Defaulting on  ATO payment plans

If you have an ATO debt you can’t pay upfront, you can arrange an ATO payment plan. This is an agreement between you and the ATO where you agree to pay off your tax debt over time in instalments. In return, the ATO agrees not to use its debt collection powers against you.

Getting into a payment arrangement with the ATO is one thing. Keeping the payment arrangement on track is a different story. We have listed just some of the ways your payment plan can default.

Payment not being received on time

This might seem very obvious, but payment arrangements often default because of late payment. Usually, the payment is made on the due date and time isn’t allowed for the payment to clear into the ATO’s system.

It’s important to remember that the due date for payment is when the payment should be received by the ATO. This keeps your ATO payment plan in check

Make sure to check how long your payment type takes to clear to know your payment will be processed on time.

Paying into the wrong account

If you’re running a business, you will usually have more than one account with the ATO.

You will usually have an income tax account and an integrated client account (which is for your GST, pay-as-you-go withholding, etc.). You might also have other accounts, such as:

• A legal action account – you will have this if the ATO has initiated debt recovery proceedings against you for unpaid tax.
• A superannuation guarantee account – you will have this if you have missed payments for your employees’ superannuation.
  
• It can be challenging to keep track of all these accounts. But it is essential that you do – especially when you’re in a ato payment plan or arrangement.
• Let’s say you have two tax debts (for different types of tax). These debts might be owed on your integrated client and income tax accounts. When you enter into a payment arrangement with the ATO for these accounts, the ATO views these as two separate arrangements that require separate monthly payments.
• So, you may have a payment arrangement of $1,000 per month in your integrated client account and $400 per month in your income tax account. The payment details for each of these accounts will be different. This means you must be careful when making your monthly payments. Make sure that each payment goes into the correct account. If you accidentally make both payments to the same account, one of your ATO payment plan arrangements will default.
• Unfortunately, the ATO doesn’t monitor your accounts to ensure your payments are going into the right place – this is up to you! So be careful – you don’t want a simple mistake to trigger a default.
• Your ignore the payment all together

Your ato payment is less than expected!

The ATO’s system looks at each payment it receives and matches it up against what it expects. If one payment is less than expected, it will flag a default. For example, a default happens if the ATO expects $1,000 per month, and you pay $1,200 monthly and $800 the next month. Your agreement with the ATO is to pay $1,000 monthly; anything less means a default.

Your extra $200 payment from the month before is voluntary. It doesn’t apply as a pre-payment toward next month’s payment.

Similarly, getting a tax credit or refund (for example, a GST credit) does not affect your payment plan. However, it won’t replace your regular required instalment payment, so you must keep paying your usual monthly amount.

• Not keeping up with all future obligations

If you’re in a payment arrangement, you must ensure you meet all your future tax obligations. This means that you must submit all your future lodgements on time and pay any new tax debts by the due date. These new debts aren’t part of the payment arrangement – if you don’t pay them, you will default.

What to do if you think you’re going to default

If you can’t pay your instalment by the due date, the best thing to do is contact the ATO. You should do this as soon as you realise you have a problem. You may be able to renegotiate the arrangement so that it doesn’t default. It’s much better to do this than wait until a default has happened.

Your payment and default history influence the ATO’s decision about whether you can enter into a new arrangement and what the terms of that arrangement should be. For example, if you have a terrible compliance history, the ATO may ask you to pay a large upfront payment or pay by direct debit.

A poor compliance history can also mean that the ATO will only agree to a temporary payment arrangement – e.g. 6 months instead of a year.

Because your payment history influences the terms of future payment arrangements, it’s best to keep in contact with the ATO. Try to renegotiate your payment arrangement before a default happens.

What happens if you default

If you are on an Australian Taxation Office ATO payment plan and you default on your payments, there are several steps that may be taken by the ATO:

Payment Default Notice: The ATO will typically send you a payment default notice if you miss a payment on your payment plan. This notice will inform you that you are in default and will usually provide instructions on what you need to do to rectify the situation.

