Monthly Archives: May 2021

2021 Budget impact for small business

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The Australian Small Business and Family Enterprise Ombudsman Bruce Billson says the Federal Government’s 2021 Budget is a clear acknowledgement that small and family businesses are central to the nation’s economic recovery and future prosperity.

The Budget includes several new, extended and enhanced measures to support small businesses including:

–       $129.8 million to encourage entrepreneurship through the New Enterprise Incentive Scheme (NEIS) and Entrepreneurship Facilitators Program

–       $1.2 billion investment in the digital economy

–       $10 billion guarantee of reinsurance pool to cover cyclone and flood damage across Northern Australia

–       $506 million extension of federal government’s JobTrainer program

–       $10 million over four years on small business deregulation agenda

–       $11 million over three years for national recognition of occupation licences

–       Tax system reform for small business

–       $4.3 million to establish the Mandatory Franchise Disclosure Registry

–       $2.6 million to improve access and awareness of Commonwealth procurement opportunities

“Tonight’s budget represents a substantial financial and strategic commitment to making Australia the best place to start, grow and transform a business,” Mr Billson says.

“These measures will support small and family businesses as they help lead our national economic recovery and play a critical role in securing our future prosperity.”

Encouraging Entrepreneurship:

The Federal Government will spend $129.8 million on consolidating and expanding small business and entrepreneurial services to support people who want to start, run and grow their own business.

“This initiative will help put the wind in the sails of fledgling small businesses and encourage the Australian entrepreneurial spirit,” Mr Billson says.

“The number of New Enterprise Incentive Scheme (NEIS) places will lift from 8,600 to 12,000 per year for people looking to create their own start-up livelihoods.

“It will also support existing micro-businesses to adjust to changing labour market conditions to ensure these businesses remain viable and resilient to changes in the face of turbulent trading conditions.”

Digital Economy Strategy:

The Federal Government has pledged $1.2 billion towards enhancing the digital economy, including a 30% tax offset for the video game industry.

“This $1.2 billion investment will encourage greater digital adoption by small and family businesses, to ensure they are globally competitive,” Mr Billson says.

“We welcome the Australian government’s commitment to help SMEs build their digital capacity and drive business up-take of e-invoicing.

“With 1.2 billion invoices exchanged in Australia every year, making the switch to e-invoicing would add an estimated $28 billion to the Australian economy over 10 years. For SMEs, we know e-invoicing streamlines productivity and improves cash flow with reduced admin and faster payments.”

“$12.7 million will be spent on expanding the Australian Small Business Advisory Service Digital Solutions program to reach as many as 17,000 small businesses.”

Mr Billson particularly welcomed the support provided to the Australian video game industry, which is comprised of many high growth potential small businesses and start-ups.

“My office has been a vocal supporter of the Interactive Games and Entertainment Association (IGEA) which estimates Australia could create a $1 billion industry in game development, providing export revenue and employing an additional 10,000 full time workers with the right support,” Mr Billson says.

“This 30% tax offset is an excellent support measure to help Australian video game producers take a greater share of the $250 billion global game development market.”

Insurance:

Mr Billson welcomed plans for a reinsurance pool to be backed by a $10 billion Australian Government guarantee to cover cyclone and flood damage across Northern Australia from July 1, 2022.

He says the scheme, which is broadly in line with a recommendation in ASBFEO’s Insurance Inquiry, will make a significant difference.

“This is certainly a welcome step in the right direction when it comes to ensuring essential insurance coverage is accessible to small businesses,” Mr Billson says.

“Our Insurance Inquiry revealed that too many small businesses have been crippled by rising insurance costs and some can’t get it at all.

“A reinsurance pool will go some way to addressing this key barrier for small businesses in Northern Australia.”

Mr Billson says he also recognises barriers still exist for SME insurance coverage in other parts of Australia.   

“In the course of our Insurance Inquiry, we spoke to over 800 small businesses – about 12% of those were from Northern Australia,” Mr Billson says.

“That means there are still many small businesses out there experiencing difficulties with accessing necessary and affordable insurance coverage.

“My office is ready and willing to work collaboratively with the government, relevant agencies and the insurance industry towards making essential insurance products affordable and accessible for small businesses across the country.”

JobTrainer:

The JobTrainer program will be extended for another 12 months, as part of a $506 million package to support SMEs to employ apprentices and trainees with a 50% wage subsidy of up to $28,000 per year.

“JobTrainer has proven to be a highly effective incentive for SMEs to take on new apprentices and trainees,” Mr Billson says.

“The cost of apprentices and trainees can be significant as they learn the ropes, so small businesses will welcome the extension of this wage subsidy.

“JobTrainer will also offer thousands of young Australians low-fee or free courses – critically in fields where small businesses are struggling to find staff.”

Deregulation Agenda:

The Federal Government will spend $134 million over four years on its deregulation agenda, including investing in regulatory technology (regtech) to support smaller employers comply with modern awards, provide data on pay and conditions and help with accuracy in payroll software.

