Renting premises and negotiating the lease

Posted on October 30, 2024 by Angus Jones

You have found the perfect place to rent for your business, and it’s time to sign a commercial lease. This guide looks at what you need to know about renting premises and negotiating the lease.

A commercial lease is a legal agreement between the owner of a commercial property and someone who wants exclusive use of it for a set period. It normally applies to a retail store, office, industrial unit, warehouse or factory.
A retail lease is a commercial lease used for retail shop businesses. Unlike explicit commercial leases, retail leases attract additional protection under State-based legislation. Generally, a lease will be governed by the relevant State Act if the retail premises is in a shopping centre.

WHY should I not just sign straight away when renting premises?

Your business must abide by the terms of this lease, which could ultimately determine your success or failure. Indeed, the lease terms are just as important as finding the right property. Please read our guide on finding the right property.

WHAT questions should you ask before signing the lease?

What is the permitted use of the premises? Check if any zoning restrictions may prohibit your business activity.
What is the lease cost per month?
What additional outgoing costs may be payable? You should request a breakdown of likely outgoings in addition to rent. These might include maintenance, cleaning, and repairs on your departure.
Are there any incentives? Fit-out subsidies, rent-free or ret reduction periods.
When does the lease end, and is there an option to renew?
How much is the security bond? This is normally negotiable.
Do I have to provide a Personal Guarantee? In an extreme case, you could be asked to put your house as collateral to ensure rent is paid (you do not have to agree)
What is the lease duration, and what are the renewal options? Your business’s goodwill can easily become associated with a location, so an option to extend protects that. Conversely, if things don’t work out, you may want a short lease as a new business. So, a one-year lease with an option for a further two years might be the answer.
When are rent reviews, and how often? This is the time you get to negotiate, as it will affect your cost increases in the future.
Do you have to pay promotional or marketing funds? If you have a retail lease, be aware of your obligations to contribute to marketing funds for the shopping centre.
What are the refurbishment requirements? A shopping centre may require you to refurbish every x years.
Who will pay to create the lease?
Does the agreement allow the lease to be terminated early?
Can the premises be assigned or sub-let?
Does the landlord have a mortgage on the premises, and has the lending authority approved the lease?

HOW do I take out a commercial lease?

Negotiation is possible with a commercial lease. The ability to negotiate depends on how long the property has been vacant, how eager the landlord is to find a tenant, and how many other potential parties are trying to secure the property.

Ensure the landlord owns the property they are attempting to lease and confirm which part is being leased. This last step is important if there are multiple tenants.

Before you sign, ensure you have all the necessary information and have done all the necessary searches. As we have seen, this legal document can be complicated, and you should get good financial and legal advice.

The savings they help negotiate from incentive terms, including fit-out, rent, signage, marketing and advertising fees, and profit-sharing arrangements, might pay for experienced legal advisor fees.

The most common disputes arising from leases revolve around renewal options, mechanisms for rental price increases, repairs, maintenance, and removal at the end of a lease.

HINTS

Ensure you have a clause in the lease agreement giving you the right to quiet enjoyment of the premises during set hours (for example, what if a noisy neighbour moves in)

Have the premises independently inspected before signing a lease. You and the owner should accept a condition report, including photographs. This report is useful if a dispute arises when the lease ends about the condition of the premises or equipment and whether this has been caused by fair wear and tear.

You should seriously consider the risks associated with redevelopment and relocation. If you cannot negotiate adequate compensation, consider whether the potential risks for your business make it worth entering into the lease.

Document everything to avoid issues at the end.

Your lease likely requires you to have valid public liability and plate glass insurance, so ensure your insurance is kept up to date.

SUMMARY – negotiate the lease for renting premises

A lease’s fine print is as important as finding the right property. Get the right financial and legal advice to help you interpret and negotiate the lease. Document everything to help avoid issues when renting premises.

Small Business Loan and Equity Funding

Posted on June 28, 2023 by Angus Jones

To start a small business or expand a business to get through a rough patch, chances are you will need to get access to additional cash. The obvious choice is a small business loan, but other options may exist. Money can be sourced from debt (you must pay it back) or equity (someone takes a share in your business). This guide will examine what loans (debt) and equity funding options are available to provide additional cash or financing to start or expand your business.

Debt is when you take a loan or a mortgage with the intent of it being paid back over time. Normally some collateral is used to secure that debt, such as an asset that will be required to be sold if you default on that debt.
Equity funding is when a share of your business is essentially sold to another permanently and is not required to be repaid. Future profits or losses will be shared with any equity partners.

