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Day to Day Accounting & Payroll

Planning Your Way to Financial Freedom: Expert Insights OR From Financial Planning to Freedom: Your Journey Starts Here

Financial planning is the process of setting and achieving specific financial goals through a structured approach to managing one’s finances.The benefits of financial planning are multifaceted. Firstly, it provides a clear sense of direction by helping individuals and businesses define their financial goals and create a roadmap to attain them. Moreover, it promotes better financial decision-making by enabling people to prioritise expenses, save for emergencies, and invest wisely. Financial planning also helps in reducing financial stress and anxiety by ensuring a sense of control over one’s financial future.

What Pain Does Financial Planning Remove from Our life? 

Financial Planning helps remove various pain points from our lives, including:

  1. Financial planning helps alleviate the stress of not knowing where your money is going or how you’ll meet your financial obligations.
  2. It provides a structured approach to manage and reduce debt, reducing the constant worry of mounting loans.
  3. Financial planning removes the uncertainty about your financial future by setting clear goals and strategies to achieve them.
  4. Financial planning helps build an emergency fund, easing concerns about unexpected expenses or emergencies disrupting financial stability.
What Opportunities does Financial Planning create in life? 

Financial Planning creates various opportunities in life, including:

  1. Financial planning provides opportunities to build wealth over time through strategic investments and savings.
  2. Financial planning can help secure the necessary capital and resources to pursue entrepreneurial ventures and business opportunities.
  3. Through estate planning and wealth preservation, financial planning allows for the creation of a lasting legacy for future generations.
  4. Financial planning creates opportunities for greater financial security, reducing the risk of unexpected financial setbacks and providing peace of mind for you and your family.
What are the KPIs to measure
  1. Financial
    1. Return on Investment
    2. Net worth
    3. Stock Portfolio Performance
    4. Retirement fund Adequacy
  2. Non Financial
    1. Financial Freedom
    2. Quality of Life
    3. Reduction in Fear of Financial Setbacks
    4. Sense of Control
What are the key areas of Financial Planning

Financial planning encompasses several key areas, each of which plays a crucial role in achieving overall financial well-being. These key areas of financial planning include:

  1. Budgeting and Cash Flow Management
  2. Savings and Emergency Fund
  3. Debt Management
  4. Investment Planning
  5. Retirement Planning
  6. Tax Planning
  7. Insurance and Risk Management
  8. Estate Planning
  9. Education Planning
  10. Charitable Giving
  11. Specialized Financial Planning
  12. Cash Flow and Debt Management for Businesses

What are the positive impacts of Financial Planning? 

Financial Planning can have many positive impacts on our life, including:

  1. Financial planning helps individuals and organisations build a safety net, ensuring they have resources to handle unexpected expenses and financial emergencies.
  2. Effective financial planning facilitates saving and investing, leading to wealth accumulation over time and the ability to achieve financial goals.
  3. Financial planning enables individuals and organisations to set and achieve specific financial objectives, such as homeownership, education funding, or retirement.
  4. A well-thought-out financial plan provides peace of mind by giving individuals and organisations a sense of control over their financial future and reducing financial stress and anxiety
What are the negative impacts of Not doing Financial Planning?

Not doing Financial Planning can have a number of negative impacts on our life, including:

  1. Without a plan, individuals may experience heightened financial stress and anxiety, as they lack clarity on managing their finances effectively.
  2. Without a strategy for debt management, individuals can easily accumulate high-interest debt, leading to a cycle of financial strain.
  3. Without financial planning, individuals may miss out on investment opportunities and potential tax savings, limiting their financial growth.
  4. Overall, not engaging in financial planning can result in a lack of financial security, leaving individuals and organisations exposed to financial risks and uncertainties.
Process of Hiring an efficient outsourcing Accounting Firm

The process of financial planning is as follows:

  1. Establish Financial Goals: Identify your short-term and long-term financial objectives. These could include saving for retirement, buying a home, paying off debt, funding education, or starting a business.
  2. Assess Current Financial Situation: Gather information about your current financial situation, including income, expenses, assets, liabilities, and investments. Analyse cash flow to understand how money comes in and goes out each month.
  3. Create a Budget: Develop a detailed budget that outlines your income and expenses. This helps you understand where your money is going and identify areas for potential savings.
  4. Emergency Fund: Ensure you have an emergency fund in place to cover  unexpected expenses or financial emergencies. Financial planning should include building and maintaining this fund.
  5. Debt Management: Evaluate your outstanding debts and create a strategy to pay them down. Prioritise high-interest debts while making minimum payments on others.
  6. Risk Assessment: Assess your risk tolerance and insurance coverage. Ensure that you have adequate health, life, disability, and property insurance to protect against unforeseen events.
  7. Investment Strategy: Determine your investment goals, risk tolerance, and time horizon. Develop an investment strategy and asset allocation plan that aligns with your objectives.
  8. Retirement Planning: Calculate how much you need to save for retirement to maintain your desired lifestyle. Consider retirement accounts like 401(k)s, IRAs, or pensions to fund your retirement goals.
  9. Tax Planning: Optimize your tax strategy by taking advantage of tax-efficient investment vehicles and deductions.
  10. Estate Planning: Establish or update your estate plan, including wills, trusts, and powers of attorney to ensure the smooth transfer of assets to your heirs.
  11. Implementation: Put your financial plan into action by opening accounts, making investments, and adjusting your budget accordingly.
  12. Regular Monitoring and Review: Periodically review your financial plan to track progress toward your goals.
  13. Professional Advice: Consider seeking guidance from a certified financial planner (CFP) or a financial advisor to help you develop and implement your financial plan.
  14. Adaptation and Flexibility: Be flexible and willing to adapt your financial plan as circumstances change, such as career advancements, family changes, or economic shifts.
Case Study

David (not real name) is a 40-year-old entrepreneur who owns a small but growing NDIS Support work business. His business has been profitable, but he recognizes the need for more comprehensive financial planning to ensure long-term success and achieve specific business and personal goals.

He had outlined the following goals:

  1. Business Growth: David aims to expand his IT consulting firm by increasing the client base and offering additional services.
  2. Retirement Planning: He wants to create a retirement plan that provides for a comfortable retirement.
  3. Tax Efficiency: David seeks strategies to minimise his business and personal tax liabilities.
  4. Emergency Fund: Establish an emergency fund to protect the business during unexpected downturns.
  5. Debt Management: Manage and reduce business debt to improve financial stability.

David recognized the need of financial planning to achieve these goals. He followed the above mentioned process with the help of a professional Financial Planner. He was able to achieve the following results:

  1. David’s business expands successfully, increasing its client base and profitability. With a well-structured retirement plan, he starts saving for his retirement systematically, ensuring financial security in the future.
  2. Effective tax planning results in reduced tax liabilities for both his business and personal finances.
  3. The business’s emergency fund provides a financial safety net during a period of unexpected economic downturn, preventing major disruptions.
  4. David manages and significantly reduces business debt, improving the company’s financial stability and creditworthiness.

Through diligent financial planning, David achieved his business and personal financial goals, ensured the stability of his company, and secured a prosperous retirement. His commitment to financial planning helped him navigate the complexities of entrepreneurship and achieve long-term financial success.

Remember, this is just a general guide and each organisation is different, so it’s important to properly review your finances with a cost-benefit analysis before making any big decisions. Our NexZen tax experts can provide personalised advice and can help you find out what you can claim as a small business. Get in touch to book a discovery call

Until then, thanks for reading and if you liked this or you know someone who would also find this helpful please feel free to reply and share. See you next time. Can’t wait.

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Day to Day Accounting & Payroll

The Power of Effective Record Keeping: Your Key to Organisational Success

Effective record keeping is of utmost importance as per the guidelines provided by the Australian Taxation Office (ATO). The ATO requires businesses to maintain accurate and complete records to meet their tax obligations and ensure compliance with Australian tax laws. By adhering to the record keeping guidelines set by the ATO, businesses can ensure accurate reporting, minimise errors, and meet their tax obligations.

What Pain Does having an effective record keeping system remove from Our life? 

Having an effective record keeping system helps remove various pain points from our lives, including:

  1. Relieves the stress of scrambling to find required documents during tax audits or assessments.
  2. Minimises the risk of non-compliance and associated penalties by maintaining accurate records.
  3. Streamlines the process of preparing and lodging tax returns, saving time and effort.
  4. Ensures easy retrieval of necessary information to support claims, deductions, and credits, simplifying interactions with the ATO.
What Opportunities does having an efficient record keeping system create in life? 

