The post-Covid, globalised economy has created a number of challenges for the average business. Depending on your business purpose and strategy, you may need to either upsize, or downsize, to secure the long-term future of your company.

But what are the implications of scaling up, or scaling down, your operations? And how do you refine your business so it’s fit for purpose and ready to take on your new aims and goals?

The answer is to look carefully at your forecasting and your future decision-making.

Looking at the ongoing needs of your business

Our experiences of the pandemic have demonstrated one very clear lesson – you never know exactly what lies around the corner for your business. But the more prepared you are, the better you can respond, as and when new threats and opportunities do appear.

With this in mind, forecasting and scenario-planning can be exceptionally important tools.

Rather than crossing your fingers and hoping for the best, you can plan for two, three or more different outcomes – with different strategies and tactics for each separate scenario. You can’t bullet-proof your business, but you CAN make sure that you at least have a Plan B (or C).

Scaling up, or scaling down?

By making constructive use of forecasting, you’ll be able to see the most viable path for your business. From here, you can make a decision on whether scaling up, or scaling down, is the most appropriate action for the long-term health of the company.

Some key questions to ask during your decision-making may include:

• Do you have enough funding to grow, or do you need to downsize? – Knowing how much working capital you have available in the business is a vital piece of information. If you have a healthy balance sheet, a workable funding strategy and access to lenders, you’ll be able to fund your growth. If your cash reserves are depleted and access to finance is limited, now may be the time to shrink the business and consolidate things down – helping you to survive to fight another day, even if it is at a reduced scale.
• Do you need more, or fewer, employees? – If your market share has dropped, you may need to downsize your team. And if you’ve hit a winning streak of sales, you may need to upsize your workforce to meet demand. Look at what resourcing you need and the types of skills, capabilities and long-term knowledge you need from your team in order to meet your new goals and targets.
• Do you need to train your existing people? – If your business purpose has evolved, or you’re moving more into the online or digital arena, you may need to train up your staff. Upskilling your people helps to bring them more in line with modern digital business practices, software and online customer interactions, all of which helps to increase your operational capabilities and your customer service levels as a business.
• Do you need the same number of branches/shops/offices? – If you’ve instigated remote working or hybrid working, you may not need so much office space for your people. And if you’ve moved a lot of your business to online selling, fewer bricks-and-mortar outlets will be required. Cutting building lease costs and/or commercial mortgage expenses can be a serious cost-saver for the business. Conversely, if you’re aiming to scale up, it’s likely that larger premises will be needed – resulting in higher property costs, but increased income from your scaled-up operations.
• Do you need new equipment, machinery or vehicles? – Knowing what tangible assets you need in the business is an important part of your new business plan. If you’re expanding your operations, new equipment and/or vehicles will be needed to meet the new demand. This is likely to mean taking out third-party finance, or digging deep into your cash reserves. If you’re downsizing, there’s potential to sell-off existing equipment and assets and to free up this equity for other projects in the business.

Talk to us about scenario planning and decision-making

If you’re in the process of evolving or changing your business purpose, please come and chat to us. We can help you review your existing business plan, run scenarios and forecasts, and look at the long-term future path of your business.

Cash is the lifeblood of any business – once the cash dries up, problems quickly begin to multiply. Keep the cash running freely and you can continue to grow your business.

Here are five tips for improving your cashflow:

Have a system to manage your debtors – Come up with a clear, step-by-step way to handle outstanding accounts. It might include:

• automated reminders on unpaid emails
• a phone call or email when the amount has been outstanding for a certain period of time
• a stop credit on the client when they exceed an acceptable payment time.

Be prepared for tax time – One of the fastest ways to run out of cash is to find yourself short at tax time. We can help with this – together we can come up with a system to help you put enough aside each month so you’re never caught short. You can also use tax pooling or other options to smooth out your cashflow.

Try not to dip into business funds for personal spending – It’s always tempting to tap your business account for personal spending. Instead, try to keep them separate. If you’ve oversaved at the end of the tax year, you can draw down a nice bonus – that’s much better than being caught short.

Sell old stock – Too much stock? Consider old stock, old furniture, machinery or even stationery: they can all be sold to free up space and provide a small cash injection.

Forecast your cashflow – Create a cashflow forecast (we can do this with you) and that will help you monitor and measure the flow of cash in and out of the business.

Need help with forecasting, tax saving or cashflow management? We’re here for you – just drop us a note or give us a call.

Are you making the most out of your investment property? Getting the income and allowable tax deductions right can be complex. Talk to us today to review your 2021 tax return and family group structure.

If you have income from investment properties, now is the time to start gathering your records and reviewing your expenses for the 2021 financial year.