Contact from ATO: The ATO may contact you via phone, email, or mail to discuss the default and try to work out a solution. They may be willing to modify your payment plan or negotiate a new arrangement based on your financial circumstances.

Additional Penalties and Interest: When you default on your payment plan, the ATO may impose additional penalties and interest charges on the outstanding amount. These can increase the total amount you owe.

Debt Collection: If you continue to default on your payments and do not respond to the ATO’s attempts to contact you or make arrangements, the ATO may escalate the matter to a debt collection agency.

Legal Action: In extreme cases, if you consistently fail to make payments and do not respond to the ATO’s attempts to resolve the issue, the ATO may take legal action to recover the debt. This could include obtaining a court judgment against you.

To avoid defaulting on your ATO payment plan, it’s essential to communicate with the ATO as soon as you encounter financial difficulties.

If your payment arrangement defaults, the ATO can use one of its many debt collection powers against you. This can include issuing a garnishee notice to your bank or serving you with papers to try to wind up your company or make you bankrupt.

You should make every effort to ensure you don’t default as it is getting more difficult to renegotiate with the ATO. The ATO is getting tougher to deal with and can ask for lots more information about your finances and assets to ensure you won’t default again.

Contact us for assistance and allow us to negotiate on your behalf . Contact Michelle at our Office on 95979966

.Au domain names are here. On 24 March 2022, anyone with a local connection to Australia (including businesses, associations, and individuals) has been able to register a new category of domain name known as au

These shorter, more straightforward domain names end in .au  NOT, com.au and effectively create 2 domain names These will than .com.au, .net.au, .org.au, .gov.au or .edu.au.

Do you have a “.com.au” domain name?

Existing domain name.com.au license holders have been provided priority to register the .au direct equivalent of their domain name until 20 September 2022,

After this date, any domain names that have not been allocated will become available to the general public.

This new option for domain names creates opportunities for businesses, organizations and individuals; however, it could also provide another opportunity for cybercriminals to utilise your name for a fraudulent activity like business email scams and the like.

Choosing not to register your name as yourname.au and just keeping your name.com,au opens your business up to fraudsters and possibly unethical behaviour by competitors

Check with your domain provider or go to a reputable Australia domain name seller and register your name before the due date.

A domain name ending in .au signifies that the person or organization using it has a connection to Australia.

Many small businesses haven’t registered their domain name and use the standard xxx.gmail.com which is not great branding. Therefore its a great opportunity to look at your branding and improve your online presence.

In .au we have several different namespaces serving different sectors and purposes and with different rules for who can register them and what name they can have.- see auda website for an explanation

‘Open’ .au namespaces

The open namespaces are those in which the public can register names, provided they are eligible.

Each namespace serves a specific type of enterprise or purpose and rules for who can register in them, and what names they can register to vary between them.

The rules for who can register what names in these open namespaces can be found in the .au Domain Administration Rules: Licensing.

https://www.auda.org.au/au-domain-names/au-domain-names

If you are a business in Victoria, you may be eligible for the newly opened Small Business Specialist Advice Pathways Program.

This grants $2,000 to “employing small businesses to access professional advice and services to help them make informed business decisions and plan for the future.”

Eligible projects include:

a) Advice and analysis regarding the management of cash flow, preparation of cash flow budgets and projections,

b) Profitability analysis and formulation of financial management and/or operational business strategies,

c) Strategic analysis to revise business planning and/or governance arrangements,

d) Advice regarding the management of debts and liabilities, or

e) Advice and/or representation regarding commercial agreement contract terms (i.e. commercial leases or commercial supply contracts).

Applications close on 30th September so jump on this offer fast.

It’s a great time to join our Valuebuilder business program and plan your business for the future.

Contact Michelle on 9597 9966, and we can send you the link to apply for the grant and tell you more about how you can join the short-track Valuebuilder program.

