Non-payers can cause significant cash flow issues for any small business. Having said that, non-payer is also an inevitable liability for most small organizations. Several small business operators really feel baffled and bewildered when dealing with problems of non-payment or particularly if a non-payer is a recurring offender or if the sum of money owed is considerable.

How do you cope with non-payers in your organization?

Absolute Accounting Solutions recommendations:

1. Partial payment up front for products or services. A customer can’t take their groceries home without paying. When you supply products or services with an invoice period, you essentially become a creditor. You’re doing your client a favour by giving them something before they remunerate you. A minimum deposit is fair and it also minimizes risk of non-payment.

2. Avoid doing business with large companies who don’t care about you or respect you in interactions and negotiations. Basically, you can't effortlessly bargain with a business on completely different foot-hold. Size sometimes equals leverage, and it’s in your best interests to conduct business with like-sized companies — except if the big company offers something that you can’t get anywhere else.

3. Do not do too much business with a single company. Always have a back-up or Plan B in case projects ever go wrong. Of course, when you are first starting out, it can be difficult to avoid exclusive dealings. But it’s worth having something — or someone — else up your sleeve at all times.

4. Understanding contracts. A quote or service agreement document are both examples of contracts. Unless you’re a business of considerable size having a complex contract drawn up by a solicitor usually represents an unnecessary expense. An engagement letter, on the other hand, is always a good idea. An engagement letter outlines what is expected of each party over the course of a project.

5. Don't send generic, template statements. They can be frustrating, and are very easily disregarded by intentional non-payers. We have found that an invoicing time period of 14 days is ideal. We also recommend that you wait around right up until 45 days following the due date before chasing after payment. Follow up the letter or e-mail with a phone call once the client has had enough time to receive the message. Ask the client when they think that they will be able to pay the invoice. Record the day/date. If the client does not pay within the promised time-frame, remind them that they communicated this date as the cut-off. Ask them to confirm another date of payment. Repeat as necessary.

6. Be honest with a client about the impact of non-payment. As a small business, reliable payment for products or services delivered is very important for retaining cash flow. Point out to your client that their business is valuable to you but that you might not be able to work with them again or any more if you do not receive payment.

7. Factor non-payment into your rate — hopefully, this will come to no more than 2% of your total gross sales. Over the course of a financial year, most small businesses have to write off some projects as debts. You’re planning needs to take this into account.

Normally if a client has paid a few times, you will not have trouble with them paying in the future. However, this is not always the case. Be consistent with chasing your debtors, no matter who they are. Yes, it takes time — but this is another reason to factor non-payment into your rates.

At some point, we all hope that our businesses will expand to include a client base that allows us the position of picking and choosing only supportive, attentive clients.

Developing the skills of assertiveness, negotiation, and tenacity are important when dealing with non-payment in your small business. But learning when to let go is just as crucial.

Contact us if you want to discuss this further or for any others Accounting Solutions!! Talk to our Experts!!

As soon as we have filed your latest activity statement, you might realise that something has been left out or else you have forgot to include a particular item. The Australian tax system is based on “self-assessment”, meaning the ATO usually takes your word, under our guidance, and bases its assessment around the information it's been provided. But this isn't to say that the ATO might not look into the information it's been provided if, for instance, its data matching activity flags an issue. If the inadvertent error slides past the keeper, you will find alternatives to make it right.

Making changes

It is not all that unusual for businesses to need to make an alteration to a business activity statement (BAS) that has already been lodged — often there may be an unclaimed credit which simply slipped your mind, or you remember that you received some other type of income.

For instance, a quite normal situation arises when a business owner has already claimed fuel tax credits in line with the intention to make use of the fuel in in certain manner, but consequently uses it in another way. An error could be either on the credit or debit side. Again using fuel tax credits for example, a credit error means you claimed less fuel tax credits than you were entitled to — for example, you used a lower rate than you had been entitled to.

