Tag: Accountant

Categories
Finance

What’s best for a small business to outsource?

Small businesses have a limited budget and can’t always afford to have full-time employees on their payroll to handle different tasks. This doesn’t mean you need to handle all essential business tasks on your own. Small business owners should focus most of their energy on business tasks and processes that require their particular skill and attention.

They can delegate ordinary business processes to a third party through outsourcing. You can maintain a lean organisation, stay within your operations budget and still get work done.

What can you outsource?

Different businesses have different requirements so it’s important to study your business processes, understand your budget and look at your employees’ skills and abilities before you determine what you should and shouldn’t outsource. Mentioned below is a list of services you can easily outsource. You can study the pros and cons of every option and make your decision.

HR outsourcing

When you have employees, you need to manage their needs and requirement though a Human Resource system. The HR department of a company maintains employee records, keeps track of their insurance cover, performance reports, leaves and absences, complaints and requests and other such information. All of these records need to be properly managed and maintained.

HR is also responsible for employee development and helps organise training. If your employees don’t have proper support from HR, they might not be inclined to remain in your company and seek employment elsewhere.

As a business owner you need to provide this support system and you can do it by outsourcing the task to an external HR company. They will handle all aspects of HR support and development, so your employees will be satisfied and perform well.

Payroll outsourcing

Business owners often underestimate how complex payroll management can be. It goes beyond keeping a record of employee payments and salaries. You need to keep track of their working hours, record leaves, bonuses and make sure all the employee information is up-to-date. Mistakes can lead to penalties, fines and sanctions, so it’s important to keep a good payroll record and ensure all the information in it is accurate.

One of the best ways to achieve this is to hire a professional bookkeeper and use a software program to manage the data. If you outsource payroll, you don’t need to worry about the details involved. You can trust the outsourcing professionals to keep all the information up-to-date and ensure there are no mistakes in the records

IT outsourcing

Modern businesses, especially small businesses, rely heavily on their IT systems. They use IT to get work done, store information, manage business processes, handle marketing and provide customer support. Unfortunately, IT systems aren’t infallible and can develop problems like viruses, data loss, software glitches, hardware issues, etc. Big companies have IT departments that can handle these problems and provide essential maintenance.

Smaller businesses can get the same security by outsourcing IT support and maintenance. IT support companies have expert technicians on their staff that can handle all kinds of computer and IT problems. They offer both remote and on-site maintenance and repairs.

IT support and maintenance companies also provide additional services like cloud system, processing power from their server, hosting services, etc. You don’t need to invest in data banks and servers to store your information; you can simply purchase one of the many cloud plans offered by IT support companies

Small business bookkeeping

All businesses need to keep track of their expenses and income through bookkeeping and accountancy. If you don’t keep track of your financial information, your business will suffer and eventually fail. You also need to maintain accurate financial data in order to file your taxes with the government at the year end. If you make mistakes and don’t pay as much tax as you’re supposed to, you’ll face penalties, fines and may even lose your business license.

Unfortunately, bookkeeping isn’t easy, even for small businesses. You need to keep track of all expenses, look at your cash flow, maintain a record of your income, determine what expenses are tax deductable and perform other related tasks. While accounting software can help you maintain the records, it’s not easy to consolidate all the information at the end of the financial year.

How to hire an accountant that meets your business requirements? A well-trained and experienced accountant can help you consolidate information, determine your tax burden, look for tax deductable expenses and provide other financial advice. This can be easily outsourced as well.

Contact local bookkeepers

Legal process outsourcing

Businesses need to handle a number of legal processes like registering trademarks for their brand, developing terms and conditions, creating contracts for customers, employees and business associates, etc. You need advice from a legal professional with experience in the industry to ensure there are no mistakes. Errors in legal process management can lead to law suits and other legal difficulties, so it’s a good idea to hire a company to keep track of all legal aspects of your business.

There are a number of third-party companies with excellent legal experts and lawyers on their team. They can advise you on all aspects of your business and ensure you stay on the right side of the law.

Business process outsourcing

A business is a complex machine with several moving parts. All of these parts must function well and without interruption for the business to move forward. Every business has a number of background processes like customer service, sales, marketing, internal maintenance and repair, etc. A business owner must keep track of these processes and ensure that they’re on track.

Thankfully, you can outsource a large number of these processes as well. For example, you can hire a company to clean and maintain your commercial property instead of creating a permanent cleanup crew.

Wrap up

Outsourcing is easy and affordable, so all you need to do is find a reliable service provider to handle all your processes. Outsourcing allows your business to grow at a reasonable pace and minimises the initial investment. You can direct your resources to areas of your business that truly need it.