WHY do you need a small business loan?

You may need a loan to start or expand your business and capitalise on a growth opportunity. Although harder to get, funds may be acquired when times are tough, or you owe money.

WHAT are the available Debt options:

Self-funding: If you have personal finance,e you can put more money into the business yourself. You are entitled to get that money back without personal tax implications unless you pay yourself interest. Other forms of finance, like investors and lenders, will expect you to have some self-funding before they offer you money.

A loan: We all understand the basic principle. Normally a bank lends us some money, and in return, we pay it back in instalments plus some interest. A bank wants the confidence it will get its money back, so it will look at your business closely to understand your turnover and assets. A bank may require personal collateral, like your home, to secure the loan. Banks are, however, not the only source of lending. Family and friends are a source but tread carefully. If things go sour, you could ruin friendships and possibly others’ livelihoods. Other organisations like finance companies will also offer loans but be aware, the easier it is to get the loan, the higher the interest charges will be to compensate for the greater risk they are taking.

Line of credit: This is similar to a loan but gives you access to a predetermined amount of credit. You can draw down on that credit and pit ay back whenever you need it. You will pay interest only on the outstanding balance.

Overdraft: This line of credit attached to your bank account allows your balance to go below zero.

Invoice finance allows for a business to borrow money against the amounts due from outstanding customer invoices. The funding company will provide a percentage of the invoice value to you upfront and when the customer pays you will receive the remainder less the funding company fees.

Leasing: Instead of buying equipment you essentially rent/borrow in return for monthly payments. A lease normally has a fixed set term of 3-5 years. The financier purchases it on your behalf and you then lease it back from them for an agreed (and fixed) monthly payment. When the lease is up, you can either re-finance the residual amount and continue a new lease on that vehicle for another set period or pay a final instalment for the ‘residual value’ of the lease and take ownership of the car. You can trade it in and upgrade to a new vehicle. A lease makes it simple to upgrade equipment like a car at the end of the lease. More details can be found in our leasing guide.

Asset financing refers to the use of a company’s balance sheet assets, including short-term investments, inventory, and accounts receivable, to borrow money or get a loan. The business borrowing the funds is providing some of its assets to secure the loan. Default on the loan and your assets will be taken away.

Store Credit: Many retailers, for example, Harvey Norman, will offer their own financing package potentially with an interest-free period. Generally the interest rates are high and failure to pay on time comes with large penalties.

Trade Credit: As an example, you buy your supplies from a company and they give you a 14-day invoice due for payment in 14 days. Thus giving you 14 days to pay for what you have already received.

Factor Companies: A factoring company will buy your outstanding invoices from you for a reduced cost and then chase up the debt themselves. It is a fast way to get cash but at a high cost compared to other methods.

HOW do I get a small business loan?

How do I get a small business loan?

Sources of debt will include banks, building societies, and credit unions.

Finance companies also provide debt but must be registered, check the Australian Securities & Investments Commission (ASIC) register https://connectonline.asic.gov.au/RegistrySearch/faces/landing/ProfessionalRegisters.jspx?_adf.ctrl-state=1cuetuxolm_4

As part of the process of getting a loan your credit history, assets and income will be reviewed.

To understand and compare loan costs and options from different institutions visit https://www.finder.com.au/business-loans

WHY do I need equity?

Equity is a great source of cash if you cannot either get a loan or a large enough loan. It is also a method of spreading risk but assumes the equity provider believes they will get their money back plus some.

WHAT are the sources of Equity funding?

As a source of additional cash in return for a slice of the business, equity funding can be done in the following ways:

Self Funding: as before, you inject additional personal money taking a larger share (assumes you are not a sole trader)

Family or friends will take a share or partnership in your business in return for their money. Remember to consider the implications.

Private investors: Same as above but not a family or friend. A new partner can often bring new valuable skills into a business.

Private equity/Venture capitalists: These are firms who search for high-growth potential businesses to invest in. They usually come with loads of experience and inject their management into the business. They often insist on a controlling percentage of the business.

Stockmarket: A small business is unlikely to list on the stock exchange, but this complex procedure allows individuals to publicly buy and sell shares in the business. Shares are issued in return for a one-time-only cash payment.

