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Does my business need to register for GST?

This is one of the multitude of questions you need to consider and answer when starting up and registering a new small business.  Knowing your obligations and ensuring that you are compliant can be daunting so below is a brief overview.

Disclaimer: below is only meant for general information.  Please feel free to contact us for advice and guidance on your specific circumstances.

 

What is GST?

GST stands for ‘goods and services tax’, which simply put is a 10% tax on most goods and services sold in Australia.

There are a few goods and services deemed by the ATO to be ‘GST free’.  A comprehensive list can be found on the ATO website.

 

Do I need to register and when?

There are 2 circumstances where you are required to register for GST:

  • Threshold: > $75,000 turnover/gross income

You must register for GST if your turnover or gross income in a tax year exceeds $75,000.  You need to register within 21 days of reaching the threshold.  Once registered, you must include the GST portion on all your sales invoices.

  • Rideshare & Taxi Drivers

Any drivers that provide travel for passengers, for example taxi, uber, ola, didi must register for GST regardless of their turnover/gross income.

If you do not meet the above criteria, you can still voluntarily register for GST.  There are several circumstances where this can be beneficial for your business.

If you don’t register for GST and are required to then you may still have to pay the GST portion on any income earned from the date you were required to registered.  This will apply whether or not you included GST in your prices or not.  The ATO may also impose other penalties or interest.

 

Accounting for GST

Once you are registered, you must start to charge your customers the 10% GST.  Things to keep mind when doing this:

  • Label your invoice “Tax Invoice”
  • ABN and your details
  • Brief description of the items sold/service provided
  • Include the GST as a separate line or note that the final figure “includes GST”

You can also claim GST credits for any GST paid by you to other GST registered businesses.  Not all purchases/expenses will have GST so check your receipts and invoices.

ATO Obligations:

You report all GST collected and any GST credits to the ATO via a BAS (Business Activity Statement).  This is prepared and lodged monthly, quarterly, or annually.  The frequency of your BAS returns is determined when you initially register for GST.

Your BAS also needs to be lodged in time to avoid any penalties.

Please feel free to get in touch with us if we can help you with determining if you need to register, walk you through the process, help you in recording the GST on all sales and expenses and prepare/lodge your BAS returns.

Heena Kalyan (Senior Bookkeeper)

AveSol Accounting Tax

www.avesoltax.com.au

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Which bookkeeping software is right for you?

We live in a highly digitised world with ever changing technology.  The way you keep track of your accounts has also changed dramatically over the years.  Therefore, it has become very important to equip ourselves with the right technology that not only assists with compliance but also helps analyse our business data. It is a long-term investment that can support the growth of your business.

So, how to decide which bookkeeping software is right for me and my business? Come step into the world of digital accounting software and let me show you.

  • Purpose – the main factor in deciding the best bookkeeping software is understanding the purpose of having one. Apart from doing the mundane tasks of recording sales and expenses, what else do you need? Do you need to track inventory, analyse different cost centres, payroll management/timesheets or a comprehensive reporting tool?  Do you want only one software that efficiently keeps all your information in one database? Once you understand what you want the software to do for you, it would be easy to decide what features you need.

 

  • Cost – let’s be honest, as a small business owner we are always trying to minimise cost when starting out. However, the cost shouldn’t be the only deciding factor when choosing the right bookkeeping software. There are a lot of bookkeeping software in the market like MYOB, Xero and Quick books that can be catered according to your needs for example you can start with a basic system and then upgrade or add on features as your business grows. The critical thing to understand here is that your costs need to outweigh the benefits you receive and have room to expand on your software as and when your business grows.

 

  • User friendly/features– well in my opinion if you cannot use it properly then you lose the whole purpose of owning it. A bookkeeping software should have an easy-to-use functionality and have an interface that is easy to flow from one function to another. For example, most bookkeeping software have inbuilt bank feeds where all your bank statements are automatically transferred into your software saving you time, paper and reducing potential errors. Some software like XERO enables you add on products that integrates with third party software such as Stripe. Therefore, it is important to test drive and get the feel for it before committing to purchase. Most software provides free 30-day trial option so keep an eye out.