Having an efficient record keeping system creates various opportunities in life, including:

  1. Supports efficient and timely responses to government requests or audits, fostering a positive relationship with the ATO.
  2. Enables accurate identification and maximisation of eligible tax deductions, resulting in potential tax savings.
  3. Provides a clear financial overview, allowing for informed business decisions and strategic planning.
  4. Enhances credibility and transparency with financial institutions, facilitating access to loans and favourable terms.
What are the KPIs to measure
  1. Financial
    1. Tax audit Penalties
    2. Cash flow
    3. Cost Efficiency
  2. Non Financial
    1. Compliance Adherence
    2. Record Accessibility 
    3. User Satisfaction
What are the five rules of record keeping for small businesses?

The ATO helpfully provides a list of five rules for recordkeeping purposes. They are:

  1. Keep all tax and superannuation-related records. 
  2. Don’t alter the records. Storage methods must protect the records from damage.
  3. Keep your records for at least five years. 
  4. If the ATO requests records, one must provide the records immediately. 
  5. The records should be in English. If they are in another language, they should be easily convertible to English.
What are the positive impacts of having an efficient record keeping system in place? 

Having an efficient record keeping system can have many positive impacts on our life, including:

  1. Facilitates smooth tax compliance and reduces the risk of penalties.
  2. Enables accurate and timely preparation of tax returns, ensuring compliance with ATO requirements.
  3. Enhances transparency and credibility with the ATO, fostering positive relationships.
  4. Maximises eligible deductions and credits, leading to potential tax savings.
What are the negative impacts of Not having an efficient record keeping system? 

Not having an efficient record keeping system can have a number of negative impacts on our life, including:

  1. Increased risk of non-compliance with tax laws and regulations, leading to potential penalties and legal consequences.
  2. Difficulty in substantiating claims, deductions, or credits during tax audits, potentially resulting in additional tax liabilities.
  3. Inability to provide accurate and reliable financial information, hindering effective business decision-making and strategic planning.
  4. Strained relationships with the ATO, potentially leading to increased scrutiny and audits due to a lack of trust in the organisation’s record keeping practices.
High Level Roadmap
  1. Assess your record-keeping requirements and ensure compliance with the Australian Taxation Office (ATO) guidelines.
  2. Implement a structured filing system to organise and categorise your records accurately.
  3. Utilise digital tools and software to automate record keeping processes and enhance efficiency.
  4. Regularly review and update your record-keeping practices to align with changing ATO regulations.
  5. Train employees on proper record-keeping procedures to maintain consistency and accuracy throughout the organisation.
Case Study

Mr Clarke(not real name) is an NDIS support provider. He is operating his medium size business under a private limited company.

Before implementing a record-keeping system, the company faced several challenges, including disorganised documentation, inefficient retrieval of information, and non-compliance with regulatory requirements.

Recognizing the need for improvement, Mr Clarke embarked on a journey to establish a comprehensive record-keeping system by following the process mentioned above as High Level Roadmap. 

By undertaking a systematic approach and leveraging digital tools, Mr Clarke’s business was able to overcome challenges related to compliance, document management, and decision-making. The implementation of the record-keeping system not only ensured regulatory compliance but also enhanced operational efficiency and empowered Mr Clarke to make informed strategic decisions.

Remember, this is just a general guide and each organisation is different, so it’s important to properly review your finances with a cost-benefit analysis before making any big decisions. Our NexZen tax experts can provide personalised advice and can help you find out what you can claim as a small business. Get in touch to book a discovery call. 

Until then, thanks for reading and if you liked this or you know someone who would also find this helpful please feel free to reply and share. See you next time. Can’t wait.

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Business Value Creation

Experience Financial Freedom: Unleash Your Business Potential with Outsourced Accounting Services

Outsourcing accounting is highly beneficial for businesses due to several reasons. Firstly, it brings specialised expertise and knowledge to the table, ensuring accurate financial records, compliance with regulations, and minimising errors. Secondly, outsourcing accounting allows businesses to save on overhead costs associated with hiring and training in-house accountants, providing significant cost savings. Additionally, it enables businesses to focus on their core competencies and strategic initiatives, while leaving the financial management to professionals.

