Tax tips for self-managed superannuation funds 2023

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.


Get Your Business Records Ready for Your Tax Return 2023

Organising your documents now will mean you can get your tax return completed earlier and access any refunds due or start planning for tax payments.

Getting your business records up to date and accurate will allow us to work with you proactively to plan for the coming year.

What Records do you Need to Have Ready for the Tax Agent?

  • Have you bought or sold assets? If so, you need full details of acquisitions and disposals.
  • Have you taken out a new loan or other finance? You must have details of the finance arrangements and statements of monies owing at 30 June.
  • Check that any bonds or deposits paid or received have been allocated correctly.
  • Have you prepaid for insurance or other large business expenses that need to be apportioned to the following financial year? Make note of the portion applicable to the current financial year.
  • Do you carry stock? If so, you need to perform a full stocktake at 30 June (unless you qualify for the simplified trading stock rules).
  • List any doubtful or bad debts to be written off.
  • Review your debtors and creditors (accounts payable and receivable). Is the list current and correct?
  • Do you have loans with related entities? Reconcile the loans to and from each entity to ensure the same value is reported in the accounts of both entities.
  • Ensure that all payments to company directors have been correctly captured. Talk to us now if you want to make director payments before 30 June.
  • Provide records of any government grants received during the year.
  • If contact details of business owners and key personnel have changed let us know.

We will let you know if there are other matters to discuss with us before completing your tax return, such as cryptocurrency transactions, capital gains, vehicle usage, private usage apportionment or superannuation. This year, there may also be new elements to discuss if you have received grants, refunds, credits or deferrals of business expenses and liabilities.

Remember you need to keep all your business records for seven years, so store everything securely and where possible electronically for safety and ease.

Once you have all your records for the 2023 financial year, make an appointment with us to schedule in your tax return for prompt lodgement.


Keeping your cashflow strong in tough times

Small businesses are particularly vulnerable in tough economic times.

When sales are slow, there are still overheads and salaries that need to be sorted. Pre-planning and being proactive can help you weather tighter economic periods and allow you to continue to thrive.

Make sure you have a clear picture of your payroll, and any other planned expenses that will need to be accounted for.

If there’s even a possibility that there could be a shortfall, it’s essential to meet this head-on. Whether this means talking to your supplier or creditors to figure out an arrangement, or compromising on other business outgoings, you must make a plan to ensure that the business, or your staff, won’t suffer.

Minimise the stress of cash-flow

Invoice early - Send any invoices that you can, and in advance if possible. Perhaps consider whether you have any regular clients or customers that you could offer a retainer or similar deal to if they book services or make a purchase from you in advance.

Chase payment - Use this opportunity to chase up any outstanding payments. Strong communication and relationships matter - talk to clients and chase invoices.

Talk to suppliers - A little honesty can go a long way. Perhaps they can extend a line of credit for your payments to them. In most cases, a good supplier would rather offer a little flexibility to keep an ongoing business relationship.

Review Inventory - Can you find a cheaper supplier locally to avoid the shipping costs or discuss alternative products that allow you to reduce expenses?

Review your costs - It’s also a good idea to do a general review of expenses. Business costs can creep up, and it’s a great idea to make a time to check on your expenses regularly, no matter what your financial situation. Review all of your regular payments and subscriptions as well as upcoming costs. There may be travel, functions or purchases which you can decide on an alternative approach to.

Talk to the bank or tax department - If cashflow is tight, make sure you have conversations early so you have everything in place to see you through.

We can help you implement strategies to protect your business for the long term and help you alleviate cashflow worries.


6 strategies to clear surplus stock

Excess stock is predicted to be one of the big challenges of 2023 for retailers around the world. It’s been a stock rollercoaster for the past few years: supply chain problems made it hard to get deliveries, then as stock started rolling in, customers started tightening their purse strings.

If you have surplus inventory from 2022, here are 6 smart ways to maximise its use in your business:

  1. Run sales and specials - A strategic sale on excess stock could be a way to win new customers. A lower price cuts into your profits, so make sure you deliver a superb shopper experience so you have the best chance of converting one-off bargain hunters into repeat customers. A flash sales event can be another way to boost interest in your brand.
  2. Refresh, reposition and remarket - Repositioning a product can give it a second chance to catch a customer’s eye. Can you move the product’s position in your store and freshen up the display? If it’s online, could new photography or SEO copy help give it a second chance?
  3. Bundle it up - Bundles can be a great deal for customers, and an excellent way to shift excess inventory. Match up overstocked products with in-demand items and sell them together at a lower price – you maintain a reasonable profit and shoppers appreciate the value. You can also offer multi-buy discounts on items, such as 10% off if you buy two, 20% off if you buy three or more.
  4. Try a promotional giveaway - Use surplus stock to create promotional giveaways on social media and in-store. You can use a giveaway to attract new shoppers, grow your promotional database, and raise your profile. For instance, it could be ‘go in the draw to win this prize pack’, or ‘get this free gift when you spend X’.
  5. Make a donation - Depending on the type of stock you have in oversupply, it might be possible to donate it to a charity – your free products support those in need and your business can get a PR boost.
  6. Liquidate - If you really can’t shift your excess stock to shoppers, you may be able to find a corporate buyer. Local surplus stores, liquidators and auction houses may be willing to buy your overstocked inventory. Buyers will expect a hefty discount off the retail price, but it can be a fast way for you to shift excess product and free up space for new merchandise.

We can help you manage your inventory more effectively

We can talk to you about stock management, surplus inventory and any tax advantages that come with donating or writing off stock.

Do get in touch, we’d love to hear from you.


5 ways to get in control of your business finances

Having proper control of your business finances is a big advantage. It helps you make well-informed business decisions and keeps your organisation profitable.

With so many digital tools for managing your bookkeeping, accounting and management reporting, it’s never been easier to manage, track and forecast your financial position.

But what are the main tools you need? And how do you set up your financial systems, apps, processes and reporting to put yourself back in the finance driving seat?

1. Bring your bookkeeping into the digital age

Digital bookkeeping apps are a great way to digitise your receipts, records and source documents. This not only saves a lot of time at year-end, it also makes it much easier for you to keep track of your company’s finances and accounting. Keeping your receipts in a box to manually enter at period-end is no longer enough. Take the next step and digitise your receipts at source, so you have up-to-date digital records and copies of source documents.

Optical character recognition (OCR) software, like Dext Prepare or Auto Entry, scans the receipt, converts it into a digital format and stores it in the cloud.

2. Do your accounting in the cloud

Cloud accounting is a software-as-a-service (SaaS) solution that helps you carry out all your main accounting and financial management online, without having to install any software.

Cloud accounting providers, like Xero, QuickBooks, MYOB or Sage, design their accounting platforms to take the pain and hassle of business accounting. You get all the tools and features you need to work on your accounting tasks. And your platform provider will also take care of all the data storage, backups and security of your data.

A good cloud accounting platform does more than just save your hard drive space. It also provides you with tools and dashboards that improve your access to management information, financial reporting, forecasting and projections, performance tracking and more.

3. Use the latest in expense management tools

Expense management can be a time-consuming and tedious job. But it’s also a vital task that helps you ensure you’re spending company money wisely and not overspending. If employees start going over their budget limits, this can be a costly mistake for the company and your cashflow.

Expense management tools, such as Soldo, Weel or Pleo, help you manage staff spending by giving employees virtual cards that are linked to a specific budget, account and code. This helps you track their expenses easily and make sure they’re staying within their budgeted limits. These platforms also give you detailed reporting and analytics, so you can see where money is being spent, and where savings can be made.

4. Make it easy to accept digital payments

The problem of slow payment is one of the most frustrating things for small businesses. If your customers don’t pay on time, this can result in a loss of revenue, poor cashflow and an inability to cover your basic costs and overheads. To resolve this issue, many companies have begun to switch to digital payment platforms that make it simpler, faster and easier to collect payment.

Payment platforms, like PayPal, Square or Stripe offer faster payment times and more control over the customer experience. Some platforms even integrate with your cloud accounting, so you get automatic bank reconciliations.

5. Embrace the latest in digital reporting and forecasting

With digital accounting changing so rapidly in recent years, there’s never been a better time to embrace the benefits of the latest in digital reporting and forecasting.

Economic conditions are hard to predict. So it’s crucial to be able to quickly analyse data, check your performance and make predictions about how your company will fare in the coming months. When you use cloud solutions for financial reporting and key metrics, you’ll be able to monitor trends in real-time while having access to the data anytime, anywhere.

Having this information at your fingertips helps you make informed decisions faster than ever before – and that translates that into more sales, increased business growth and bigger profits.

Talk to us about updating your financial systems

If you’re looking to give your finances a touch of digital magic, please do come and talk to us.

We can walk you through the best cloud platforms, fintech apps and business tools to add to your app stack – so you’re ready to make the most of a digital approach to your finances

Get in touch to supercharge your finances.


2023 Federal Budget Highlights

The Federal Treasurer Jim Chalmers handed down the 2023 Federal Budget on 9 May 2023. The following is a list of highlights from a tax and superannuation perspective.