Crowdfunding: This is a very modern way of raising money for a business. Essentially you ask many people to either invest or donate monetoin your business idea via the Internet. In return you give nothing if they donated, or if they invested, a product or a cheaper product when you are up and running, equity or money back with interest. See ASIC for more details https://asic.gov.au/regulatory-resources/financial-services/crowd-sourced-funding/

Government: The government does not provide finance and is not likely to buy equity in your business however they do provide grants which may assist you greatly. The types of grants and assistance normally come in the following areas innovation, research & development, exporting, and business expansion. Some information on grants can be found at https://www.business.gov.au/Grants-and-Programs

HINT

More information on funding options can be found at the Australian Small Business and Family Enterprise Ombudsman https://www.asbfeo.gov.au/resources/business-funding-guide

SUMMARY – Get small business loan or equity advice

We strongly recommend that you speak with your accountant or business advisor before committing to loans and equity funding options. Always shop around for the best deal and always think carefully before doing business with family or friends.

Buying a business

Posted on March 8, 2023 by Angus Jones

Starting a business from scratch means having no customers,no processes, no assets etc, however on the other hand buying an existing business could mean the hard work has already been done. Alternatively, buying an existing business can also be a way of expanding a business you already own. In this guide we will look at what you must consider.

WHY should you consider buying a business?

There are many advantages of buying a business, which for some might be buying themselves a job. For example, if you bought a lawn mowing business with all the equipment you immediately start to earn income with existing clients. Your chances for success are greater as the business already has runs on the board. Even the process of asking for a loan will be easier as there is a known risk. Ideally, you will buy a business that is undervalued or has the potential to grow through your hard efforts.
There are also disadvantages, like the business was misrepresented by the previous owner, that could be turnover, reputations, debts, etc.

WHAT do you need to consider when buying a business?

It is critical that before buying a business you do your research carefully. The more information you have the better the decision. Unless you have the skills we strongly suggest you retain the services of at least a business advisor, accountant, or lawyer. The following steps may be helpful

Where the business is conducted through a company

Do a company search to verify the vendor
ASIC Search
Are all ASIC compliance requirements up-to-date?
Does the company have any overseas operations?

Financial position

Review the last four years’ financial statements for the business. Analyse liabilities, inventory, and accounts receivable and payable.
Understand who currently owns the business such as shares, options, warrants as well as outstanding debt instruments.
Review an up-to-date copy of the business’ credit report.
Does the business have a loyal customer base? For example, subscriptions, loyalty programs, etc.
Have you considered the financial projections and major growth drivers of the business in the next four years?

Tax considerations

What are the tax obligations of the business to be purchased?
Have you obtained confirmation that all tax obligations – for example, income tax, GST, PAYG withholding, stamp duty, and payroll tax are up-to-date and paid?
Obtain the last four years’ tax returns, including supporting schedules and work papers of the business, such as capital allowance schedules, business activity statements, fringe benefits tax returns, etc.
Check if the business is currently being audited by the ATO or has been audited in the last four years and, if so, what the outcome was.
Have you considered the stamp duty implications of the purchase of the business? (fees payable to the government associated with the purchase)

Assets that you are buying that the business currently owns

Has a fixed asset register been obtained detailing all the assets being sold?
Have you sighted the assets and condition of the assets being sold?
Where assets are leased by the business, have you obtained copies of the leases?
Are the assets adequately insured until the settlement of the purchase?

Employee obligations

Have you obtained a list of the employees, including their salaries and other entitlements?
Do any employees have close contacts with customers that, if they were to leave, the business would be at risk of losing customers?
Are there any key staff who would be imperative to the smooth continued running of the business? Considerations should include special skill sets or knowledge.
Are you aware of all employment conditions, including key workplace agreements, incentive bonus plans, staff rotation policies, disciplinary procedures, etc.?
Have all outstanding employee entitlements, such as superannuation guarantee and annual leave, been accounted for?
Are the WorkCover premiums up-to-date?

Inventory

Does the current inventory include any obsolete stock?
Has the inventory been valued at market value?

Business premises

Do you have copies of all real estate lease agreements, deeds, mortgages, and any documents relevant to the premises?
If the same business premises are to continue, has the vendor facilitated a lease transfer to you?

Miscellaneous

Do you know why the vendor is selling?
Has the vendor attempted to sell the business before?
Is there a documented business plan?
How complex is the business? Do you have the skills required to continue?
Are the business operations subject to any government regulations? If so, are all relevant government licenses, permits or consents up-to-date?
Have you done a competitive analysis? Do you need a non-compete clause to stop the vendors from setting up in competition?
Does the business have any pending or ongoing lawsuits or any recently finalised litigation cases?
Have you searched the local council and other government agency records to ensure there are no plans or council orders that could disrupt the business or lead to a potential drop in sales?
Have you identified the key customer and supplier contracts, and the likely impact a change of ownership might have on these agreements?
Review the business’s current production, distribution, sales, and marketing strategies (including websites and social media) and the likely impact of a change of ownership.
Have you considered potential issues that could negatively impact the viability of the business (e.g. changing technology, trends, etc.)?
Are there any intellectual property matters to consider? For example, trademarks, licenses, patents, etc.
Seek advise on other questions you should answer

HOW do I buy a business?