What Pain Does Having an Outsourced Accounting Firm Remove from Our life? 

Having an an outsourcing accounting firm helps remove various pain points from our lives, including:

  1. Outsourced accounting firms remove the pain of hiring, training, and managing an in-house accounting team.
  2. They alleviate the stress of keeping up with ever-changing tax laws and regulations.
  3. Outsourced accounting firms handle time-consuming financial tasks, freeing up valuable time for business owners.
  4. They reduce the risk of errors and penalties by ensuring accurate and compliant financial reporting.
What Opportunities does having an outsourcing accounting firm create in life? 

Having an outsourcing accounting firm creates various opportunities in life, including:

  1. Having an outsourcing accounting firm creates the opportunity to focus on core business activities and strategic initiatives.
  2. It allows for access to specialised expertise and knowledge in financial management and compliance.
  3. Outsourcing accounting creates the opportunity for cost savings by avoiding overhead costs associated with hiring and training an in-house accounting team.
  4. It provides scalability and flexibility to accommodate business growth or seasonal fluctuations.
What are the KPIs to measure
  1. Financial
    1. Cost Efficiency
    2. Tax Saving
    3. Return on investment
  2. Non Financial
    1. Reduction in errors and Penalties
    2. Stability
    3. Expertise & knowledge
What are the key differences between an In-house accountant and an outsourcing Accounting firm?

The key differences between an in-house accountant and an outsourcing firm are as follows:

  1. An in-house accountant is an employee of the company, working within the organisation’s structure, whereas an outsourcing firm is an external service provider hired on a contractual basis.
  2. An in-house accountant is dedicated solely to the company’s accounting needs and may have limited expertise in specific areas, while an outsourcing firm brings a team of specialised professionals with diverse skill sets and industry knowledge.
  3. Employing an in-house accountant comes with costs such as salaries, benefits, training, and software expenses, while outsourcing firms offer cost-effective options, as their fees typically cover all necessary resources.
  4. In-house accountants may face limitations in handling sudden increases in workload or specialised tasks, whereas outsourcing firms provide scalability and flexibility to accommodate changing business needs or seasonal fluctuations.
What are the positive impacts of having an outsourcing accounting form in place? 

Having an outsourcing accounting firm can have many positive impacts on our life, including:

  1. Access to specialized expertise and industry knowledge in accounting and financial management.
  2. Cost savings through reduced overhead expenses and the elimination of hiring and training costs.
  3. Scalability and flexibility to adapt to changing business needs without the need for internal staffing adjustments.
  4. Improved efficiency and accuracy in financial processes and reporting.
What are the negative impacts of Not having an outsourcing accounting form in place?

Not having an outsourcing accounting firm can have a number of negative impacts on our life, including:

  1. Lack of specialised expertise and knowledge in accounting, potentially leading to errors and non-compliance with regulations.
  2. Increased costs associated with hiring and training an in-house accounting team.
  3. Limited scalability, making it challenging to handle fluctuations in workload or business growth.
  4. Inefficient financial processes and reporting, leading to potential delays and inaccuracies.
Process of Hiring an efficient outsourcing Accounting Firm
  1. Assess your accounting needs and determine the specific services required for your business.
  2. Research and shortlist potential outsourcing accounting firms based on reputation, expertise, and industry experience.
  3. Request detailed proposals from the shortlisted firms, considering factors such as services offered and pricing structure.
  4. Conduct interviews or meetings to evaluate the firms’ expertise, communication skills, and compatibility with your business.
  5. Finalise the contract, establish a transition plan, and maintain ongoing communication for a successful onboarding and collaboration experience.
Case Study

Mr Richardson(not real name) is an NDIS support provider. He is operating his medium size business under a private limited company.

With an in-house accountant, Mr Richardson faced limitations in terms of expertise and scalability. The accountant lacked in-depth knowledge of industry-specific tax regulations, hindering effective tax planning and compliance. Additionally, as the company grew, the workload became overwhelming for the in-house accountant, leading to delays and inefficiencies in financial reporting.

Recognizing the need for a change, Mr Richardson initiated a careful transition process to ensure a smooth shift to an outsourced accounting firm as per the process mentioned above in High Level Roadmap.   