 

  • Mobility of software– do you want a cloud base software that you can access it from anywhere and anytime? Do you want the software to travel with you in your pocket and you can see real time data on the go? Are you a person, who wants the function to close the sale and prepare an invoice on the spot while standing in front of the customer via your phone? Do you want to capture all your expense receipts on the go with your phone and upload it automatically into the software before you forget it or lose it? Think of how you would like to use the software and what features would make your life easier.

 

  • Compliance – The ATO consistently puts pressure on businesses to have compliant software. In the unlikely case of an audit, your accounting software can attach an electronic copy of all invoices/receipts/supporting documents to the relevant transaction eliminating the need for any hardcopy folders and making it very easy for anyone, internal or external to the business, to review and audit. Your software also needs to be compliant for BAS, STP and Superannuation.  Some accountants are also very particular which software they would work with and sometimes they prefer the clients to use a software that integrates with they own tax software. So, it is a good idea to involve your accountant in the decision making.

 

So, choosing the right bookkeeping system is very crucial for a successful business, as your data, is your business’s success.

Avenue Accountants is partnered with all major bookkeeping software currently on the market and can assist you with the right choice of software by consulting with you on your current needs and future expected growth of your business.  We are also able to provide training and on-going support.

 

Time and money spent wisely will provide results.

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If Cash is the King, Cashflow is the Queen

Gone were the days when businesses were operating cash on hand, and now the modern world has bought a new way of receiving cash through direct debits and credit cards. No matter what you call it, at the end of the day you are rich if your bank balance is healthy. The terminology of Cash is the king, still reflects the beliefs of the olden society that no matter what, cash is still the asset of a business.

What is Cashflow?

Cashflow is the flow of money coming in versus money going out. Pretty easy right! Then why is it 80% of small businesses in Australia are forced to shut down businesses due to cashflow problems.

If you have more cash going out than you have coming in – that is where your problem lies.

The common complaints we hear from our clients is “Cash is always tight”. Cash is scarce like water, if not managed properly, there is only limited amount to go around.

 

Managing Cashflow is a nightmare?

Believe me when I say I have lived this nightmare myself. Even though being an accountant, to my surprise, I also had to tackle the challenges of cashflow sometimes on daily basis.

It does not mean that you are bad at business, it just means that there is an obstacle that you need to try and tackle.

Recently, I applied for a bank overdraft facility to manage my cashflow obstacles. To my amusement, the application was rejected based on ability of repayment.

The ego in me questioned the bank manager for the reasons of rejection. To cut the long story short, despite having such a good turnover and net profit, if the cash doesn’t flow in the business, my net worth is nothing. The banks still determine your cashflow as the indicator of loans and not the balance sheet which has high debtor balance sitting ideally.

So, the morale of the story is Cash is still the most important factor of life and business. Liquidity in business is very important and having assets that could turn into cash quickly are the ones you want to focus on when you are faced with cashflow crisis.

 

 

The common myths around Cashflow

 

  • Profit equals Cash. (making vs receiving)

Let me be very clear in pointing out that Profit never equals Cash. There is a difference between making money and managing money. You can achieve a high sales target but if the money is not received in due course, then it can potentially cause cashflow issues. Therefore, forecasting and budgeting tools are important to know when money is coming in and the times it will need to flow out.

 

Factors to consider in Cashflow

Debtor Management – (the money coming in)

If the money doesn’t come in before it has to go out, then this could pose a major challenge for the cashflow management.

If the debtors are too high on the balance sheet, that indicates that money is tied down and you need to put some strategies in place to reduce the debtor balance.

As a real example, recently we changed our terms of payment from 30 days to 14 days from date of invoice. We noticed that on a 30-day term, the client’s payment turnaround was 45-50 days which was causing issues when paying rent and other business expenses.