A debit error indicates you claimed more tax credits than you had been entitled to. This will occur if you:

• Made clerical errors, for example, double counting some fuel purchases

• Over calculated your eligible quantity of fuel

• Used a higher fuel tax credit rate than you were entitled to

• Claimed fuel tax credits for all fuel you acquired, not just the fuel meant for use in an eligible activity.

If you did not make an adjustment in the BAS period in which you become aware an adjustment was required, it becomes an error. In the event you made multiple errors in a BAS period, you have to treat each error individually when determining if it can be corrected and the way to correct it. Apart from these specific circumstances, there's also those straight-out mistakes that we all make every so often, or you might have forgotten to tell us something about your tax affairs at our appointment.

How we can help

We can use your current activity statement to improve many previous GST and fuel tax credit errors, to make claims for previous periods or to vary a PAYG instalment. 4 year time limit applies to claiming refunds and credits, and this “period of review” commences from the day you were required to lodge the activity statement.

If you can’t make such corrections on your current activity statement, we may have to revise the original BAS for you. Note that the process for correcting mistakes and making claims for previous periods can depend on the specific tax or type of credit involved, so you may need to check with us.

If you need to correct information you provided on a BAS and are not eligible to correct it on a later statement, you may need us to complete a revised activity statement. The important thing is to make sure that as soon as you realise that the information you have reported to the ATO is incorrect or incomplete, that you ask us to take actions to correct it.

And the way we can do this is to revise a BAS or apply to make an amendment (in fact the ATO generally treats a revised activity statement as an application to amend an assessment).

If the ATO accepts your revised amount in full and also the amendment is made within the period of review, the revised statement will be taken to be a notice of amended assessment. The date of after effect of the amended assessment is the day it is adjusted in your running balance account. However if the ATO does not accept the revised amounts entirely, it'll issue a notice of amended assessment.

In case your revision increases the tax you owe or reduces your credit, the ATO will generally treat your revised activity statement as a voluntary disclosure of unpaid tax or over-claimed credits. What this means is you’re likely to receive concessional treatment for any penalties and interest charges which may apply. (You will still have to pay any outstanding tax or overpaid credits, and we might have to request for a reduction in interest charges for you.)

Call us for all your Accounting needs!! Let us take care of the rest!!

Does your employees want a Salary Package?

Salary packaging is an excellent method for an organisation to boost the take-home pay of its staff — and if executed effectively, at no extra cost to the business however with a tax benefit to the employee.

What’s salary packaging?

Basically, an employee agrees with their employer to forego part of their future salary or wages in return for the employer providing benefits of a equivalent value. By paying for items out of pre-tax salary the employee can reduce taxable income. Benefits typically provided include cars by way of novated lease, provision of property (such as a computer) or payment or reimbursement of expenses.

For the employer, salary packaging has some benefits, for example the ability to attract employees, and it may also act as a motivation or incentive for employees. Benefits that employees can bundle could be determined by the type of organisation as well as the items the employer is willing to consider.  There can however be additional administration costs to the employer in making sure that it is all processed correctly.

Consider Fringe Benefits Tax

The ATO says employers need to be very aware of fringe benefits tax (FBT) when working out what can be provided to replace the income in a typical salary sacrifice arrangement.  Sometimes it can cost employers more in remuneration if salary packaging is done incorrectly because of FBT being levied.

For an employer, if an FBT liability is generated through a salary sacrifice agreement, that cost could be passed on to the employee by reducing their total remuneration by the same amount. There may be extra paperwork, but an employer should be no worse off once they provide taxable benefits under a salary sacrifice arrangement.

Benefits provided that would typically be subject to FBT include property (such as goods) and expense payments such as loan repayments, school fees etc.

So for example if an employee salary packages golf club membership worth $2,000 (including GST), the amount sacrificed from their salary will generally be that amount plus any FBT liability.

Superannuation a common choice

Salary sacrificed super contributions are treated as employer contributions, and if made to a “complying super fund” the sacrificed amount is not considered a fringe benefit for tax purposes — which means employers will not be liable to pay FBT on the super contributions.  Further, these will not be included as a reportable fringe benefit amount on the employee’s payment summary.