Mr Richardson’s transition from an in-house accountant to an outsourced accounting firm proved to be a strategic decision that yielded substantial benefits. By leveraging specialised expertise, achieving cost savings, and improving scalability, the firm experienced streamlined financial operations, enhanced compliance, and gained the flexibility to support its growth trajectory. The successful transition allowed Mr Richardson to allocate resources efficiently and focus on its core competencies, ultimately positioning the company for sustained success in a highly competitive industry.

Remember, this is just a general guide and each organisation is different, so it’s important to properly review your finances with a cost-benefit analysis before making any big decisions. Our NexZen tax experts can provide personalised advice and can help you find out what you can claim as a small business. Get in touch to book a discovery call

Until then, thanks for reading and if you liked this or you know someone who would also find this helpful please feel free to reply and share. See you next time. Can’t wait. 

Categories
Business Value Creation

Designing Your Financial Freedom: The Crucial Role of the Right Business Structure

Choosing the right structure for your business is a critical decision that can significantly impact its success and longevity. Whether you’re starting a new venture or considering restructuring an existing one, the structure you select will determine how your business operates, how it is taxed, and how it is legally protected.

What Pain Does having a right business structure remove from Our life?

Having a right  business structure helps remove various pain points from our lives, including:

 

  1.  Personal liability protection for your personal assets. 
  2.  Tax optimization and reduced tax burdens.
  3.  Simplified compliance with regulatory requirements.
  4.  Improved access to financing and investment opportunities
What Opportunities does having a right business structure create in life?

Having a right business structure creates various opportunities in life, including:

  1. Optimises tax position, minimising tax burdens and ensuring compliance.
  2. Facilitates partnerships and joint ventures with other businesses.
  3. Access to government grants and incentives specific to certain business    structures.
  4. Provides a solid foundation for succession planning and business continuity.
What are the KPIs to measure
  1. Financial
    1. Tax Saving
    2. Cash flow
    3. Revenue Growth
  2. Non Financial
    1. Perpetuity in business
    2. Ease of Business expansion
    3. Personal Assets protection
What are the different business structures available for small businesses

The common business structures available for small businesses in Australia include:

  1. Sole Proprietorship
  2. Partnership
  3. Company 
  4. Trust
  5. Incorporates Associations
  6. & more
What are the positive impacts of having a right business structure in place?

Having a right business structure can have many positive impacts on our life, including:

  1. A proper business structure separates personal and business liabilities, safeguarding personal assets from business-related risks.
  2. The right structure limits personal liability, protecting business owners from being personally responsible for business debts or legal issues.
  3. An appropriate business structure can offer tax benefits, such as deductions, exemptions, or lower tax rates, optimising the business’s financial position.
  4. A well-structured business increases credibility, making it easier to secure financing, attract investors, or qualify for government grants or funding programs.
What are the negative impacts of Not having the right business structure?

Not having a right structure for business can have a number of negative impacts on our life, including:

  1. Without the right business structure, business owners can be personally liable for business debts and legal obligations, putting personal assets at risk.
  2. Inadequate structuring may result in missed tax deductions, limited access to tax incentives, or higher tax rates, leading to increased tax liabilities for the business.
  3. Not having the right structure may result in non-compliance with legal and regulatory requirements, leading to penalties, fines, or legal consequences.
  4.  Ineffective structuring can lead to confusion, inefficiencies, and conflicts within the business, hindering decision-making, coordination, and overall operational effectiveness. regulations, potentially resulting in penalties, audits, and legal issues.
High Level Roadmap
  1. Assess Your Business Needs and Goals
  2. Seek Professional Advice to understand the options available
  3. Evaluate Different Business Structures
  4. Consider Legal and Compliance Requirements:
  5. Assess Tax Implications
  6. Analyze Liability and Risk Factors
  7. Long-Term Planning and Flexibility
  8. Make an Informed Decision
  9. Seek Professional Assistance for Implementation
Case Study

Mr Richarson(not real name) is an NDIS support provider. He was earlier operating his business under sole trader & never truly dedicated his time or attention to choosing a business structure.

After a few years of high taxes and poor cash flow management that threatened his personal home, Mr Richardson decided it was time for action. 