Businesses

  • The instant asset write-off threshold for small businesses applying the simplified depreciation rules will be $20,000 for the 2023-24 income year.
  • An additional 20% deduction will be available for small and medium business expenditure supporting electrification and energy efficiency.
  • FBT exemption for eligible plug-in hybrid electric cars will end from 1 April 2025.
  • An increased capital works deduction rate and reduced withholding on managed investment trust (MIT) payments will apply to new build-to-rent projects.
  • The clean building managed investment trust (MIT) withholding tax concession will be extended from 1 July 2025 to eligible data centres and warehouses, where construction commences after 7:30pm (AEST) on 9 May 2023.
  • The start date of a measure to prevent franked distributions funded by certain capital raisings announced in the 2016-17 Mid-Year Economic and Fiscal Outlook has been postponed from 19 December 2016 to 15 September 2022.
  • The patent box regime announced in the Coalition government’s 2021-22 Budget, and expanded in the 2022-23 Budget, will not proceed.The introduction of tradeable biodiversity stewardship certificates issued under the Agriculture Biodiversity Stewardship Market scheme will be delayed to 1 July 2024.
  • The Location Offset rebate and the Qualifying Australian Production Expenditure thresholds will be increased to boost investment in film production in Australia.
  • Deductible gift recipients list to be updated.

Individuals

  • Income support payment base rates will be increased by $40 per fortnight.
  • The minimum age for which older people qualify for the higher JobSeeker Payment rate will be reduced from 60 to 55 years.
  • The workforce participation incentive measures to support pensioners who want to work without impacting their pension payments will be extended for another 6 months to 31 December 2023.
  • Eligibility for Parenting Payment (Single) will be extended to support single principal carers with a youngest child under 14 years of age.
  • Housing measures will be introduced to increase support for social and affordable housing and improve access for home buyers.
  • The maximum rates of the Commonwealth Rent Assistance (CRA) allowances will be increased by 15% to help address rental affordability challenges for CRA recipients.
  • CPI indexed Medicare levy low-income threshold amounts have been announced for the 2023-24 income year.
  • Eligible lump sum payments in arrears will be exempt from the Medicare levy from 1 July 2024.

Multinationals

  • Australia will implement key aspects of the Pillar Two solution of the OECD/G20 BEPS Project, meaning certain large multinationals will be subject to a 15% minimum tax in the jurisdictions in which they operate.
  • The scope of the general anti-avoidance rules in Pt IVA of ITAA 1936 will be expanded from 1 July 2024.
  • Changes will be made to petroleum resource rent tax (PRRT), including the introduction of a cap on deductible expenditure at 90% of assessable income for projects that produce liquefied natural gas from 1 July 2023.
  • The meaning of “exploration for petroleum” in the petroleum resource rent tax legislation will be amended to reflect the government’s intent and ATO guidance.
  • Taxation legislation will be amended to realign the taxation law with the reissued AASB 17: Insurance contracts for income years beginning from 1 January 2023.

Superannuation

  • Superannuation tax concessions will be reduced for individuals with total superannuation balances in excess of $3 million from 1 July 2025.
  • Employers will be required to pay their employees’ superannuation guarantee entitlements at the same time as they pay their salary and wages from 1 July 2026.
  • The non-arm’s length income (NALI) provisions will be amended to provide greater certainty to taxpayers.

Tax administration

  • Funding will be provided to the ATO over 4 years to lower the tax-related administrative burden for small and medium businesses, cut paperwork and reduce time small business spend doing taxes.
  • Reduction in GDP adjustment factor for pay-as-you-go and GST instalments.
  • Funding to improve the administration of student loans will be implemented.
  • Additional funding will be provided to address the growth of businesses’ tax and superannuation liabilities, and a temporary lodgment penalty amnesty program will be provided to small businesses.
  • The Personal Income Tax Compliance Program will be extended for 2 years from 1 July 2025 and its scope expanded from 1 July 2023.

GST and indirect taxes

  • Funding for GST compliance will be extended for a further 4 years to address emerging risks to GST revenue.
  • The Heavy Vehicle Road User Charge rate will increase 6% per year from 2023-24 to 2025-26.
  • Indirect Tax Concession Scheme: diplomatic and consular concessions extended.
  • The start date for streamlining of excise administration measures announced in the Coalition government’s 2022-23 Budget will be amended.
  • Tobacco excise measures to improve health outcomes and align the treatment of stick and non-stick tobacco tax.

If you would like to know more information about any of these measures, please do not hesitate to contact our office.


