Most small business owners are pretty close to their business. For many it is a major part of their life and the distinction between personal and business is easily blurred. This can also cross over to their financial affairs with business and personal finances being interlinked.
Some recent tax cases are a reminder of the risks you run if you don’t keep sufficient separation between personal and business. Get it wrong and you can lose some valuable tax deductions. The risk occurs where you are operating your business through another entity such as a company or trust. This is quite common and makes good sense from an asset protection and separation perspective. The problem occurs when you incur expenses on an individual basis, on behalf of your business, and then seek to claim tax deductions for them.
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Tags: discretionary trust | Dividends | Division 7A | Tax planning | Tax strategy and structuring | Trust income
Posted in Business Insight, Infotelligence |
The 2011/2012 Federal Budget was a ‘nip and tuck’ Budget. Many of the changes were either because of or justified by the need to improve the workforce participation rate to counter the declining unemployment rate from the current level of 5% to 4.5% by June 2013. Others were simply to fulfil the promise of bringing the budget into surplus.
Some changes were more than cosmetic with a temporary flood and cyclone reconstruction levy set to apply in the 2011/2012 income year to those who earn over $50,000 (adding $1.725bn to Government revenues over 5 years). FBT changes will add an additional $970m over 5 years. And, a few tucks will be made to the tax system with restrictions to income splitting, the phasing out of the dependent spouse tax offset, and removing the ability for minors to access the low income tax offset on unearned income.
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Tags: budget changes | Federal Budget | Federal Government
Posted in Business Insight, Infotelligence |
The ATO use industry benchmarks to assess business performance and will take a closer look at businesses that fall outside of these benchmarks. But what happens if you have a niche business or have unusual trading conditions that mean you will almost never fall within these benchmarks?
This is the major problem with the current benchmarking approach. The ATO has a huge data base of information on business performance. When you lodge your business income tax return your accountant needs to include an industry code that is the closest match to your business. It is through the matching of data against common industry codes that the ATO builds it benchmark information and is able to statistically establish ranges for what is normal. With a lot of businesses however, there is no such thing as normal.
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Tags: ATO | Industry benchmarks | Tax & accounting compliance | Tax strategy and structuring
Posted in Business Insight, Infotelligence |
Need a car? If you’re in small business the Government thinks you do!
Spreading some joy prior to the Federal Budget, Treasurer Wayne Swan has announced an immediate tax write-off for small business of the first $5,000 on the cost of a new car used for work purposes. However, the tax write-off is not scheduled to start until the 2012/2013 financial year, so we hope you did not need that car now. The write-off is in addition to other previously announced incentives for small business operators due to start in 2012. These include:
- an immediate write-off of all assets valued at under $5,000 (up from $1,000 presently);
- a write-off of all other assets (except buildings) in a single depreciation pool at a rate of 30%. Currently, small businesses allocate assets to two different depreciation pools, with two different depreciation rates (30 per cent and five per cent); and
- a reduction in the company tax rate to 29%.
The write-off for cars will replace the current entrepreneur’s tax offset that provides a 25% tax offset on business income where income is between $50,000 and $75,000.
Tags: Federal Budget | Federal Government | tax write-off
Posted in Business Insight, Infotelligence |
If you haven’t done so already, now is the time to start thinking about the end of financial year. Last minute tax planning can be a recipe for poor decisions and you need to work through the cash flow implications on anything you decide to do.
No point saving some tax if you create a cash flow crisis in the process. Tax planning these days falls into three baskets – health & hygiene, timing & efficiency, permanent savings.
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Tags: cash flow | End of Year Reporting | Tax planning | Tax strategy and structuring
Posted in Business Insight, Infotelligence |
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