“Small business owners are hard-working, time-poor and don’t have the systems or resources needed to deal with onerous compliance requirements,” Mr Billson says.

“Research shows a small business hiring its first worker can spend up to 18 hours getting their head around awards, pay rates, tax, OH&S and record-keeping obligations.

“This government investment in ‘regtech’ is a positive step towards making it easier for small businesses to pay wages and entitlements correctly and on time, recognising how much they value their team.”

$11 million will be invested in the implementation of automatic mutual recognition of occupation licences across states and territories.

“This will help small business tradespeople who want to meet the demand for their skills in different areas of the country,” Mr Billson says.

Tax system reform:

Small businesses in dispute with the ATO will get a fairer go, under new rules proposed in tonight’s budget.

Mr Billson welcomed the pledge to give the Administrative Appeals Tribunal (AAT) greater powers to pause or change debt recovery actions applying to a small business in dispute with the ATO.

“Small businesses disputing an ATO debt in the AAT will get a fairer go by stopping the ATO from relentlessly pushing on with debt recovery actions against a small business, while the case is being heard,” Mr Billson says.

“I commend the government which has acted quickly to implement a key recommendation in our recently released report: A tax system that works for small business which will allow small businesses to pause ATO debt recovery actions until their case is resolved by the AAT.

“Currently, small businesses are only able to pause or modify ATO debt recovery actions through the court system. This can be prohibitively expensive and time consuming for a small business.

“Under the proposed changes, small businesses can save thousands of dollars in legal fees, not to mention up to two months waiting for a ruling.

“In line with our recommendation, the AAT will be able to pause or modify ATO debt recovery actions, such as garnishee notices, interest charges and other penalties until the dispute is resolved.

“It means that rather than spending time and money fighting in court, small business owners can get on with what they do best – running and growing their business.”

Employee Share Scheme:

The Government will help Australian businesses to attract and retain staff by removing cessation of employment as a taxing point for the tax-deferred Employee Share Scheme (ESS) and reducing red tape for ESS.

Instant Asset Write-Off:

Small businesses can continue to write-off the full value of assets purchased until 2023.

“This one year extension of the uncapped instant asset write-off is a big win for small businesses,” Mr Billson says.

“It gives small businesses more time and certainty to plan and buy major equipment. It significantly reduces the need for depreciation and cuts red tape.”

Loss Carry Back:

“The loss carry back provision will also be extended to June 2023,” Mr Billson says.

“This is a tax initiative that effectively allows a small business to carry back tax losses from 2022/23 income year to offset previously taxed profits as far back as 2018/19, to support business recovery.”

Payment times:

The Government is committing an additional $16 million to ensure effective implementation of the Payment Times Reporting Scheme, which has been in effect since 1 January, 2021.

“This reporting framework requires big business to be upfront and honest about the time it takes to pay their small business suppliers,” Mr Billson says.

“Cash flow is king for small business and we know that if small businesses are paid on time, the whole economy benefits. AlphaBeta estimates if large businesses pay small businesses in 30 days, the net benefit to the economy is $313 million per year.”

Mandatory Franchise Disclosure Registry:

A Franchise Disclosure Registry is set to be established at a cost of $4.3 million. The registry will require franchisors to lodge disclosure documentation about their franchise annually.

“This is about improving transparency of franchise operations and providing prospective franchisees with vital information they need before entering into a franchise agreement,” Mr Billson says.

“My office has advocated for the implementation of this registry as a key component of effective due diligence all prospective franchisees should undertake before entering into a franchise agreement.”

SME procurement:

The Australian Government will provide $2.6 million over 4 years to support and strengthen SME participation in procurement, including mapping common pain points for SMEs.

One in five left behind in the digital divide

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MYOB says incentivising digital adaptation worth $10bn economic injection

Nearly half a million Australian SMEs have no or very low levels of digitisation in their business and getting them online would be worth a $10 billion injection to the Australian economy, says business management platform MYOB.

MYOB calculates 466,062 SMEs – approximately 20% of the 2.29 million* sector – are not engaged with digital tools across critical areas of their business workflow, such as compliance and supplier management.

Fresh research of 1000 SMEs from MYOB** delves further into typical digital use among the small business community, finding 40% of businesses use digital cloud-based software for work in progress (WIP) management, 38% for managing their people and 37% for growth opportunities, such as marketing. Just 26% of SMEs are connecting with their customers on social media.

With SMEs with advanced levels of digitisation 50% more likely to grow revenue***, MYOB views support packages that bridge the digital gap for the one in five left behind as an economic imperative. MYOB forecasts a 1.8 per cent increase in the SME GDP contribution, or a $10.5 billion gain for the Australian economy, if remaining SMEs are brought up to speed.

MYOB’s Chief Employee Experience Officer Helen Lea says the most effective tool Government has at its disposal is the tax system and cloud-based software as a service (SaaS) products are the perfect gateway for SME digitalisation.