Business plant and equipment: Buy or lease?

When your business needs new plant or equipment, what’s the best choice – buy or lease? The answer will depend on your specific circumstances, but there are some basic considerations that can help you weigh up the options.

The advantages of buying

Buying gives you certainty and ownership, at a higher upfront price, but a lower total price. Owning an item of plant or equipment gives you unrestricted use for the lifetime of the item. You can alter it to suit your business, and you can sell it if you need to free up some cash. The full cost is paid up front, so you have no ongoing payments, and there may be opportunities for tax depreciation.

When equipment lasts for a long time and maintains its value, ownership can be a particularly good choice. Overall, the total price of ownership is usually lower than the total cost of leasing the item.

The advantages of leasing

Leasing tends to give you more flexibility, at a higher cost. It spreads out the cost of an expensive item – you don’t need to save or borrow the purchase price, and instead you make regular payments. You can return a leased item if it’s not working out, or upgrade to a better model as your business grows.

If the equipment or plant is something that quickly becomes obsolete, or that you’re likely to upgrade, or that you’re not totally certain is right for your business, leasing could be ideal. While leasing is generally more expensive across the lifetime of the item, it also frees up your money to invest in other areas of the business.

Running the numbers can help you find the right decision

The decision to invest in new plant or equipment can be a tricky one, but we can help. We can tally up the upfront and ongoing costs, and weigh these against the economic benefits you might get from the new equipment. We consider your cashflow, the cost of borrowing, and sales projections, so you can make an informed choice.

Drop us an email or give us a call – we’re here to help.


The importance of goodwill in your business

Goodwill in accounting refers to the intangible value that a company can hold, above and beyond the pure financial value of its assets. This covers areas like brand reputation, intellectual property, and both external and internal relationships.

A business that can show its goodwill in the marketplace is actually worth more – both intangibly and financially. When a company is up for sale, the price a buyer is willing to pay will be greatly increased if the seller can demonstrate this quality of goodwill.

What do we mean by goodwill?

Goodwill includes the value of your business’s brand, your loyal customers, proprietary technology, reputation for great customer service and good employee relationships. It is the amount someone is prepared to pay for your business that is above your net assets at fair value. Building goodwill in your business is not only good for its market value, these aspects of your business potentially also represent a competitive advantage.

Five key ways to build goodwill in your business through relationships

In a business context, building goodwill is all about developing a trusted and benevolent way to work with your stakeholders that can increase the longevity (and value) of your business idea. In the long term, a business that’s part of a trusted industry network has great potential in the marketplace.

  • Make goodwill one of your core values – every business needs a set of core values at its heart. With the right values in place, you can put goodwill front and centre of how you operate. Be kind and thoughtful. Always be honest and upfront. And behave in a way that helps the business, but also helps your stakeholders, community and team. Living goodwill in this way makes it second nature for everyone on the team, and helps set the best possible reputation for your company.
  • Nurture your customer relationships and make them feel valued – a solid customer base is one of your biggest assets. So, treat these customers well and do your best to create long-term, valued relationships. The more you can do to reinforce this value, the more likely it is that customers will become proactive advocates for your brand.
  • Build long-term trusted relationships with suppliers – your supply chain is the arterial system that feeds your business. If you want to keep this supply chain stable and affordable, you need to be professional with your suppliers. Pay them on time and negotiate fairly over prices. Be reliable with your orders and work together if there are any supply problems. Treat these businesses as you would want to be treated.
  • Treat your employees well and make them feel engaged – be transparent and open with your team. Keep them in the loop with planned strategies and results. Offer them great benefits and time off. Make sure they are happy, healthy and loving their jobs – and do everything you can to create a great team spirit within the organisation.
  • Be truthful and honest in all your business dealings – Sometimes telling the truth won’t seal the deal, but it’s always better to demonstrate this goodwill and to be open and honest. Dishonesty is never the path to greatness and it could break the trust you have with your customers, suppliers, team or community.

Talk to us about nurturing goodwill in your business

Demonstrating goodwill in your business isn’t just one of those ‘nice-to-have’ goals on the CEO’s wishlist. It’s actually an intangible part of the value of your business.


Hiring employees who share your core values

At the beginning of your startup journey, you and your co-founders will be in charge of selecting and hiring the key members of your new team.

The people you choose will identify with your core aims for the business and will (usually) share your core values too. For example, if being green is a key value, the people you hire need to resonate with this. But as the business grows and expands, it's likely that the hiring process will move to your operations director, human resources director or people managers.

So, how do you ensure that you're still hiring people who share your core values? And why are these foundational values so important?

