http://chrisfoster1959.blogspot.com.au/
Is a blog worth reading.
Tuesday, March 4, 2014
Monday, December 3, 2012
Home Office
Home Offices vs Home Studies
Australian Tax Handbook [9 980]
General Principles for Home Office:
- Occupancy costs can be claimed if an area is a "Home Office" (Set aside for Business and accepted as such by the public)
- Occupancy Costs: Mortgage Interest, Rates, Rent, Building Insurance.
- Basis for deduction: Proportional floor area.
- Part of the CGT main residence exemption may be lost.
- TR 93/30: IF requirement inherent in nature of activity that taxpayer needs a place of business AND the taxpayers circumstances are such that no alternative place of business is available, and the taxpayer must work from home, and the area of the home is used almost exclusively for income producing purposes, then it may also be considered a place of business.
Exclusions/Qualifications:
- Convenience: If area is merely used as a convenient location to undertake specific work then a deduction will not be available. However other deductions may be available as it would be considered a "Home Study".
TR 93/30:
Summary (Para 1-7)
- Home Office: "Place of Business". Can claim Occupancy expenses and Running Expenses. Basis: Floor Proportion. And time basis if part of year.
- Home Study: "Connection with income earning activities but not a place of business". Can claim running expenses only. Basis: Claim additional expenses incurred as a result of income producing activities.
- Various factors to determine if it is a "place of Business". None conclusive on their own: Identifiable as place of business? Area is not readily adaptable for private use with the home generally? Area is used almost exclusively for carrying on a business? Area used regularly for visits of clients or customers?
Detail:
- Distinction drawn b/w 1. Where part of a home can be characterised as place of business and 2. Where a room is used as a study merely as a matter of convenience. (P 10)
- "Place of Business"- Balanced consideration of: Essential character of area, nature of taxpayer's business, other relevant factors. Utilise common sense. (P11).
- Absence of alternatives is relevant, but must be "Necessary". (NOTE: What about cases where it makes the most business sense to work from home but it isnt strictly necessary? When would it ever be strictly necessary anyway!? Clearly they arent using "Necessary" in its literal meaning. Based on the three examples given).
- Place of Business will only exist if: Requirement inherent in nature of taxpayers activities that the taxpayer needs a place of business, circumstances are such that there is no alternative place of business and it was necessary to work from home, and the area of the home is used exclusively or almost exclusively for income producing purposes. (Necessary- if there's no office available elsewhere?).
- Depreciation: Remember to reduce claim by private usage if items are also used in the home office for private reasons.
- Repairs: Home Office repairs? Yes. Study repairs? No.
Australian Tax Handbook [9 980]
General Principles for Home Office:
- Occupancy costs can be claimed if an area is a "Home Office" (Set aside for Business and accepted as such by the public)
- Occupancy Costs: Mortgage Interest, Rates, Rent, Building Insurance.
- Basis for deduction: Proportional floor area.
- Part of the CGT main residence exemption may be lost.
- TR 93/30: IF requirement inherent in nature of activity that taxpayer needs a place of business AND the taxpayers circumstances are such that no alternative place of business is available, and the taxpayer must work from home, and the area of the home is used almost exclusively for income producing purposes, then it may also be considered a place of business.
Exclusions/Qualifications:
- Convenience: If area is merely used as a convenient location to undertake specific work then a deduction will not be available. However other deductions may be available as it would be considered a "Home Study".
TR 93/30:
Summary (Para 1-7)
- Home Office: "Place of Business". Can claim Occupancy expenses and Running Expenses. Basis: Floor Proportion. And time basis if part of year.
- Home Study: "Connection with income earning activities but not a place of business". Can claim running expenses only. Basis: Claim additional expenses incurred as a result of income producing activities.
- Various factors to determine if it is a "place of Business". None conclusive on their own: Identifiable as place of business? Area is not readily adaptable for private use with the home generally? Area is used almost exclusively for carrying on a business? Area used regularly for visits of clients or customers?
