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False Claims Spark Calls for Blanket Deduction System

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Deduction DebateAustralia’s current tax deduction system has been a hotly debated issue in recent months. There have been strong opposing views, with one side claiming that the current system is severely flawed, due to the sheer amount of fraudulent and petty claims occurring. However, many are claiming that the current system should be kept in place, and stating the problem as being with the public not being educated enough when claiming work-related expenses.

Joanne Dunne, director at Accounting firm PwC is strongly in the corner of a reform of the current system, stating that the current tax deduction system is “out of control”. Dunne has claimed that the current system is inefficient, due to “silly expense claims” that are burdening the ATO’s resources. Dunne also stated that the time spent on these trivial claims should be allocated to “more important” work, and also claims that the cost of investigating these false claims outweighs the costs recovered. The proposition of a simple yearly $1000 blanket deduction for each taxpayer has been discussed, with the view of simplifying the system and nullifying any incorrect claims made.

This has proven to be an unpopular recommendation for some; with Ram Pandey from the ATO expressing disapproval of this idea. Pandey has defended the current system, explaining that the actual problem lies with the public’s misunderstanding of what should be claimed. He argued that a complete overhaul of the system would not be practical, and that it should undergo some gradual tweaking and enhancement instead.

We found this debate quite interesting; we believe that any changes in the tax system are definitely worth keeping an eye on for any small business owner. Our taxation accountants are also very knowledgeable in this area, if you’re looking for some specific advice or simply want to speak with an accountant about your tax planning options, call us today to schedule an appointment on (07) 3367-0852.

Post Contributor:
Andrés Pascoe

Tradesmen Bunnings ABN Scam Uncovered

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An interesting tax avoidance scam has been uncovered recently, involving thousands of tradesmen around Australia and hardware chain Bunnings Warehouse. Because of the amount of cash transactions that occur in the trade industry, a large number of these service providers have been able to circumvent the tax system.

Large amounts of contract workers in Australia have been able to beat the system by replacing their own ABN number with Bunnings ABN number on invoices, making the transactions untraceable to their actual recipients. This has created a black economy of sorts for tradesmen as a result of the large amount of unaccounted for payments. Paul Drum, a member of the government’s national tax liaison group has responded to this issue, proposing that the Government implements a system “to make sure we can verify ABNs on a real-time basis”. This new system would ensure that all contractor transactions are accounted for in real time, eliminating the possibility of contractors escaping tax payments and ensuring the Government does not lose out on hundreds of millions of dollars.

Understanding Your Tax Obligations

If there is a chance that you are not fully aware of all of your tax obligations, there are a range of online guides that can help you. The ATO website has a comprehensive guide to what payments need to be reported each year, including details about businesses in building and construction. We recommend giving the website a look by clicking here, as it is a valuable resource designed to help you make sure that you are fulfilling your tax obligations. As always, you are welcome to contact one of our taxation experts on (07) 3367-0852 if there are any further questions you had regarding your tax planning options. We would love to hear from you!

Post Contributor:
Andrés Pascoe

Happy New Year

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Usually, January 1 is the common new year celebration. We get together with our friends and family to say goodbye to the year that was and welcome the new year with excitement. It’s a chance to set personal goals to improve ourselves in hope that the coming year is greater than the last.

As accountants, we have a second New Year’s celebration on June 30. Traditionally we complete our performance reviews, we detail our work achievements from the previous year, document our career goals for the current year and our 5 year plan. It is the time of the year we focus on our careers and how we personally want to see them advance in the coming year/s.

After all of this, we head to our local watering hole and celebrate all that we have achieved and aim to achieve. It’s never hard to find an excuse for celebration, but Financial New Year is certainly never an occasion we miss.
At this time of year it is quite common to find our clients thinking about how they can improve their business, their income, their investments, particularly after completing the reports for the previous year and seeing results which they wish were better. June 30 seems to be the time of year for people to reassess the financial aspect of their lives. It’s something many of us think about but not necessarily seek assistance with.

We, as Business Advisors, find that this is a great time to put plans into action, make adjustments to current business activities and if necessary, convert to Xero from other accounting software systems. A five year plan is great for business too, as it gives us as business owners, direction and something to aim towards. At the end of all our hard work the income is great, but achieving business goals to encourage growth is a great feeling and form of motivation. It’s just another way to receive more self-satisfaction for something that absorbs so much of our time, making it all worth while.