However salary sacrificed super contributions in excess of mandated contribution caps must be reported on the employee’s payment summary as reportable employer super contributions. Note however that salary sacrificed super contributions made to a non-complying super fund will be a fringe benefit.

Can a deduction be claimed by the employer?

If the employee is younger than age 75, you can claim a deduction on all employer super contributions, including salary sacrificed contributions, you make to their super fund. After age 75, only mandated employer contributions can be accepted by the super fund and a deduction claimed.

Also note that while reportable employer superannuation contributions are not included in the employee’s assessable income, the amount can be included in the income tests applicable for some benefits and obligations, such as:

• The super co-contribution

• The Medicare levy surcharge threshold calculation

• Deductions for personal super contributions and non-commercial losses

• A range of Centrelink and child support benefits and obligations.

Salary sacrificed contributions to a super fund form part of the employee’s “concessional contributions” for the financial year, on top of superannuation guarantee (SG) payments. There is a cap on the amount of concessional contributions that an individual can make each financial year before paying extra tax. For the 2016-17 financial year, this is $30,000, or $35,000 if the employee is aged 49 or over on June 30, 2016.

Note that the employer SG obligation amount of 9.5% is based on the reduced salary (that is, post the amount sacrificed). Also note that some awards or agreements may stipulate the amounts of super, so the salary sacrificing arrangement will not affect SG obligations.

Call Absolute Accounting Solutions at 1300 488 330 if you want to get all your questions answered in regards to Accounting. Our professionals will be happy to offer your accurate financial advice according to your personal circumstances.

Fringe Benefit Tax (FBT) is a Federal Government tax imposed on employers on the value of certain fringe benefits that have been provided to employees in respect of their employment. The FBT year runs from 1 April to the following 31 March. The current rate of FBT is 49% (2015/2016) and this is calculated on the grossed-up value of the benefit.

Fringe benefit tax payments are different to salary or wages. It's a benefit provided with respect to employment. There are a variety of benefits and these include entertainment, private use of a company car, cheap loans provided to employees, gym memberships, school fees and child care fees. In addition, most employers/salary packaging providers will allow you to claim personal expenses which have been paid in the last 6 months.

Therefore, for those commencing employment in January or towards the end of any FBT year, you should look to claim your full entitlement for the FBT year which ends on 31 of March allowing you to receive $9,094. 80 plus any meals tax-free up to this date. Often referred to as FBT, the Fringe Benefit Tax is imposed on non-cash benefits that employees receive from employers. The tax first came to be in 1986 with the release of the Fringe Benefits Tax Assessment Act of 1986. The ATO can be a little vague in describing Fringe Benefit Tax (FBT): “FBT is paid by employers on certain benefits they provide to their employees or their employees’ associates (typically family members) in respect of the employee's employment. FBT is separate from income tax and is based on the taxable value of the fringe benefits provided”.

Even though the employer is the one that pays a Fringe Benefit Tax, the employee must still report it on their PAYG statement if the benefits exceed $2,000. Despite the requirement to report the benefits, the employee will not be responsible for paying any taxes on the items. Despite these benefits, there are some important things to bear in mind when considering salary packaging. Fringe benefits paid for using salary sacrificing may be subject to Fringe Benefit Tax, although there is a range of exceptions included for employees of not-for-profit organisations and public hospitals.

The Tax Office has several different categories of fringe benefits, which include:
• car fringe benefit
• debt waiver
• loan fringe benefit
• expense payment
• housing fringe benefit
• living away from home allowance
• airline transport
• board (accommodation)
• entertainment
• tax-exempt body entertainment
• car parking
• property fringe benefit, and
• residual benefits (that is, other benefits not covered by the above).

If you need more information in regards to this please call 1300 488 330 and talk to our professionals at Absolute Accounting Solutions.

DISCLAIMER: All information provided in this publication is of a general nature only and is not personal financial or investment advice. It does not take into account your particular objectives and circumstances. No person should act on the basis of this information without first obtaining and following the advice of a suitably qualified professional advisor.

