Increase of the Instant Asset Write Off Threshold from $30,000 to $150,000

Businesses with a turnover of less than $500 Million (up from $50 Million) will be eligible for this.

• Eligible assets purchased from 12 March 2020 to 30 June 2020 that are under $150,000 will be eligible for the instant asset write off (examples include a concrete tank for a builder, a tractor for a farming business, and a truck for a delivery business).
• Eligible assets that are over the $150,000 will be eligible to claim 50% of the cost as an instant asset write off cost in the year of purchase until 30th June 2021 with the balance to be depreciated at the depreciation rates applicable in future income years.

Boosting cash flow for Employers

Businesses with a turnover of less than $50 Million will be eligible for this.

PAYG Withholding Incentives

• An incentive of up to $100,000 (up from $25,000 previously announced) with a minimum of $20,000 (up from $2,000 previously announced) for anyone who employs staff between 1 January 2020 and 30 June 2020.
• Businesses will receive a 100% (up from 50%) rebate of their PAYG Withholding reported on their BAS or IAS for this period.
• The payments to eligible employees are stated to be made within 14 days of lodgement of the March quarter BAS or IAS (i.e. for the period ending 31 March 2020). It is not clear how this will apply to those who lodge a monthly BAS for January and February 2020. Presumably, the PAYG withheld for these months would also be considered with no further payments to be made once the $100,000 cap is reached.
• These incentives have also been extended to include not-for-profit charities.

Eligible Apprentices

• Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage for up to 9 months from 1 January 2020 to 30 September 2020.
• Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice of trainee.
• Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter).
• The subsidy will be available to small businesses employing fewer than 20 full-time employees who retain an apprentice or trainee. The apprentice or trainee must have been in training with a small business as at 1 March 2020.

Targeted support for the most severely affected sectors, regions and communities

• $1 Billion to support those sectors, regions and communities that have been disproportionately affected by the economic impacts of the Coronavirus, including those heavily reliant on industries such as tourism, agriculture and education.
• This will include the waiver of fees and charges for tourism businesses that operate in the Great Barrier Reef Marine Park and Commonwealth National Parks.
• Additional assistance to help businesses identify alternative export markets or supply chains. Targeted measures will also be developed to further promote domestic tourism. Further plans and measures to support recovery will be designed and delivered in partnership with the affected industries and communities
• On a case-by-case basis, the ATO will look to provide administrative relief for some tax obligations for people affected by the coronavirus outbreak.

Other announcements that were made last week

• The big four banks announce assistance package for those affected by COVID -19, including deferring loan repayments on small business loans for six months. Banks have also passed on varying cuts to interest rates on these loans so check with your bank as to what your revised rate will be.
• Government to supply a 50% guarantee on small business loans up to $250,000 to keep small businesses alive.
• An interest rate cut by the Reserve Bank of Australia (RBA) to bring the cash rate down to 0.25%, the lowest in Australian history.
• Additional relief being provided temporarily for those businesses facing insolvency and bankruptcy including changes to when creditors can issue a statutory demand. Directors will be temporarily relieved of their duty to prevent insolvent trading for any debts incurred in the ordinary course of the company’s business. This change will also apply for six months.
• Reducing the minimum pension drawdown rates by 50% for this financial year as well as the next financial year.
• Allowing early access to superannuation for those financially affected by the virus up to $10,000 for both this year and the next financial year, which will be tax-free.
• In Victoria, Payroll tax waived in 2019-20 for eligible businesses with taxable wages up to $3 million.
• Additional $750 stimulus payment provided after 13 July 2020 for certain income support recipients.

Parliament meet this week and the above items announced by the Morrison Government are to be tabled so they can be legislated. These are challenging times for our clients and yes, I will use the term ‘unprecedented’. We hope you and your families stay safe during these difficult times.

For any questions in relation to the above, feel free to contact our office.