Once you have completed all your due diligence and you want to move ahead its time to make an offer. Be prepared to negotiate. Once you agree you will need a contract. We strongly suggest you retain a lawyer in this process. The written contract ensures that both you and the seller clearly understand what each agrees to, for what cost, and what method of payment.

You should also understand what training will be needed and, if the original owner continues to work in the business, a specified period to do a handover.

HINTS

As the last thought we suggest you:

Make sure this is a business you want to buy
Don’t assume you will not have to work hard yourself and you are buying a money train
Have a clear vision and plan for the future
Keep records of all conversations and all documents
Do your homework

SUMMARY – Get help from a business consultant

Buying a business can help you grow quickly but be sure to follow some strict due diligence to minimise any nasty surprises. Your accountant or business advisor would be a good independent advisor for the purchase.

Car Leasing and vehicle financing

Posted on February 8, 2023 by Angus Jones

Your business needs a vehicle, and you do not have the spare cash to buy it outright. What options do you have? This guide will look at the options for car leasing.

WHY do you need a Car Lease?

Your vehicle represents your business and your key means of earning revenue. Unfortunately, few businesses have enough cash to buy a vehicle outright, so financing must be sought.

WHAT are my vehicle financing options?

Business loan – a financial institution lends you the purchase price. If your business is brand new, you will likely need to provide personal guarantees.

Credit Card – high interest and reduces your credit limit

Car Lease – essentially, you rent the car for a period with the option to buy at the end. Great for freeing up money that can be spent on other things

Hire Purchase – similar to lease, but the business owns the asset after the last payment is made

Chattel Mortgage – business car loan where the vehicle is security for the loan

Car Subscription Service –the car is provided for a fixed weekly fee with the option to swap or stop the subscription with short notice.

Long-Term Rental – fixed cost for a fixed term and may or may not include insurance, fuel, and maintenance.

HOW do I decide if car leasing is right for my business?

Leasing is suitable if a new vehicle is required every 3-5 years. Remember, a newer car will be more reliable and give a good impression of your small business. Some leases may have a balloon payment at the end of the lease, or you have the option to buy outright.

A car lease does not necessarily have to be a direct cost to the business. A small business owner may allow employees to salary package a novated lease.

Put simply, a novated lease is a car finance package that allows your employer to make lease payments for you from your pre-tax income for the term of a lease whilst you are still employed. This has the effect of reducing your taxable income, which in turn, reduces your income tax.

Most often, a lease will include running costs such as registration and servicing. The employee will be liable for Fringe Benefits Tax (FBT), which is based on a forecast that uses the value of the car and the distance of your business travel vs personal use to determine an amount.

If the business takes out the lease, there are two options, a Finance Lease or Operating Lease. With a finance lease, the vehicle is bought by a finance company and rented out to the lessee over a lease period. At the end of this period, the lessee must either purchase the car from the finance company by paying the residual value or lease the vehicle again. Operating leases are like a finance lease, except the lessee is not responsible for the residual value at the end of the lease – the car is handed back to the finance company. Some businesses with a high turnover of vehicles use operating leases to reduce administration costs. Operating leases can include all charges for a fixed monthly payment.

Your accountant can help you understand the costs of buying vs leasing.

HINT

For a business, depending on the circumstances of use and current legislation, lease payments are tax-deductible. The car leasing advantage is a more predictable cash flow. This vehicle financing method should not significantly affect the small business’s borrowing power for other purposes. The lender may claim the GST on the car’s purchase price if you are eligible. Only the vehicle’s price, exclusive of GST, is financed, lowering monthly payments.

When deciding, do not take the first deal offered to you. Different companies will offer different prices. Make sure the leasing company is reputable, and last but not least, be realistic about how much you can afford each month.

SUMMARY – compare companies for car leasing

Car leasing is a cost-effective way to get your business mobile without borrowing money. Ensure your business or individual can support the payments and that you compare leasing companies to get the best deal.

Intellectual Property & Trademarks

Posted on December 19, 2022 by Angus Jones

The best idea in the world is useless if someone else copies it and they benefit from it. Similarly, just because you register a business name in Australia does not mean it is protected. This guide will look at intellectual property & trademarks, what you need to know about protecting your ideas or brands, and how you protect them.