ATO Targeting Investment Property Dealings

The ATO has launched a program to ensure that taxpayers are correctly meeting their tax and other obligations.

The collection of information includes, landlords’ names, rental periods, rental bond amounts, payable rents, dates of property trans relating to property, by obtaining information on all taxpayers as far back as 1985.

The information collected will be matched with the information that the ATO already holds on the 11.3 million individual taxpayers and the tax returns that they have lodged.sfers, names of transferors and tranferees and the valuation details.

If you think that you may have understated/undeclared income or gains, or have over claimed expenses in the past 30 years, you should visit your tax agent. It is now simple for the ATO to build a picture of property related transactions, a voluntary disclosure before the ATO comes to talk to you, is far better than the penalties that will arise from the audit that may take place.

For further information on investment/rental properties contact Absolute Accounting Solutions on 1300 488 330

Last night I attended a free business seminar, held at the Werribee City Council. I met some very interesting people, that had some great ideas, products and services. The topic of the night was "Boost your Business with Social Media, even for a person like myself that uses computers frequently, it was eye opening to know that I am only using between 0-50% of the Social Media platforms that are now available. The presenter Andrew was great, he made the presentation light hearted but very informative for the time frame that we had. Refreshments were supplied as many people would have missed dinner for the 6.30 start of the seminar.

As an Accountant that gives advice to businesses, I thought I would attend the seminars to see what is information is available for people that are struggling or new at marketing, and normally don't have the budget of big business marketing campaigns. Marketing using Social Media is one of the biggest things I have had to learn and still learning, as the way we are now communicating is evolving dramatically.

This program in an Australian Government-funded initiative to help small-to-medium businesses (this includes not-for-profit organisations), and are held in the Brunswick, Bacchus Marsh, South Morang, Geelong and Melbourne's outer East and North areas. The biggest surprise came with the handout mentioning a FREE Business Mentoring Session on your business premises when you participate in the business seminars.

I have booked myself in for the next seminar in March 2015 and look forward to it. If you are interested in building your business you can visit their website www.digitalenterprisedecl.net or on 03 9490 1427.

Many individuals have investment properties, but quite often the right information is commonly overlooked.

Documents that need to be kept for your rental property.

The ATO requires:
· The date the contracts of purchase was signed (this is the day of purchase).
· The price the property was purchased for.
· The amount of stamp duty, any legal fees and bank establishment fees charged to purchase the property.
· The date the property was first rented.
· How many weeks in the financial year that the property was rented.

Any income earned by the property is accessible income.

Income for the financial year is the:Rental Property
· Rent received.
· Bond money used to pay for outstanding rent or damage to the property.
· Rent paid in advance.
· Insurance payments for rent not paid.
· Late rent paid.

This is reduced by the expenses spent to maintain the property.

Some examples are:
· Loan interest.
· Water rates.
· Council rates.
· Repairs and maintenance.
· Gardening.
· Real estate agent fees.
· Insurances.
· Depreciation.

The sale of the investment property will attract a Capital Gains Tax (CGT) for the period of time that it was rented out and earning an income, however there are ways of minimalising the CGT.

For further information on investment/rental properties please contact Absolute Accounting Solutions on 1300 488 330

Who does SuperStream apply to?

SuperStream is mandatory for all employers that make superannuation contributions for employees using either an APRA-regulated super funds or a self-managed superannuation fund (SMSFs).

According to the ATO the SuperStream standard is part of the government's Super Reform package. Designed to provide a consistent, electronic method of transacting, that links data and payments to superannuation funds as contributions.

It has been implemented to improve the efficiency of contributions, assist with the timeliness of rollovers, while attempting to reduce the amount of lost accounts and unclaimed monies within the superannuation system.

Employers must make their payments by an electronic bank transfer, and can no longer make superannuation payments by any other means. If you continue to send cheques, you will not be compliant with SuperStream and may face penalties under the law.

For employers with 19 or less employees.

SuperStream will start from 1 July 2015. You have until 30 June 2016 to meet the SuperStream requirements when sending an electronic transfer for superannuation contributions for employees.