“Our new research tells us 24% of SMEs are worried new technology is too expensive and a further 24% don’t have the time to set it up.  Of the businesses who digitised during the pandemic, 39% found themselves to be more productive and 34% were more profitable. Eighty-five per cent said they were able to keep their business running thanks to digital tools.

“For the one in five SMEs at risk of being left behind, a tax incentive that is easy for businesses to engage with, that is pointed out to them by their accounting and bookkeeping advisors with whom they speak regularly, will remove a significant hurdle to digital adaptation. Our research supports this: 27% of respondents shared that an incentive, such as a tax deduction, would help them get started.

“SaaS model software is custom built for the SME way of working. Cloud-based SaaS products allow businesses to work however and wherever they like and the subscription model allows a business to grow their software use with their operations.

“We are recommending to Government that they consider a refundable rebate on new SaaS subscriptions for SMEs with 0-199 employees, with a tiered incentive structure to promote end-to-end digitisation of businesses. This change alone we predict is worth $10.5bn to our economy in the short term.

“If you combine this with the annual saving of $23.5bn afforded by a mandatory introduction of B2B e-invoicing, adoption of which could also be motivated by this SaaS incentive, it’s a pretty compelling case for putting our trust in small businesses as Australia’s economy recovers and grows.”

MYOB has released a white paper outlining its SaaS tax incentive proposal in full. It can be accessed here.

More information from Small business Answers on selecting accounting software can be found here.

Small businesses in dispute with ATO get a fairer go

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The Australian Small Business and Family Enterprise Ombudsman Bruce Billson says small businesses in dispute with the ATO will get a fairer go, under new rules proposed by the Australian Government.

Mr Billson welcomed the pre-Budget announcement, giving the Administrative Appeals Tribunal (AAT) greater powers to pause or change debt recovery actions applying to a small business in dispute with the ATO.

“Small businesses disputing an ATO debt in the AAT will get a fairer go by stopping the ATO from relentlessly pushing on with debt recovery actions against a small business, while the case is being heard,” Mr Billson says.

“I commend the Government which has acted quickly to implement a key recommendation in our recently released report: A tax system that works for small business which will allow small businesses to pause ATO debt recovery actions until their case is resolved by the AAT.

“Currently, small businesses are only able to pause or modify ATO debt recovery actions through the court system. This can be prohibitively expensive and time consuming for a small business.

“Under the proposed changes, small businesses can save thousands of dollars in legal fees, not to mention up to two months waiting for a ruling.

“In line with the recommendations in our report, the AAT will be able to pause or modify any ATO debt recovery actions, such as garnishee notices, interest charges and other penalties until the dispute is resolved by the AAT.

“It means that rather than spending time and money fighting in court, small business owners can get on with what they do best – running and growing their business.

“These proposed changes follow the ATO’s decision to turn its small business independent review service into a permanent offering.

“ASBFEO’s tax concierge service and ongoing advocacy work has led to substantial tax administration improvements for SMEs, with leadership from ATO Deputy Commissioner Small Business Deborah Jenkins and government support.

“Collectively, these changes align with ASBFEO’s vision of a tax system that works for the small business sector, so businesses can achieve greater productivity, return to profitability and grow employment.”

The new powers for the AAT will be available following Royal Assent of the legislation. 2

Small businesses engaged in a tax dispute are encouraged to contact ASBFEO for assistance on 1300 650 460 or email info@asbfeo.gov.au  .

Samsung Galaxy Enterprise Edition for business mobility

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Samsung Galaxy Enterprise Edition refers to a suite of hardware and software solutions laser-focused on business mobility needs.

While a business can buy affordable off-the-shelf consumer-grade phones or tablets, it has special needs these do not address. Security, financing, roll-out, life-cycle management, maximising productivity, dual profiles (work and personal), warranty (24×7 support and replacement) and more are the differences between being business-critical and business inconvenient.

Danny Mandrides, Head of Samsung’s Enterprise and Government Mobile Business, briefed analysts and journalists on Samsung’s business initiatives for 2021.

“I Iead a team of professionals who enable Australian businesses to rethink how mobile devices and applications can improve their business processes and increase productivity. Mobile technologies such as Smartphones, Tablets, Wearables, M2M, IoT and Applications are at the heart of business disruption and transformation.”

