See the new rules for Employers, Employees and Casuals.
The changes come in from 28 September 2020
The government has now passed legislation for the $130 billion JobKeeper Payment scheme to support businesses significantly affected by the coronavirus to help keep more Australians in jobs.
Eligible employers will be reimbursed a fixed amount of $1,500 per fortnight for each eligible employee. Employers will need to pay eligible employees a minimum of $1,500 (before tax) per fortnight to claim the JobKeeper payment. This will be paid to the employer in arrears each month by the ATO.
The first payments to eligible employers will commence in the first week of May 2020. JobKeeper payments can be made for the period beginning 30 March 2020.
To be eligible for the JobKeeper payment, employers and their employees must meet a range of criteria.
If your business is affected by the coronavirus, you may be eligible to access the JobKeeper payment to assist you to be able to continue paying your employees.
Employers can choose to participate in the scheme and then nominate the employees they wish claim for. An employer can choose not to participate in the JobKeeper payment.
Employers will be eligible for the JobKeeper payment if all the following apply:
You only need to satisfy this requirement once – you don’t need to retest turnover each month.
To work out your fall in turnover, you can compare either:
As an employer, you will receive a payment from the ATO of $1,500 per employee per fortnight as long as you and your employees meet the eligibility criteria.
The ATO will pay you for each eligible employee monthly in arrears beginning in May 2020. Payments will be made from the first week of May.
An employer will usually get $3,000 a month per eligible employee for the two fortnightly periods in that month.
|Example of amounts paid to employers
|Amount per employee
|$3,000 (for fortnights starting 30 March and 13 April)
|$3,000 (for fortnights starting 27 April and 11 May)
|$3,000 (for fortnights starting 25 May and 8 June)
|$3,000 (for fortnights starting 22 June and 6 July)
|$4,500 (for fortnights starting 20 July, 3 August and 17 August)
|$3,000 (for fortnights starting 31 August and 14 September)
To enrol and apply for the JobKeeper payment follow the steps below.
You or a registered tax professional can enrol for the JobKeeper payment:
Confirmation of eligible employees you will claim JobKeeper Payment for (available from 4 May 2020 onwards)
You or a registered tax agent can apply for the JobKeeper payment for your eligible employees:
If you use the ATO Business Portal, you will need a myGovID linked to your ABN in relationship Authorisation Manager (RAM). You can find out how to set this up at ato.gov.au/mygovid
If you would like us to assist your business to enrol and apply for the JobKeeper Scheme please contact us here.
Your employee is eligible under the JobKeeper Payment scheme if they:
You cannot claim for any employees who:
Casual employees are not eligible unless they were employed by you on a regular and systematic basis for at least 12 months as at 1 March 2020.
Before you enrol to receive JobKeeper payments, you need to notify each eligible employee that you intend to nominate them as eligible employees under the JobKeeper scheme.
You must tell those employees that you have nominated them as an eligible employee to claim the JobKeeper payment. They must agree to be nominated by you by completing the JobKeeper employee nomination notice and returning it to you for your records.
The nomination form does not need to be provided to the ATO however employers are required to keep a copy of the completed form as part of their record keeping obligations under the law.
If you would like us to assist your business to enrol and apply for the JobKeeper Scheme please contact us here.
You need to pay your eligible employees at least the minimum amount of $1,500, even if you re-hire them or they earn less than this per fortnight. You cannot pay your employees less than $1,500 per fortnight and keep the difference. You will not be eligible for the JobKeeper payment if you pay your nominated employee less than $1,500 per fortnight.
You need to re-start or continue to pay your eligible employees at least $1,500 a fortnight in line with your existing pay cycle through your existing payroll solution.
You should pay your employees for each JobKeeper fortnight you plan to claim for. The first fortnight is from 30 March – 12 April and each JobKeeper fortnight that follows.
For the first two fortnights (30 March – 12 April, 13 April – 26 April), the ATO will accept the minimum $1,500 payment for each fortnight has been paid by you even if it has been paid late, provided it is paid by you by the end of April. This means that you can make two fortnightly payments of at least $1,500 per fortnight before the end of April, or a combined payment of at least $3,000 before the end of April.
