Business Structure

Are you in the right business structure?

When you start a business in Australia, there a number of structures that it can be set up under. Setting up your business structure requires careful consideration as there will be a number of factors that come into play with taxation, employing people and the amount of paperwork you will need to do.

There are four types of business structures that are commonly used in Australia:

Sole trader

This is an individual operating as the sole person legally responsible for all aspects of the business.

 

Partnership

A partnership is an association of people or entities running a business together, but not as a company.

 

Company

A company is a legal entity separate from its shareholders.

 

Trust

A trust is an entity that holds property or income for the benefit of others.

 

The type of business structure you start your business under will determine factors such as how much tax you may need to pay, any licenses that may be required, whether you’re considered an employee or the owner of the business and the amount of control you have over the business.

To be sure you are operating under the right business structure, you need to speak with our expert accountants at Plant & Associates 07 5596 5758. Our offices are conveniently located at Beenleigh and on the Gold Coast.

Our team is experienced in dealing with all facets of business structures, business tax and we stay up to date with all tax changes that can impact you so we can minimise your tax obligations and take advantage of any new benefits for you and your business.

At Plant & Associates, we can also prepare and lodge tax returns for all types of entities; sole traders, partnerships, trusts and companies.

www.plantandassociates.com.au

Investment Property

Tips to buying your first investment property

Plant & Associates, Certified Practicing Accountants (CPA’s) at Beenleigh and the Gold Coast, help many would be investors dip their toes into the world of property investment.

Property is a sought after investment, given the huge amount of capital gain that can be achieved if the property is bought for the right price and held over a long period of time.

For many years our clients come to us at Plant & Associates for expert advice on property investment, which is critical when it is their first purchase as not all property investment deals will deliver what is promised.

Here, Plant & Associates, share some important information for first time property investors as there is much more to property investment that meets the eye!

Seek professional advice

From the outset it is imperative you speak with an accountant who is well experienced in property investment.

Qualified accountants will be able to guide you on returns on investment, depreciation and any deductions you can make on your investment property, whether that be an existing or newly built property.

They can also advise you what type of structure to purchase the property under whether that be as an individual, as tenants in common if purchasing with another individual, as a company or a trust.

Talk to your lender

It is important to speak with your lender to determine if you are eligible for an investment loan before you make an offer on a property.

You will need to know the maximum amount you can borrow and if you can in fact afford it if the property if it is not tenanted for a period of time and you are solely responsible for coming up with the mortgage payment each week.

Research your market well

Once you have an idea of the price range you can comfortably afford for your first investment property, you need to understand and research the property market well.

Price may determine which suburb you are able to buy in but you still need to know and understand key factors such as rental yields, demographic and amenities.

If the suburb you can afford is not one you are familiar with, it is vital you are well researched before you commit to purchasing a property.

Buy well

Sometimes it is very easy to get carried away with your first property investment but you need to keep a cool head and take the emotion out of it.  This is like a business transaction.

Just because you love a house with character doesn’t mean a tenant will. They often want a basic, clean and low maintenance home they can move straight into.

Buy only what you can afford and get the best property you can for your money.

Have it managed

It may be tempting to think you can manage your investment property yourself first time around but it is not recommended.

Tenancy laws can be complex and if you are not well versed in these laws, there could be issues arising from your lack of knowledge.

A good and reputable property manager is well worth their fee to take care of everything from collecting the rent to organising repairs and their fee is tax deductable.

Long term outlook

Property investment can be a great strategy to building wealth for retirement. Property investing needs to have a long term view though.  The longer you hold the property the more likely you will realise significant capital gains and perhaps be able to use the gained equity to add to your property portfolio.

Property investment can be a very rewarding experience if you proceed with caution and are well informed.

For expert advice on property investment and to make sure you are claiming the correct deductions on your investment property at tax time, call Plant & Associates on 07 5596 5758.

We have fully qualified accountants at both our Beenleigh or Gold Coast offices readily available who are committed to helping you build your property portfolio.