We have also included some helpful links should you seek further information:

Click here for further information from treasury.gov.au

https://treasury.gov.au/coronavirus

https://www.safeworkaustralia.gov.au/covid-19-information-workplaces

https://www.sro.vic.gov.au/frequently-asked-questions-response-covid-19

The post COVID-19 Stimulus Package – What this means for your business appeared first on HBT Advisory.

If you are, then that’s great, however there many things to consider before going into business.

I am sure it is great walking in to tell the boss “That’s it, I am done! I am starting my own business!” but before you go and give that letter to the boss to tell you are off, make sure you consider whether going into business is right for you. Being in business isn’t for everyone. In fact, it doesn’t just need to be right for you, it needs to be the right decision for your family as well.

Before going into business it is certainly worthwhile having these conversations with your family and getting them on board before taking that leap of faith and a good way to start is by putting together a business plan.

As the old saying goes, if you fail to plan, you plan to fail! By doing a business plan, you can then work through:

Now: What is your current situation, personally and financially.

Where: What is your vision for your business? Do you have a competitive edge? What do you hope to achieve by going out into business?

Why: What is your Why? Whether that is to build and grow a successful business to sell or pass on to the family, or whether you are simply looking at a business that is in an industry that you love! No matter what it is, we all have our WHY!

Action: What do you hope to achieve in your business? What is the one year, three year or five year plan? Does it fit or is it in line with your personal goals?

Timing: Have you put time frames on when you would like to achieve particular goals? Can you hold yourself accountable for these goals?

If you are looking to start a business and you have a plan in mind, feel free to contact Andrew Harper, Director and Founder of HBT Advisory Pty Ltd to discuss your business and work through preparing a business plan.

The post Starting a Business in the New Financial Year? appeared first on HBT Advisory.

You need them to tell your friends and family how good your product or service is so you can sell more of these in order to grow.

Most importantly, you need your customers to pay you or your business fails!

The questions you need to consider are:

Am I invoicing our customers promptly or is there a serious lag between the time you sell the product or service and the invoice being prepared?

• Do you post your invoices or email them directly to your customers?
• Is it easy for customers to pay me?
• Are my payment terms clear and concise?
• Are these invoices followed up should payment not be received by the due date?
• How are you monitoring your debtors?

Good paying customers are vital to your cash flow. Whether you are start up, looking to grow or are a mature business, slow payers can have a significant impact on the performance of your business and can hinder the opportunity for your business to grow.

We work with clients for solutions to debtor management and understand the importance of having good payers for the success of your business. Through cloud accounting programs such as Xero and Intuit Quickbooks Online, you are able to monitor debtors at ease.

If debtor management has been a problem in your business, contact us today to discuss ways to create efficiencies in this process as well as to discuss what products may be suitable for your business in order to improve your cash flow.

The post Is it taking too long for your business to get paid? appeared first on HBT Advisory.

Sometimes it can just be a little bit of budgeting and reviewing your profit margins to see what products or services are generating you what levels of profit.

Understanding your gross profit (GP) margin

For every $1 of sales, what is your GP? It is important to understand what your GP margin is in order to ensure that you can cover the overheads to operate your business and also to have a desired level of profit.

What product or services generate you good margins?

Understand and analyse your profit margins to see what product/services categories, segments are more profitable.

This allows you to understand your high margin or low margin products and also whether there is room for adjustment on price. If there are segments that you are making losses on, it is time to cut them!

Review your prices

Are your prices in line with the competitors? What justifies you charging your prices?

If there is a price increase, you may lose the odd customer here and there, but as a business owner, your costs are going up and therefore you need to consider whether your prices are in line with the current market.

But in saying that, it’s not always about price!

It’s about what value you are offering your customer. Are you giving an excellent level of customer service and do your key sales people in your business truly understand your products and services? Do your customers feel comfortable working with you and your team?

This adds value to the transaction and justifies your price and can lead to repeat business.

Customers love a discount, but how does that affect your business?

Have a good understanding as to why you are offering a discount. Are you doing it to get paid sooner or just to make that sale? Discounting can ruin a profit margin on a product or service and see you making very little profit.