Intellectual property (IP) is a category of property that includes intangible creations of the human intellect. There are many types of intellectual property, and some countries recognise it more than others. The most well-known types are copyrights, patents, trademarks, and trade secrets.
A patent is a form of intellectual property that gives its owner the legal right to exclude others from making, using, or selling an invention for a limited period of years in exchange for publishing an enabling public disclosure of the invention.
A trademark is a type of intellectual property consisting of a recognisable sign, design, or expression which identifies products or services of a particular source from those of others, although trademarks used to identify services are usually called service marks.
Wikipedia

WHY should I protect my ideas and brand?

Let us assume you have registered a business name and set up an internet domain. For example, you own the business name GREAT PLUMBER and the internet domain greatplumber.com.au. This does not preclude someone else from writing great plumber on the side of their van.

If, however, you owned the Australian trademark for great plumber, you could take legal action to stop them from using the words great plumber.

You can apply for a patent if you invent something or have an idea you do not want anyone to copy, and this will give you protection so you might generate earnings from your patent. A patent allows you to stop others from manufacturing, to use, and/or selling your invention in Australia without your permission.

Other types of IP not covered in this guide includes copyright (for example, music), registered design (such as the shape of a product), circuit layout rights (for example, circuit board design), and plant breeders rights (such as a new plant variety)

WHAT do I need to know about patents and trademarks?

Patents

If you wish to discuss your idea with anyone before a patent is issued, you should ensure they have signed a confidentiality agreement. If you have not kept your idea/invention a secret, there is a chance a patent will not be issued.

There are two kinds of patents:

Standard Patent – provides up to 20 years of protection and control over an invention. The invention must be new, have an innovative step and be made by or used in industry. Your claims will be examined, and expect the process to take from 6 months to several years. Application fees start at around $400.
Innovation Patent – The Australian Government has decided to stop offering innovation patents from 25 August 2021. It is a patent that protects an invention for up to eight years, and it is not as stringent in its requirements as a standard patent and can get approval much more quickly.

Trademarks

A trademark can be a unique symbol, word(s), sound, number, image, or scent used to represent a business or its products. Once you register a trademark in Australia, it gives you the sole right to use, license or sell it to others in Australia. Expect the trademark process to take at least seven months and cost more than $200.

It is possible to register a trademark in different industries by different people, such as Dove chocolate and Dove soap.

If you do not use your trademark, it can be removed on the grounds you are not using it.

HOW do I apply for a patent or trademark?

To apply for a patent or trademark, you must be authorised to do so by the owner/inventor and be planning to use it.

Your first step should be to check if anyone has already applied:

Trademark search https://search.ipaustralia.gov.au/trademarks/search/quick

Patents search https://www.ipaustralia.gov.au/patents/understanding-patents/searching-patents

Patent Applications

Although you can apply yourself, we strongly recommend you use the services of an attorney to increase your chance of success. https://www.ipaustralia.gov.au/patents/engaging-an-attorney-toolkit

A provisional application can also be filed, which helps prove you were the first to come up with an idea before a patent is approved.

You can apply for a patent through a patent attorney, on the IP Australia website and in writing. More details can be found here: https://www.ipaustralia.gov.au/sites/g/files/net856/f/patent_application_guide.pdf.

Trade Mark Applications

Assuming you have checked your trademark is available, you can visit IP Australia and make an online application where you will have two choices for your application:

TM Headstart – for a higher fee, you can get assistance with your application and the ability to make changes before your final review
Standard – application for formal review

The Australian Government provides a special portal to further help you with your understanding and application here http://trademarks.business.gov.au/assist/welcome.

HINTS

Although the idea of having IP protection is good, you may end up in a situation where the time, effort and money involved outweigh the commercial benefit.

This guide has discussed registering IP in Austral a. If you wish to have those same protections overseas, you would need to consider IP protection in each country you want.

Visit IP Australia’s website to use the IP Toolkit https://www.ipaustralia.gov.au/tools-resources/ip-toolkit.

You can look at alternative dispute resolution or take the matter to court if you believe your IP has been infringed. More information can be found at IP Australia https://www.ipaustralia.gov.au/ip-infringement/enforcing-your-ip.

SUMMARY – Intellectual property and trademarks in Australia

If you want to protect your brand’s intellectual property and trademarks or ideas, you will need to register a trademark or pate t. Registering a trademark is a much simpler process and can be done yourself. But it is strongly recommended you get professional assistance if you wish to register a patent. Be prepared to wait six months to several years to get the protection approval. Note that it will only be for Australia and not other countries.

