There are three main areas of tax that you need to deal with as an investor or business owner
Tax – income Tax – (applicable to everyone)
Tax – General Services Tax (GST) – (applicable to business )
Tax – Capital Gains Tax (CGT) – (applicable to Share investments, business assets, property)
There are others such as luxury car tax, wine equalisations tax etc but they are not so common in most business owners” lives
The ATO regards almost any receipt as taxable under the Income Tax Assessment Act. It can either be a receipt where full income tax applies or a partial income tax effect. Would you believe that under the income tax assessment act, if you received $10,000 for driving the getaway car for a bank robbery, the ATO expects you to declare it as income in your tax return? See Tax – Income Tax
Income Tax and GST are integrated in any given transaction as most of the income that you generate and expenses that you pay have a GST component. This is not always the same as there are certain items that may be exempt or have a partial GST component. See Tax -GST
Capital gains Tax applies when a ” Capital Gains Tax event” occurs. There may be no physical transaction occurring, but a CGT event has happened that gives rise to the application of capital gains tax at that point in time. There are numerous situations where this happens and this is not understood by many people actually involved in a business enterprise or in an investment. It can have a nasty financial “sting’ and this is why you need good reliable advice as to how to structure your financial affairs as efficiently as possible. In some cases Capital gains Tax can be deferred even if it still applies to the transaction. See Tax – capital Gains Tax
The ATO is constantly checking business profit margins and for this reason it is essential for you to be aware of how profitable your business is compared to your competitors. If you are under the average for your type of business the ATO may check up on you to see why you are not showing the right level of profit. You can discuss this with us and we can guide you as to what you need to do going forward. See Benchmarking Tax
Call us now on to arrange a time to have a chat about your tax situation over a cuppa
The ATO has had business profit margin information for years. Businesses are categorised into small medium and large, $125k, $400k and $2 million turnover repectively. The ATO has cost percentages for materials, labour and rentals for many businesses. The ATO also knows what gross profit and net profit margins businessess should achieve.
The problem now is……the ATO is contacting businesses that do not achieve the required profit margin to se why. If the explanation is not satisfactory then a business is placed in the audit pool. Worse is to come as the ATO has also signalled it’s intention to “‘default assess”” a business owner on the benchmark net profit rate on any turnover…EVEN IF THE BUSINESS DID NOT ACHIEVE THE BENCHMARK PROFIT.
It is a mathematical exercise. The ATO views any variance between the benchmark rate and your actual business profitability as an indicator that you may not be including all of your sales or exagerating expenses.
So now it is essential for you as a business owner to be aware of the required benchmark profit rate and ensure that you have your business performing at better than the benchmark rate.
You need to find out what your benchmark rate is and make the necessary changes to the way you operate your business. There are a range of options and strategies that we would love to discuss with you.
Income tax will always be here. There are choices of how much tax you pay when you run a business. Your effective tax rate will be determined by the following factors.
1. Business straucture – sole trader, partnership, trust (unit, discretionary or hybrid), company (private or public)
2. Timing of transactions
3. Choice of Accounting method, (cash or accruals accounting)
4. Type of transactions (Capital or revenue)
Accounting for GST is a real hassle !!!! It is a really detailed process that few people handle correctly as there are a multitude of “traps”” in GST legislation. For example insurances include fire service levy and stamp duty, neither of which have GST components. So when accounting for insurances it will not be 1/11 GST.
Whether you calculate GST manually, or use as software package, there is a lot you need to know. We have seen business owners dividing their expenses by 10 to calculate GST instead of 11. It sound incredible but there are many business owners who still (after 10 years of GST being a part of business life – 01/07/2000 GST started), do not understand GST and have not eceived any professional help. Call us now on for a free no obligation consultation where we will demonstrate how quickly you will be able to make real changes.
The ATO is also imposing fines for late lodgement of BAS statements. Up to $650.00 per BAS, which can really add up.
There are ways of dealing with GST and you need professional guidance on this, as the ATO is aware that the moment they check your GST records, they know that many businesses take the broad approach of just treating every expense including 1/11 normal GST.
See how easy it is to fall foul of the ATO !!!!!! Once the ATO auditor sees one mistake they will then look a lot closer at everything else
Australian Tax Law is complex and constantly changing. In addition, the GST environment places considerable emphasis on compliance and lodgement deadlines. Our team members undertake extensive training to keep abreast of developments and we provide a comprehensive accounting and taxation service to assist both individuals and business owners with their compliance obligations.
A significant part of our strategy is to provide you as a client with timely and accurate advice on tax matters including legitimate tax minimisation strategies. We bring a personal approach to tax and are able to provide you with expert consulting advice as well as meet your compliance requirements.
Our range of accounting and taxation services that will help simplify your business include:
We understand network marketing and have carried out mathematical modelling on manyof the network organisations that currently offer reward plans. We consult on how to structure your individual organisation and how to develop the maximum reward for the minimum product turnover and member sponsorship.
We also provide a bookkeeping/record keeping package so that you can structure your affairs for tax purposes.
There are a number of tax rules and concessions for networking activities and you need to be aware of what they are for your individual network. it is essential to be aware of these guidelines as a number of networks have minimum turnover thresholds that deny tax deductions if you do not have a turnover that exceeds the threshold. Network organisations take time to build and this requires careful planning so that you do not spend a lot of money without being able to claim the expenses as deductions.
Tax planning is an art form. Some tax professional advocate various methods of tax planning that often lose more actual money than paying tax in the first place. Amongst these are the agricultural projects. You then not only have to worry about the ATO but also about the weather and the financial stability of the company operating the project, i.e Great Southern, Tmbercorp.
Why would you invest in something that ends up being a dud trying to reduce your tax, where you lose all of your money (equivalent to 100 % tax), when you can tax plan with safety and reduce your tax by 10%, 30%, 50%. ?????
There are a number of very effective legitimate ways of reducing your tax as an individual investor or as a business. You need to have tax professionals looking after your interests that understand the tax law and ATO policies as well as being sensible with effective strategies that will actually work for you.
There are a number that the ATO accepts, providing the correct documentation is in place. Many require you to elect a course of action. This election has to be in writing but held by your Accountant and does not have to be advised to the ATO. The ATO may require it if they query or audit you but that is when the advice you have received really works for you.
One area for example, is the DIV 43 special writeoff for residential property constructed after 1985. A property does not have to be a new construction to be able to claim this writeoff. We have a number of clients who have obtained a quantity surveyors report (accepted by the ATO) and have been able to claim depreciation writeoffs for rental properties. This has reduced their tax significantly…..and more importantly legitimately, without fear of the ATO arguing about it.