Why are core values so important to a new business?

Your values are the pillars on which the business is built. They’re the fundamental building blocks that will define what you believe in as a brand, how you treat your customers and employees and what your underlying mission will be for the company.

  • What's the advantage of having a team with shared core values? - A team that shares the same ethical foundations is a team that works well together. You know WHY you’re doing what you do, and you know the right path to take when operating the business.
  • How do you weave these values into your hiring process? - Make sure the initial job description clearly sets out the values you expect from an employee, and how these help to drive the company forward. You'll also attract the right talent. A Glassdoor survey found that 77% of respondents consider a company’s culture before applying for a job there. During interviews, swap outlooks and to gauge if this person is a good fit for the team.
  • What should you include in your onboarding for new employees? - It’s a good idea to have your company values written down in a format that can be shared with new hires. By formalising your core values, you create a solid bedrock on which to base your training and onboarding. New employees can read, digest and ask questions about your values, and can see how your existing staff apply these values in the real world.
  • How do you measure employee satisfaction and adherence to these values? - Having regular catch-ups with new employees is a must. Your managers should be holding 360 feedback sessions at least once every 6 months, so you can track progress, performance and employee satisfaction. Your core values should be part of these metrics, measuring how well your employees are hitting the right standard, and finding out what the business can do to make this easier.

Building a team that reflects your brand values

When a customer calls your customer support line, or a potential new client visits your offices, they expect these experiences to be consistent. This doesn’t mean getting rid of personality or the uniqueness of each employee. But it does mean having the same foundational values being lived and demonstrated throughout the company.

With a team of people who share your vision for the company, you’re ready to expand, scale and deliver the very best customer experience to your valued customers.


Understanding Your Breakeven Point

Understanding your business breakeven point is essential to know how much money you need to make to stay in business. It can therefore help you make well-informed financial decisions and practical business plans.

The breakeven point is the income or sales needed to cover all costs. Any earnings above this point generate profit. So your breakeven point tells you the minimum sales required to continue operating a viable business.

Understanding the breakeven point in conjunction with financial reports can give you valuable data to analyse fixed and variable costs and set sales targets for the business or individual staff members.

Fixed and Variable Costs

  • Fixed costs - remain the same regardless of how many sales you make. Expenses like rent, equipment lease repayments or full-time staff have to be paid whether you sell any goods or services or not. Fixed costs are often called overheads.
  • Variable expenses - (sometimes called production costs) fluctuate based on sales. For example, cost of goods sold, production labour, and commissions paid to salespeople will vary according to the number of goods or services sold.

It's helpful to work out an amount or percentage of variable costs compared to the sale price of your products or service. This may not be exact initially, but even if you get a rough figure to work with, this will help calculate your breakeven point. Over time as you analyse your financial reports, you’ll be able to refine the calculation and adjust your selling price accordingly.

How to Calculate Breakeven

You’ll need to know your fixed costs (overheads), selling price and production costs.

One common method of calculating breakeven is as follows:

  • Overheads / (selling price – production cost)

For example, let’s say overheads per month (rent, vehicle lease, administration staff) are $20,000, and you sell a coaching program for $3,000 with variable costs (coach fees, handout materials for participants, advertising) of $1,500 per program.

  • $20,000 / ($3,000 - $1,500) = 13.33

You would need to sell over 13 programs per month to break even, which equates to $40,000 worth of sales.

If the same program had variable costs of $1,800, you would need to sell 17 programs per month to generate $50,000 worth of monthly sales just to cover costs. Variable costs of $1,000 per program would mean you only need to sell 10 per month to break even.

With these examples, you can see how important it is to understand your fixed and variable costs. Then you'll know exactly how much you need to make to remain in business and the resulting impact on your financial position. Once you have a reasonably accurate breakeven figure, you can quickly calculate your profit before tax for sales above the breakeven point. In the example where variable costs are $1,500 per program, let’s say you sell 20 programs each month. This would result in an extra $10,000 in profit (before tax) after paying for overheads and variable costs.

Can breakeven help with your pricing?

Understanding your breakeven point can give you some deep insights into your selling prices, helping you understand if they’re realistic.

For example, if your variable costs are high, how much more income will you need to reach breakeven. Is there a fair price for consumers that covers your expenses in a reasonable time frame? Do you need to raise prices to account for fixed and variable costs accurately?

Talk to us about calculating your breakeven point

There are different ways of calculating your breakeven point to confirm the viability of your business, and the ideal pricing point for driving both sales and profitability.

We'd love to help you understand your business financials in more depth, so you can plan for long-term sustainability, enjoyment and profitability.