From all of us here at Rush Associates, we wish you a Prosperous New Financial Year FULL of Achievements and Growth!!!

Your Time’s Worth More

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As a business owner, one question which we continually ask ourselves is, ‘How can I make more money?’ It’s such a broad question… How about we rephrase it to ‘How can I more efficiently use my time to maximize value?’

If you think back over your day, where you spent your time, can you say that it was effective and efficient? For example, are you a Plumber, but kept yourself chained to the office desk for the day to catch up on your bookkeeping because your BAS is due next week? Is that effective? A Plumbers’ hourly charge out rate might be $60/hr. If we multiply that by five hours of bookkeeping that was done, it has cost the business $300 in revenue. Would you believe me if I said there was a more efficient way to utilize the plumbers time? Let’s send the plumber out to site, charging $60 an hour, revenue is then $300 for the five hours. The builder engages a bookkeeper at $40 per hour, (but it takes them 2.5 hours to do what it took the plumber 5 hours to struggle through) costing the business $100. The net effect of this transaction is revenue of $200, much better than losing the plumbers time at the desk.

You may then think, ‘yep, good point, but I do my bookkeeping at night time or on the weekends’, which is a common practice in small business. However, most of the time, our weekends come and go and very rarely do we get all our items crossed off our ‘To Do’ list. We are then forced into a situation of having to do it in a hurry or at the last minute, cutting into our productive time or chargeable time.

The other downside is that, as accountants, we regularly spend time correcting ledgers simply because the person inputting the data is doing the best they can without having expertise in the field. Traditionally, this costs the business money in higher accountancy fees as time is spent correcting ledgers and sometimes, amending lodged activity statements etc.
Perhaps, whilst the initial reaction to employing or engaging a bookkeeper may seem like an unnecessary cost and sometimes maybe even a luxury, if you think about how you manage your books as a business owner, it may actually be a time saver, and as we’ve said before, time is money. A bookkeeper (considering you engage a good one) will ensure your books are up to date, can provide you with reports on a regular basis to help make financial decisions, ensure that all data is correct and ready for the accountant at the necessary time and take away the worry of another item on your ‘To Do’ list.

Another advantage which is of significant value, is your down time and your time with family. Working five or six days a week and quoting and paperwork during off-site or out of hours time can have an affect on your family and, not to mention, your sanity. Finding work/life balance is crucial in our super hectic lives. So we challenge you to consider how and where you spend your time, can it be spent more effectively, do you need to be relieved of one aspect of your business – and if you answer yes, then we can help. Whilst we are accountants, we do offer bookkeeping services at very competitive rates and would love to be a helping hand in your business. Just food for thought….

2017/2018 Budget Review

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Recently, Scott Morrison released the second budget for the Turnbull government. As always, there was a lot of information released so we have documented a few of the major points which may be of interest to you.

If you are thinking of purchasing a rental property, keep reading. Any investment property purchased after May 7, 2017, can not claim depreciation for Plant and Equipment embedded in the purchase price, if purchasing a pre-existing property. This eliminates the benefit of having a depreciation report prepared, as investors have done in the past. Don’t panic if you are already claiming deductions from a depreciation report, as any properties purchased prior to this date can continue to claim these deductions as they have done in the past.

Another change to rental property investment deductions is the elimination of travel expenses being deductible for travel costs between home and property. Our current financial year (16/17) is the last year you will be able to claim a deduction for travel to inspect, view or work on your investment property.

There is an increase to the Medicare Levy which will come into play in the 2019/20 financial year, it will increase to 2.5% from the current 2%. Also, the Low Income Threshold for the current financial year is $21,655 for a single person and $36,541 for a family, plus $3,356 for each dependant child or student. Not to forget the increase to the HELP repayments which are set to take effect from July 1, 2018. If you have a HELP debt and your earnings for the 2018/19 year reach $42,000, you will be required to repay 1% of the debt. As your earnings increase, so does the repayment rate, up to 10% of earnings of $119,882 and above.

Great news for small businesses, the 100% deduction of assets purchased under $20,000 will continue through the next financial year, these deductions will be allowed until the end of 2017/2018 financial year.

If you are looking to purchase your first home and eligible for First Home Buyer Grant (FHBG) the government has released a scheme to help savers accumulate their deposit using their superannuation fund. A great initiative to promote self funding as opposed to increasing borrowings.