Most businesses nowadays offer early discounts and repayment concessions. So chose a strategy that works best for your business.

Creditor Management- (the money going out)

We almost always see that bills comes faster than money. My tip is don’t pay before it is due, and if really struggling only pay when you cannot push beyond the limit. Also speak with your creditors, let them know the situation and request to push the limit a little bit.

If you are in a product market especially in product manufacturing and/or distribution from overseas, the biggest hurdle is trying to find a balance between paying your suppliers versus receiving the money from the customers.

The time lapse between the two could be a juggling act of cashflow where money must be invested before you see the end results. In this case, try and find funding from investors if possible or get a bank overdraft facility to ease some pressure off. Nowadays the market is full of credit providers who can provide funds such as line of credit, unsecured business loans (the rates are high) or Debtor Finance which will all come at a cost to the business so evaluate your options properly.

The key to finding the right fit between money coming in and going out is negotiating the terms of credit with suppliers. If you know your debtors are paying around 30days then negotiate supplier terms at 45 days.

A great example of supplier negotiation is Coles and Woolworths, regardless what your terms are, they will only pay you after 60 days according to the rules. Now this is easy for them as they dominate the market, but for small businesses it would be impossible to dictate your own terms. Therefore, the focus should be more on turnover of debtors than creditors.

 

Stock/Inventory Management – (money in transit)

 More than half of the time we see clients holding more stock than needed. If your stock is perishable, get the timing process right from manufacturing to freight to customer.

The higher the stock balance the more money is sitting in your warehouse doing nothing so watch out for the unused stock. If some of your stock is not selling or is absolute, take it out at a cost price or lower. It’s better to cut your losses early and salvage some money than having no dollars.

Minimise Expenses- (reduce wastage)

Don’t spend if not needed. Analysing your expenses with a magnifying glass may be needed if you are making a loss in your business. You cannot control the sales, but you can monitor the expenses. Check how much you are spending on each item and see if you can source it better or importantly outsource the whole task.

 

This is a very common discussion I usually have with my clients who are surprised that they did not make a profit despite sales reaching the heights. The reason I advise clients to reflect on the P&L every month so that you understand the outgoings of the business. Nowadays it is easy to spend money with plastic cards, but when you see the cost to the business that is the biggest eye opener.

 

Go through your expenses on the P&L and think whether the cost is necessary for the business or you could do without. The important items to watch out is your advertising, promotion and Marketing spend. Small businesses are spending way too much on Marketing without checking the ROI and this could be more of a wastage than income generation tool.

 

Understand your cost of sales, the cost to you to produce/distribute the goods. Are there better suppliers who can provide the same input as your current supplier but with better prices? Some of my clients have also changed the logistic companies and sourced better ones that would fulfil the business goals.

 

There is always someone doing better than the other, find those sources and create a good long-term working relationship with them. You usually have no control over your sales, but you have 100% control over your expenses so before spending, think and check.

 

Resale of assets – (use it or lose it)

 

Liquidity in business is very important and the most liquid assets are debtors and stock if managed properly. When we move houses, we are amazed how many things we have accumulated throughout the years and now know that half of the things are unnecessary. The result is either we donate, sell it on eBay or have a garage sale. Same concept applies to assets of business.

 

Recently, I had a discussion with a client to sell some of the motor vehicles that are now not needed because the sub-contractors are delivering the products. He was reluctant to sell, firstly because he was emotionally attached to them and secondly, he didn’t think it would have any resell value. An asset sitting vacantly was costing him $5000 a year in registration and maintenance that was unnecessary to the business as the asset was not generating any income.

 

When making business decisions, always keep emotions out so that clarity can prevail. If an asset is ideal and occupying the space, and no longer doing its job, sell it. The common assets to look out for is machinery, equipment and motor vehicles.

 

Conclusion

 

Understanding the flow of money will assist you better in making business decisions.