As mentioned earlier, understand with your products or services where there is room for movement so you are not depleting your margins.

Your customers love a discount and so does your business!

If there are discounts on offer from your suppliers, you may find it attractive to take up these offers as this improves profitability, however you need to look your cash flow to see whether it is viable to do so.

You may find borrowing the money to pay that big supplier is still going to improve your profit margin than waiting the full term and paying the full price.

Could you be operating your business more efficiently?

Are you running your business the most efficient way possible? Can technology help smooth out those process and allow you more time working on your business?

Using technology to reduce time spent on processes can free up more time to allow you to work on your business and have your key people trying to generate more sales.

Understand your business performance regularly during the course of the year.

How often are you checking your profit and loss statement to see the profit you are making?

Using a cloud-based accounting package can allow you to monitor your performance in real-time and allow you to track your results more regularly. Your business may be making more profit, however you could find cashflow tight.

We work with clients regularly during the course of a Financial Year to help them understand the performance of their business through regular meetings. This is our way of offering a tailored business package for a fixed fee not just focused on the tax compliance, but also the performance of your business.

Feel free to contact us today for a no obligation meeting to discuss your business.

The post Enhancing Business Profits: Effective Measures for Success appeared first on HBT Advisory.

Being in business with someone, whether work colleagues or friends getting together is a like a business marriage and therefore you need something in place that can be used to help solve disputes.

The best time to prepare a Shareholders/Partnership agreement is while you are “in love”. This is usually when you are about to start a business or taken the reins from someone else in the business and you are “in love” with being a business owner.

What is a Shareholders Agreement?

A Shareholders / Partnership Agreement covers the funding, structure, management and direction of the business. It outlines the responsibilities and obligations of the business owners and provide guidance should there be disputes between business owners.

Why do we need one and when should we get one?

It is designed to deal with the issues that may arise during the life of a business, by determining in advance, how such issues should be dealt with (hence my comment above about doing it “whilst you are in love”).

The process of developing a Shareholders Agreement and the content included will differ between each entity after discussion and input involving all the relevant partners/shareholders and their relevant advisors. There is no ‘one size fits all’ approach.

What other measures are in place should there be a dispute?

It is a good opportunity for you and your business partner/s to have a think about what you personally want from your business and then collate and collaborate those thoughts with your other business partners.

It is ideal to discuss the items below openly and freely to keep communication lines open. You will get an understanding of each other and the direction that you personally see the business going very quickly!

Common features of a Shareholders/Partnership Agreement include:

• How do we add or remove partners/directors/shareholders?
• What key business decisions that require a unanimous decision?
• Frequency and timing of Directors Meetings (should be regular with an agenda and notes taken)?
• Expectations, roles and responsibilities of a partner/director (or principle of a shareholder) within the business.
• Dividend/Drawing policy & loan accounts within an entity.
• Consequences in the event of death or permanent/temporary disability of partners/directors/principal in the event of death. (There are insurances available to protect this, however we would need to refer you to a business insurance specialist).
• Determining goodwill calculations on entry and exit Agreements need to cover in what circumstances a goodwill payment is made and how any such payment is to be calculated.
• Restraint requirements and notice period on retirement. Care needs to be taken to ensure that any restraint requirements set out under an agreement are enforceable, and do not invalidate the whole agreement.
• Requirement for capital on the happening of a defined event. There may be a need for capital injections into the entity in periods of declining business growth or insufficient economic activity.

A pre-agreed resolution process is extremely important and can save the parties to a Shareholders’ Agreement a lot of time, money and inconvenience in the unwanted event of a major dispute.

On too many occasions, business owners don’t consider a Shareholders Agreement, usually taking the “she’ll be right” approach or the “we have been mates for years” or “I’m sure we can work it out if there is a problem”.

HBT Advisory works with clients to discuss planning opportunities for the business, but also works with the key individuals that are involved within that business. A Shareholders Agreement is a legal agreement and therefore is required to be prepared by a solicitor, however having these conversations with your Accountant can be important to the content of the Shareholders Agreement.