Our Valuebuilder program will identify areas where we can help your business improve cash flow and growth and strategically plan your future.

In the meantime, if you would like to get your value builder score, follow the link here:

https://score.valuebuildersystem.com/gartly-advisory-pty-ltd/geoff-gartly

The last 2 years have highlighted major issues for small businesses and cash flow is one on top of the list.

Small businesses have been plagued by closures and staff absenteeism due to Covid. This can account for why some businesses’ cash flow is facing an uphill battle in recovery. But there is also a fundament lack of planning by some small businesses. Not knowing where you going is like a hose that you turn on it flicks and turns and you have no control.

Cash flow when it trickles it is painful!

Typically when cash flow impacts things blow out. Our friendly ATO becomes the bank of last resort. Changes in Debt reporting on CRA reports of tax debt may make it harder for some small businesses to recover. It’s a tool the ATO now can use to be recognised as a Creditor in the public domain like any other supplier. Don’t ignore the ATO as they won’t don’t like taxpayers that don’t engage with them. Better to open up to them about your situation than ignore them and shovel your way out of a hole later on.

Nether the less positive cash flow is an opportunity that every business can undertake.

Don’t be like an emu with its head in the sand. Take a positive stand. Start with predicting when the cash will come in. Fundamentally 80% of the hard work is done if you know that the cash is coming in the door. Struggling to predict cash in the door . Start with Sales Budget . Look at last year’s monthly turnover and then replicate that into the coming year. Then don’t forget to invoice your customer. It’s surprising how many people forget or delay the invoicing process

Slash costs but make sure it is for the right reason

When it comes to costs, slash where appropriate but don’t slash costs that are fundamental to the business or costs that help you make money. As a small business accountant Gartly Advisory can help you.

When you’ve worked out your budget put it straight into your cloud software and each month see if the actuals are close to or better than what you predicted. So when the cash starts rolling in remember the golden goose 10% for the ATO, 10% for investment and 10% for you.

A Share trader is regarded by the ATO as conducting a share trading business when it comes to reporting your tax, based on factors around how you and how often you invest. An investor is looking long term and will not frequently undertake a systematic approach.

Tax law regards Share trading is assessed as income on a Revenue Account, and no Capital Gains Discount can be claimed.

Share traders and tax

However good news for share traders is, share losses are allowed as a tax deduction un S8-1 of the ITA997. A share trader can recognize unrealized losses and gains as the change value in the share process can be reflected. Whereas a Share Investor will only recognize losses and gains when they are realized. An investor can access the cgt 50% tax discount concession if shares are held for 12 months.

Your shares held as a share trader are considered trading stock and must be included as part of your year-end income statement. Your share stock can be valued at either cost, market, or replacement value, enabling you to determine the best tax result for you. If your records are in order, you can choose which suits your taxation circumstances for each parcel of shares

Factors that may classify you as a share trader

A share trader is considered in business if

• There is a system
• Operating to a plan
• Maintains regular trading in a systematic way
• Record system to track transactions and revenue earned
• The volume of the equity trading
• The reliance on share trading to earn a regular income

Determining if you are a trader will always be a matter of fact, and based on the above, your actions will determine whether the ATO would consider you a trader. Repetition – the frequency of transactions or the number of similar transactions – is a crucial characteristic of business activities as a share trader.

The higher the volume of your share transactions, the more likely it is that you are carrying on a business.

Changing from trader to investor

If your activities change from trader to investor, your shares are no longer trading stock.

At the time of the change, you treat your shares as if:

1. just before they stopped being trading stock, you sold them to someone else (at arm’s length and in the ordinary course of business) for their cost
2. you immediately bought the shares back for the same amount.

Take the time to consider your position. Look at your facts and consider what has been outlined above.

The information provided above is of general nature and not specific to circumstances. Please contact us if you would like to discuss your specific situation.