Tax return for small business

Posted on June 16, 2022 by Angus Jones

If you are paying taxes, you are making money. All small businesses have tax and reporting obligations, and this guide will help you understand what is required to do a tax return for a small business and where you can get help.

A tax return is the completion of documentation that calculates a business’s income earned with the amount of tax payable to the Australian Tax Office (ATO).

WHY should you do a tax return?

It’s the law
You may get a refund
It helps you understand the true position of your business

Irrespective of your business structure, you must submit an annual tax return. Sole traders and partnerships will be taxed at the individual income rates as part of your personal income. Companies must lodge a tax return as a separate legal entity and pay tax at a rate of 26% (in 2020/21 dropping to 25% in 2021/22 details here) of every dollar earned.

WHAT do I need to understand about small business taxation?

Your taxable income = assessable income – deductions

Assessable income is your total earnings before tax from an everyday business source such as sales and other business activity like capital gains. It does not include GST.

Deductions are any expenses incurred in running your business.

Sole traders must include any salary or wages in their tax returns, and the ATO will calculate if any tax is owing or a refund is due. A sole trader not paying themselves a salary, including PAYG withholding tax, is likely to receive a PAYG instalment for estimated income to be earned.

Partnerships must lodge a partnership tax return. Then as an individual partner, you must lodge an individual tax return for your share of income or losses. The partnership does not pay income tax; rather, the partners themselves do.

Trusts and beneficiaries must lodge a trust tax return. Then as an individual trust beneficiary, you must lodge a company or individual tax return for your share of income or losses.

Companies lodge a company tax return and pay company tax on assessable income. Companies might pay PAYG (pay as you go). The ATO will inform you if you need to pay PAYG instalments; however, as a general guide, expect to pay it if your assessable income exceeds $2 million. PAYG is a means to collect tax throughout the year versus waiting until the end of the financial year. You can also make a voluntary payment or apply for a variation if you feel your circumstances have changed.

HOW do you lodge a tax return?

A tax return should be lodged by 31 October for the previous year. Exceptions may apply if you use a registered tax agent or file a company tax return. A tax return must be lodged every year you run a business, even if you don’t expect you will have to pay tax.

You can lodge a tax return:

By paper
Online via myTax if you are a Sole Trader
Via a registered tax agent
If you are a company, trust, or partnership by standard business reporting (SBR). See our guide on accounting software

If you are required to pay PAYG on your business earnings, this will become part of your BAS reporting and payment requirements. More details on this can be found in our BAS guide. The benefit of having PAYG is that tax is paid during the year, and you can budget to make these payments rather than having a large lump sum payable at the end of the year.

After you have lodged an electronic tax return, the ATO aims to finalise the return in approximately two weeks. The ATO warns that processing may be delayed if there are incorrect or incomplete details in your return.

When completing your income and deductions for business:

keep accurate and complete records of your assessable income and expenses
use the correct method for calculating and reconciling the amounts you claim
report all income and deductions to ATO at the right time
pay any amounts owed on time
only use valid business deductions
- the expense must have been for your business, not for private use
- if the expense is for a mix of business and personal use, you can only claim the portion that is used for your business
- you must have records to prove it

Types of expenses that are not deductible include entertainment expenses, traffic fines, and private or domestic expenses such as childcare fees or clothes for your family. GST cannot be claimed as an expense if you have already claimed it as a GST credit.

If a prepaid expense exceeds $1000 and you will not receive the goods or service within 12 months, or it is not eligible for an immediate deduction, the expense will need to be apportioned over time.

A capital expense for items such as machinery or equipment will normally be needed to be apportioned over time.

HINTS

The Australian Tax Office provides an online search engine to assist small businesses http://www.sba.ato.gov.au/

You can also book an after-hours phone call http://www.sba.ato.gov.au/Forms/Book-an-after-hours-call-back—small-business-support/

The ATO provides an app providing tax and super information and tools https://www.ato.gov.au/General/Online-services/ATO-app/

If you employ people, you will also have PAYG withholding tax payments you will need to make from your workers’ wages. See our guide on payroll.

SUMMARY – PAYG small business tax

You must pay tax on your assessable income minus deductions. The way you submit a tax return is based on your business structure. You will likely pay PAYG tax in instalments throughout the year, with your tax return determining if any further payments are required or if you are due a refund. Accurate records must be maintained; deductions will only be accepted for valid business deductions.

Close a business

Posted on April 21, 2022 by Angus Jones

We understand this is a difficult time for you, and this guide will take you through the steps you should consider to close a business.