The final big point which we found attractive is the ability of people aged 65 or more to contribute up to $300,000 to their super from the sale of their principal place of residence. This is available from July 1, 2018, but only if the property has been owned for a minimum of the last 10 years. These non-concessional contributions are in addition to what they are currently making under existing rules and caps and will be exempt from the age test, work test and the $1.6 million balance test. This is definitely something to spark interest amongst our retirement age community.

These are a few of the big points we noted from the budget release. We’d love to hear your thoughts below, or if you want to run some thoughts past one of us or have some questions about the budget, give us a call.

Another Step In Business Growth

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This week we launched our new website!!!  Do I hear you saying, “Why, you already had one?”  We can answer that with two words, “mobile friendly”.   So whilst we think it looks great, all sparkly and new, the best part about it is that it is very effective on your mobile devices.

The need for being ‘mobile friendly’ is simply because we pick up our phones to do a quick search as opposed to sitting down at our desktop computer. Sometimes we do the searches when we aren’t even at home, so the need to have a website that is suitable for mobile devices is vital.

Like many businesses, a large part of our lead generation is from Google.  Making sure we have the correct SEO keywords working and doing all that we can to put our site at the top of the google search results is important.  Gone are the days when we would pick up the yellow pages and look under ‘A’ for ‘Accountant’ – we now type what we are looking for in Google’s search bar, ‘Brisbane accountant xero’, then hit that little ‘search’ button.  However, when the world operates from tablets and mobiles it is vital that our websites are not only visually attractive on these devices but also flexible enough to adjust resolutions to fit the endless screen size variations. First impressions are crucial and if your website is clunky and doesn’t adjust to their mobile devices accordingly those people searching will just flick to the next business on their list of search results.

Technology is something that is hard to keep on top of, but it is crucial to our businesses.  We believe a mobile friendly website is a great aspect for our business growth, and perhaps it would be worthwhile looking into for yourselves, if you haven’t already.

Eat That Frog

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I recently heard of the saying, ‘Eat That Frog’ when reading about business growth and development. At first, my reaction was, “What on earth could a frog have to do with growing my business??” Feeling intrigued, I continued reading and was quite impressed, so much so, I’m sharing it with you.

We all have jobs which we absolutely hate doing, in every aspect of our lives, our personal lives, our work lives, and particularly in our businesses. Those jobs we procrastinate about, think about, talk about endlessly. In a business perspective, we all know time is money! Think of these jobs as the frog, just as Brian Tracy has explained in his blog.

Imagine knowing that today you had to eat a live frog. It would no doubt be something you would be dreading, taking over your concentration knowing you had a horrible job to do. Tracy says to just get up and eat it straight up without taking too much time to think about it, get it over and done with so you can move on with your day effectively. The downside of not tackling the frog first is that it would be constantly on your mind until you ate it, you would not be able to commit to other tasks fully, knowing you had such a horrible job still on your to-do-list.

Whilst eating a frog is one of the grossest things we can think of doing, particularly live, we can relate it to having jobs hanging over our head, constantly worrying about them, thinking about how we can get around them or make them less painful. If we just tackled it first thing and got it out of the way, we can then focus on other items more clearly which means our time is being used more effectively. Then, we’ll get a little feeling of success for completing something so painful – a good kick start to the day! That little confidence kick and a clearer mind to carry you through the day is bound to bring efficiency and, in turn, more room for growth and achievements.

So have a go at eating that frog – first thing in the morning!

Xero’s A Life Changer

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As you may know, we are a reasonably young, technically up to date, Accounting Practice. In the early years of our careers we were completely bound by paper. Essentially this meant that accounting was an ‘after the fact’ procedure that allowed us to evaluate the past and make estimated predictions and budgets for the future. That was the best we could do, as the accounting software at the time allowed us to only input data after receiving bank statements.

Best case, if our client was extremely efficient, we would receive a bank statement within a week or so from the end of the month, and have it scheduled into our jobs and processed within the following week. Then, sometimes we had queries, we would send a letter asking for further clarification on one or more transactions to ensure appropriate allocation. There was time lost waiting on replies to be returned via snail mail. We would be lucky to have a job processed and data updated within a month of a particular date.

Slowly, technology changed, there was email, there was internet banking, electronic bank statements – all of which allowed increased productivity and less time lapse between end of month and reporting. But, nothing changed the world of accounting like Xero!!! In a nut shell, Xero has allowed us to have real time reporting which means we can report on data as recent as yesterday, at any time of the month, but not only that, businesses can process their invoices, payroll, inventory, all in one place, eliminating the double up of processing, AND it can all be done while you (as business owners/managers) sit and have smoko, have your morning coffee, sit at the soccer fields or dance class rehearsals – on your smart phones or tablets. No more trying to remember what you did 4 weeks ago, what that transaction was – you can now process the following day, reconcile daily with ease.