Samsung Galaxy Enterprise Edition highlights

 Mandrides spoke of the significant advances Samsung had made with its ‘Mobile First’ strategy, including

  • Developing the Knox for Enterprise suite to cover end-to-end device security, enforce security governance on the device, and a range of automatic deployment tools.
  • DeX  (Desktop eXperience) allows the use of many Samsung devices as a PC – just add a monitor and keyboard/mouse via cable or wirelessly.
  • Closer partnership with Microsoft to deliver Microsoft 365 productivity tools, Microsoft Windows Virtual Desktop, OneDrive Azure cloud storage and Link to Windows, a seamless workflow between mobile and PC.
  • Partnership with Telstra for financing, fleet management and Microsoft Azure services
  • Business rugged Galaxy Tab Active series – Tab Active 3 Wi-Fi/4G, Tab S7 and S7+ Wi-Fi/4G/5G, Tab Active Pro Wi-Fi/4G  and other Samsung consumer Tablets with Business-grade Knox security
  • Business rugged mobiles like the Galaxy XCover 5 and Pro.
  • More importantly, a range of its consumer smartphones with Business-grade Knox security in 4G and 5G including Galaxy S21/+/Ultra, Note 20 Ultra, S20 FE, S20/+, A90 and more recently, its low-cost A32 5G that at $480 democratises 5G in a ‘fleet’ device.

Now Australian Signals Directorate approved for sensitive and protected use

The icing on the cake was the acceptance of Galaxy S20 FE, S20 FE 5G, Note20 and Note20 5G by the Australian Signals Directorate. These Samsung mobile devices have approval for use in ‘Sensitive’ and ‘Protected’ deployments. But more than anything, the Galaxy S20 FE (GadgetGuy review here 9.8/10) brings a $799 device to a market dominated by iOS devices costing two to three times that.

Moving forward

Mandrides said

“We’re living in a world of dispersed workforces, and enterprises are putting mobility at the heart of their operations to thrive and survive. This year, we will open a wider range of options for our mobility customers in Australia with the launch of Galaxy Enterprise Edition, continued deployments of our customisable Knox security platform, as well as enhancements to how we optimise Samsung DeX.”

Samsung Galaxy Enterprise Edition in 2021 means more devices with push to talk (walkie-talkie style), more convergence (devices that have barcode and QR scanners, mobile POS, 5G and other productivity features like DeX and even removable batteries), and new devices that are IP68 rated and comply with the new MIL-STD 810H (see an overview of the differences between 810G and H here).

Whatever size business you have, it may be worth approaching the Samsung Business Division first before you whip down to JB or Telstra to buy a few phones or tablets. It may open your eyes to productivity improvements you have never envisaged.

https://youtu.be/zh2EY1FKM_4

https://youtu.be/eDL_9WVhilo

Small Business Answers also has a guide on buying a mobile phone

Accounting Software to run your business

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You started with a shoebox of receipts, now you have a storage box or maybe you are meticulous and have it all on a spreadsheet.  Either way it is time to start thinking about accounting software. This guide will look at why you need it and lead you through what you should consider in making your decision.

Accounting software, package or system describes a type of application software that records and processes accounting transactions within functional modules such as accounts payable, accounts receivable, journal, general ledger, payroll, and trial balance. It functions as an accounting information system.
source Wikipedia

Accounting software has changed a fair bit over the last few years with new competition driving new features and simplicity.  Probably the biggest change however is that it is all in the cloud. Put simply this means you rent access to the solution and do everything via the internet.  You no longer have software that you must buy and host internally on extra computer hardware that you must keep safe.  Instead you have a user-friendly solution that you can access from anywhere that integrates with your bank, POS system, etc.

WHY should you buy Accounting Software?

WHY should you buy Accounting Software?

Saves you time – track invoices, manage bills and expenses and pay staff in a few clicks
Tax time ready – calculate GST, PAYG and BAS reports
Built for Australian legislation reporting
Get paid faster – online invoices, pay now buttons and automatic payment reminders
Enter receipts on the move – use your smartphone to take a photo of the receipt from Bunnings. Great for travellers and tradies.
An external accountant or bookkeeper can have instant access at the same time you do
Reporting lets you quickly get a good idea of how your business is going now
Accounting software becomes increasingly beneficial as the business gets more complicated

HOW to make a decision on which Accounting Package

So now we understand that this software solution is so much more than getting a bill in the system, it is about automating the whole process.  Let us look at the features you should consider when selecting which vendor:

  • Different accounting package vendors offer different features and even within the same company they offer different levels which means you only get what you need.  For example, if you have no employees you do not need the payroll functionality. Consider what package you will need?
  • Pay Staff – Do you want payroll integration? Does the system calculate all payroll requirements including PAYG, annual leave, long service leave etc.? From July 2019 small employers with 19 or less staff must report payroll info to the ATO through Single Touch Payroll. https://www.ato.gov.au/Business/Single-Touch-Payroll/ (Be sure to read our essential guide on Payroll)
  • Ease of use – As an untrained small business owner how easy is it to learn to use the package and be assisted through the software to understand what the requirements are of controlling your finances?
  • Invoicing – Send customised, trackable invoices.  Can clients pay right from the invoice?  Can automatic payment reminders be sent?
  • Tax and GST –  Can you easily and automatically track what you owe, and see all your position at a glance?
  • Does the software support Standard Business Reporting (SBR) allowing you to lodge your GST BAS requirements? (Be sure to read our essential guide on GST)
  • Application integration – Can the package be connected to other software solutions you are using?
  • Time tracking and billing – If you charge by the hour are there features that will simplify gathering this data? For example, a smartphone App.
  • Reports and budgets – What level of detail do you need and can you compare against a plan or budget?
  • Track jobs – Does the system track stock, work in progress, orders, jobs, and other task management requirements?
  • Bills and expenses – How easy is it to upload your bills and easily categorise expenses?
  • Point of Sale (POS) integration – Is there a seamless connection to track sales and inventory movements?
  • Inventory – If you hold inventory/stock will this package help you forecast and manage it? Can you barcode scan items in and out if you want to?
  • Bank Reconciliation – Will the system be able to handle multiple bank accounts?
  • Manage customers & suppliers – Can you easily see which customers owe you money, and which you need to follow up on?
  • Take payments – Does the software allow EFTPOS or credit card processing?
  • Cash flow management – Can you see your money in and money out at a glance, and understand quickly what your cash position is?
  • Online accounting – Is there a smartphone or tablet app that lest you enter data or receipts as well as run your business from anywhere?
  • Multi-currency – Does the system need to handle foreign currency?
  • Account sharing – Can you invite accountants, bookkeepers, and partners so they can help you manage your business?
  • Security – What security and backup procedures do they offer to help you protect your data?
  • Customer Relationship Management (CRM) – Does the system keep detailed records on customers including what they buy, how often they buy, and when they buy?
  • Service – What support and training are available, what hours and does that support understand Australian regulations?

HINTS

For more information on what accounting tools are available and the specific features, they offer visit

Free trials are available to help you compare and chances are your financial expert will have an opinion on which one to use.

The accounting software packages you should consider in no particular order include Xero, MYOB, Quicken, Reckon, QuickBooks and Sage.

SUMMARY – Right Accounting Software

Having the right accounting package will save you vast amounts of time and effort and will help keep your business compliant with government regulations. 

Although these modern tools are brilliant in helping you control your business finances they will never replace having access to a financial expert.  We strongly recommend you have access to an accountant or bookkeeper to help guide you.

If you do not have external financial support today you can visit this site to help you find the right person

GST do I have to pay it?

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They say two things are certain in life, death and taxes. We certainly hope your small business lives a long and prosperous life and that you never fall foul of the taxman.  In this guide, we will explain the GST and show you that it is not a tax you pay but instead one you help collect from the final consumer.

The Goods and Services Tax (GST) is a broad-based tax of 10% on most goods, services, and other items sold or consumed in Australia. If you are registered for GST, you must add GST on all your applicable taxable sales unless they are GST-free or input-taxed. You are able to claim credits for GST included in the price of business purchases of goods and services.

WHY do I need to register?

If your business exceeds $75,000 turnover or provides taxi or ride-sharing services you must register and charge for GST! You need to register within 21 days of exceeding the turnover threshold.

WHAT are the steps to follow for Standard GST registration?

  1. Register for GST online, by phone or through a registered agent. Make sure you get an Australian Business Number (ABN) first. https://www.ato.gov.au/Business/GST/Registering-for-GST/
  2. Determine which of the goods and services you sell must include GST.
  3. Issue tax invoices when you sell something which GST is included you must issue an invoice clearly showing the 10% GST added.  For example, $100 x 1.1 = $110 inc GST. Under Australian legislation, all goods and services pricing should be indicated as total price with GST included. For example, from the previous example, $110 inc GST, not $100 ex GST.
  4. GST credits for anything that you have bought for your business. Collect tax invoices that show GST has been paid . Link

Australian GST-free products and services
Most basic foods, some education courses and some medical, health and care products and services are exempt from GST.
Exports of goods and services from Australia are generally GST-free.
The supply of a service is GST-free if the recipient of the service is outside Australia.
Further info
  1. Your accounting system should clearly show how much GST you have collected and paid. (Be sure to read our essential guide on Accounting software as this will simplify the process). Ensure you put aside any GST money you have collected, as it must be paid to the tax office and it is not your business’s revenue. You will pay your GST collected minus your allowable credits to the ATO.
  2. Lodge a BAS statement. A Business Activity Statement (BAS) is your report to the ATO on your GST activity. You can lodge online through MyGov, the ATO Business Portal, directly through some accounting software, tax agent, or mail.
    If your turnover is less than $20 million you must lodge quarterly otherwise monthly. More details can be found in our How to Complete a BAS guide.

The Australian tax office requires GST invoices to include certain information and this will differ based on the sale being below or above $1000. The above $1000 format can be used for the lesser value.  The specific requirements and a suggested format can be found here https://www.ato.gov.au/business/gst/Tax-invoices/

BAS due by QuarterDue date
1. July, August, and September28 October
2. October, November, and December28 February
3. January, February, and March28 April
4. April, May, and June28 July

HINTS

  • Keep good records
  • Ensure your sales reconcile with your bank statements
  • Keep all your tax invoice and GST records for 5 years
  • GST is not claimable on private expenses such as entertainment and food
  • All claims must be in Australian dollars
  • When claiming a tax credit for less than $82.50 for you only need one of the following; a tax invoice, a cash register receipt, a receipt, or an invoice.
  • You cannot make credit claims for invoices that do not include GST
  • Further GST and BAS tips can be found on the ATO website

If you sell something that is GST exempt you can still claim credits for the GST included in the price of purchases you use to make your GST-free sales.