He learned from his mistakes and wanted to grow his business while ensuring he was in full legal compliance. We advised him a Pty Ltd Company after careful consideration on the following points: 

  1. liability protection for the stakeholders
  2. A flat rate tax as opposed to marginal tax rate for sole traders
  3. Professional image and credibility of the business
  4. Separate legal entity, distinct from its shareholders.
  5. Business expansion & Succession Planning
  6. & More

Mr. Richardson experienced financial freedom for perhaps the first time. Though his business was always successful, taxes and other liabilities limited his personal income over the years. With his new structure, he saved money on taxes and had a plan for increasing his cash flow in the future. Perhaps more importantly, he increased the value of his business.

Remember, this is just a general guide and each organisation is different, so it’s important to properly review your finances with a cost-benefit analysis before making any big decisions. Our NexZen tax experts can provide personalised advice and can help you find out what you can claim as a small business. Get in touch to book a discovery call. 

Until then, thanks for reading and if you liked this or you know someone who would also find this helpful please feel free to reply and share. See you next time. Can’t wait.

Categories
Business Value Creation

Tax Planning: You Are One Step Away To Your Financial Freedom

Tax planning is not just about compliance; It is one step towards creating your financial freedom. With strategic tax planning, you can minimise your tax liabilities, maximise your savings, and create a solid foundation for long-term financial success.

What Pain Does Tax Planning Remove from Our life? 

Tax planning helps remove various pain points from our lives, including:

  1. Removes the pain of financial stress by minimising tax liabilities and maximising savings.
  2. Eliminates uncertainty by providing clarity and certainty regarding tax obligations.
  3. Alleviates compliance concerns, reducing the risk of penalties, audits, and legal issues.
  4. Manage cash flow effectively, avoiding cash flow challenges caused by large tax payments.
What Opportunities does Tax Planning create in life? 

Tax planning creates various opportunities in life, including:

  1. Allows individuals to minimise their tax liabilities, resulting in increased savings.
  2. Effective tax planning helps optimise cash flow by strategically timing income and expenses.
  3. Tax planning provides opportunities for individuals to allocate more funds towards investments.
  4. Provides access to valuable tax deductions, credits, and incentives.
What are the KPIs to measure
  1. Financial
    1. Tax Saving
    2. Cash flow
    3. Director Loan
    4. Tax Liability
    5. Dividends & Distributions
  2. Non Financial
    1. Certainty about tax obligations
    2. Resource Planning
    3. Peace of mind
What are the different methods of Tax Planning

There are various methods and strategies for tax planning. Here are a few different approaches:

  1. Income Allocation
  2. Timing of income and expenses
  3. Capital Gains & Losses management
  4. Tax Efficient spendings & investments
  5. Entity Structuring
  6. & more
What are the positive impacts of Tax Plannings? 

Tax Planning can have many positive impacts on our life, including:

  1. allows individuals and businesses to strategically minimise their tax liabilities, resulting in potential savings.
  2. improves cash flow by providing individuals and businesses with more disposable income. 
  3. Promotes financial stability by ensuring that individuals and businesses have a clear understanding of their tax obligations and can meet them in a timely manner.
  4. support business growth by optimising tax structures, taking advantage of tax incentives, and maximising deductions. 
What are the negative impacts of Not doing Tax Planning? 

Not doing Tax planning can have a number of negative impacts on our life, including:

  1. Failing to engage in tax planning can result in higher tax obligations, leading to a reduced ability to save, invest, or meet financial goals.
  2. Without tax planning, individuals and businesses may overlook valuable deductions, credits, and incentives, resulting in missed opportunities to reduce their taxable income and save on taxes.
  3. Not considering tax implications can lead to cash flow challenges, particularly if individuals or businesses are unprepared for large tax payments that could strain their financial resources.
  4. Lack of tax planning increases the risk of non-compliance with tax laws and regulations, potentially resulting in penalties, audits, and legal issues.
High Level Roadmap
  1. Gathering financial information
  2. Setting financial goals
  3. Analysing tax implications
  4. Identifying tax-saving opportunities
  5. Implementing tax strategies
Case Study

Ms Taylor is an NDIS support worker and owns a proprietary Limited company with 10 payroll staff members. Her estimated Tax payable for the year was $64k with a taxable income of $259k.