Income to Declare

All income earned from each property must be declared. If you have multiple properties, keep the records for each property separate to make the tax return more efficient.

• Rent received, whether paid directly to you or through an agent or through an online management platform. Rent includes recurring regular amounts as well as any lump sum amounts paid in advance.
• Rental bonds returned for example if the tenant caused damage or defaulted on rent payment.
• Insurance payouts received as compensation.
• Expenses reimbursed by the tenant, for example if they have caused damage and you have paid for the cost of fixing the damages, or if they have reimbursed you for water.
• Extra fees received, for example letting or booking fees.
• Government rebates, for example for installation of solar utilities.

You will need statements or recipient created tax invoices from agents or management platforms and documents for all other payments received.

Tax Deductions

Deductible expenses for property are different for residential and commercial properties. Not all expenses related to owning a property are allowed as deductions, so it’s important to check what you can claim.

• Expenses You May be Able to Claim This Year
• Advertising for tenants
• Body corporate fees
• Council rates
• Water supply charges
• Land tax
• Cleaning, gardening, pest control and property maintenance
• Insurance
• Agent fees
• Repairs and maintenance
• Some legal expenses
• Loan interest

Other Expenses

There are some expenses which need to be claimed over a longer period such as several years or decades. These can include borrowing expenses, capital expenditure, depreciation, initial repairs and capital works.

Some expenses cannot be claimed for income tax purposes. These include stamp duty, loans and repayments, some legal expenses and some insurance premiums.

Get Help to Simplify Your Property Records

Tax matters for property investors can be complex. The ATO keeps a close eye on tax returns that involve property investment, as it’s easy to make mistakes. There are other matters to consider such as the period of rental availability, private use of the property, capital gains tax, legal contracts and positive or negative gearing.

We’d love to help ensure you are claiming the right deductions to make the most out of your investment property this year and beyond. Book a time now for your 2021 tax return and review of your family group structure.

With the increased availability of share trading apps, making it cheaper and easier to buy and sell shares, more people are entering into share trading for the first time.

You must declare all income from investments in your tax return, including dividend payments from shares, whether you have traded through a broker, an online platform or a phone app.

Dividend income could be received as bonus shares instead of cash payment, and some dividends have franking credits attached, which may reduce your tax liability.

All payments and credits for dividends and non-cash dividend payments need to be reported. The ATO matches shares data from your tax return to the shares trading details held by the Australian Securities and Investment Commission.

Records for Your Tax Return

You need to include details of all purchases and sales of shares this financial year – not just payments received.

Each company you buy shares from will issue dividend or distribution statements that provide details of the amount and nature of the payment and whether franking credits apply. If you have not supplied your tax file number to the company, the statement will also show the amount of withholding tax.

Always keep all documents provided by the companies you hold shares with. And remember to keep your shares records for at least five years after you have completed your tax return.

Need Help?

Once you enter the share market, your tax return can become more complex. For example, some shares transactions will result in capital gains tax or a capital loss, affecting your tax return. In addition, certain expenses incurred in earning your dividend income are claimable – but different rules apply to different types of payments and credits.

We’d love to help you streamline your shares information and make sure you are claiming the offsets and expenses you are allowed to claim, to maximise your tax return.

Having a self-managed superannuation fund (SMSF) gives you control and flexibility over how you make investments and prepare for retirement.

It’s important to get your deductions and record keeping correct for the SMSF audit process and the tax return, as there are strict laws governing SMSFs.

An SMSF must be set up as a trust and must also have a legal document called a trust deed. A super fund trust is set up for the sole purpose of providing retirement benefits to its beneficiaries. The trust deed governs how the fund is set up and how it will operate and must be used in conjunction with the superannuation laws.

There are many different investment strategies for SMSFs according to the fund’s trust deed and operations.

Common Tax Deductions

Deductible expenses for SMSFs vary according to the nature of investments and the trust deed, however there are some general expenses that apply to most funds.

• Operating expenses, such as management and administration fees, audit fees and ASIC annual fees.
• Investment-related expenses, such as interest, investment advice fees, costs of servicing and managing investments, property fees and brokerage fees.
• Tax-related expenses, such as preparing the SMSF annual return.
• Legal expenses including amending trust deeds.
• SMSF statutory fees and levies.
• Insurance premiums for death, total and permanent disability, terminal illness and income protection.

The rules for tax deductibility for SMSFs are different to those for individuals and business. Many people are used to claiming deductions for certain things in business or property investment and find they don’t apply to SMSF tax returns. We can help clarify what’s deductible and what’s not.

Expenses must relate to the sole purpose of the super fund being to provide retirement benefits to its members. There may be some items you want to query with us for the audit and tax return to see if they meet the sole purpose test, such as investment training courses, collectibles and artwork, travel expenses or personal computers.

