your place is where to rest their head!

Always ask and seek online reviews. Reply glowingly when someone leaves a great review and reply empathetically when a review isn’t satisfied.

Always be aware of the reviewer that pays out after the event without having confronted you first hand. Having told someone that you have fixed the problem for next time is better than ignoring it completely.

Running a motel or air BnB takes effort and you need to be a people person which ensures success. Occupancy rate is something that takes time to maintain but ultimately is what drives profitability and value in your business

11job profit

Understanding job profit on my last job?

Making job profit on every job is important to make a profit and cover your business overheads and administration.

In the world of Building and Construction, there are many types of tradespersons who operate small businesses in Australia.

Some people are great trades person but not always running a business.

Amongst the construction industry, there are those who can run a successful business, those that can make a living but not much else and those that lose money and should not be self-employed!

Making a profit is an art and takes some understanding of your trade, what the market will bear and the cost of the ingredients it takes to make the end service product or project. Might at this stage also throw in mess ups where you have to fix a problem caused by not doing things right!

Yet many don’t take the time to get it right. They rely on their gut and this leads to losses and cash flow problems.

Good habits help makes job profit

Get into the habit of examining every job and take the time to understand costs vs profit. Understand what work you should continue you win and which jobs you should work away. Look at the labour on job and was it efficient or were there defects that required additional time and loss of resources that could have been spent elsewhere?

There are tradies out there that use the back of enveloping approach For them this works only because the price quoted is well above the odds. Often it also leads to low margins and has the reverse impact on profit.

There is no excuse these days with the sophistication of accounting software that you cannot monitor these jobs properly.

Cloud accounting software

 Accounting software such as XERO and MYOB can help you track jobs. A good accounting system can tell you the result or ongoing costs of a job.

There is also specific job costing software that is functional and affordable for smaller trades.

A final tip that many trade businesses neglect to do is while they measure their results on a job to job basis they forget to keep the score of the annual year to date result. This is where you may make a profit in a job but with insufficient margin, your administrative overhead can dilute your profit quickly with undesired effects of cashflow and taxes being unpaid. 

Don’t fall into the habit of not looking at the big picture not just on a job to job basis. Practical ways that some tradies ensure that they make a profit on a job is to :

  1. Add 10% to cover for incidentals
  2. Throw in a couple of thousand to make it worth while
  3. Use a professional quanity quote service
  4. Compare othe jobs you have done
  5. Ask other tradies as to what they quote

Plan your quotes, do the job and review the outcome. A good business will make nice profits and when you get the taste for profit it becomes something you strive for do better and this is a nice feeling to enjoy

11

Rental expenses claim. Keeping the ATO happy

Are you claiming rental expenses that might relate to the private use of your rental property?

The ATO has indicated that they intend to review taxpayers who have rental properties.

Who’s on the title is important!

When declaring the property. The ATO will be looking for the persons whose name is on the title to declare the net rental income or loss. This also goes for the eventual gain when sold.

Many think that if they share in the loan liability that this is sufficient. The truth is it is entirely based on ownership and title details.

Beware of the ATO

The ATO’s focus will be looking closely at those taxpayers that incur expenses beyond the norm for their rental property. The ATO will consider these expenses as both excessive and where the rental property is not available for rent but rather used as a holiday home.

The ATO like all of us is aware if you have a holiday home for rental in most cases there is a big chance you will use it for your personal use.

Travel to and from your holiday home or rental property

From 1st July 2017 travel expenses to your travel holiday home were legislated to be disallowed. (note this does not apply to commercial properties).

The ATO has previously been on the public record stating that they will take a keen interest in the interest expense claims. They will look to see if the property is available for continuous rent vs the percentage of the expense claim. Remember also you can only claim interest from the time it’s available to rent and not before.

Further, those taxpayers who have drawdown additional funds against their investment loan or refinanced will need to ensure the loan interest claim reflects the proportion % of the original loan.

Those using loan offset accounts should be okay

Adjust for private use on rental expenses

Make sure that if the property is used for private use then the property expenses are proportionately claimed accordingly.

The same goes for low rental, not arms-length, adjustments also apply.

The ATO has technological ways to check taxpayers’ stories, including real estate sites, social media and other sources such as water and electricity accounts. Take care when claiming and if in doubt please check with us.

Rental properties are still a great investment. We are now seeing many of the rental schedules being positive rather than negative gearing. This is entirely due to low-interest rates and high rentals.