Local manufacturing businesses based in the South East area in Melbourne such as Moorabbin and areas such as Currum Downes and Seaford can take advantage of bringing forward tax incentives to help their manufacturing business.

Helping local manufacturing businesses

Gartly Advisory are Melbourne Accountants based in Ormond. We love servicing manufacturing businesses. Our advice to the manufacturing businesses is that we help is to take advantage of these incentives. Modernise your systems and save tax!

Manufacturing, like every business experiences growth and also tough times. We have seen that those businesses that chose to invest in new equipment and technology thrive ahead of those that don’t.

Technology can save labour costs and also the accuracy of delivery of the product. One of our small businesses was able to almost replace one staff member by investing in the latest machine that delivers quicker and more accurate production of materials.

We work in interesting times but in saying that we encourage our clients to stick to their goals and vision.

As small business accountants, we work with our clients to strategically plan their futures. A successful manufacturing business will understand its metrics. They know how many widgets to produce that result in a healthy gross profit result.

Understand your numbers

Understand your numbers, your capacity and your opportunities. Knowing this data allows for careful planning as your business grows.

Over the next month take the time to analyse three key products that you make and sell. Understand the costs and time components. The next step is to look at your Gross Profit margin and see how this impacts the bottom line? Are you making enough from manufacturing

Understanding your market and pricing gives you a competitive advantage when it comes to growing your customer base. Businesses will be forced to look at price increases moving forward. The cost of manufacturing will increase and therefore price rises will need to be factored in to maintain profits. Make sure you have the data to do so.

Gartly Advisory are Chartered Accountants in Ormond. We love helping manufacturing businesses. Reach out and see if we can help you to make your manufacturing business shine in the local Melbourne market.

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

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

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

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

Initial Repair must be capitalised!

Though Initial repair cannot be claimed outright in the first tax year, there is some tax relief. These repairs should be treated as a capital expense. Treating them as a capital expense will add them to the property’s cost base.

We are often asked what the tax treatment of an initial property repair is. Can you claim a tax deduction for repairs to a newly acquired rental property investment? Will the ATO allow it!

Why won’t the ATO treat all repair claims as an expense?

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

In looking at the intent of the legislation, the lawmakers said if you haven’t yet rented the property out 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 a rental property. The ATO has designed a tool kit, which can be accessed here. Also, you can refer to taxation ruling TR 93/23 where you can read more. The ruling outlines 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.

Examples of an initial repair

Here are some initial repair examples:

Fixing a Damaged Roof: If the rental property’s roof was damaged or leaking at the time of purchase.

Replacing Broken Windows: If any windows were broken or dysfunctional when the property was bought, their replacement is categorized as an initial repair.

Repairing Electrical Systems: If the electrical systems, like wiring or electrical appliances, were not functioning correctly at the time of purchase. Therefore, any repairs to make them operational would be considered initial.

Plumbing Repairs: Fixing any pre-existing issues with the plumbing system, such as leaking pipes or faulty plumbing fixtures, is classified as an initial repair.

Restoring Damaged Flooring: This includes repairing or replacing floorboards, tiles, or carpets that were in poor condition when the property was acquired.

Repairs that are regarded as initial cannot be claimed outright and must 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 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 worked perfectly when you started renting the property but needed repairing a couple of months thereafter. 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.

Unsure what can be claimed upon purchasing your new rental property, reach out to us, and we can assist!

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 4^th 7:30 pm online – rsvp admin@gartly advisory.com.au

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

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.

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

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

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

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.

Gifting Assets to your Family Trust or transferring property to a trust protects your investments and assets by placing them in a Trust Environment!

Let’s explore why you would transfer a property into a Trust or just give money to your Trust!

There are many opportunities for this. For a start a Family Trust is great for tax planning. Many of us establish a Family Trust for asset protection and to ensure our assets are correctly passed on to the next generation.

Your Family Trust should be the hub of your investments allowing for flexibility and control of your family assets!