SMSF Annual Return and Records

Once the formal audit of the SMSF has been completed, the annual return must be lodged with the ATO. The annual return is not only a tax return but also reports regulatory information and member contributions. You must keep all records relevant to the annual return.

• Keep all transaction, tax, accounting and financial reporting records for at least five years.
• Keep all records relating to trustee meetings, minutes, investment strategies and appointments or changes of trustees for at least ten years.

Make Your SMSF Management Easy

SMSF management can be time consuming. We can help with researching and managing investments, checking trust deed compliance, setting investment strategies, keeping records and conducting the audit.

Talk to us now and get ahead for your next annual SMSF return.

Have you dived into the world of cryptocurrency exchanges?

Cryptocurrency is used to describe encrypted virtual currencies which exist as digital tokens. This digital currency operates outside of government via decentralised ledgers or digital wallets but can be exchanged for online goods and services.

The ATO treats cryptocurrency as a form of barter exchange. There is no problem with exchanging goods and services so long as the transactions are recorded and valued correctly.

Business or Personal?

Whether it’s business or personal, crypto exchanges (buying, selling or holding crypto assets) are subject to the same income tax and GST treatment as cash or credit transactions.

If you use cryptocurrency in your business, you’ll need to account for cryptocurrency just as you would for other business transactions. If you’ve used it for personal investment, you’ll need to include details in your income tax return.

The ATO uses data supplied by Australian cryptocurrency exchanges, state revenue offices and shares data to cross-reference the crypto gains and losses information in your tax returns.

Crypto Transaction Records

Keep records of all transactions, including dates, AUD value, the nature of the transactions, exchange receipts, legal costs and other parties involved (even a crypto address is enough) in the sale or purchase of cryptocurrency.

Cryptocurrency and the ATO

The ATO has taken a lenient approach to pursue taxation of crypto assets. However, now that cryptocurrency is attracting more mainstream investors and there is a lot more data available, the ATO checks the taxation obligations of individuals and businesses with crypto assets.

There are different rules for using cryptocurrency in business and for personal expenses or investment. Business transactions use the trading stock rules, while private exchanges involve capital gains tax rules.

Talk to us. We’ll check that all your crypto transactions are recorded correctly for your tax return. Don’t get caught out by the ATO spotlight on cryptocurrency at tax time!

Are you making the most of allowable tax deductions? Individuals can claim for general work-related expenses as well as occupation-specific expenses and working from home. Book a time now to prepare your 2021 tax and we’ll help maximise your return.

Get ahead now by preparing all the documents required for your 2021 tax return so you can get your tax done quickly and get any refund due to you in your bank!

Income

The Australian Taxation Office (ATO) automatically receives information from your employers about salary and wages that you have been paid for the financial year. You need to declare all income from other sources on your tax return as well.

• Wages, salaries, allowances or bonuses from all employers.
• Pensions, annuities or government payments such as JobSeeker or JobKeeper.
• Investment income including interest earned and dividends paid.
• Business income, if you have a business as well as a job.
• Foreign income.
• Crowdfunding income.
• Sharing economy income such as Uber or Airbnb.
• Income such as hobbies, prize money, compensation or insurance payments may be tax free but check with us.

Even if you have only earned a small amount from one of these sources, it still needs to be declared on the tax return. Gather all your records for anything you have earned apart from salary and wage payments from employers.

You will need:

• bank statements that show interest income;
• proof of earnings from other sources such as crowdfunding or share economy platforms;
• records of business or hobby income;
• records of government payments received;
• and records of any other payments received from overseas sources, prize winnings, insurance or investments.

Tax Deductions

Have you captured all your work-related deductible expenses to make the most of your 2021 tax return?

Employees are entitled to claim work-related expenses as a tax deduction. To claim a deduction, you must have spent the money out of your own funds and not have been reimbursed by your employer. The expenses must relate to your earnings as an employee. Make sure you have invoices and receipts as proof of payment for any work-related expenses.

Expenses you may be able to claim

• Vehicle and travel expenses – use a travel diary to record details of trips taken for your employment.
• Clothing, laundry and dry-cleaning expenses – you can claim for occupation specific clothing, uniforms and protective gear.
• Home office expenses – there are special rules this year for employees working from home because of COVID-19. You will need records of the hours you have worked from home to claim the ATO special rate.
• Self-education expenses – some education expenses that relate to your current employment are claimable.
• Tools and equipment – if you buy gear to help you in your job, this may be claimable. Small tools of trade, protective items, professional references and laptops are some examples of equipment you may be able to claim.

Occupation and Industry Specific Guidelines

The ATO recognises that some occupations and industries have specific requirements that employees need to pay for.