We encourage you to contact us if you are purchasing a new property and let’s discuss who should hold the property and what claims can be made

11Payinga Franked Dividend

Can my Company pay a Franked Dividend?

Franked Dividends are recognising tax paid by the Company and transferring the tax as a credit when the Company pays Profit to shareholders.

Running your own Company will mean that as a shareholder you will want to access these profits. This is done as a Dividend. In simple terms your company is a money box and the only way to get it out as a shareholder is to pay profits as a Dividend. This will either be paid to you as a Franked or unfranked Dividend.

Profits to shareholders can be paid from the Company retained profits as a dividend.

A company pays distributions to its members. Shareholder members may be individuals or other entities such as your family trust. The amount of a dividend allocated will depend upon a number of shares you hold and the percentage of ownership.

What is a Franked Dividend and a Franking Credit?

Your Company, after paying a paid tax payment, either in the form of a company tax instalment or year-end company tax, will record these amounts as franking credits in the Company Franking Account.

Presently the Company Tax rate is set at 26%

When the Company issues a dividend, it will issue a distribution or dividend statement to each shareholder member.

The dividend statement is then given to each shareholder who receives a distribution outlining their entitlement.

Dividends paid by your company can be either Franked Dividend or an un-franked Dividend. The franking amount will depend upon the availability of tax paid by the company in the company’s franking account. When no company tax has been paid by the company a franked dividend may not be paid. Therefore, the Company may choose to issue a dividend, as un-franked.

The Dividend statement will show the amount of franking credit attached to the distribution. The statement will also show the extent to which it’s franked. Only resident taxpayers of Australia can claim a tax offset for a franking credit attached to a dividend.

Non-resident taxpayers, receiving a franked distribution are exempt from withholding tax in Australia. This is to the extent that it’s franked. Therefore, if it is 100% franked there is no final tax to pay or declare as a non-resident.

We recommend reviewing your Company’s Retained Profits regularly. Leaving large profits in retained earnings can lead to tax problems down the track when you decide you need to access these profits. Regular Dividends can eliminate the problem of tax implications being paid out in large Dividends.

Grossing up your Dividend in your tax return.

An individual shareholder in your Company will pay you a dividend. The franked dividend from the Company must include the amount together with any franking credit as declared taxable income. This is known as Grossing up your Dividend.

Receiving a franked divided also entitles you to a tax offset equal to the” franking credit amount. For tax purposes, this effectively means any tax up to 26% on the income will result in a neutral result.

A tax offset can result in a refund or excess tax payable. The tax may result in the need to pay additional tax liability on the distribution. When this happens, it is known as ‘top-up’ tax.

Taxpayers with lower taxable incomes can receive a refund of all or almost all the franking credits. This will be dependent on their income position.

As your accountant, we try and work with you to obtain the best result for your tax position. Managing how you declare your declared Frank Dividends using the right tax opportune time. The aim is to help smooth out your tax position and reduce your retained earnings in the Company.

Contact us for help 03 9597 9966

11business startup

New business startup what to do!

Starting out in a new business and being your small business startup journey

I remember many years ago how exciting it was to begin the small business journey.

It has been a journey twenty years later that’s is full of ups and downs, fun and pain and plenty of laughs.

Twenty years in and I have no regrets. In fact, anyone that can do it, should. Yes like all of us I have made some dumb decisions but I don’t have any regrets? No way, in fact, I have also made some good decisions too.

There have been a lot of characters I have met in my business career over the last twenty year’s. Some shady ones, some terrific ones and some that have become lifelong friends. Yes, I have been used, abused and ripped off but I have also been supported, encouraged and led to opportunities.

Starting out needs support


Your business startup relies on lots of support from friends family and associates. You really know who are your friends and where your support comes from. For me, it was my wife and kids who have driven me to success. There have also been many friend’s who have looked out for me along the way.

You see as an accountant many don’t see you as a small business person but there to help others. It took me a long while to accept that I too am a small business owner with the same pain, enjoyment and problems that you too have in small business.

Tips for business startups

So what advice can I give you as a new budding small business owner :

1. Just go for it! Have no regrets and enjoy the ride. Believe in yourself! Destroy the non-believers and the dream stealers. If you make strategic decisions based on evaluation then your business will grow.

2. Set goals. Set a road map don’t amble along in business with no direction. A person who knows his direction might get lost along the way but will always find the way to their final goal or destination.