Categories
Finance

Car allowance tax guide

Saving money at tax time is something that everyone wants to do. If you have work-related car expenses, then you might be able to deduct work-related car expenses under certain circumstances. Let’s explore when and how you can deduct your vehicle expenses at tax time.

Here are a few examples of times when you might be able to deduct your car expense when using it for business.

  • Hauling tools and equipment used for your job.
  • Pick-up and delivery of items for your employer.
  • Travelling between two different places of employment.
  • Your work begins at home and involves various sites.
  • Travel for meetings, conferences, and other work-related events.
  • Travel to your workplace, but only under certain circumstances.

How do I track & claim my car-related expenses?

The Australian government allows two different methods for claiming the car allowance tax deduction. When claiming car expenses, you can use either method. Here is a break down of how they work.

Cents per kilometre method

Using this method, you can deduct a set rate for each kilometre that you travel for business-related activities. If you use this method, you must demonstrate that you used the kilometres claimed for work. A simple logbook that includes the miles travelled is sufficient. Let’s take a look at an example.

Jim is a manager for the construction industry. He uses his personal car to deliver and drop off supplies to a remote worksite that is 7km away. The round trip is 14 km to and from the home office. He does this once a week, every week of the year except for two weeks of vacation. The current allowable rate is $0.68/kilometre.

  • 14km per week X 50 weeks = 700 kilometres that can be claimed
  • 700 allowable kilometres X $0.68 = $47.60 that can be deducted

Pros

  • Easy to calculate using a simple formula.
  • Computed using a standard rate set by the government.
  • Suitable for people who use their car less than the maximum allowable kilometres.
  • Record keeping is simple for this method.

Cons

  • Limited to 5,000 kilometres per vehicle per year.
  • Cannot claim separate vehicle expenses.

Logbook method

This method requires more record keeping of motor vehicle expenses. Still, if you use your personal vehicle for work frequently, it can add up to a more significant deduction. Let’s see an example.

Now, let’s say Jim uses his own vehicle for 1,000 km during the 12 week period when he tracked vehicle mileage in his logbook. Let’s also say that Jim kept records of fuel, repairs, service, insurance, and took depreciation on his new vehicle. The current deduction rate using the logbook method is 85%.

  • 1,000 km X 0.85 = $85
  • $8,430 of vehicle expenses X 0.85 = $7,165.50
  • $7,165.50 + $85 = $7,250.50 deductible expenses

Pros

  • Only have to keep a motor vehicle logbook for 12 consecutive weeks.
  • You only need to complete the logbook once every five years.
  • More detailed record keeping.
  • Can deduct expenses such as registration, fuel, service, insurance, etc.
  • Based on a percentage of all costs.
  • An excellent choice for those who exceed the 5,000 km limit for the cents per km method.

Cons

  • You must own the car.
  • Must record all business and all personal trips.
  • Must keep all receipt for related expenses.
  • More restrictions apply to this deduction method.

What car-related costs can’t I claim on my taxes?

Both vehicle expense deduction methods have different rules that apply to when you can and cannot take the deduction. Here are a few examples that might apply to your circumstances.

  • Travelling from home to your regular place of employment.
  • Car expenses that are reimbursed or are included as part of a salary package.
  • Picking up something for your employer on your way to your regular work location.
  • Fuel when using the cents per km method.
  • An employee is driving your personal car for work.
  • You are working overtime, and public transportation is not available.
  • You have to drive back to work for after-hours calls.

What about owned or leased cars?

You can deduct expenses from a car that you own, lease, or is under a lease-to-own agreement. This can be claimed using either the logbook or cents per km method. In some cases, you might be able to claim the car tax deduction for vehicles, such as motorcycles, passenger vans, or trucks fitted to haul equipment.

How to hire a tax accountant

Sometimes, deciding how the rules for the car tax deduction apply to you can be tricky. Hiring a tax accountant can help you take the maximum allowable deduction for your circumstances and help you to avoid any penalties for claiming something that is not allowed. Here are a few tips for hiring a tax accountant.

How to create an accurate estimate

To claim your tax deduction and get the proper credit for your circumstances, you need to do a few things to help your tax professional:

  • Keep all vehicle-related receipts.
  • Print out all electronic receipts.
  • Place all of your receipts in a file.
  • Keep your logbook with you at all times.
  • Place your logbook in a place where you will see it.

Licencing & qualifications

Hiring a tax professional is an important decision. You must choose carefully because utilising the wrong one can land you in trouble. Here are some of the requirements needed to become a tax accountant.

  • Must have a Bachelor’s degree in accounting.
  • Must participate in the Certified Practising Accountants (CPA) program or be a member of the Institute of Public Accountants or Chartered Accountants Australia.
  • Be sure to ask how long they have been a tax accountant and their experience with similar tax circumstances.