Cloud based accounting systems

Gone are the days where we found ourselves bound to the desk and a particular PC at our workplace or business premises if we wanted to work on our accounting system.

New advances in technology see the emergence and the huge popularity of cloud based accounting systems allowing business owners to access their accounting systems from anywhere in the world.  All you need these days is a computer and an internet connection!

Apart from giving you the flexibility to work anywhere, cloud based accounting systems also provide benefits such as:

Mobility

As with most cloud based applications, you can access these on a laptop or tablet.  Even better, most are mobile phone ready as well, giving you the ability to raise quotes, invoices and even take payments, all on your mobile phone.

Saves you money

Cloud based accounting systems mean no more physical products like discs that need to be installed on your PC or laptop. As the physical product is no longer required to be manufactured, the cost of the product reduces.

It can also reduce your I.T. costs as you won’t need that I.T. person looking after your server in the back of your office.

Security

No longer is your data dependent on a manual back up to a different hard drive from your PC or laptop.  With cloud based accounting systems, your data is backed up daily, encrypted and stored safely on their servers.

App compatible

Cloud based systems can work or sync with third party apps to make your life even easier. For example, no more entering receipts manually. There are apps that will electronically read the receipt and import the information directly to your accounts payable section in the accounting system, saving on valuable data entry time.

Syncing

Importing and exporting bank statements or sharing information with your accountant is now instantly available with the click of a button.

You can also sync cloud based accounting systems with some job management systems, allowing the transfer of client, quote, job and invoice data effortlessly between both systems.

 

The benefits of installing a cloud based accounting system are obvious. You can free up huge amounts of your time that could be better spent within your business.

Plant & Associates are proactive in the world of cloud based accounting systems and can advise you on which cloud based accounting system would best suit your needs.

Our accountants see Xero, MYOB and Quickbooks as the most common cloud based accounting systems that clients use.

Call Plant & Associates on 07 5596 5758 at either our Beenleigh or Gold Coast offices. We can help you to bring your business into the modern world with a cloud based accounting system.

Tax thresholds explained

Australian residents who undertake paid work, are required by law to pay tax (dependent on their level of income).

This compulsory tax the Government levies on Australian worker’s income, is a major contributer to its revenue. The Government then uses the revenue from taxes and other revenue streams to pay for expenses, which they detail in their annually released budget.

Tax is withheld on worker’s income once the level of income exceeds the tax free threshold. Currently, the tax free threshold of yearly income is $18,200.  This means the first $18,200 you earn is not taxable.

Once the tax free threshold of $18,200 has been exceeded in earnings, workers can expect to be taxed at the following rates:

Taxable Income Tax on income
$0 – $18,200 Nil
$18,201 – $37,000 19c for each $1 over $18,200
$37,001 – $87,000 $3,572 plus 32.5c for each $1 over $37,000
$87,000 – $180,000 $19,822 plus 37c for each $1 over $87,000
$180,001 and over $54,232 plus 45c for each $1 over $180,000

Note: This tax table does not include Medicare Levy, Surcharge or HELP debt repayments.  Speak to an accountant to receive specific tax advice.

During the year your employer deducts tax based on an Australian Taxation Office (ATO) formula under a Pay As You Go scheme (PAYG) to ensure you have paid enough tax over the year.

After each financial year which runs from the 1st July through to the 30th of June the following year, a worker needs to lodge a tax return. Tax returns can be lodged by the individual or by a professional tax agent or accountant.

If an individual has ended up pay too much tax or has a number of taxable deductions that reduce their taxable income, there can be a tax refund.

Generally, individuals who have had the correct amount of tax withheld under PAYG do not receive significant refunds as the scheme was designed to cover the correct amount of tax paid by a worker to within a close range.

Depending on your individual circumstances, there may be additional tax amounts such as Medicare Levy & surcharge and potential HELP debt repayments.

 

Plant & Associates with offices at Beenleigh and the Gold Coast, have qualified tax accountants who can prepare and lodge tax returns for individuals and businesses to ensure you are in fact claiming correct deductions and paying correct amounts of tax.