Having now established your Trust, you may now ask how do I get money into the Trust and what can i use it for?

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’s trust.
• Trustee – runs the Trust on behalf of the beneficiaries
• Appointor – appoints the Trustee.
• Beneficiary – family who benefits from the Trust.

How do I get money into my family trust?

There are two main ways to add money into your trust :

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.

In transferring your Asset to the Trust make sure you have ticked all the legal boxes. This will mean that the Trust Assets are secure and recognised as owned by the family trust. The Trustee should for all property and loan transfers document the transfer. Minutes should explain why and how the it is a gift to teh Trust. Assets that are transferred to your Trust these will then be allocated to the Corpus of the 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.

Beware Gifting means not easy to get it back

There are 2 points here you should consider

Transferring the Asset or loan to the Trust as a gift achieves your estate planning needs . The asset or money is gifted it forms part of the capital or corpus of the Trust. In simple terms your Trust now owns it and the only way to get it back is to either make a specific distribution as capital or vest (ie windup) the Trust. In most cases, upon vesting of the Trust the capital would be distributable to the default beneficiaries. To understand how it would work for your circumstances you should consult you’re Trust Deed

Point 2 – is the ability of the Trust to enter into a Gift and loan back arrangement. Be careful if you are considering this as again it needs a well-documented agreement and actual $$$ changing hands.

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. When there is no loan agreement is in place , then the loan should be recorded by the Trustee by a minute to ensue there is some documentation. The accountant should record it on the Trusts balance sheet. As Trustee or the lender you can request 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

There will be Capital Gains implications and we can assist you here . Tread carefully and allow us to help you work through the implications of the potential transfer..

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 Trust’s capital or corpus. A Trust can offer protection over time. Your Trust protects your assets when things go wrong. These include Creditors, angry family members and newly wedded children. The Trust protects your Assets as these people are now not able to make a claim on these assets as they are now owned by the Trust.

A Family Trust, mechanism allows the control to be 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 the trust vesting day normally 80 years after establishment.

There are Social Security opportunities . Gifting can in some circumstances for social security planning but seek advice!

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.

Reach out to Geoff if you wish to talk about your circumstances. Phone 95979966

When I die what happens to my business and my affairs? Will my business continue or just stop?

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

Your business asset forms part of the assets of the estate. Therefore legally executed will , can help give certainty to your wishes.

Many clients are unsure of the process of what happens once they die.

There are several matters that should be dealt . These need to 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 is a going concern ! – The longer the business is left un-managed, the greater chance that the business value may disappear
• Your executor will take control of your business until its decided upon . It maybe be sold wound up or given to a beneficiary as part of the estate distribution
• Choose your executor wisely that can deal with your business affairs
• Until probate takes place, its best to ensure if a beneficiary is to inherit the business that, this takes place as soon as practical. If this cant take place then allow a beneficiary to act as a caretaker mode
• Reassure customers and suppliers of the situation., Ensure, where possible, that the business remains of value and assets are protected from going missing
• Chase down outstanding monies and secure the business assets from theft. Stop and people thinking well the business owner has died they won’t care!

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, the estate is placed in bankruptcy.

Sometimes a business who is a sole trader dies suddenly leaving lots of debt. If the estate is unable to pay, then the estate becomes bankrupt. Pleas talk to us if this maybe your situation for a person you are acting for after death.

For those who run their business in a Company or a Family Trust

If you choose to operate your business as a Company or a Trust, your legal representative should be appointed as the Director or Trustee in your place. In this case, the business would continue. The ownership if the shares were owned by you it may form part of your estate. This may include any loan account owing to or from the Company.

If your ownership of your business is held by your Trust then you will need to consult your Trust Deed and control will also be held by the appointor and or Trusteee. This is an interesting area of law and taxation and we suggest you consult us.

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 in managing 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.

If you are an executor you need to act to preserve the business value and we can help here

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!

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

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Reach out if you need our help