SUMMARY – GST do I have to pay it

In summary, GST will be part of your business, so ensure you keep accurate records and employ an appropriate person to help and/or use a software tool to ensure you stay compliant.

Choosing a business structure

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Right at the beginning of your Small Business journey, you need to decide which business structure is best for your situation. This will have an impact on the complexity of running it as well as taxation and personal liability implications. This guide will explain your options to help you decide which is best for you.

A business structure is the legal structure in which you set up your business

WHY does a business structure matter?

The practical impacts of this decision can affect how much tax you pay, legal implications like licensing and personal liability, and the control and procedures you have in running your business.
You cannot run a business unless it fits into a business structure.

WHAT are my business structure choices?

The four most common types are:

  • Sole Trader – one owner full control
  • Partnership – 2 or more owners split income and liability
  • Company – a legal entity where liability may be limited
  • Trust – a person manages assets for the benefit of others

HOW do I decide sole trader, partnership, company or trust?

This can be a very complicated decision therefore seeking advice from an accountant, lawyer or business advisor could be a worthwhile investment.  The good news is that if you change your mind or circumstances change, you can change your business structure at some point in the future. 

Sole Trader

This is the simplest form of setting up a business and requires the least amount of paperwork but the most risk to your personal assets. If things go wrong, you could lose your house.  On a more positive note, you make all the decisions and all the reporting is rolled into your personal tax return. 

You will have to keep all records, like receipts, for 5 years and all profits and losses fall back to you and cannot be split. If you hire employees, you are still bound by any government legislation obligations like superannuation contributions and workers’ compensation.

Partnership

There are 3 types of partnership structures you can consider:

General partnership – all partners are equally responsible for managing the business, and each has unlimited liability for the debts and obligations the partnership incurs.

Limited partnership – is a great tool for partners who want to invest in a business but not be involved in the day to day.  Here liability is limited to the amount of money they have contributed to the partnership.

Incorporated Limited Partnership – Put simply one partner has unlimited liability the rest of the partners have limited liability.

Each state has slightly different laws for partnerships and details can be found here:

A partnership must have an ABN and each partner requires a tax file number.  Each partner will be responsible for the tax implications on their share of the business and must take responsibility for their superannuation.  If a partnership earns more than $75,000 they must register for GST.

Company

A company is the most expensive option to set up and run. It is a legal entity and as such can borrow money, take legal action, and be sued by someone else.  As a shareholder of a company whether it be 10% or 100% you are only liable for any unpaid money on your shares.  So in theory they cannot come after your house, however as a director of that company, if you are found to be in breach of your legal obligations, you could be sued. A company is owned by its shareholders but controlled by its directors. More information on this can be found https://asic.gov.au/for-business/running-a-company/company-officeholder-duties/ . All money a business makes is owned by the business and an annual tax return must be completed in its name.
You must register for the Goods and Services Tax (GST) if revenue exceeds $75,000.  The Australian Securities and Investment Commission requires companies to keep records for 7 years.  Directors also have an annual obligation to show a business is solvent which means you can pay your debts and have the cash to run your business.

Trust

This is an expensive way to run a business but might have certain tax benefits.  A formal trust deed must be established that sets out how the trust operates and also comes with annual formal administration tasks.

According to the Australian Tax Office:

Trusts are widely used for investment and business purposes.

A trust is an obligation imposed on a person or other entity to hold a property for the benefit of beneficiaries. While in legal terms a trust is a relationship, not a legal entity, trusts are treated as taxpayer entities for the purposes of tax administration.

The trustee is responsible for managing the trust’s tax affairs, including registering the trust in the tax system, lodging trust tax returns, and paying some tax liabilities.

Beneficiaries (except some minors and non-residents) include their share of the trust’s net income as income in their own tax returns. There are special rules for some types of trust including family trusts, deceased estates, and super funds.

The Australian government also provides a handy tool to help you decide. https://register.business.gov.au/helpmedecide

HINT

This handy guide can help you make your decision. Be sure to select I am not sure. https://register.business.gov.au/helpmedecide

SUMMARY – Research Business Structure

If unsure get some professional help deciding and possibly assisting you to set up your business structure.  It comes down to how many owners there will be and how you divide profits and liabilities.  For those of you worried about losing your house, this can be protected by insurance as discussed in a separate essential guide on Business Insurance.

IT Support – help with technology

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Chances are you are reading this because you need help now!  IT support is one of those things that you never think about until something goes wrong or you need to do something but have no idea how to do it. This guide will look at how to get support and what you must consider.