Our broad range of tax services include assistance with:

  • Pay as you go (PAYG) Summaries
  • Business Activity Statements (BAS)
  • Instalment Activity Statements (IAS)
  • Fringe Benefit returns (FBT)
  • Superannuation
  • Payroll Tax
  • Income Tax returns for all entities – (Individuals, Sole Traders, Trusts, Partnerships, Companies and Self Managed Superannuation Funds)
  • Tax planning

If you are an individual, business or corporation needing assistance with tax matters, talk to the expert tax accountants at Plant & Associates on 07 5596 5758 at either our Beenleigh or Gold Coast offices.

Our highly experienced tax accountants can take the stress and hassle out of tax compliance and preparing and lodging tax returns!

Self Managed Superannuation Funds. Do you know your obligations?

A self managed superannuation fund (SMSF) is a private superannuation fund you manage yourself, that is regulated by the Australian Taxation Office.

Members of the SMSF (there can be up to four) must be trustees (or directors if there is a corporate trustee) and are responsible for decisions made about the fund which will be set out in the trust deed for the SMSF.

If you have an SMSF, you are responsible for managing it and complying with all laws. Managing your own SMSF is a big commitment!

Here, Plant & Associates, CPA’s with offices at Beenleigh and the Gold Coast outline for readers, just what obligations are involved in taking on a Self Managed Superannuation Fund.

Money

Starting a SMSF needs to be worthwhile as accounting fees, audit fees, tax advice and legal fees will all be deducted from the balance of the SMSF.

Time

Efficiently managing a SMSF takes time. You will need to allocate time regularly to actively manage the SMSF.

Investment expertise

As the trustee, you will need to devise your own investment strategy.  Would your superannuation be better handled with a qualified financial adviser or investment manager who have years of investment experience?

Trustees must provide a written strategy document showing how they intend to develop, implement and regularly review their investment strategy for the benefit of the beneficiaries of the SMSF.

Legal Responsibilities

Taking on the role of trustee of a SMSF comes with legal responsibilities and you need to fully aware of what these legal obligations are. Some of the responsibilities include:

Ensuring the money is only used for retirement benefits for the trustees

Allowing trustees to access information about the fund

Record keeping

Lodging annual statements

Reporting contributions

Asset valuations

Having the SMSF audited each year by an approved SMSF auditor

 

Protection

Lower levels of protection apply to SMSF’s.  Australian Prudential Regulation Authority (APRA), regulated funds are eligible for compensation where they suffer loss as a result of fraud or theft whereas SMSF’s are not eligible for any compensation.

With any investment, you really need to do your research and speak with qualified professionals to ensure a SMSF is right for you.

Our expert superannuation accountants at Plant & Associates can advise you on all superannuation matters.  If you decide a SMSF is the best option for you, we provide a full range of self managed superannuation fund services, including:

  • SMSF set up
  • Preparation of SMSF trust deeds, completion and lodgement of relevant ATO forms
  • Ensuring your SMSF is fully compliant with current laws and regulations
  • Provide investment strategies
  • Prepare annual accounts, audits and tax returns
  • Prepare annual financial statements
  • Prepare SMSF tax returns

If you currently have a SMSF and are finding you need help fulfilling your obligations as trustee, Plant & Associates can assist you with this also.

Call to speak with one of the expert superannuation accountants at Plant & Associates on 07 5596 5758 so you can live your retirement life the way you want to!

Starting a new business?

Starting a new business? Why a business plan is essential

Starting a new business venture can be an extremely exciting time and also one that keeps you very busy with the myriad of tasks you need to get done.

Writing a business plan is one of those very important tasks.

A well thought out and written business plan can provide much more information than projecting how much money you need from a lender or from an investor, but can help you to manage your business more effectively, can set out business objectives and strategies and also provide benchmarks in what the business is going to achieve.

A business plan can also determine any areas of strengths and weaknesses and also provide an exit strategy for the business owner in the future when the time comes to sell or move on from the business.