If you usually pay your employees less frequently than fortnightly, the payment can be allocated between fortnights in a reasonable manner. For example, if you pay your employees on a monthly pay cycle, your employees must have received the monthly equivalent of $1,500 per fortnight.
If your eligible employees change or leave your employment, you need to notify the ATO.
You must pay the minimum $1,500 before tax to each eligible employee per fortnight to claim the JobKeeper payment for that fortnight.
If your eligible employees earn less than $1,500 per fortnight before tax, you must pay them at least $1,500 for each fortnight to claim the JobKeeper payment. This is a ‘top up’ of their salary or wages and will ensure they remain eligible. You cannot pay your employees less than $1,500 per fortnight and keep the difference. You will not be eligible for the JobKeeper payment if you pay your nominated employee less than $1,500 before tax per fortnight. If your eligible employees earn more than $1,500 per fortnight, you should continue to pay them their regular salary or wages. However, you will only receive $1,500 for each eligible employee. Any amount you pay above $1,500 per fortnight is not subsidised by the JobKeeper payment.
If an employee has been stood down after 1 March 2020, you can start paying them $1,500 per fortnight to qualify for the JobKeeper payment for that employee. If an employee ceased working for you after 1 March 2020, you can re-engage them and pay them at least $1,500 per fortnight. You will only be eligible to claim for the fortnights after you re-engaged your employee.
If you usually pay your employees monthly, the payment can be allocated between fortnights in a reasonable manner. For example, if you pay your employees on a four-week pay cycle, your employees must have received at least $3,000 for every four-week period.
All JobKeeper payments are assessable income of the business that is eligible to receive the payments. The normal rules for deductibility apply in respect of the amounts your business pays to its employees where those amounts are subsidised by the JobKeeper payment.
The JobKeeper payment is not subject to GST.
New rules are being introduced by the government with the intention to not require super guarantee to be paid on additional payments that are made to employees as a result of JobKeeper payments. Further updates will be available once legislation or regulations are in place.
You cannot claim the JobKeeper payment on behalf of employees who were not paid at least $1,500 before tax during each JobKeeper payment period.
You cannot claim the JobKeeper payment in advance. The JobKeeper payment is a reimbursement from the ATO to an employer in arrears and cannot be paid in advance in any circumstances.
If you would like us to assist your business to enrol and apply for the JobKeeper Scheme please contact us here.
At Accorti Accountants + Advisors we specialise in helping clients with complex and challenging issues. We are here to help. We work with clients all over Australia and have offices in Brisbane and the Gold Coast. If you have questions or need assistance: Contact us now
#economicstimulus #covid19 #coronavirus #JobKeeper #JobKeeperScheme #Construction #Medical #Professionalservices #Property #Tourism #Advice #tax #Bookkeeping
The Morrison Government announced on 30 March 2020 a 3rd round of economic stimulus aimed to keep Australians in jobs, keep businesses in business and support households and the Australian economy as the world deals with the significant challenges posed by the spread of the coronavirus.
Details of the update to the plan are below:
The Government has announced a $130 billion JobKeeper payment to help keep more Australians in jobs and support businesses affected by the significant economic impact caused by the Coronavirus. Around 6 million workers will receive a Government funded fortnightly payment of $1,500 (before tax) through their employer. The payment ensures eligible employers remain connected to their workforce and will help businesses restart quickly when the crisis is over.
If your business has been significantly impacted by the Coronavirus you will be able to access a wages subsidy to continue paying your employees. Under the JobKeeper program, you will be able to claim a fortnightly payment of $1,500 per eligible employee from 30 March 2020, for a maximum of six months. This assistance will help you keep staff and will help you restart when the crisis is over.
The JobKeeper payment helps businesses significantly impacted by the Coronavirus cover the costs of their employees’ wages, so more Australians can retain their jobs and continue to earn an income. Your employer will notify you if they intend to claim the fortnightly payment of $1,500 on your behalf.