3. Celebrate success, acknowledge others and enjoy the ride. Failure will happen but pick yourself up learn to understand what went wrong. Remember the sun shines tomorrow and you can do it all again. Don’t give up and follow the plan.

No matter at what stage you are in business a big congratulations It’s not easy to run a small business and the statistics say many don’t succeed in the first three years.

Live life to the fullest and grab every opportunity with no regrets. All the best.

Many of us launch a new business based on an idea or a need to sell our professional or trade expertise.

Business startups offer challenges

Starting a new business will provide you with new challenges and opportunities! It’s fun, it’s exciting and it will be rewarding.

Whatever your reason for starting your new business, your future will be an exciting time. However, it requires careful planning, lots of energy and the ability to follow through with the journey during times of toughness.

Geoff and his experienced team of professionals can guide and advise you on launching your new business and making it successful from day one!

Whether you are yet to start or are in the early stages of launching your new business, we can help you to work through the logistics and questions that everyone has.

Practical startup tips

Here are some practical tips that can help you start your new business:

  • Talk with us so we can gain an understanding of what you are trying to achieve, your dreams and business aspirations.
  • If you are buying an existing business, we can help make sure it’s the right one for
  • We will discuss and explain the different structures available (sole trader, partnership or company).
  • We can set up your company or family trust if that is the right structure for you.
  • We can clarify what you need to do to meet ATO regulations when getting started and applying for an ABN.
  • We will help you establish a practical business plan, cash flow projections, budgets and trading forecasts. We will help you set a 90-day action plan.
  • We can help you present your program to your Bank manager if you’re looking for finance.
  • We can also advise on the best sources of finance.
  • We can work with you to ensure that you set up the right accounting systems in place to manage the financial paperwork.

We have helped lots of small businesses start out. We know you will have lots of questions such as dealing with government red tape and other businesses as this may be something you haven’t done before. We can help you determine what are the essential tasks in the first few months to get your business off to a flying start.

We welcome you to contact us for a FREE initial consultation. Please call us on 03) 9597 9966.

11gifting assets

Gifting assets to a family trust

Gifting Assets to your Family Trust protects your investments and assets and is also great for tax planning. Many of us establish a Family Trust for asset protection and to ensure our assets are correctly passed onto the next generation. Having now established your trust, you may now ask how do I get money into the Trust?

Fundamentals of a family trust

Let’s explore the basics of a family trust first. The Trust has a couple of fundamental elements that you should be aware of, but in simple terms these are:

  • Trust Deed – the rule book of how you run your Trust
  • Settlor – establishes the family trust.
  • Trustee – runs the Trust on behalf of the beneficiaries
  • Appointor – appoints the Trustee.
  • Beneficiary – family who benefit from the Trust.

How do I get money into my family trust?

Putting money into your trust can be done in two ways:

  1. Gifting assets from your funds to the trust.

2. A Loan from you to trust – repayable defined or non-defined

Either method works but gifting assets to your Trust is better for estate planning. It must be done properly so that the Trust Assets are secure and recognised as owned by the family trust.

A Trust is a legal entity . However, some registries won’t recognise the Trust but require the Trustee to be the registered owner on behalf of the Trust.

Loaning money to your Trust!

Loaning money to your Trust will allow you to request that you can recall the monies you have lent to the Trust . Repayments will depend upon the Trust the ability to pay and several other factors. Even though a loan agreement is not necessary, many people still decide to draw up an agreement for certainty and estate planning.

The Trustee has an obligation to repay the loan if requested. If no loan agreement, then maybe at a minimum the loan should be recorded by the Trustee by a minute. The accountant should record it on the Trusts balance sheet. Yes ,interest can be charged but that again depends upon what you have agreed to with the Trust and you as the lender.

Gifting assets to the Trust

A Trust can help protect you and your family’s assets. Many families gift assets to the Trust. This means that you forego ownership and the asset forms part of the Trusts capital or corpus. This means that over time creditors, angry family members and newly wedded children cannot make a claim on these assets as they are now owned by the Trust.

In most Family Trusts, the control is established by yourself as the Appointor. The appointor has the ability to fire and hire the Trustee. This means that you effectively control the Trust.

Upon your death, your executor acts on your behalf. The great thing is that the Trust continues to the next generation detailed in the Trust Deed. This will continue until trust vesting day normally 80 years after establishment.

As the Assets are owned by the Trust, gifting can in some circumstances for social security planning.