How to write a business plan

Your business plan will involve writing on a number of sections which provide clear information about all facets of your business.

Even if it is only ever written for your use, a professional business plan that you refer to regularly, can give you clear direction and help you to remain focused on achieving your business goals and growing your business into a successful one.

Your business

The business plan usually starts with a title page that states it is a business plan for your business.

After the title page, the next section will be about your business.  Here you will provide all details about your business such as:

Registration details

Business name

ABN

Business structure

Products & services

Date registered

GST registration

Location of the business

Domain names

Licenses/permits

Organisational chart outlining management & staff

Target Market

Following on from the about your business section, you will then be writing about your target market. This essentially forms the basis of your marketing plan and will address advertising and marketing of your products or services.

After careful market research you will be detailing the industry your business is in, who your customers are, what demographic they are in, which other businesses you will be competing with and what your point of difference will be.

After analysing your target market, you will be able to determine the key strategies to achieving your businesses goals and targets.

Vision

Next, you may like to discuss your vision for the future of the business. Some business owners will compile a vision statement about their business.

A vision statement is a declaration of an organization’s objectives, ideally based on economic foresight, intended to guide its internal decision-making.

As a vision statement declares your future plan for the business, a mission statement states how you will achieve your vision.

In your mission statement you will write about the goals and objectives of the business for the short term and the long term and what activities you will undertake to meet them.

This section may also involve an action plan, clearly setting out milestones, who needs to meet them within the business and what date these milestones should be achieved.

Finances

The financial plan of the business summarises the profitability of the business, provides the businesses key financial objectives, discusses any working capital required, where such capital will be obtained from and any financial contribution from the business owner.

For new businesses you would be outlining start up assets, liabilities, expenses, funding and projecting income.

An income statement, balance sheet and profit and loss will also need to be provided in this section of the business plan if the business is already established.

Supporting documentation

Any licences, financial documents, organisational maps, resumes etc are attached here for referral by the reader.

Business summary

Lastly, you will detail your business information in summary form:

  • Business Name
  • Business Structure
  • ABN
  • ACN
  • Business location
  • Date it was established
  • Business owners
  • Business owners experience
  • Product or services
  • Target Market
  • Projections for the future
  • Finances

Writing a business plan can seem quite daunting and often new business owners seek the help of a qualified accountant.

Plant & Associates, with offices on the Gold Coast and Beenleigh, can write a business plan for you, assisting you to start, grow and sustain a profitable business.

The expert team at Plant & Associates are dedicated to making the lives of business owners easier so they can get on with what they do best.  We also offer accounting, tax and superannuation services.

If you want your new business to succeed right from the start, call Plant & Associates today on 07 5596 5758!

Q&As to consider if and when you have an investment property

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How important is it to get the right advice before buying a rental property?

Getting the right advice is imperative. You can read hundreds of articles about the benefits of owning a rental property, but it is important to conduct a property analysis and consider all factors including your current and future situations.

What are some of the factors that people need to consider if and when they have a rental property?

Consider instances where you go down to one income and how it will affect your ability to pay all the bills. If your rental property is untenanted for 10 weeks, how will you cope with the lack of income? Also, consider property being damaged either by natural disasters or current tenants and if interest rates continue to rise above and beyond your means.

How can investment property owners alleviate the risks involved in owning their properties?

They can mitigate all these risks by having landlord and building insurance for damages, ensure they have income and life insurance and making sure not to buy a property at your maximum borrowing capacity.

What does a negatively geared property mean?

Negative gearing can be achieved by having a property that costs you in interest, rates, insurance etc. more than what you receive in rental income. For tax purposes, depreciation and building write-off on the property also reduces your profit to a negative figure ensuring you do not pay any additional tax.

There are many other factors to take into account when considering an investment property. Always seek advice to determine if it’s the right investment for your financial circumstances by speaking to your accountant or financial adviser. Call Plant & Associates on 1300 783 394 to receive your FREE initial consultation.