To receive the JobKeeper Payment, employers must:
Employers will be eligible for the subsidy if:
The employer must have been in an employment relationship with eligible employees as at 1 March 2020 and confirm that each eligible employee is currently engaged in order to receive JobKeeper Payments. Not-for-profit entities (including charities) and self-employed individuals (businesses without employees) that meet the turnover tests that apply for businesses are eligible to apply for JobKeeper Payments.
Eligible employees are employees who:
If your employees receive the JobKeeper Payment, this may affect their eligibility for payments from Services Australia as they must report their JobKeeper Payment as income.
Initially, employers can register their interest in applying for the JobKeeper Payment here from 30 March 2020. Subsequently, eligible employers will be able to apply for the scheme by means of an online application. The first payment will be received by employers from the ATO in the first week of May.
Eligible employers will need to identify eligible employees for JobKeeper Payments and must provide monthly updates to the ATO. Participating employers will be required to ensure eligible employees will receive, at a minimum, $1,500 per fortnight, before tax. It will be up to the employer if they want to pay superannuation on any additional wage paid because of the JobKeeper Payment.
Businesses without employees, such as the self-employed, can register their interest in applying for JobKeeper Payment here from 30 March 2020. Businesses without employees will need to provide an ABN for their business, nominate an individual to receive the payment and provide that individual’s Tax File Number and provide a declaration as to recent business activity.
People who are self-employed will need to provide a monthly update to the ATO to declare their continued eligibility for the payments. Payment will be made monthly to the individual’s bank account.
We work with clients all over Australia and have offices in Brisbane and the Gold Coast.
#solveaccountants #economicstimulus #covid19 #coronavirus #Construction #Medical #Professionalservices #Property #Tourism #Advice #tax #Bookkeeping
The Morrison Government announced an increase to their economic plan to keep Australians in jobs, keep businesses in business and support households and the Australian economy as the world deals with the significant challenges posed by the spread of the coronavirus.
Details of the updated plan are below:
The Government is temporarily expanding eligibility to income support payments and establishing a new, time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight. This will be paid to both existing and new recipients of JobSeeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit.
The Government is providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders. The first payment will be made from 31 March 2020 and the second payment will be made from 13 July 2020. Around half of those that benefit are pensioners. The second payment will not be made to those eligible for the Coronavirus supplement.
The Government is also offering administrative relief for certain tax obligations, including deferring tax payments up to four months. This is similar to relief provided following the bushfires for taxpayers affected by the coronavirus, on a case-by-case basis.
The Government is allowing individuals affected by the Coronavirus to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21. Individuals will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.
The Government is temporarily reducing superannuation minimum drawdown requirements for account-based pensions and similar products by 50 per cent for 2019-20 and 2020-21. This measure will benefit retirees holding these products by reducing the need to sell investment assets to fund minimum drawdown requirements.
On 12 March, the Government announced a 0.5 percentage point reduction in both the upper and lower social security deeming rates. The Government will now reduce these rates by another 0.25 percentage points.
As of 1 May 2020, the upper deeming rate will be 2.25 per cent and the lower deeming rate will be 0.25 per cent. The reductions reflect the low interest rate environment and its impact on the income from savings.
The Government is enhancing the Boosting Cash Flow for Employers measure it announced on 12 March 2020. The Government is providing up to $100,000 to eligible small and medium-sized businesses, and not for-profits (NFPs) that employ people, with a minimum payment of $20,000. These payments will help businesses and NFPs with their cash flow so they can keep operating, pay their rent, electricity and other bills and retain staff.
Small and medium-sized business entities with aggregated annual turnover under $50 million and that employ workers are eligible.
Under the enhanced scheme, employers will receive a payment equal to 100 per cent of their salary and wages PAYG withholding (up from 50 per cent), with the maximum payment being increased from $25,000 to $50,000. In addition, the minimum payment is being increased from $2,000 to $10,000.
An additional payment is also being introduced in the July – October 2020 period. Eligible entities will receive an additional payment equal to the total of all of the Boosting Cash Flow for Employers payments they have received. This means that eligible entities will receive at least $20,000 up to a total of $100,000 under both payments.