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Federal Budget – Reset and Restart the economy

The Federal Budget delivered on 6th of Oct will support many small to medium business to survive and regrow Post COVID. There were significant tax incentives announced by the Treasurer to support the businesses and put Australia back to recovery. Some of the key incentives that affect SME are:

Tax relief for individuals

The government is bringing forward stage two of its personal income tax plan by two years. From 1 July 2020:

  • the low-income tax offset will increase from $445 to $700;
  • the top threshold of the 19 per cent tax bracket will increase from $37,000 to $45,000; and
  • the top threshold of the 32.5 per cent tax bracket will increase from $90,000 to $120,000

Loss carry-back for businesses

  • The government is allowing companies with turnover up to $5 billion to offset losses against previous profits on which tax has been paid, to generate a refund.
  • Losses incurred up to 2021‑22 can be carried back against profits made in or after 2018‑19. Eligible companies may elect to receive a tax refund when they lodge their 2020‑21 and 2021‑22 tax returns.
  • Normally, businesses would have to return to profit before they can use their losses, however, these measures will enable companies to bring and utilise losses instead of waiting for a profit.
  • This measure is estimated to deliver $4.9 billion in tax relief to businesses over the forward estimates, and $3.9 billion over the medium term.

Full Asset write off (no more threshold)

  • To support new investment and increase business cash flow, any assets purchased from 6th of October 2020 until 20 June 2022, businesses with turnover up to $5 billion will be able to deduct the full cost of eligible depreciable assets of any value in the year they are installed. The cost of improvements to existing eligible depreciable assets made during this period can also be fully deducted.
  • This is the biggest measure for small and big businesses to now write off asset instead of depreciating over the years.

Jobmaker Hiring Credit

  • The government’s new Jobmaker Hiring Credit is expected to help accelerate growth in employment during the recovery by giving businesses incentives to take on additional employees that are young job seekers aged 16 to 35 years old.
  • Under this measure, businesses will receive the Jobmaker hiring credit of $200 per week for every worker aged up to 30 and $100 a week if they hire an eligible young person aged 30 to 35 years, payable for the next 12 months for new hires who work at least 20 hours per week.
  • The Jobmaker Hiring Credit is estimated to support around 450,000 positions for young people and cost $4 billion from 2020-21 to 2022‑23.
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Small Business Advisor Finalists

Finalists in top finance industry awards

MEDIA RELEASE:

Melbourne entrepreneur Arpana Patel named as finalist for Small Business Advisor of the year 2020

Melbourne business woman and overnight entrepreneur Arpana Patel of Avenue Accounting Services, has been named a finalist in the Small Business Advisor category of the AMP Women in Finance Awards, announced on August 3rd. The Awards are dedicated to recognising the outstanding women shaping and influencing the financial services industry.

“This really is a huge honour for me, as I never expected to be recognised for an award like this,” explains Ms Patel. “My choice to become an entrepreneur and start my own Accounting and Taxation business was really made for me and it happened overnight.  My marriage had ended and with two young children to care for, I had to act fast. I had to shift my mindset and take a leap of faith and start my own business.”

Arpana wants to help lead change and be an example to others who may be facing similar challenges in their lives, she faced some individual challenges including having to care for her child with special needs whilst establishing and managing her business.

“There are a lot of barriers and stereotypes that women experience. I want to help change that. I want to show others who may be facing adversity that you can turn things around, you can create new possibilities and achieve great things if you set your mind to it.”

Although Australia has made significant strides towards equality, women still continue to experience inequality in many aspects of their lives.  Women and mothers who experienced hardship due to marriage breakdown, job loss or health issues are often at a higher risk of financial insecurity and more likely to experience financial distress.  When asked about the importance of financial security, Ms Patel explains that her services help to ensure small business owners can improve their financial literacy and achieve their financial goals.