As accountants, our role is changing in your businesses, we started as reporters, reporting to you the effects of your business transactions and decisions, months after the event. Our current role with businesses using Xero is advisors – we can see exactly where the business is situated at any time with ease. We can advise on decisions such as big equipment or vehicle purchases, increased superannuation contributions, the need for accounts receivable collection when they get too high…. All of which could not have been done before. We are now a part of your business activity, advising on how to increase it, not just reporting on it.

The best part about Xero is businesses are spending less time on their bookkeeping and more time in their business, generating more revenue. In a world that finds us all so limited with our time, never enough time in the day, Xero allows our time as business owners and accountants to be used so much more efficiently and effectively.

If you need this in your life, call us – we will give you a free consultation to show you the advantages, explain how to adapt it to your routine, to allow efficient and effective book keeping and give you the opportunity to evaluate how Xero would assist you – it really is ‘Beautiful Software’.

Australian Government Gift Small Businesses with the Fear of Bankruptcy

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Over the Christmas break PM Malcolm Turnbull and Treasurer Scott Morison proposed a plan that could bankrupt or put out of business thousands of small enterprises. Small businesses with a turnover of less than $2 million owe the ATO a massive $13 billion in overdue taxes, and the government is ready to collect.

The proposed plan will allow the ATO to disclose to credit reporting bureaus the names of those who owe money to the ATO. Fortunately, the ATO has assured that those who enter into a payment arrangement with the ATO, to manage their debts, will not be named. Unfortunately for those whose names are on that list, bank and supplier credit could be withdrawn, forcing almost all of these businesses to fold.

Going forward, this plan if correctly implemented, may have its benefits. The theory behind this plan is that when small businesses go through a rough patch they will stop paying their taxes and superannuation, and before long could be snowed under in late fees. This naming measure will make small businesses think twice about going down this path and instead make them change their business model or raise capital. The government hopes that in the long run this will make the small business sector much more healthy.

Whilst good in theory this plan has some serious flaws. It is believed a large chunk of the $19 billion overdue tax is not actually owed. For large enterprises with the money to spend on lawyers, rebuking these claims in court is easy, but for those small businesses that were ‘named and shamed’ the legal expenses would be enough to send them bankrupt.

While this is still a plan in the making we will be sure to keep you up-to-date with the latest surrounding these changes. In order to learn more, and we recommend you do, read business columnist, Robert Gottliebsen’s, article here.

Are You Paying Enough Attention To Your Super?

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Are you paying enough attention to your super?

The tax incentives on Australians’ super contributions can welcome better investment returns in an environment full of low investment returns. Experts advise that by learning how to properly understand your super, and what it can do for you, you can save a lot of money.

Australian super contributions dropped 0.3 per cent last financial year, despite a growing working population and rising wages, with the June quarter falling a staggering 0.8 per cent. Wealth for Life Financial Planning principal Rex Whitford believes that the lack of trust between Australian people and the government has developed due to the chopping and changing of the rules when it comes to super. If you are unfamiliar with the latest super changes check out some of our ‘super’ blogs.

Despite the changes, super is still the most tax-effective structure to hold your life savings. Your super is more than just cold hard cash. It can hold property, bonds, shares, infrastructure, or a mixture of these. Maximum Wealth Advisers partner Mauro Grossi says that saving diverted to super at only 15 per cent – instead of your marginal tax rate – can add-up over time. “It’s not the government’s money. It’s your money for your future. If it was sitting in a bank account you would be far more worried about it.”

So how can super tax actually help?

  1. Earnings within super are taxed at only 15 per cent, rather than marginal tax rates
  2. Tax-deductible contributions, such as salary sacrifice, get taxed just 15 per cent. Whereas your wage income tax can be up to 49 per cent.
  3. Tax on withdrawals, income and capital gains for most people aged over 60 is zero
  4. The planned rule changes do not affect these tax rates. They only cap how much you can contribute, and will adjust super savings above $1.6 million per person out of the zero-tax environment and into the 15 per cent tax environment.

We highly recommend that you invest some time into understanding your super and learning what it can do for you, even before retirement. We have a team of highly trained, and knowledgeable experts that would love to have a chat with you, should you wish to learn more.