The Government is temporarily increasing the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive. The package also includes temporary relief for directors from any personal liability for trading while insolvent, and providing temporary flexibility in the Corporations Act 2001 to provide temporary and targeted relief from provisions of the Act to deal with unforeseen events that arise as a result of the Coronavirus health crisis.
The ATO will tailor solutions for owners or directors of business that are currently struggling due to the Coronavirus, including temporary reduction of payments or deferrals, or withholding enforcement actions including Director Penalty Notices and wind-ups.
The Government is increasing the instant asset write-off threshold from $30,000 to $150,000 and expanding access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020. In 2017-18 there were more than 360,000 businesses that benefited from the current instant asset write-off, claiming deductions to the value of over $4 billion. This measure will support over 3.5 million businesses (over 99 per cent of businesses) employing more than 9.7 million employees.
The Government is introducing a time limited 15 month investment incentive (through to 30 June 2021) to support business investment and economic growth over the short term, by accelerating depreciation deductions. Businesses with a turnover of less than $500 million will be able to deduct 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost.
The Government is supporting small business to retain their apprentices and trainees. Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage for 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. Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter).
Support will also be provided to the National Apprentice Employment Network, the peak national body representing Group Training Organisations, to co-ordinate the re-employment of displaced apprentices and trainees throughout their network of host employers across Australia.
The Government will set aside $1 billion to support regions most significantly affected by the Coronavirus outbreak. These funds will be available to assist during the outbreak and the recovery. In addition, the Government is assisting our airline industry by providing relief from a number of taxes and Government charges estimated to total up to $715 million.
At Accorti Accountants +Advisors we specialise in helping client with complex and challenging issues. We can help you weigh up various options to get the best outcome possible and protect your business. We work with clients all over Australia and have offices in Brisbane and the Gold Coast.We work with clients all over Australia and have offices in Brisbane and the Gold Coast.
#solveaccountants #coronavirus #Construction #Medical #Professionalservices #Property #Tourism #Advice #tax #Bookkeeping #economicstimulus #covid19
Coronavirus has caused significant public health concern both in Australia and internationally. The virus is also impacting business activity. Australia is particularly vulnerable to the effects given our close trade relationship with China. This impact on business, particularly disruptions to supply chains, is expected to get worse.
Disruption Business Supply Chains
The first wave of economic disruption hit airports, airlines, travel agencies, casinos, hotels and educational institutions. Now, as many factories in China remain closed, the virus is having a second wave of economic chaos, disrupting business supply chains and reducing business activity.
While all business is likely to feel the effect, the impact is likely to be felt hardest by those with direct exposure in their supply chain to China, particularly:
And the list goes on….
Top 10 Supply Chain Risks
According to Resilience360 by DHL the top 10 risk to supply chains are being caused by:
1. Lockdowns cause labour and supply shortages in factories
City-wide lockdowns and quarantines have triggered labour and supply shortages as Chinese authorities from different jurisdictional levels seek to contain the coronavirus outbreak. Some of the most notable provinces and cities imposing transport restrictions on the movement of residents and vehicles include the provinces of Guangdong, Jiangxi, and Liaoning as well as the cities of Tangshan (Hebei), Nanjing (Jiangsu), Hangzhou (Zhejiang), Zhengzhou (Henan), and Ningbo (Zhejiang).
2. Regulatory uncertainty slows the restart of factory operations
Production has resumed for companies in most provinces across China as of February 10 following a government-mandated delay to restart normal business operations aimed at mitigating the virus outbreak. However, some jurisdictions, predominantly at the municipal and district level, have imposed different production schedules and requirements for resuming normal operations sometime between February 17 and March 1.
3. Public health requirements impact industrial operations
In anticipation of firms returning to normal operations, some authorities have also issued additional requirements mandating that factories apply for permission to reopen operations or meet specific coronavirus prevention standards. These list of requirements for local companies to obtain permits to resume production include, but are not limited to, (1) setting up a prevention and control protocol; (2) quarantining non-local and/or migrant workers; (3) supplying protective gear for all workers; (4) conducting routine temperature checks and disinfection; and (5) providing protective gear like masks, gloves, temperature guns, disinfectants, etc.