There are handy ATO fact sheets for many industries, including hairdressers, teachers, performing artists, hospitality workers, lawyers, medical professionals and more.

These guides are a great starting point if you are not sure what you can claim, but we can give you information tailored to your situation when you do your tax return with us.

Superannuation

If you have made personal superannuation contributions separate to your employer’s superannuation guarantee contributions, you may be able to claim this as a tax deduction. You will need to provide a notice of intent to claim form to your super fund and receive acknowledgement from the fund before doing your tax return.

Book a time with us now to prepare for your tax return and we’ll make sure you make the most of all applicable tax deductions this year.

Are you interested in learning more about income splitting and how to minimise tax by apportioning income or profit between associated entities?

Professional services firms frequently use income splitting – for example, medical, legal, financial or IT services firms. It’s a good way of reducing tax within the allowable provisions – so long as it is not stepping over the boundary into tax avoidance.

New ATO guidance on this topic means individual professional practitioners (IPP) will need to prove that arrangements are commercially motivated before self-assessing the risk level of current income splitting arrangements.

The new guidelines will apply from 1 July 2021 and are more involved than the guidelines currently used to satisfy the ATO’s requirements.

The ATO will be on the lookout for arrangements that result in payments to an individual that seem to be artificially low due to income splitting in order to avoid tax.

In assessing the risk of tax avoidance, the ATO takes into account several factors:

• The proportion of profit entitlement from the whole of the firm that is returned to the IPP.
• The total effective tax rate for income received from the firm by the IPP and associated entities.
• The remuneration returned to the IPP as a percentage of the commercial benchmark for the services provided to the firm.

Talk to us about income splitting arrangements and how they can benefit you within the rules.

We’ll work through the new guidelines with you to assess the commercial rationale of arrangements and any high-risk features that may trigger an ATO audit. If you’re thinking of restructuring operations, now is the time to review existing arrangements.

Reach out to the team at Solve Accounting today!

The Prime Minister and NSW Premier has announced an expanded support program for NSW business affected by this current lockdown. This is welcomed as we know many clients and individuals who are struggling financially due to the restrictions.

The package includes a number of support measures, for which businesses will be able to apply from Monday 19 July 2021:

1. The extension of the existing NSW Business Grants package for a third lockdown week. The NSW Government grants are available for businesses, sole traders and not-for-profit organisations impacted by the restrictions. You can receive a grant of between $7,500 to $15,000 depending on decline in turnover experienced.

2. A cash boost for businesses across NSW with an annual turnover of between $75,000 and $50 million which can demonstrate a 30% reduction in this turnover during lockdown. The cash boost will be 40% of weekly payroll with a payment of between $1,500 to a maximum of $10,000 per week from week 4 of lockdown onwards, provided staffing levels are maintained.

3. $1,500 fortnightly grants for micro businesses with turnover of between $30,000 and $75,000 which can demonstrate a 30% reduction in turnover where the business is the primary source of income.

4. A payroll tax deferral this quarter for all businesses, and a waiver for this quarter if you can demonstrate a 30% reduction in turnover and you have a payroll of between $1.2 and $10 million.

5. Increase in the payment amount for stood down workers from $500 to $600 per week for those who lost more than 20 hours, and to $375 for those who lost between 8 and 20 hours, and for it to be available to workers outside of Sydney lockdown areas.

6. Several provisions around residential, commercial and retail leases, including no lockouts and forced evictions, and those landlords who provide rent relief will be given land tax reduction incentives.

Applications for the “Business Grant” are open today. Applications for “JobSaver” and “Micro Business Grant” are not yet open but should be available within the next week.

Here’s what you can do to prepare for your grant application:

• Calculate your decline in turnover – you need to compare a 2-week period within 26 June 2021 to 17 July 2021, to the equivalent period in 2019.
• Confirm your turnover for the year ended 30 June 2020 – the key threshold is whether you are above or below $75,000 (and under $50m).
• If you are an employer, confirm your employee headcount as at 13 July 2021 (permanent employees and casuals that have been employed for more than 12 months)
• Create a MyServiceNSW Account for your business (if you do not have one), and ensure your details are up to date.
• If you meet the eligible criteria as outlined by Service NSW, please apply online and follow the steps.
• Maintain records of supporting documentation as outlined by Service NSW for each grant application for up to 5 years in the event of an audit.

Please visit https://www.service.nsw.gov.au/campaign/covid-19-help-businesses/grants-loans-and-financial-assistance for more details and information around eligibility and how to make a claim.

Please contact us if you need assistance with your grant applications or to confirm your eligibility. The team at Solve Accounting are here to support you through this challenging period.