Contact local tax accountants

How to save money hiring a tax accountant

Tax accountants use different methods of charging for services. Some charge a flat fee, while others work on a percentage basis. Here are a few tips for saving money when hiring a tax professional.

  • Ask what they charge and how they charge upfront.
  • Save your receipts, or you cannot deduct all of your eligible expenses.
  • Keep your records in the proper order to save your preparer time.

FAQs

Can you claim fuel on tax?

Claiming fuel on tax is only allowed if you choose the logbook tax method. A matching receipt must accompany a fuel claim, and you must keep a travel logbook for tax purposes. You can only claim a portion of your fuel expense that was used for work purposes. You cannot claim this deduction if you use the cents per km tax deduction method.

Categories
Finance

How to do a Tax Return in Australia

We’ve reached that time of the year when the ATO (Australian Taxation Office) and accountants begin getting ready for the slew of calculations they will be handling as people across the country lodge their tax returns. The cost of having a registered Tax Accountant lodge your tax return on your behalf can vary. If you prefer to prepare your own tax return there are quite a few things you will have to remember.

Before we take a detailed look at how to complete your tax return, here is some basic information you should be aware of:

  1. Your tax return for any particular year (eg: 2020) is for all income earned from 1 July 2019 to 30 June 2020.
  2. The tax return for 2020 will be available in June 2020, with lodgement available from 1 July 2020.
  3. If you’ve missed any tax returns for previous years, you must complete them as soon as possible to avoid any fines from the ATO.
  4. Since most of us are now working from home due to COVID-19, the ATO has introduced a new method to calculate your expenses working from home called the Shortcut Method. Find out more about the Shortcut Method in our guide explaining How to Lodge a Tax Return if You’re Working from Home.

How to do your tax return online

As an individual doing their own taxes, you may have several questions. Here are some useful tips on how to do your taxes online:

Gather your paperwork

Before you lodge your tax return you need to gather all relevant information and paperwork to ensure it will be accurate. You will notice that the ATO pre-fills certain information from superannuation funds, Centrelink and banks in your online form. However, it is recommended that you check the accuracy of this pre-filled information. Some of the documents you require for your 2017 tax return include:

Your income

  1. Payment summaries – These record the income you’ve received from superannuation funds, an employer, or any government agencies such as the Department of Veteran’s Affairs or Centrelink.
  2. Bank statements – These will detail the interest you may have earned over the past financial year.
  3. Shares, managed funds or unit trusts statements – These will be required to calculate any dividends or distributions made to you.
  4. Statements of buy and sell investments – You can acquire these from your stockbroker or investment advisor if you purchased or sold any shares.
  5. Records from rental properties– This has information relating to either a capital gain or capital loss from the sale of any property.
  6. Foreign income details – All details of foreign pensions or any other form of foreign income will be required.

Your expenses

  1. Statement of your private health insurance policy – This will be required to complete the tax return section that requires information about your private health insurance. See more information below.
  2. Donation receipts – These are needed from all the approved charities you make contributions to.
  3. Educational receipts and records – Not every expense is claimable, refer to the self-education expenses page on the ATO site for additional information.
  4. Investment property receipts – These will be required to claim the maintenance and repairs costs on any investment property you own.
  5. Your spouse’s income and expenses – If you have a spouse, you will require details of their income as well as their expenses to ensure your entitlements are correctly calculated.
  6. Union membership – The cost of your union membership can be deducted from your taxable income amount.
  7. Work-related expenses – You might be eligible to claim certain work-related expenses.

Medicare levy and private health insurance rebate

From 1 July 2015, income thresholds used while calculating the Medicare levy surcharge and the private health insurance rebate have been frozen for three years at 2014-15 levels. If there is an increase in your income, you may move into the next threshold for the private health insurance rebate. This may mean a few things:

  1. If you have private health insurance, there may be a decrease in your rebate entitlement.
  2. If you don’t have the required level of private health insurance, you may have to pay the Medicare levy.
  3. If you paid the Medicare levy surcharge payment last year, there could be an increase in the levy you pay in 2017.
  4. If you’ve received an increase in pay, contact your health insurance provider to make sure the appropriate rebate is applied. You will be able to find more detailed information about income thresholds for private health insurance on the ATO’s website.

Claim your deductions

You may be eligible to claim income tax deductions for certain job-related costs; the expenses must meet these criteria:

  1. Relevant – The expenses must be job-related.
  2. Real – The money spent must have been your own and has not been reimbursed.
  3. Recorded – You must have records such as receipts as evidence of the job-related cost.

You will find more details on the ATO website about how you can claim work-related expenses.