4. Suppliers invoking force majeure clauses on the rise
On top of disruption to production and delays in orders, companies dealing with suppliers in China will be confronted with legal defences like force majeure clauses being invoked for non-performances, shielding such suppliers from legal and financial liability. Force majeure refers to unexpected external circumstances that prevent a party to a contract from meeting their obligations, typically natural disasters. While force majeure clauses rarely mention diseases, they frequently provide relief in the event of unforeseen acts of government, for which the government-mandated shutdowns may qualify.
5. Provincial border checks exacerbate trucking shortage
Overall, trucking availability has been reduced to 40 percent within the Shanghai city area, while capacity is been down to 10 percent from Shanghai to other cities as drivers reject trips to inland provinces to maximize the number of runs per day. No drivers from outside Tianjin were reportedly allowed to enter the city, while only 10 percent of the local drivers were able to offer services. These developments have led to delays and a sharp increase in trucking prices.
6. Closed borders delay movement from and to Vietnam and Hong Kong
As of February 11, cross-border traffic between Vietnam and the Chinese provinces of Yunnan and Guangxi remains severely disrupted.
In Hong Kong, authorities have started to quarantine for 14 days all Chinese citizens coming into the territory as of February 8 to drastically reduce the number of travellers into Hong Kong. Cross border truck drivers have so far remained exempted from the measure, and cross-border deliveries continue to be possible, albeit requiring advanced booking. Since January 31,
Russia’s 16 border crossings with China along a 4,000 km border have been closed to prevent the spread of the coronavirus, likely affecting trade volumes. No reopening date has been announced yet, but Russian authorities indicated that the closure may be extended until March 1.
7. Labour shortage causes congestion at airports and seaports
With limited trucking capacity available, congestion has started to build at air cargo terminals and warehouses. This is due to inbound shipments that have either not been cleared by customs brokers or for which delivery and pick-up services could not be arranged. As a result, cargo operations have slowed down; shipment (including critical medical device shipments) delays and demurrage costs are also starting to materialize.
8. Reduced ocean freight capacity out of China
About 82 trans-Pacific sailings have been cancelled into March, taking out around 198,500 TEU off the market, while carriers have blanked around 54 sailings in total for trade between Asia and Europe, according to Sea-Intelligence Maritime Consulting. According to some shippers, a delay of three to four weeks for containers to arrive at European destinations can be expected.
9. Limited air and rail cargo capacity to increase prices
Similarly, the large number of cancellations of both passenger and freighter flights combined with factory and logistics operations restarting in the coming weeks are expected to cause an air freight capacity shortage that could last until April. In total, more than 25,000 flights have been cancelled per week so far, reducing air freight capacity by approximately 50%. In addition, Emirates Airlines has reportedly cancelled freighters from Guangzhou to Dubai until March 27, while Etihad has cancelled freighters from Shanghai to Mumbai and Chennai until March 30. The expected capacity crunch could lead to an increase of air freight rates by 300-400 percent, according to The Load Star.
10. Ripple effects felt across supply chains overseas
The coronavirus outbreak has also had major implications on industrial production and global supply chains spanning beyond China’s borders. Some companies have also been faced with severe financial stress due to the coronavirus crisis. American medical device maker Valeritas that makes insulin patches filed for Chapter 11 bankruptcy citing the coronavirus as having worsened its supply chain problems. Hong Kong airline Cathay Pacific similarly asked its suppliers for price reductions after being forced to cut flight capacity by 90 percent to Mainland China over the next two months due to the coronavirus.
You can access the full Resilience360 report here.
Steps to Mitigate the Impact on Your Business
Given the impact that is likely, take steps now to insulate your business from the impact.
1. Discuss supply chain issues with your suppliers
Find out what impact they are expecting including delays, shortages and cost increases. Negotiate new terms to protect your business.