Every person’s circumstances are different. Therefore what we have outlined above is a very simplified summary of the operation of the trust and your money. We suggest that you seek professional advice. We are happy to assist you if you need help in this area.

11when i die

What happens to my business when I die

Who takes over my business when I die as a sole trader?

If you were running as a sole trader and you die then in most cases your legal personal representative will step in and manage your business. They will be in a position to assess if the business needs to be either wound up, sold or transferred to a beneficiary.

Your business asset forms part of the assets of the estate.

For many clients, they are unsure of the process.

There is a number of matters that should be dealt with in a timely matter when it comes to a sole trader business.

What happens after I die ? The process of winding up my affairs

The process that can take place after death include

  • The business continuation as a going concern ! – The longer the business is left un-managed the greater chance that the business value may disappear
  • Until probate takes place its best to ensure if a beneficary is to inherit the business that this takes place as soon as practical or allow the beneficiary to act as caretaker mode
  • Reassure customers and suppliers of the situation and ensure where possible that the business remains of value and assets are protected from going missing

The business forms part of the estate and impacts the final distribution to beneficiaries. Often upon the death of a sole trader, there may be outstanding debts to the ATO, suppliers and financiers. If there are insufficient assets upon realisation to pay the debts then the estate is placed in bankruptcy.

Careful planning required

We suggest careful planning of your affairs. Planning will ensure that when it comes to your business your wishes and adhered to and that a plan in cases of death has been considered to assist the executor to manage the sale of the business. It is why for many reasons Life Insurance is recommended. Insurance will ensure that insurance proceeds can cover some of these unexpected business expenses.

As a final tip is to make sure all registrations such as GST, ABN, social media accounts and WorkCover have been cancelled. This will avoid recurring notices. We can assist you here!

Suggest that you contact us and discuss a plan so that we can guide you on how you would like to finalise your affairs after the man upstairs has called you for higher duties.


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11Cashflow stratgey

A smart Cashflow Strategy will generate better business profits!

For many businesses, cash flow is an issue that holds the business back. But, unfortunately, there never seems like there is never enough cash when you need it.

With Christmas around the corner, it’s time to plan. Naturally, a business owner will not want to reduce their cash balance unnecessarily at this time. But, on the other hand, an increase in cash into the business can make life easier and lower the cost of financing. Moreover, squiring the money now can pay dividends in the post-festive month of January.

How to reduce cashflow leaks

 To help you preserve or increase your money, here are our five cash management leaks to avoid.

1. Bloated Bank Fees

Some banks are more business-friendly than others.  Therefore, we recommend you assess the fees you are currently charged and aim to eliminate any unnecessary services.

  •  Is it practical to maintain a   cash balance to avoid monthly fees? Do you charge merchant fees to recover?
  • Are you being charged online banking fees, and are these still necessary?
  • Are you being charged for a high volume of transactions or cash drawer services, and are these competitive with other banks?

Banks are open to negotiation, and we sharpen their pencil for a long term relationship.

2. Are you sure you are paying the lowest amount of taxes you legally can do without entering into tax avoidance? 

 There are several opportunities to review to ensure that you are not overpaying taxes anywhere in your business or personally:

  • Payroll taxes
  • GST tax
  • State and local income taxes
  • Property taxes
  • SMSF – are you in pension mode if you are retiring etc. and can have your smsf pay zero tax

3. The Cheque Is in the Snail Mail!

Customers who take too long to pay you are one of the biggest cash drains in your business. Consider reviewing your terms, asking for deposits, or becoming more aggressive with collections to bring your DSO (days sales outstanding) down. 

When you do, you will see an instant, permanent cash flow improvement. Don’t do work for people that can’t or won’t pay you or are slow

4.  Watch for those unknown bank errors and scammers

You may have an eagle eye on your most extensive bank account, but what about your other cash stashes? 

 PayPal, petty cash, credit cards and business savings accounts are among the places that may not get daily scrutiny.  Ensure those accounts are properly reconciled and have the proper controls so funds don’t go missing or someone else’s transaction ends on your account

5.  It’s in Your Interest

An excellent problem to have is when your bank balances get to be significant

What is your optimum working capital level? First, you don’t need the money immediately, so make it work for you.  Then, make sure that money is still working hard for you by putting the excess in an interest-bearing account, reducing loans or used for more resourceful opportunities. 