Detail:
- Distinction drawn b/w 1. Where part of a home can be characterised as place of business and 2. Where a room is used as a study merely as a matter of convenience. (P 10)
- "Place of Business"- Balanced consideration of: Essential character of area, nature of taxpayer's business, other relevant factors. Utilise common sense. (P11).
- Absence of alternatives is relevant, but must be "Necessary". (NOTE: What about cases where it makes the most business sense to work from home but it isnt strictly necessary? When would it ever be strictly necessary anyway!? Clearly they arent using "Necessary" in its literal meaning. Based on the three examples given).
- Place of Business will only exist if: Requirement inherent in nature of taxpayers activities that the taxpayer needs a place of business, circumstances are such that there is no alternative place of business and it was necessary to work from home, and the area of the home is used exclusively or almost exclusively for income producing purposes. (Necessary- if there's no office available elsewhere?).
- Depreciation: Remember to reduce claim by private usage if items are also used in the home office for private reasons.
- Repairs: Home Office repairs? Yes. Study repairs? No.
Friday, August 10, 2012
How to Find A Good Accountant
Guide to Finding an
Accountant
Everyone uses an Accountant.
The latest figures show that 71% of Australians lodge their tax returns through a tax agent. What’s more, there are thousands of small businesses in Australia, and the percentage of those who lodge through an agent is much higher (I don’t have a figure for you there).
The moral of the story?
Pick wisely!
Here I’ll give you some no fuss advice on finding a good accountant.
So, why would you listen to me anyway? Because I’m an accountant with many years experience helping people like you. I’ve worked with the good, the bad, and....well, you know how it goes.
The first thing you need to know is this: It’s all about you. When it comes to lodging your tax, your financials, and complying with your obligations, you need to feel comfortable with your choice of accountant and pick wisely. Many people go through the motions and are content with a mediocre accountant- that’s bad. But there’s something worse. Some people go through the motions and have an accountant who’s more interested in themselves than they are in you. You know the ones- they follow up their own invoice after 14 days but when it comes to the important phone call that you really want an answer for- they leave you waiting almost as long! So please make sure your accountant knows that you’re the one paying them, and make sure they treat you how you deserve to be treated: ie- well, because you’re giving them your business!
The 2nd thing you must know is this: It’s not about accounting and tax. It’s about something completely different. There are thousands of Australian accountants who know a thing or two about tax. There’s a lot of CA’s and CPA’s out there, and FCA’s, and FCPA’s, and FTIA’s, and...you have the point by now. (For the record, I personally am a CA and believe it to be the pre-eminent professional qualification in Australia). But really, it’s not about being a CA, or any of the above. (Yes, not all Accountants keep their knowledge up to date, but many do and many will do a fine job of the technical side of things). If you want to find a CA then log onto Google, type in “Chartered Accountant”, followed by your location and voila, the Pope’s Catholic and sure enough you found yourself a CA. The best accountants are the ones who can break down their knowledge and explain it to you so that you understand.
The 3rd thing you must know is this: Accounting advice doesn’t come cheap. You generally get what you pay for. Don’t be surprised if you have to pay plenty for the services of a good accountant. These guys have spent years doing the hard slog and the market allows them to charge high hourly rates, and so they do. The key is not to complain that an accountant charges a lot (because they all do that) but rather to make sure they’re willing to be open and upfront about what their fees will be and the basis on which they will invoice you (they don’t all do that).
The 4th piece of advice I have for you is: Pick a suitable accountant for your needs. Different accountants specialise in different things. But sometimes, an accountant will take on your business because, well...you’re willing to pay them and/or they need the work. Ask your accountant whether they have experience dealing with businesses like yours. Check out their website and see if you have the sort of issues that they are gearing themselves towards dealing with. If their website talks about SME’s, improving your business’s cash flow and growing personal wealth then don’t give them your i-return to do, with your group certificate, interest on your measly bank account and your two deductions.