2. Find alternative supply chains
Even if you don’t deal directly with China it is likely your suppliers and contractors rely on China for materials. Look for alternatives before your competitors start doing the same.
3. Discuss the impact with your customer
Talk to your customers, let them know what your experiencing, hearing and trying to do to mitigate the issue. The best thing to do is get in front of the issue. If these issues are impact you, they will be impacting your competitors as well. Be the one that delivers bad news first and in personal where possible.
4. Understand the impact on your Finances
If you are going to have supply chain issues how will that effect your finances? Will you be able to deliver on contracts and terms? Negotiate funding requirements with your bank to help you through the issue. Do it early rather than when the cash crunch hits.
5. Get legal advice
What risk are you exposed to in your contract terms? What impact will Force Majeure clauses have on your supply chain and can they be passed on to your customers? How will you manage the additional legal risk this issue creates? What do you need to change in your contracts going forward to isolate the issue to current contracts?
Coronavirus has the potential to cause significant and prolonged disruption to business activity across the global. Australia is particularly vulnerable to the effects given our close trade relationship with China. It is prudent for all businesses to consider the impacts on their business and plan to mitigate the risk.
At Accorti Accountants +Advisors we specialise in helping clients with complex and challenging issues. We can help you weigh up various options to get the best outcome possible and protect your business.
#accortiaccountants #coronavirus #Construction #Medical #Professionalservices #Property #Tourism #Advice
Question: Am I better off to do business myself or partner with someone?
At Accorti, we get asked this question a lot. And I have asked myself this question many times. This is a question with no easy answers. You will generally not know the answer until after the fact.
I find that for most clients, the question has one main driver: Fear. Fear of the unknown, of failure, of not having all the answers or fear of XYZ….
I recently had a client which had 3 partners in a private company that started several years before coming to us. They had similar goals so “joined forces”. I doubt very much at the time they sat around and said “I’m really scared that I can’t do this on my own, lets join together” but that is what happened (they just didn’t talk about it).
Needless to say, people change and the subtle differences started to magnify. The financial reality of having partners sunk in. As there were 3 owners they all needed to earn a living and therefore too much capital came out to support their respective families, cash flow suffered. Then resentment set in as others were perceived as not pulling their share of the weight.
Ultimately, we then had the disastrous task of unwinding it (a business divorce).
Don’t get me wrong, partners can add tremendous value to your business. Generally, a partner will bring something to the table you lack, normally skills, capital or both. But it is critical you understand your motivation. To help determine whether you are driven by fear, ask yourself the below questions.
If you have reasonable clear answers to the above and realistic means to address them then you need to consider what is the point of having a partner. Why are they coming along? What value are they bringing at you can’t source another way? Be honest with yourself.
If you are still on the fence, as yourself this:
Will the business generate enough profit to support more than one owner? If it can’t … well you know.
In my experience, 9 out 10 times you are better off to go it alone. Sure this might make things a bit harder, take a bit longer, or cause more sleepless nights but you have control of your future. You will make mistakes but we all do (even that partner you want will). But unless the partner can bring something to the table that is truly invaluable, you get along very well, and you want to work together for the next 10-15 years then I’d say go it alone. Or at least try it first.
At Accorti we love to help people find the right answers (whatever they may be).
Tax planning helps to minimise your business tax liability.
Paying tax is not a bad thing, it means your business is profitable, but paying more than tax than you should is a bad thing!
Most people want their business to be working at its full potential and want to save on tax. Tax planning needs to be completed by 30 June every year, which makes it a great opportunity each year to step back, reflect and plan ahead.
Helping our clients each year with the tax planning, we:
During the process, we will ask questions like:
This is a great time to also plan for the coming financial year. We like to consider your business strategic plan, budgets and cash flow requirements.
What are some key areas to consider for tax planning?
If you own a business, make sure you maximise contributions to your own superannuation each year (for both you and your souse). This is the best tax planning available. You are literally getting a tax deduction for investing in your own future.