Feel free to contact Andrew to arrange a meeting (either at the office or at your business premises) to discuss the strategic direction of your business.

The post Do you and your business partners have a Shareholders Agreement? appeared first on HBT Advisory.

As business grows (sales, staff etc.) there are many benefits of becoming a company. Although becoming a Director of a company has its perks, you need to ensure you are making the switch for the right reasons.

What is a sole trader?

• A cost-effective, simple structure to set up.
• Have full control over your assets and business decisions.
• Fewer financial and tax obligations than if you operate as a company.
• Legally responsible for all financial aspects of your business.
• Personal assets are at risk (house, car, shares) and can be seized to pay off any debts if the business runs into financial trouble.

The post Outgrown Your Business Structure? We can help! appeared first on HBT Advisory.

Are you working from home?

Seems like more of us are taking work home and are using items such as Mobile phones, Computers, Laptops and other assets. Any items that are used for work related purposes under $300 you can claim an immediate deduction, anything $300 or more you can claim depreciation on over the effective life of the asset (don’t worry too much about the effective life as we have guides you can use to determine that).

If you are working from home and are using your study, you may be able to claim home office expenses. Please ensure you keep record of the hours you spend in the home office over a four week period as well as any other costs you incur (eg. telephone and internet expenses).

Do you have any Professional Memberships or Subscriptions?

Items such as Memberships (professional memberships not to your favourite AFL team), Union Fees, Annual Registrations are all tax deductible as long as they are paid for before 30 June 2018.

Have you borrowed money to invest in a rental property or a share portfolio?

You can pay the interest in this financial year for the year in advance and claim a tax deduction in this financial year.

Do you have Income Protection premiums due?

Premiums for income protection can be prepaid in advance for the next 12 months to receive the tax deduction in the current financial year.

Have you made (or are looking to make) a donation to a charity?

If you are feeling generous leading into the end of a financial year and are making a donation to a charity or non-profit organisation, you can claim a tax deduction as long as the charity has received your donation before 30 June.

Are you making additional contributions into super?

For the 2018 Financial Year, the pre-tax concessional contributions cap is $25,000.

If you’re a salary/wage earner the concessional contributions cap includes the following:

• Employer’s Superannuation Guarantee (SG) contributions (currently SG is at 9.5%)
• Any voluntary employer contributions including salary sacrifice amount
• Any personal deductible contributions you make.

If you’re claiming a tax deduction for a personal contribution this financial year, you will need to ensure that it is received by your super fund before 30 June 2018 (which is a Saturday this financial year).

Don’t break the bank to claim a tax deduction

Please also be mindful you don’t want to be breaking the bank just to pay for something prior to 30 June so you can claim a tax deduction.

The start of June is a great time of year to start planning and putting all these things together and will hopefully get you into a good habit to do this planning for years to come!

Disclaimer:

The following information is provided as an information service only and, therefore, does not constitute, and should not be relied upon as, financial product advice. None of the information provided takes into account your personal objectives, financial situation or needs, and you will need to make your own decision about how to proceed. Alternatively, for financial product advice that takes account of your particular objectives, financial situation or needs, you should consider seeking financial advice from an Australian Financial Services licensee before making a financial decision, which we are able to provide you a referral should you wish to do so.

The post What you can do between now and 30 June to make tax time a breeze appeared first on HBT Advisory.

This is Part One of our two-part series and we will focus on Individuals in Part Two.

Here are a few things to consider leading into 30 June:

Pay it Forward!

If you incur the expense before 30 June 2018, then it can fall into the 2018 Financial Year. Some examples of this can include:

• $20,000 instant asset write off (if you meet the small business entity conditions)
• Office Supplies and Stationery
• Employee Superannuation payments

$20,000 Instant Asset Write Off (set to end on 30 June 2018)

Small business entities with a $10m turnover threshold for the 2018 Financial Year have access to the $20,000 instant asset write-off for new or second hand depreciating assets, if they have been bought and installed ready for use before 30 June 2018. This is a good opportunity for businesses to purchase those assets required to run their businesses and be able to depreciate them fully in the 2018 Financial Year.