Your options may include:Superannuation

• upgrading your payroll software
• using an outsourced (external) payroll function or service provide
• using a commercial clearing house or the free Small Business Superannuation Clearing House (19 or fewer employees).

For employers with more than 20 employees

SuperStream started from 1 July 2014. From that date, employers needed to start implementing SuperStream and have until 30 June 2015 to meet the SuperStream requirements when sending superannuation contributions by an electronic transfer for employees.

Self Managed Super Funds (SMSFs)

If you have a Self Managed Super Fund you will need to register your SMSF on the Register of SMSF messaging providers as from 1st July 2014.

 
The ATO has stated that "From 1 July 2014, self-managed superannuation fund (SMSF) trustees are required to receive both electronic messages and payment when making contributions for employees using the SuperStream data and electronic payments."

As an SMSF trustee, you will need to obtain an electronic service address (alias) from an SMSF messaging provider so that you can receive contribution messages sent using SuperStream.

Once the SMSF is registered with the messaging provider, they will be able to link your SMSF with the electronic service address of the provider.

If you have an employer, the employer will need your SMSFs electronic service address and bank details to be able to make contributions to your fund electronically.

SMSF members should be aware that if they do not provide their fund's Australian business number (ABN), electronic service address and bank details to their employer, they may be asked to complete a standard choice form.

Below is a link to a register of SMSF messaging providers and it is open to all SMSF trustees.

SMSF Service Providers

Feel free to contact us on 1300 488 330 or via our contact us page if you want to discuss this with one of our expert accountants.

2015 Budget - Small Business what a night!

The Treasurer last night announced the expected reduction of the company tax rate of 30% by 1.5% to 28.5%.
Sole traders, partnerships and trusts did not miss out and will enjoy a 5% tax discount, capped at $1000 per person, per year. This will be given as a tax offset at the end of the financial year.

The hugely unexpected announcement for small business with a turnover of less than $2mil, was the $20,000 immediate tax write off for any new purchase of tools or machinery that the small business will make from 7.30pm May 12, 2015 and June 30, 2017.

 
While this can be a great for the small business that will make a large profit in a specific year, assisting to reduce their
immediate year's taxable profit. The accelerated write off can have implications later in the event that the small business was to sell or dispose of the asset. The small business will have to pay tax on the whole amount of the sale price as it has been written off. The election of whether to use the immediate tax write off, should be applied by a case by case basis discussed with your Accountant.

Capital Gains Tax (CGT) rollover reliefs was only available to sole traders or partnerships that chose to become a company, new changes will allow a small business (that has a turn over of less tha $2mil) to change their legal structure without triggering  a CGT liability from 1 July 2016. The Government has recognised that new small businesses may have chosen an initial incorrect structure that may not be appropriate later when the business is established.

As small business was the highlight of last nights Federal budget, it also addressed the complexities individuals have had with business start-ups. The introduction of one website to provide ease for the registration of a business name, application for ABNs and other Government requirements will all in one place, there will also be an immediate deduction for some of the expenses associated with the starting-up a new business these are professional, legal and accounting advice, this is a welcome improvement.

Thinking about starting a new business?

The new financial year is coming, many people have approached me about starting new business.

To give you a bit of an advantage, I found some information for free business information and courses that the Victorian Government hold to assist new business owners. Understanding what is involved and ideas of how to manage, control and advertise your new business, is one of the most difficult hurdles to get over and accomplish.

Here is a quick link, have a browse of the web site and tell me what you think and if you found it helpful.

http://www.business.vic.gov.au/

Wave Accounting is a free accounting package for the small business owner. So far the testing has been fun. Besides creating your invoices and any other financial document you need, I liked the way you can link your bank accounts to it, so that it is uploaded directly into your Wave Accounting package. Once it is all set up you can download an app to your phone or tablet that allows you to take a photo of your receipts and they too load into your Wave Accounting package.

https://www.waveapps.com/

If you struggle with computers and need some help to set up your accounting software call us on 1300 488 330 or contact us at This email address is being protected from spambots. You need JavaScript enabled to view it.