For employers, superannuation is deductible for the year that the contributions are received by the superannuation fund. If it is possible, pay your employee’s superannuation before 30 June to make sure the business can claim the tax deduction this financial year.
Assets – Instant asset write-off
There are a number of thresholds and dates to consider when a business purchases any new assets so to access the instant asset write-off:
Remember: a business should only buy assets that it can afford and that will be used. Don’t buy things just to save tax!
Write off bad debts
Every business should review the debtor list before 30 Jun 2019. Any debts that can not be recovered should then be written-off.
Stocktake to calculate stock on hand
Every businesses that has stock should complete a stocktake before 30 Jun. The stock can be valued at market value, cost or replacement value (whichever is lowest). These different values can make quite a significant difference.
Bring forward expenditure
If possible, bring forward expenditure. Dependent on business cashflow, you may bring these costs forward into the current year and this will reduce the tax payable. Expenditure may include equipment repairs, marketing orders, stationery, or any other outlays that are necessary.
As with all planning, it’s best to start early, so all options can be considered and budgeted.
Would you like to find out more about business tax planning and what you should do prior to 30 June?
This time of year it seems like everyone is talking about year-end tax planning, strategies to minimise tax, or top 10 tax tips, etc. These are all helpful but really miss the point.
Tax is tax, and yes there are a few things you can do prior to year end, but as long as you have a good accountant this should just be business as usual.
The goal of any business should be to maximize your free cash flow. Period.
At its simplest, Free Cash Flow = Cash In – Cash Out*.
While you can impact both, your accountant will be better able to help with Cash Out (including Tax). We are pretty good at costs, efficiencies, minimising tax and alike. Accountants, on the other hand, are generally not that great with Cash In. We can help for sure, but it is not a natural strength.
So, the questions you as a business owner should focus on, and ideally not just at year end, are things like:
and so on.
As a business owner, a focus on these areas can be profound. It also makes it easier to succeed. Rather than juggling everything you can just focus on one thing: Increasing Cash In. Then leave the rest to people that are better at it.
If you do, and your income goes up, you will likely have higher costs and perhaps tax too. Who cares? Your Accountant will focus on this and make sure there is as much left for you as possible. If they don’t, get a new one!
Focus on Cash In. Let us focus on Cash Out. Trust me, we are better at it!
* Free cash flow is more fully defined as: FCF = Net Income + Non-Cash Expenses – Increase in Working Capital – Capital Expenditures
Running a business is hard, but there’s no reason to go it alone. Setting up an advisory board or finding the right mentor to advise you, can help you grow your business. Talk to us about your advisory structure. #smallbiz #leadership #solveadvisory
When you are planning for business success, it is important to keep track of the bigger picture. To develop your business in ways that will assist growth may mean you appoint advisors that can help your business to grow.
Setting up a board to advise or appointing a business mentor are good options if you are considering an advisory function.
Advisory boards give the small business the benefit of other parties’ knowledge without incurring the expense and formality of a board of directors. Advisory boards are usually linked to not-for-profit companies, but many other companies also benefit from utilising this resource. An advisory board will assist in providing advice and insight to the business, but the advisory board can not make decisions or have roles and duties as directors.
The board you select should bring a range of perspectives to the table. The space should be comfortable for members to disagree. Select your members and carefully set the tone for meetings!
You may not quite be at the level to form a board, but a business mentor could be the perfect idea. Business mentor’s help you to see the bigger picture and assist you to look outside of your business. Working together to identify different ways to seize opportunities and meet upcoming challenges. To find a business mentor start by firstly identifying the knowledge and expertise that you are wanting. Then start building your business network. Look specifically towards local organisations that mentor and make connections with networking organisations specific to your industry. Looking for a person who has the relevant experience is important but also remember you should also consider a mentor that you will feel comfortable sharing your business with. When you are ready, repay the favour and become a business mentor!
It is very easy to be caught up in the day-to-day running of your business and lose sight of the bigger picture. Taking stock of your business health is important. Knowing exactly where you are will allow for better planning strategies, early warnings for any issues, and opportunities to chart better courses for the success of your business.