Fifth and finally, get a referral. Ask your friends who their accountants are and whether or not they would recommend their accountant. Get a short list of 2 or 3 accountants who are meant to be absolute stars, and then proceed to use my criteria. All of the advice I’ve given is fantastic as far as it goes, but in reality it’s an imperfect world with imperfect information and so it can be hard to know whether any accountant will satisfy the criteria. So take a recommendation off someone who you trust, preferably someone who’s dealt with their accountant for years. That might just give you the best possible indication about whether the accountant is worth engaging or not.
There’s much more I could say here, but those five points are the most basic, simple, critical thoughts to keep in mind when you’re searching for an accountant.
To summarise:
-
It’s all
about you. Make sure you have a commitment that they will look after you.
-
It’s not
about accounting and tax. It’s about having an accountant who can actually
help you understand what’s going on.
-
Accounting
advice doesn’t come cheap. If you pay peanuts, you might get an accounting
monkey.
-
Pick a
suitable accountant for your needs. Horses for courses.
-
Get a
referral. Find out from someone who knows, and who’s experienced the
accountant in action.
Thursday, August 9, 2012
Do you need a tax agent? Tips for Individual Taxpayers
Don't ask me, I'm biased.
However, I can direct you to a more neutral source. Here's an objective and fair minded article on the Financial Review website which will help you make up your mind.
It's geared towards the individual tax return investor, not small businesses. I'd strongly recommend you get a tax agent if you're a small business owner, as the rules get more complicated and there's a much higher risk of you doing something wrong which could land you in hot water. Plus it's probable that you'd be missing tax planning or structuring opportunities that could save you tax and put you in a better position. The situation with individuals is more complicated (if I'm to be objective for a moment) and the article does a great job of laying out the pros and the cons.
For what it's worth, $800 is a huge amount for a tax return with salary/wage, basic deductions and just one rental property so I'd be interested to know which tax agents are charging that. One thing the article doesn't mention is that most accountants charge on a time basis, so if you're lazy during the year and you give them a shoebox (or, for business owners, a messy MYOB file) then you'll get charged a lot more than if you give them something that's neatly presented, clean and tidy. The more time the Accountant has to spend sorting through your mess, the more they'll charge you.
However, I can direct you to a more neutral source. Here's an objective and fair minded article on the Financial Review website which will help you make up your mind.
It's geared towards the individual tax return investor, not small businesses. I'd strongly recommend you get a tax agent if you're a small business owner, as the rules get more complicated and there's a much higher risk of you doing something wrong which could land you in hot water. Plus it's probable that you'd be missing tax planning or structuring opportunities that could save you tax and put you in a better position. The situation with individuals is more complicated (if I'm to be objective for a moment) and the article does a great job of laying out the pros and the cons.
For what it's worth, $800 is a huge amount for a tax return with salary/wage, basic deductions and just one rental property so I'd be interested to know which tax agents are charging that. One thing the article doesn't mention is that most accountants charge on a time basis, so if you're lazy during the year and you give them a shoebox (or, for business owners, a messy MYOB file) then you'll get charged a lot more than if you give them something that's neatly presented, clean and tidy. The more time the Accountant has to spend sorting through your mess, the more they'll charge you.
Small Business Tax Changes- 1 July 2012
The world of tax is constantly changing.
Bat your eyelids and you'll miss something, possibly something crucial.
You don't need to worry, if you have a good accountant who keeps track of all the changes. The problem is, many accountants don't have the time or inclination to keep track of it all. They deal with the same old clients and do the same thing every year, without realising that something has changed- something that could benefit their client. I hope this is not me- I aim to be constantly proactive in updating my knowledge. Writing this blog is one small part of that.
So, what's changed recently that could impact on small business owners? Well, quite a few things, but there's one that will impact on many businesses and that could save you a lot of tax this year: The changes in small business assets. Eligible small businesses can now write off assets costing up to $6,500 immediately.
Keep in mind that only businesses with turnover of under $2mil are "eligible". Nonetheless, this is very helpful.