“Great client service, transparent pricing and tailoring a solution to the unique needs of our small business clients are some of the reasons our business has grown since it was established in 2014,” says Ms Patel. In recent times with the rise of the global pandemic Avenue Accounting Services have continued prosper despite a difficult business environment.

AMP Women in Finance Award Winners will be announced via a live broadcast on Thursday 10th of September 2020 at 6pm.

For more about the AMP Women in Finance Awards, visit: https://www.womeninfinanceawards.com.au/

 

Media Enquiries:  Please contact Small Chilli Marketing

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We have been awarded the ATO lodgement certificate for 3 years in a row.

As a registered tax agent, AveSol Accounting plays an important role in helping taxpayers
meet their tax and superannuation lodgment obligations. To help us manage this workload,
ATO provides a lodgement program that accommodates progressive document lodgment over
a 12-month period.

The lodgment program framework promotes a level playing field among registered agents by
benchmarking lodgment performance.

The framework recognises agents who:

  • have good practice management
  • lodge electronically
  • are consistently on time.

AveSol Accounting Services is proud to be meeting the 85% on-time lodgment performance benchmark for the last 3 years in a row. We are proud that our firm is maintaining the integrity of our clients and actively engaging them with the tax system through education, advice, and assistance.

AveSol accounting services is determined in future to maintain the same level of achievement and assist small businesses in meeting their tax and super obligations.

View Our certificate here

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Home Office Expenses

The business world has come a long way and there are many options now available in regard to workplaces and how the work is completed. Many businesses are now becoming a lot more flexible with their working options and are starting to offer the option to work from home.

This can be an ideal situation for many people who are unable to get into the office each day due to having children, travel concerns or disabilities. Working from home can be very beneficial for the workplace and can improve productivity.

If you are someone who works from home on a regular basis it is important to know what you can claim in expenses. Expenses are the costs that are made for different items. If you are working from home, there are a number of expenses that you can claim.

 

Running Expenses

If you work from home on a regular basis you may be able to claim a percentage of running costs that are incurred within the home. These running expenses can include; electricity, internet, furniture costs and the decline in their value, the cost to repair these items if needed and consumables such as printer ink, paper and stationery.

These can only be claimed in a percentage since you are not using the total cost of these towards your work time. You need to calculate the amount of time that these running expenses are used for a work basis.

 

Phone and Internet

If you are using your personal mobile phone or home phone for work purposes, you are able to claim a percentage of the cost of these as a business expense. The same goes for if you are using your internet for work purposes as well.

Once again you do need to calculate the amount of time that these items are used for work purposes and work out the percentage that you are able to claim. If you are claiming more than $50 for the expense of these, do you need to keep paper records of the amount of time that they are being used for work purposes and keep copies of the total bill amounts.

 

How do I claim running expenses?

If you want to claim at a fixed rate you can use a standard rate calculation of 52c per hour to calculate the amount that you are able to claim. This covers the cost of all running expenses and the total is used to calculate the amount that you can claim back. You need to document at least 4 weeks of running expenses in order to create the overall amount of time that you can claim over the year.

If you want to calculate based on actual hours, you firstly need to have a dedicated work area such as an office in a separate room of the house. From there you then need to work out the floor measurement of the room to give the percentage of the house that is being used for work purposes.

The running expenses for the house can then be divided so that you can determine the amount that is relevant to that dedicated room of the house. This is the overall amount that you are able to claim on running expenses.

 

How do I claim phone and internet?

There are a few ways that you can calculate the amount you can claim. If you are claiming under $50 that you can do a fixed rate for the number of phones calls the phone is used for.

If you want to work, it out based on actual usage this can be done by breaking down your itemized bill and selecting the times and calls that are used for business. If you do not receive an itemized bill than you will need to record the time the phone and internet is used for over a 4-week period in order to determine the amount you can claim back as an expense.

 

Claiming expenses where you can will help with your financial position and help lower the burden of working from home. If you are unsure on the rates, please talk to your Accountant.

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