Posted in Investments, Property

Protecting your finances and planning your estate after retirement

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In a previous article we wrote about Centrelink deeming income.  In particular, the structure used to hold your assets can result in you being eligible for some Centrelink payments that you would not be eligible for if your assets are not structured correctly.

 Most readers of this article will be either close to retirement or already there.  Everybody will have different tax and financial needs but something everyone will have in common is protecting your assets no matter how big or little they are.

 At a time where your loved ones want to grieve, they do not want to be worrying about where your will is and sorting out your finances.  In addition, you have worked hard to amass what little or grand assets you have so don’t let them go to waste.

Prepaid Funerals

Whilst these are not a tax deduction they are also not classed as an asset by Centrelink.  Therefore if you have some cash sitting around, prepaying for your funeral reduces the burden on family, locks in a price at today’s rates and reduces your assets with Centrelink potentially making you eligible for some further benefits.

 Wills and super

Most people either do not have a will, or it is not up to date.  Do you know where your will is?  Remember your superannuation may not form part of your estate and as such you may need a binding death nomination within your super fund.  Did you know that you can reduce the amount of estate taxes paid by ensuring the right person is the beneficiary of your super?  This can apply to the rest of your assets too.

 Access to bank accounts where only one signatory

Do you have a bank account where your spouse is not a signatory?  Does that account get used to pay the bills?  If so, your family could potentially have difficulty in paying your bills when the account is frozen once you are no longer there to access it.  An enduring power of attorney can be put in place to avoid this issue.

 SMSF

If you have a Self Managed Super Fund and you are individual trustees, your fund becomes non-complying upon the loss of one of the trustees.  This can be avoided by having the executor of your estate step in but also through having a corporate trustee.

 Insurance

Ensuring you are adequately covered and the right entity holds the insurance is vital.

 Investment Properties

As per our previous article on deemed income, holding the property as an individual is generally the best way to go unless you are a property tycoon.  However there are pros and cons of holding the property in a trust or a company.  When to sell is another commonly asked question.  Timing is very important when it comes to selling an asset that may have a capital gain as it makes a difference to the amount of tax you have to pay.

 As you are reading this article you may be thinking of a number of questions.  Give us a call for a free consultation to discuss these matters in more detail or alternatively sign up to our monthly email newsletter by providing us your email address. These monthly editions give advice, tips and up to date information on current and emerging laws.

Posted in Retirement, Super

Funding your retirement

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 Whether you still have a while to go until you retire, are considering retiring now, or you are retired; you may find the following articles interesting.

 Centrelink deemed income

Biggest mistake most people make, is underestimating how much money they will need to retire comfortably and not putting enough away.  The pension from Centrelink certainly won’t be sufficient if you plan to buy birthday and Christmas presents as well as eat and pay the general cost of living. You can certainly forget about travelling and other holiday plans. 

When considering your eligibility for a pension, did you know that Centrelink consider both your assets and your income in determining how much pension you will qualify for. In some circumstances they may also deem you have earned an income even if you haven’t.

 Take for instance Bob. He retires with some investments in a trust account.  Centrelink will deem him an income on top of the trust profits, therefore reducing his pension to almost nothing.  However, if Bob transfers the investments into his personal name instead of the trust account, Centrelink will ignore any income from the investment and just deem a percentage of income. Although Bob will need to declare his income in his own personal tax return, there are however, various tax offsets available once you reach pension age and in most cases they are sufficient to cover the tax you would have had to pay on your taxable income for the year. 

 The deemed income rules also apply if you have some money in superannuation and you have reached the preservation age. Even if you elect not to drawdown a pension from your super fund, Centrelink will deem you to have received a % as income.

 There are ways around this and it is important to see an accountant and financial planner to ensure that your affairs are set up to your advantage.  In addition, there are Centrelink staff who will come and talk at your event to show you how to get the most pension from Centrelink.

Transition to Retirement

Are you are 55 years or older and working but are considering retirement soon?  You can effectively sacrifice a large portion of your salary into your super fund, thus reducing the tax you pay, then drawing down a tax free pension from your super fund that tops up your disposable income.