Bat your eyelids and you'll miss something, possibly something crucial.
You don't need to worry, if you have a good accountant who keeps track of all the changes. The problem is, many accountants don't have the time or inclination to keep track of it all. They deal with the same old clients and do the same thing every year, without realising that something has changed- something that could benefit their client. I hope this is not me- I aim to be constantly proactive in updating my knowledge. Writing this blog is one small part of that.
So, what's changed recently that could impact on small business owners? Well, quite a few things, but there's one that will impact on many businesses and that could save you a lot of tax this year: The changes in small business assets. Eligible small businesses can now write off assets costing up to $6,500 immediately.
Keep in mind that only businesses with turnover of under $2mil are "eligible". Nonetheless, this is very helpful.
Wednesday, August 8, 2012
Family Trust: Read the Deed
Sometimes there are certain truisms in life.
In Accounting and Business, one rule has always been "Cash is King". (The idea being that regardless of how much profit you make, it won't mean anything until the cash is in your pocket. Can you pay your bills? Can you pay your staff on time and their super (now more of an issue than ever before, as soon? Do you have surplus cash to invest in your business or are you living week to week). Anyway, I will carry on. To the point.
There's a new truism that you might need to know: READ THE DEED.
In today's environment, small businesses are often run through discretionary trusts. And there are good reasons for this: For example- The ability to effectively engage in tax planning by sending the profits where it's most tax effective, the ability to provide an extra level of shelter for asset holdings and access to the capital gains tax 50% discount (not available in a company).
However, trusts have come under scrutiny in recent years. Distributions to children are now off the agenda, save for a miniscule $416 distribution per child. Distributions to "bucket companies" are more difficult and less worthwhile in most cases, since the 2010 financial year. But the biggest issue has been the ongoing confusion caused by a myriad of major cases that have a direct bearing on calculating the income of a trust, and/or the streaming of trust distributions.
The details of these cases and their interpretations have even the most experienced accountants scratching their heads. The government is still planning on reviewing trust legislation and is planning to do so over the next two years. However, there is one massive lesson to come out of all of this. I've been told that if there is one principle that is THE take away from everything that has been going on and is still going on, it is this:
If you operate your business through a family trust, have a read through the dead. Who are the "default beneficiaries?" What is the definition of "income"? Who is the appointor (This is a very powerful position within a trust)? And what powers does the appointor have under the deed?
Familiarise yourself with the basics. The above issues have all been crucial in various recent case law. Many people have come unstuck because they (or their accountants) didn't read the deed. Maybe their deed wasn't written up very effectively in the first place. Either way, the deed is absolutely crucial. So have a read, and educate yourself a little bit. If you do decide to seek professional help, make sure it's from the right person and someone who knows what they're doing- don't assume that a qualification means someone knows what they're doing.
One last thing: Make sure your Accountant prepares a distribution minute, in consultation with you, before 30 June. If they haven't done that, then they aren't doing their job and they're allowing you to be exposed to significant risk!
In Accounting and Business, one rule has always been "Cash is King". (The idea being that regardless of how much profit you make, it won't mean anything until the cash is in your pocket. Can you pay your bills? Can you pay your staff on time and their super (now more of an issue than ever before, as soon? Do you have surplus cash to invest in your business or are you living week to week). Anyway, I will carry on. To the point.
There's a new truism that you might need to know: READ THE DEED.
In today's environment, small businesses are often run through discretionary trusts. And there are good reasons for this: For example- The ability to effectively engage in tax planning by sending the profits where it's most tax effective, the ability to provide an extra level of shelter for asset holdings and access to the capital gains tax 50% discount (not available in a company).
However, trusts have come under scrutiny in recent years. Distributions to children are now off the agenda, save for a miniscule $416 distribution per child. Distributions to "bucket companies" are more difficult and less worthwhile in most cases, since the 2010 financial year. But the biggest issue has been the ongoing confusion caused by a myriad of major cases that have a direct bearing on calculating the income of a trust, and/or the streaming of trust distributions.