Cash is King and so is a good cashflow strategy

We always recommend a cashflow strategy of ensuring your trading company does not become a cash-rich piggy bank. In case of if things go wrong, you leave your cash exposed. Reach out if you would like to discuss this aspect further.

Cash management is important when conducting an import or export business. Planning for funding of containers, currency fluctuations and disruption are all strategic planning matters. We have assisted clients in scenario planning for lumpy cash flow and large inflows and outflows that can happen with these types of operations.

Cash can also disappear when job planning does not happen or the project goes pear shape. Read our article about job management.

Make a your cashflow strategy a priority

If we can help you plug any of these cash leaks into your business, please don’t hesitate to reach out and let us know. A cash flow forward strategy allows you to plan where your working capital can find it hard. If you aren’t using a cash flow plan, then let us help you start the process.

Estimated reading time: 3 minutes

11Success

Why success will outdo failure every time

Are you taking a giant step to make a difference or falling into a black hole? The fear of failure has killed more dreams than all other fears combined.

The fear of failure is insidious because it’s mainly in your imagination.

It can also prevent you from trying new ideas, growing and trying something new. Fear guarantees failure.

Interestingly, young children have no concept of failure. They couldn’t care less if they failed to do something. They just try again. There are no negative thoughts or emotions involved. They just keep on going.

Having hesitations is essential, which leads to calculated risks. But, give it a go, and in most cases, success will outweigh failure most times.

Consider these facts:

The fear of failure doesn’t have to impact your life significantly.

  1. Failure is temporary – unless you quit. Failure isn’t final unless you give up. Successful people experience failures too. But they ended up being successful precisely because they didn’t stop. So failure is just a temporary state that means nothing because it’s only temporary.

  2. Failure will occur with everyone. You’ve failed thousands of times and managed to survive. Consider how many times you were unable to walk or to talk well. Babies have constant failure.

  3. Successful people fail all of the time. It’s a massive part of how human beings learn. We realized that our approach didn’t work; we adjusted and tried again.

  4. Failure allows you to learn. You can learn something from every single one of your failures. Failure makes you more knowledgeable and capable. The more you fail, the stronger you become.

Why it’s in your imagination

  1. Others are far less concerned about your failure than you think. A few people might notice your disappointment, but they quickly turn their attention back to themselves and their own challenges.

    There’s nothing to worry about. Feel free to fail as much as necessary. Fail enough, and you’ll quickly see that no one relevant cares.

  2. Focus on how great it will be when you succeed. Don’t look at possible failure; consider possible success. Make yourself feel excited and optimistic about taking action.

    With high enough expectations, you’ll do just about anything without worrying about failure.

  1. Redirect your thoughts. Put your attention on what you’re doing. Forget about the outcome. Stay focused on your actions or something positive. Thinking about failing will freeze you in your tracks. Take risks but put stop gap measures in so that failure is only a small chance in scheme of what you want to achieve.

  2. Consider the cost of doing nothing. Taking action might be a little scary, but what will happen if you do nothing?

    • What will you feel about failing to take action?
    • What if you’re stuck in your current life for the nextfew years or more?
    • Maybe taking a risk is far more attractive than remaining where you are.
      We’ve all allowed the fear of failure to influence our decisions. We’ve allowed this fear to stop us from trying new things or taking risks. As a result, we all have more minor lives than we could because we’re too concerned with what others think.

Rejecting the fear of failure is one of the most incredible things you can do for your future! Your small business , your team and your family will be incredibly proud if you achieve your goals.

Plan to succeed!

 Bite off what’s going to give you joy. Go where no one has gone!

In business, we have all failed, but many also succeed.

Personally, I have failed at things that looked right. Ultimately I have used my failures to move forward and help myself and others. Failure to me is if I do the same dumb thing again and don’t learn from past mistakes

When it comes to inspiration you need to read what others have achieved and make your own list.

Not sure where to focus on in your business then check out our business value score and within 15 minutes receive your free score.

In 2022 to succeed, start an action plan. Focus on those things you are passionate about that will make a difference in your business. Many of us have a long list of formal and informal goals. Some of us don’t start then for fear of failure. Others find excuses, and others try to do everything at once. Don’t over commit but start by actioning small runs that you can get on the board.

You can start today. What are you going to do today that you’ve been afraid to try? What small step can you take that may make a difference? Sometimes 1 per cent changes can result in extraordinary outcomes. Conquer your fear of failure and just do it

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