MyDeductions

Tax Return Australia - MyDeductions
Source: Australian Taxation Office

The myDeductions tool on the ATO app can be used to help you keep track of all your deductions. Using this tool, you can:

  • Record all work-related expenses
  • Store photos of receipts
  • Record gifts and donations
  • Track car trips

NB: myDeductions isn’t for small business owners. It’s only for those claiming various work-related expenses as employees. With effect from 1 July 2016, these deductions can be pre-filled on your online tax return via the app. Alternatively, you can share this information with your tax agent.

How to track my tax return

To lodge your tax return online, you need to ensure you have a MyGov account (this can be easily created if you do not yet have one). This account will have to be linked to the ATO. Once you have completed the process and lodged your tax return, you should check your MyGov inbox for the tax receipt and your notice of assessment.

If you are planning to use a professional to handle your tax returns, make sure the tax agent is registered. You can check the agent’s registration status via the online tax and BAS (Business Activity Statements) agent register.

Categories
Automotive

How to finance a car loan when you’re self-employed

Purchasing a new car isn’t something everyone manages outright. Throw self-employment into the mix, and the challenge can be harder.

Variable income and unpredictability often make securing finance feel out of reach. But that’s not the case. If you’re self-employed or an owner of a micro-business, there are options to secure a car loan that doesn’t break your bank.

Now with times more uncertain than before, it pays to invest and choose wisely. Here’s how you can increase your chances of successful car financing. 

Interior of a red ferrari with white leather seats and black steering wheel.
Source: Creative Car Care

Prioritise loan type

One of the most common financing mistakes is falling in love with the car before the loan.

You wouldn’t buy a house without sorting the paperwork, and your vehicle buying strategy should follow the same rule.

If you want to save money, seek pre-approval first and understand how different types of car loans work. This helps you budget, compare and approach the right lender for your needs and is the smartest way to determine what you can afford. Apply this strategy whether you’re shopping new, used or private.

Make sure you:

●  Review interest rates, fees, charges and repayment frequency to work costs into your budget

●  Prioritise your credit score to confirm your current financial position

●  Shop for car financing before you visit car dealerships

Tip:  Be careful not to apply for too many loans in a short period of time as this impacts your credit report and may decrease chances of approval. 

Research, compare and negotiate

Will you be leasing or buying your car?

The type of loan you choose depends on your business needs. Consider the purpose of your car, budget and whether you need to keep its ownership. Research and compare at least three loans from various lenders before you decide.

If buying outright isn’t for you, leasing enables you to get a new car with low monthly repayments. But it still pays to do your research first to compare and strengthen negotiating power.

Pre-approval of car finance also improves your negotiating influence.

Consider potential tax benefits

Buying a vehicle for business is a great tax advantage.

You may claim your car against business tax with a registered ABN. Generally, leasing means you won’t pay GST.

If you’re GST registered, the tax is charged on the purchase price which you can claim back when you lodge your statements. Depending on the type of car you’re after, see if you’re eligible for the Australian Government’s instant asset write-off. This only applies to new and second-hand cars under $20,000.

Minimise lender risk

There are a few ways to minimise the lender’s risk, which could improve your chances of approval.

  1. Have a substantial deposit
  2. Get your credit score up to scratch
  3. Keep balance sheet to prove business growth, profit and equity 

Weigh up features and restrictions

Every contract will have its own set of benefits and loan restrictions.

Before you sign, review the fine print. Sometimes, there are features to fuel savings like additional warranties and Guaranteed Auto Protection (GAP) insurance. Optional extras such as maintenance plans, GPS navigation and car alarm installation may sound good, but verify they’re meeting your needs and not adding to the total costs unnecessarily.

If there’s a chance you’ll pay your loan out early, look for flexible payment options and smaller payout fees like a chattel mortgage. These are favourable for self-employed individuals or tradies.

Buyer Beware: Not all features are what they seem. For example; some extended warranties are only valid if you return to the same dealership for servicing, which could end up costing you more. Remember it’s a car salesman’s job to upsell features, so it’s important to know what you’re really getting and if it’s worth your money.

Partner with a financial advisor

Partnering with an accountant or financial advisor is a wise move to determine all options and tax benefits.

Whilst it’s always vital to do your own research, a financial advisor provides knowledgeable guidance, so you find the best loan, lender and deal for your industry. These professionals have access to a network of financiers to save you the hassle of negotiating with each. Such savings in time and energy are valuable when you’re self-employed or a small business owner.

Flexibility, simplicity and clarity are the essential ingredients for anyone who is self-employed and looking to apply for car finance. The right loan will assist in the growth of your business, by ensuring access to the transportation you need.