The most common reasons for closing a business include the business is no longer viable, costs exceeding income, or you wish to retire, and the business has no value without you.

WHY should you close a business?

There is a fine balance between the emotional desire to be successful and the reality of financial stability. A decision to close your business might not be needed if you get some help from a business advisor or an accountant. Similarly, they may also recommend closing your business is the best action. Unfortunately, the truth can be the most painful thing to accept.

Recognising that it is time to close your business may save you from further debt that will still need to be repaid.

If you are closing your business to retire, this can be an exciting time to start a new chapter in your life.

If you are in doubt, these are key indicators that should encourage you to question your business viability.

You feel you should close
You are losing money
Your goals are not being met
Many customers but no profits
Your product or service is not needed or wanted
Nothing you have tried has worked
Marketing is making no difference
Competitors dominate your industry
No long-term customers
Your dream is not the reality
Home and work life is suffering
Employees are leaving
Your health is suffering
Trouble sleeping
You have become negative and angry

WHAT are the steps to close a business?

Once you have decided to close your business, it is best if you work on a plan to achieve this.

The first step is to decide on a date that will allow you to accomplish the following tasks:

Notify your employees. This will be difficult for them as well, and you will need to pay out any outstanding wages and leave. Also, ensure that the employee’s superannuation has been paid.
Suppliers. Let them know the date and plan to pay any outstanding debts.
Notify your customers. It would be best if you showed those who have been loyal to you the courtesy of letting them know you can no longer supply them. This could be done with a sign on your website or a phone call. It may also be an opportunity to sell off any remaining stock or assets.
Pay outstanding bills.
Cancel services, including the Internet, power, bank accounts, web hosting, social media accounts, etc.
Sell your business assets. These can include stock, fixtures, tools, machinery, intellectual property and domain names.
End lease agreements. This could be for machinery or property but remember, based on the terms you have in your lease agreement, you may still be obliged to continue payments until the end of the lease term.
Taxation responsibilities. You must pay outstanding taxation debts, including income tax, GST and capital gains. There is also a requirement for you to post final tax returns and a final GST activity statement.
Cancel your ABN. https://www.abr.gov.au/business-super-funds-charities/updating-or-cancelling-your-abn/cancel-your-abn
Cancel your business name. https://asic.gov.au/for-business/cancel-your-business-name/
Keep business records. Records should be kept for a minimum of 5 years after you close.

HOW can I get help to liquidate?

The following resources may be useful in helping with this process:

Your accountant and or business advisor can assist you with the decisions to keep, close or sell a business. Business advisors can be found here https://www.business.gov.au/expertise-and-advice.

Suppose a registered company becomes insolvent and goes into liquidation. In that case, a liquidator must be appointed to take control of the company so that its affairs can be wound up in an orderly and fair way for the benefit of all creditors. More details on this can be found here https://asic.gov.au/regulatory-resources/insolvency/insolvency-information-for-directors-employees-creditors-and-shareholders/.

Auction houses like Grays Online can provide a means to sell off your excess stock and assets.

Bankruptcy is a legal process when you are unable to pay your debts. It is a means that allows you a fresh start but may affect your ability to get credit, travel overseas and gain future employment. More details https://www.afsa.gov.au/insolvency/cant-pay-my-debts/what-bankruptcy

National debt helpline provides free financial counselling https://ndh.org.au/ or 1800 007 007

Crisis support – Lifeline.org.au or 13 11 14

Mental health – Beyondblue.org.au or 1300 22 4636

Family dispute resolution – Relationships Australia https://www.relationships.org.au/what-we-do/services/family-dispute-resolution

HINTS

The Australian tax office provides a business viability tool to help determine if a business is still viable. https://www.ato.gov.au/Calculators-and-tools/Business-viability-assessment-tool/

SUMMARY – a big decision for any small business owner

Closing a business is a big decision for any small business owner. Be sure that you are making the right decisions and not emotional ones. If your business is not going well, be careful in taking on additional debt. Create a plan around closing your business and make sure you do the best for those who have supported you, like employees, customers and suppliers. Don’t be afraid of asking for help. There are several free services to support you.

Computer Monitor for small business

Posted on April 5, 2022 by Angus Jones

Are you staring at a laptop screen trying to work on a large spreadsheet? An attached monitor may be just the tool you need to increase your productivity. But which one? A good basic monitor sells for around $400, but some the same size might be $1000 more. Why? This guide will explain what you need to know about a computer monitor and help you understand the key features you should consider when making your buying decision.

A computer monitor, screen or display is a piece of hardware that displays the video and graphics information generated by a connected computer. Monitors are like TVs but usually display information at a much higher resolution, showing more detail and making them easier to read.