Any assets over the $20,000 threshold can be pooled in a general small business pool and depreciated at 15% in the first year, and 30% in the years after that.

With a Federal Budget set to be released on the night of Tuesday, 8 May we will have any further developments about any changes to this posted on our website and Facebook page.

Pay employee super contributions before 30 June

To claim a tax deduction for superannuation for the 2018 Financial Year, the superannuation contribution needs to be received by the employee’s super fund before 30 June. It can take a few days from the time you pay the superannuation contribution to being received by the employee’s super fund so be mindful of this when making the payment.

If you are using the ATO’s small business clearing house, the superannuation contributions are considering to be received when the clearing house accepts them (so you don’t have to worry about when the employee’s super fund receives them!)

Review your debtors

Do you have any debtors that just have not paid? Have you shaken them (not literally, but figuratively) as much as you can to get the money they owe you? If you aren’t getting any traction with the debtor, then these debtors need to be written off. To be able to claim a deduction for a bad debt, each bad debt must be written off before 30 June and have been previously included in the last financial year as income.

Tip: Keep documentation and correspondence of your attempts to chase this debt.

Review your business structure

Whether you are operating your business as a sole trader, partnership, company or a trust, it is a good opportunity to review your business structure as you may find that it may no longer be suitable for your business. This may depend upon when you are growing/expanding or scaling down your business.

For small business entities (that is entities with less than $10 million turnover), you can change your business structure without being subject to capital gains tax on the transfer of assets. This allows businesses to consider what the most suitable business structure would be to continue operating their business without any serious tax consequences.

Between now and 30 June, you can establish that new business structure ready to commence trading for 1 July 2018.

These are a few of the examples that could be available to your business, however it is not always a “one size fits all” approach and we ask that you seek specific advice tailored to your circumstances.

Should you wish to discuss your business and are looking at taking some steps leading into 30 June to help minimize your tax, please contact our office for a free no obligation meeting to discuss your business.

The post What does your small business need to do before 30 June to save tax? appeared first on HBT Advisory.

No pun intended with the ‘click with the cloud’, however as small business owners, we need to be more efficient with our record keeping and have our finger on the pulse when it comes to our customers, suppliers and overall finances for our businesses.

Cloud accounting software creates automation with the day to day processing of the transactions in your business. With automation comes efficiencies, however having an understanding of what information your cloud accounting software can produce can allow you to make informed decision about your business.

Here are some of the benefits of using a cloud accounting package.

Accuracy – Using the old cashbook or keeping an Excel spreadsheet is prone to errors and risks of that formula going astray!

Collaboration – Traditional accounting software only allows access to a single user which means key people can’t access financial and customer details. Utilising cloud accounting with a laptop, PC, smartphones or any other handheld devices lets users edit financial data and view real-time accounting information anytime, anywhere with an internet connection. It makes it easy for your team (Staff, Management, Advisors such as your Accountants & Bookkeepers) to collaborate.

Easy updates and free up storage space – Having a cloud accounting package, everything is done online, which means you don’t need to install updates or worry about ‘old’ data, it is in real time!

Updates are done behind the scenes and are conducted regularly and automatically by the software providers.

Security – Cloud technology provides backup functionality to prevent the possibility of data loss. You can control the privacy access of confidential data through allocating rights to particular users of your file. So even if your computer is stolen, or is dropped in a swimming pool on holidays, your data is safe and backed up because it is stored elsewhere.

Integration – Most cloud accounting software can integrate with other cloud-based software, which makes for greater control and flexibility (and saves on a lot of data entry!). If you have specific needs, say a payroll system or a management tool, you can often integrate systems using add-ons.

Efficiency – It is important to create efficiencies in the record keeping process and if you don’t have this information readily available and in real time, then you are flying blind. Have your financial information working for you behind the scenes means as a business owner you can spend more time focusing on revenue-generating activities. Seeing your data streamlined gives you a clear overview of your finances at a glance.