 Consider Jane age 55, earning $50,000 in gross income. She pays tax of $8850 plus 1.5% medicare levy leaving net $41150. If she puts $20,000 into her super fund, she will reduce her gross income to $30,000.  She will only pay $3600 tax leaving $26400 net income. She then takes a pension of $14,750 so that she still has net income of $41150.  Jane’s super fund pays tax at 15% on the $20,000 contribution ($3000) meaning total tax paid is $6600. This is a total saving of $2250.

 There are many different strategies available to save you tax and put more money into your retirement. Act now and speak to your accountant or financial adviser.

 Centrelink can assist:

Your local Centrelink office usually has an adviser available to sit down with you and assess your eligibility for a full pension. They can advise you on what you are entitled to depending on your current financial position, your assets and liabilities. Contact your nearest office for an appointment with one of their appointed advisers.

*Please note Centrelink cannot give financial advice and cannot guide you on what investments you should acquire.

Posted in Centrelink, Income, Retirement

Withdrawing money from your company – Div 7a – Importance of Tax Planning Accountants Beenleigh

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Division 7A of the Income tax Assessment Act (ITAA36)

It is common knowledge that where a private company makes a loan to a shareholder or their associate a potential deemed dividend issue arises under Division 7A.  The shareholder has until the due date of lodgement of the tax return to repay the loan in full or enter into a loan agreement.
If a loan agreement is entered into, the taxpayer has until the end of the first year after the year the loan was made to make a repayment.
The minimum yearly repayment is calculated on the balance of the loan using the benchmark interest rate and the term of the loan.  However, where the loan has a payment made prior to lodgement day then the interest is pro rata’d.  In addition, the payment made before the lodgement date does not count towards the minimum yearly repayment

Example

Reducing loan balance for pre-lodgment day payment.
On 15 august 2009, Viking Pty Ltd made a $100,000 loan to Annie, a shareholder in the company. The loan was made pursuant to a loan agreement that satisfied the requirements of S.109N Annie had made no repayments as of 30 June 2010.
However, she repays $25,000 on the 15 December 2010 which is prior to the company’s lodgment day of 1 March 2011.
What is the closing balance of Annie’s loan as at 30th June 2010?
Because S.109E(3) allows the $25,000 to be taken into account, the closing balance of the loan as at 30June 2010 is not the $100,000 she originally borrowed but $75,000 (ie, $100,000 – $25,000)
What is the MYR that Annie must make by 30th June 2011
Based on the closing balance of the loan and the other variables contained in the formula in S.109E(6) the MYR is $14,1111. However, if the MYR were based on $100,000 it would be $18,815. Note that the benchmark interest rate for 2011 is 7.4% p.a.

Example

Correctly calculating interest in year two of the loan 

Valerie is a shareholder in Aromas Pty Ltd the company’s lodgement day for the 2010 tax return is 1st March 2011. The following loan transactions occur.

Date                       Transaction                DR                    CR                     Balance

1st Aug 2009          Loan To Valerie           $50,000                                           $50,000

1st Sep 2010          Repayment                                         $10,000                  $40,000

1st June 2011        Repayment                                           $5,000                   $35,000

30th June 2011      Interest                         $3,055                                          $38,055

What amount if the MYR for 2011 based on?

$40,000. The $10,000 repayment on 1 September 2010 is counted as it was made before ‘lodgment day’ the MYR is $7,526.

Has Valerie made the MYR?

YES. Both the $10,000 and $5,000 repayments made by Valerie during the 2011 year are taken into account. As the total payment of $15,000 exceeds $7,526 the MYR is covered.

What is the closing balance of the loan for the 2011 year?

To work this out it is necessary to calculate the interest charge for the year. Note, interest does not begin to accrue until 1st July 2010. The benchmark interest rate is 7.4% p.a which is 0.020273973% per day.

When do the new dividend rules apply from?

The rewritten s.254T applies to all dividends declared on or after 28th June 2010, it will not apply to dividends declared before this time but paid on or after 8th June 2010.

Posted in Asset Protection