WHY should I buy a better computer display?

If you have a desktop, then you need one. If you buy a laptop, it is a handy addition (for more information on choosing a desktop or laptop, see our PC guide).

Most laptops and desktop computers can run more than one display, and the display can be spanned across several external monitors. Additionally, a laptop display can be mirrored or “cloned” to appear on an external monitor.

Having one or several monitors expands the workspace for a variety of tasks. An external monitor can deliver improved image quality and much more screen real estate if you have a small laptop.

Getting a new monitor is a bit like getting a new TV. It will look better than the old one with a sharper picture and better colours. Generally speaking, the more you pay for a monitor, the better-quality image you will get.

WHAT do I need to know about computer screens?

The size of a monitor is measured in inches from one corner of the screen to the other, not including the outer casing.

The monitor will require its own power supply and will need a connection cable to connect to a computer.

The connection options include:

HDMI – preferred method, same modern standard as a TV. Both a modern PC and monitor should have one. It will carry video and audio and support up to 4K video.
DVI – older standard for HD video
VGA – old standard using those blue plugs with pins
Thunderbolt 3 (USB Type C) – high-speed cable with a very small connector that will carry data, ethernet, power, video, and audio. Sometimes the only video connection port on a smaller laptop.
USB – USB 3.0 is the modern standard, and although it can carry video, it generally does not.
Wireless – normally referred to as screen sharing or Miracast. It uses a direct Wi-Fi connection to stream your PC image normally to a TV.

A monitor may not run to its best ability if you do not load the drivers on your PC for that monitor. Look for some instructions in the box.

You can adjust the settings of the monitor display, although most don’t. If you work with graphics, photos or video, you should explore these adjustments.

Some monitor brands provide software that will turn one monitor into many. When using a very big screen, you can trick the PC into thinking it is looking at different screens even though they are on one screen. Useful when you need to keep certain apps open all the time, and you don’t want to be resizing windows.

HOW do I choose a computer monitor?

Computer monitors can be bought online, at Officeworks and the likes of JB-HiFi and Harvey Norman. Not knowing your particular needs, it is hard to recommend a monitor beyond suggesting a 27-inch monitor with Full HD resolution.

When choosing, you should consider:

Size – measured in inches. The screen becomes a much longer rectangle the larger the size. It allows you to do more on one screen. As an alternative, some people may buy two screens to get the same effect.
Resolution – The more pixels, the better the picture. 1920 pixels by 1080 pixels is Full HD (1K) or FHD, double that is QHD (2K) and four times is 4K
Response times – (preferred by gamers) is the time it takes to change a pixel colour. Shorter is better, and it reduces the blur effect when watching fast action like sport on the screen.
Colour reproduction – Panel and processor quality will affect colour reproduction. Better is more expensive but simply look at quality instore before buying. It is important for those working with images that consider a monitor certified as colour accurate.
Base Mount – is the base adjustable, and how will that work with the way you will look at it.
Thunderbolt 3 laptop power – Some monitors support powering your laptop from the monitor. This same cable will carry the video and USB traffic (keyboard, mouse, USB drive etc.) Thus, only one cable is required for everything simplifying laptop power and connection to all your other devices.
Touchscreen – If the monitor supports this feature, you can control actions with your fingers on the screen.
Inbuilt speakers – allows sound to be projected from inbuilt speakers in the monitor.
Microphone and Camera – If installed it helps with video calling.

HINTS

Visit the Gadgetguy website to see reviews and recommendations on various monitors.

If you need to connect an older cable to a newer port (such as HDMI to VGA), there are adapters for this purpose.

Watch out for specials. As this is such a competitive market they are always around and will save you some money.

SUMMARY – best computer monitor for your small business

Having a good computer monitor will help you be more productive and enable you to see more clearly. When buying, you should have some sort of budget in mind then see the size you can get for the quality and resolution of the picture you need for your job. Ensure you have the right cables and that the display stand will work with your needs.

Choosing a business structure

Posted on May 6, 2021 by Angus Jones

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

Posted on May 6, 2021 by Angus Jones

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:

Advice & installation of solutions
Repair of issues
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:

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?
Might you require out of hours support?
Can the IT support representative talk to you in plain English so you understand what is going on?
Are phone support and remote interrogation offered? This will save both time and cost.
Area of coverage. If you have a 2^nd location can this firm provide adequate support?
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.
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?
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.
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.
Does the proposed IT services business have a good reputation? You can ask for references and also search on the internet.
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 3^rd 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.