Information Technology (IT) support refers to any assistance given with technology-related products and services. The role of an IT technical support engineer is primarily to help monitor and maintain computer systems and networks across an organisation.

WHY is keeping my IT running so important?

If your computers and technology are not working you may not be able to make any money, it may also affect your customer service to valued clients. IT support can be critical to your small business to get you running again.

WHAT does IT Support cover?

IT stands for Information Technology and in your business could extend to your computers, phones, printers, network, software, and cloud solutions you use like an accounting package or POS system.

IT support will come in three forms:
  1. Advice & installation of solutions
  2. Repair of issues
  3. Monitoring and optimisation of your IT

The actual support is provided by experts who are most likely running their own small business servicing clients like you. Some of the most common services would include:

  • Hard drive, email, and network configuration
  • Software installation
  • Software, hardware, and network upgrades
  • Desktop support
  • Application solution recommendations
  • Server and application support
  • Cloud services integration
  • Preventative maintenance and network audits
  • Data backup and recovery
  • Virus protection and removal

HOW do I choose the right IT support for my Small Business?

You should consider the following points to determine what you will require from an IT vendor:

  1. Do you need onsite support or do you just need to visit your local computer store where you bought your PC or other IT devices?
  2. Might you require out of hours support?
  3. Can the IT support representative talk to you in plain English so you understand what is going on?
  4. Are phone support and remote interrogation offered?  This will save both time and cost.
  5. Area of coverage. If you have a 2nd location can this firm provide adequate support?
  6. What sort of response times do you need and what can be provided? Rule of thumb here is the more critical the resolution, the better the response time needed. You could represent this by how much money you are losing if an IT solution is not working.
  7. Do you want a Service contract that would provide you a predictable fixed cost per month or pay by the hour or a hybrid of the two?
  8. It is possible to have an IT support business monitor your IT environment which could mean issues are fixed before you are aware of them? This could be as simple as creating an alert to notify the internet is down.
  9. What is the process to log a service request and to check its status?  Many IT service companies offer a portal where “tickets are logged” via an internet portal providing you extra peace of mind.
  10. Does the proposed IT services business have a good reputation?  You can ask for references and also search on the internet.
  11. How much are you prepared to pay to keep everything running?  It may come as a surprise to many that the cost of IT support can far exceed the cost of the hardware (PC) in the first place.

You can find IT support by googling small business IT support, asking associates for recommendations, or even asking your local computer store. Note it can be hard to find a good vendor.

HINTS

  • Reliability comes in two forms.  Make sure the business you deal with is reputable and delivers consistent service.  Having great customer service in the first month is no good if it is bad in the 3rd month. Also understand the actual person visiting your office of a multi-person firm may not be as reliable as another.  If the individual is sub-standard insist on a different person servicing your business.
  • Confidentiality is critical.  Remember you are giving access to an external party to your confidential information held on your computers.
  • If your IT device such as a printer is not working is it a configuration issue or is it just broken and need a warranty repair.  If it is a warranty repair, this will in theory not cost you anything.  Having an IT person in your office to tell you this will incur a per hour fee.
  • Same day service and service out of normal business hours will most likely cost you more.
  • We have a whole guide devoted to back up however if you do nothing else ensure you back up your data and keep it securely on the cloud or at an external location. If everything goes wrong, you will still have a copy.

SUMMARY – Reliable Tech Support

IT support may seem expensive until you need it, and at that time you will be prepared to pay a lot to get back up and running.  Pick a reliable support organisation that you can call on when needed.

Temporary shortcut method – claiming WFH deductions

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The Australian Taxation Office (ATO) reminds the community that the temporary shortcut method is available to those claiming working from home deductions this year.

The temporary shortcut method was created at the height of the pandemic last year to respond to the sudden influx of makeshift home workspaces.

Assistant Commissioner Tim Loh said that “even with people shifting back to the office, we know many Australians have opted to continue working from home at least one day a week.”

The working from home shortcut method allows claims at the all-inclusive rate of 80 cents per hour, rather than needing to do complex calculations for specific items.  

“The shortcut method is straight forward; just multiply the hours worked at home by 80 cents,” Mr Loh said.

“The only proof you need is a record of the number of hours you’ve worked from home, such as a timesheet.”

The temporary shortcut method can be claimed by multiple people living under the same roof. Unlike existing methods, the temporary shortcut method does not require a dedicated work area.

The shortcut is all-inclusive. You can’t claim the shortcut and then claim individual expenses such as telephone and internet costs and the decline in value of new office furniture or a laptop.

Taxpayers can still claim under the existing arrangements if they choose.

“If you decide to go with an existing method, I would encourage you to do your research and keep good records. Keeping track of each individual expense and calculating the work-related use of each one can be fiddly, so be organised. So, make sure you’ve read the guidance on our website or chat to your registered tax agent”, Mr Loh said.