The details of these cases and their interpretations have even the most experienced accountants scratching their heads. The government is still planning on reviewing trust legislation and is planning to do so over the next two years. However, there is one massive lesson to come out of all of this. I've been told that if there is one principle that is THE take away from everything that has been going on and is still going on, it is this:
READ THE DEED.
If you operate your business through a family trust, have a read through the dead. Who are the "default beneficiaries?" What is the definition of "income"? Who is the appointor (This is a very powerful position within a trust)? And what powers does the appointor have under the deed?
Familiarise yourself with the basics. The above issues have all been crucial in various recent case law. Many people have come unstuck because they (or their accountants) didn't read the deed. Maybe their deed wasn't written up very effectively in the first place. Either way, the deed is absolutely crucial. So have a read, and educate yourself a little bit. If you do decide to seek professional help, make sure it's from the right person and someone who knows what they're doing- don't assume that a qualification means someone knows what they're doing.
One last thing: Make sure your Accountant prepares a distribution minute, in consultation with you, before 30 June. If they haven't done that, then they aren't doing their job and they're allowing you to be exposed to significant risk!
Tuesday, August 7, 2012
MYOB, Xero and The Online Accounting Revolution
The online accounting revolution is now well and truly underway.
That is to say, that if you haven't considered putting your business accounts online yet, then you should drop tools and do so immediately. Chances are that at least some of your competitors have already gone online and reaped the benefits of doing so.
Note- I said you should drop tools and consider the option, I didn't say "Run off and get online ASAP". Understand me here. Online Accounting is not for everybody. However I'm certain that it will help many businesses.
I recently attended a presentation where a MYOB consultant showed us MYOB's new online offering. As of next month, MYOB Basic, Standard and Plus will be available online. Those with Premier will have to wait until February (Although, unless you use Multi user or multi currency options you could downgrade from Premier to Plus anyway...). I was very impressed by the presentation.
Xero got the jump in Australia with aggressive marketing strategies, and they targeted Accounting firms by promoting the benefits of cloud accounting. They ran free seminars, provided usual support notes, training videos and more. Now that the traditional market leader- MYOB- has joined the cloud properly (their previous online offering was very basic) it will be interesting seeing how it all plays out.
More savvy professionals have waited for this day for a while now. Instead of jumping on the Xero bandwagon, many advisors have bided their time by waiting until all the options are on the table, so they could figure out exactly what the best option will be for their clients and then advise accordingly. Good things come to those who wait. The real question now though: Was MYOB's online offering worth waiting for? Keep checking this page for more on this in the future.
That is to say, that if you haven't considered putting your business accounts online yet, then you should drop tools and do so immediately. Chances are that at least some of your competitors have already gone online and reaped the benefits of doing so.
Note- I said you should drop tools and consider the option, I didn't say "Run off and get online ASAP". Understand me here. Online Accounting is not for everybody. However I'm certain that it will help many businesses.
I recently attended a presentation where a MYOB consultant showed us MYOB's new online offering. As of next month, MYOB Basic, Standard and Plus will be available online. Those with Premier will have to wait until February (Although, unless you use Multi user or multi currency options you could downgrade from Premier to Plus anyway...). I was very impressed by the presentation.
Xero got the jump in Australia with aggressive marketing strategies, and they targeted Accounting firms by promoting the benefits of cloud accounting. They ran free seminars, provided usual support notes, training videos and more. Now that the traditional market leader- MYOB- has joined the cloud properly (their previous online offering was very basic) it will be interesting seeing how it all plays out.
More savvy professionals have waited for this day for a while now. Instead of jumping on the Xero bandwagon, many advisors have bided their time by waiting until all the options are on the table, so they could figure out exactly what the best option will be for their clients and then advise accordingly. Good things come to those who wait. The real question now though: Was MYOB's online offering worth waiting for? Keep checking this page for more on this in the future.
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