To help gauge your business health there are some quick ratios that can help. Accorti Accountants + Advisors can help you assess the health of your business and explain how you can calculate these checks.
The liquidity ratio calculates how quickly you can convert the assets of the business into cash – this helps assess if you are able to pay the business bills.
The higher the ratio the better, this means that the business has more assets than liabilities.
Current ratio = Total current assets / Total current liabilities
Dependent on the type of industry the business is in, and nature of the business assets and liabilities, a general guide, 2:1 is a good current ratio.
Quick ratio = (Current assets – stock on hand) / Current liabilities
The quick ratio excludes existing stock from the calculation, which may not be converted quickly to cash. This ratio is a more realistic snapshot of the business position.
Solvency ratios look at sources besides cashflow to assess the business ability to settle outstanding debts.
Leverage ratio = Total liabilities / Equity
This ratio measures if the business is reliant on equity or debt finance to fund assets. Higher ratios will make it more difficult to borrow money.
Debt to assets = Total liabilities / Total assets
This calculates the percentage of assets that are being financed by the business liabilities.
Profitability ratios calculate the efficiency of business operations. If possible, it is recommended to measure against other businesses in the same industry.
Gross margin ratio = Gross profit / Total sales
The gross margin ratio will tell you if your business can cover the business overhead costs from the sales income.
Net margin ratio = Net profit / Total sales
This ratio calculates the percentage of sales dollars remaining after your expenses have been settled (except income taxes).
Giving your business health a regular check up is a good habit to get into. Using the ratios will help you to understand the current health of your business and will allow you to plan for the future. Talk to the team at Accorti Accountants +Advisors about how to calculate these ratios to keep your business heading on the right track.
At Solve Advisory we thrive on helping people with great ideas build great businesses. Whether it be through strategy, financial modelling, tax or simply just honest, straight-forward advice.
Here is some information from an article by Karen Lerner in Entreprenuer, for the full article go to: https://www.entrepreneur.com/article/324337
Over many years, people have spoken about business plans and marketing needs but are too early in their thinking to really get started. They might have an idea what to sell, and to who, but they have not clearly identified what will differentiate their business enough to make it a success. They believe they can join the bandwagon.
Confidence is great, but you need to be realistic as well. There are many good services and products out there, how is your business going to be truly different. Miss this important step, and you will get lost in noise, never gain the traction and then ultimately fail!
Many people say their business is different, but is it really? To succeed you need to identify what makes your product or service different and that will give it the edge. Write down and refine at least three statements which clearly describe how your business is different from your competitors. These small efforts will give you the direction on business positioning for optimum success.
People will lose confidence if they ask the price and the answer you provide is flaky. Be specific and choose the numbers that feel right. A normal fear is quoting too high and putting them off. To work out prices you will need three numbers.
Firstly, calculate the minimum amount that you would charge, then work out what you think is a fair price for the work and experience, etc. And then figure out the highest end, identifying the price that your competitors may charge for something similar. You now have three benchmarks to begin with so to better assess what price is right for your business. Start at the low-mid range and then gradually increase the price as the business and reputation grows.
It’s great when people think big! All too often though, people underestimate the time and head space needed to achieve that plan. Be realistic on what can be achieved as the bare minimum. Eg, stating “I will write two blog posts each week,” may be too much pressure as a business owner. If you acknowledge that the minimum required is three blog articles per month but you would like to aim to write two per week, that is more realistic as there leeway for yourself.
If you want to make room in your life for certain things, then you have to learn to say “no” sometimes to things that take up precious time but do not help you reach those goals. It is commonly the hardest thing to do – let go of those other things that are going on in your life, but to be realistic you have to face those facts. Write a list which contains all of the things that you “have to do.” Circle anything on the list that does not inspire or fulfil you. Unless the list includes family commitments, then your answer will be staring you in the face.
See how logical and easy it can be? Starting up a business using this mindset and setting realistic goals will set your business up for success – many others will skip these steps and they will end up disappointed. It is time, roll up your sleeves and enjoy the journey and all that you will learn along the way.