Top 4 no-go expenses

If you chose to claim your working from home expenses through the fixed-rate or actual cost methods, remember you still can’t claim:

>    Personal expenses like coffee, tea and toilet paper. While they might normally be supplied by your employer, they still aren’t directly related to earning your income.

>    Expenses related to your child’s education, such as online learning courses or laptops

>    large expenses up-front. Any asset that costs over $300 (either in total or per item), such as a computer, can’t be claimed immediately. Instead, these claims should be spread out over a number of years

>    Employees generally can’t claim occupancy expenses such as rent, mortgage interest, property insurance, land taxes and rates. Working from home does not mean your home is a place of business for tax purposes.  If you claim occupancy expenses, you may have to pay capital gains tax when you sell your home, even if it is your main residence.

Three different methods for 2020-21

You can choose one of three ways to calculate your additional work from home running expenses for this tax time:

·           claim a rate of 80 cents per work hour at home for all your working from home expenses;

·           claim a rate of 52 cents per work hour at home for the heating, cooling, lighting and cleaning of your dedicated work area and the decline in value of office furniture and furnishings. Then calculate the work-related portion of your telephone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device.

·           claim the actual work-related portion of all your running expenses, which needs to be calculated on a reasonable basis.

Remember, to claim any work-related expense, you must have spent the money yourself and not been reimbursed. The expense must be directly related to earning income (not a private expense). You must have kept any necessary records (a receipt is best).

Additional information

More information about working from home is available at ato.gov.au/home.

Small business Answers guide to tax returns can be found here.

Small business accountant is unexpected hero

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By Kerry Agiasotis, Managing Director and Executive Vice President at Sage Asia Pacific

Would you consider your small business accountant an ‘essential worker’? It is a phrase we have heard again and again the past year in the context of medical professionals, grocery workers and law enforcement, however never in the same sentence as ‘accountant’.

For small businesses, that is exactly what they are – essential. While accountants may not be providing medical care or keeping our grocery shelves stocked, they have, in many cases, helped keep the doors to many Australian businesses open throughout the ups and downs of the past year.

While the Australian economy is beginning to recover. March data from the Australian Bureau of Statistics found almost 20 per cent of small businesses think they will struggle to meet their financial commitments over the next three months.

With almost a fifth of small businesses feeling uncertain about their immediate future, there’s all the more need for accountants to maintain their ‘essential’ status in the months to come.

From number-crunchers to trusted advisers

Accountants worked all hours to keep their clients up to date with the latest changes, as the world locked down and the government rolled out emergency stimulus packages.

Recent data from the Australian Bureau of Statistics found that three in five Australian businesses sought external advice, such as accounting services, to navigate the unchartered territory of the pandemic.

As the challenges facing businesses undoubtedly increased, the nature of the accountant’s role underwent profound change.

Many accountants admit they felt more like a counsellor at times while supporting their clients throughout this period. On a more positive note, one of our accountant partners recently noted her highlight was getting to know her clients personally as the pandemic prompted them to open up and have more meaningful conversations.

Fast forward twelve months, and those businesses lucky enough to have access to an accountant have come to realise that accountancy is not just limited to number crunching and financial reporting.

Instead, a small business accountant is a trusted advisers guiding business owners through make-or-break decisions around how best to manage cash flow, revenue streams and whether and how to pivot business models.

Technology the key to success 

Although every accountant has his or her own unique experiences from the past year. I’ve consistently heard one piece of feedback that nobody could have dealt with the unforeseen challenges without technology.

As with many industries, the wholesale adoption of new technologies by accountants throughout the pandemic launched many practices years into the future.

Automated workflows from bookkeeping to tax, dashboards, customised reporting, and data-driven insights allowed them to keep their heads above water while focusing on what mattered the most: the needs of their clients.

Accountants who had instant access to financial and operational data were able to provide the best counsel to their clients so they could make the right decisions in the ever-changing environment.

This trend is accelerating in 2021 and beyond. As cloud-based, automated practice solutions continue to enable firms to become more productive, freeing up time for accountants to focus on running their practice and supporting their customers’ needs with timely counsel.

A trusted partnership for the future

If I were to look for a silver lining in the past year, without a doubt, it would have to be how technology transformed the accountant-client relationship.

It seems ironic that software helped bring people closer together. However, by leveraging new technologies such as cloud-based and automated practice solutions, accountants could free up time to focus on well-needed client counsel. 

Despite the enormous adversity endured, businesses and accountants managed to weather the storm together, finding solutions to the seemingly impossible.

As we look towards the May budget, the reopening of borders, and life after the pandemic, businesses must continue to work even closer with their accountants to leverage new opportunities and mitigate risks that may arise.

By keeping your small business accountant close and recognising the value they provide as essential to your business, you will be well placed to capitalise on the strong economic growth that’s on the cards as we continue to bounce back from the pandemic.

Small Business Answers guide to accounting software can be found here.