There are a couple of main players when it comes to cloud accounting packages which are Xero and Intuit Quickbooks Online. We certainly don’t favour one over the other, unless it is specific to your circumstances and therefore we would tailor a particular package to your business based upon your business needs. We are Xero Certified Advisors and Intuit Quickbooks Online Advanced Certified.

So whether you are Team Green (Intuit Quickbooks Online) or Team Blue (Xero), there is a cloud based solution for you.

If this is an area that you would like to explore further in your business, contact our office to discuss which cloud accounting solution would be suitable for your business.

The post It’s time to Scrap those Spreadsheet and Click with the Cloud! appeared first on HBT Advisory.

Do you know how small business CGT concessions can apply to the sale of your business?

The small business CGT concessions are concessions in the legislation for small businesses which have an aggregated turnover of under $2 million or the market value of your net assets are under $6 million. Should you meet either of these conditions you could potentially sell your business without paying Capital Gains Tax.

How I hear you ask? We will discuss these in details later in this article, however here is an example of Joe, who has a manufacturing business.

Meet Joe: He is ready to retire and going to sell his business.

Joe purchased a manufacturing business for $100,000 in 2005. The business had a sales turnover of $900,000 in 2017 and likely to get to $1 million for the 2018 Financial Year.

Joe operates his business through a family trust and has been distributing the income entirely to himself over the last five years.

At age 57, Joe has bought himself a caravan. He is ready to retire so he can travel around Australia so has made the decision to sell his business.

He is going to sell his business to one of his staff who has been with him from the beginning of the business, Tony who is committed to the purchase and will take over the business on 1 July 2018. Joe sells the business to Tony for $650,000.

Joe’s cost base is $100,000 and therefore the capital gain on the sale of the business is $550,000 ($650,000-$100,000).

What are the Small Business CGT Concessions?

There are the following small business CGT concessions that are available to small business owners who meet the basic conditions of the turnover test and the net asset tests.

The 15-year exemption

This is available when the business has been owned for 15 years by the same owner. Under this exemption, the taxpayer’s capital gain is entirely disregarded and no other concessions can be (or in fact need be) applied. This concession is applied before any capital losses are applied against the gain.

Capital losses

The taxpayer’s capital gain is then reduced by:

• any capital losses from the current income year; or
• any previously unapplied net capital losses from prior income years.

CGT discount

If the asset has been owned for over 12 months, the capital gain is reduced by the 50% discount.

50 per cent reduction

A capital gain or discount capital gain can be reduced by the Active Asset reduction which is also at 50%.

The active asset reduction is optional. A taxpayer can choose not to apply the concession in order to maximise use of the retirement exemption (mentioned later in this article).

Retirement exemption

The retirement exemption and/or the small business roll-over may be applied as alternatives, or in combination, to reduce a capital gain. The retirement exemption is based upon the following:

If 55 years of age or over, you can utilise the $500,000 retirement exemption. This is the lifetime cap or;

If under the age of 55, you can still utilise the $500,000 retirement exemption, however you will need to contribute the remainder into superannuation in order to maximise the tax free exemption Note 1.

How can we apply these concessions to Joe?

Joe’s $550,000 capital gain is subject to three separate capital gains tax concessions, being the 50% discount that applies to all assets, the active asset exemption and the retirement exemption.

Their combined effect is cumulative, and in summary, this means no Capital Gains Tax is payable on Joe’s capital gain.

This is a very basic example of how small business CGT concessions can apply to the sale of a business. We ask that you seek advice based upon your specific circumstances in order to determine your eligibility for these concessions.

This can be a complex area and it is important to get the right advice. Should you be in a situation where you are considering or are ready to sell your business (whether that is to retire or not), contact HBT Advisory to discuss your business and what small business CGT concessions could be available to you.

Note 1: We note that you should obtain financial advice on making a contribution into superannuation and we can assist you regarding this process.

The post Understanding CGT Concessions When Selling Your Business appeared first on HBT Advisory.