We implemented the following strategies in her Tax planning

  1. Paid Director fee to Ms Taylor and her spouse for $90k. 
  2. Paid $27,500 Superannuation to the directors.
  3. Paid Superannuation for the staff for the June Qtr in advance.
  4. Prepaid expenses such as rent, conference fees etc worth $20k for the business before 30 June.
  5. Bought a business Car for $50k to utilise the $150k temporary expense claim finishing on 30 June 2023.

The net result was a saving of approx $42k tax for the company 

Remember, this is just a general guide and each organisation is different, so it’s important to properly review your finances with a cost-benefit analysis before making any big decisions. Our NexZen tax experts can provide personalised advice and can help you find out what you can claim as a small business. Get in touch to book a discovery call. 

Until then, thanks for reading and if you liked this or you know someone who would also find this helpful please feel free to like and share. See you next time. Can’t wait.

Categories
Business Value Creation

Crypto Investor vs. Trader: What Tax Obligations Do You Have?

Most people who buy and sell cryptocurrency fall under the official classification of an investor, even if they buy and sell often. This means your crypto is subject to Capital Gains Tax (CGT), which can result in hefty obligations. If you want to reduce your tax obligations, you’ll need to be able to classify yourself as a trader.

Of course, calling yourself a trader isn’t enough. The ATO is cracking down on investors who are attempting to minimize their cryptocurrency tax obligations by misclassifying themselves, whether accidentally or intentionally. 

Here’s a look at how the ATO distinguishes between cryptocurrency investors and traders, along with the requirements you need to meet to prove you’re conducting cryptocurrency trading as a legitimate business activity.  

What Is a Cryptocurrency Investor? 

Most Australians that buy and sell cryptocurrency fall under the “investor” classification. These investors may buy and hold for the long-term or they may sell or swap cryptocurrency regularly. In any case, an investor is focused on long-term capital growth. While most cryptocurrency holders in Australia are classified as investors, this is less than ideal.

As an investor, you will be subject to capital gains tax (CGT) rules, which means you’ll have to pay taxes on any gains you make when you sell your cryptocurrency. For instance, if you buy $500 in crypto and sell it for $700 later in the year, you may owe capital gains tax on the $200 profit. You might be able to deduct transaction fees from the profit, but the proceeds will be taxable.

Some investors may qualify for a 50 per cent discount on CGT if they hold crypto for at least 12 months before selling it and it is wholly owned by a trust or individual. Crypto held by a superfund may qualify for up to a 33 per cent discount within the same timeframe. So, how much does CGT cost?

Instead of taking a percentage of your profits, you will instead add the profits to your income. As such, you may pay as much as 45 per cent on your crypto gains if you are in the top marginal tax bracket. This system makes cryptocurrency less attractive for high-income earners, especially those handling it in volume, which is why it’s important to understand if you meet the requirements to be considered a trader. 

What Is a Cryptocurrency Trader? 

There’s a long list of requirements you must meet to be considered a cryptocurrency trader for tax purposes. Starting with the definition, a cryptocurrency trader is someone who buys and sells crypto for short-term profits (compared to the long-term capital growth goal of an investor).

Additionally, a trader works with a detailed strategy that determines when they will purchase cryptocurrency and when they will sell that cryptocurrency. Traders also work in high volume, meaning they trade large amounts often and they keep a record of all of their gains/losses and transactions over time.

The Australian Tax Office will only designate you as a trader if you prove that you are “carrying on business” and not just an individual looking to turn a quick profit with your crypto transactions. This does not require substantial capital, a registered business, paid research or hired staff, although any of these elements can help you solidify your classification as a trader over an investor. 

If you do meet the requirements to be classified as a cryptocurrency trader, you will not be subject to the CGT rules. Instead, the rules of trading stock will apply. While this can save you money, it’s advisable that you understand the implications. 

How Cryptocurrency Traders Are Taxed

While cryptocurrency traders are not subject to CGT rules, they must understand the implications of the trading stock rules. In short, these rules mean:

  • Cryptocurrency traders have all profits taxed like any other income.
  • Crypto assets held at the end of the year that have shown an increase in value will realise income for tax purposes.
  • Crypto assets held at the end of the year that have shown a decrease in value will realise deductions for tax purposes.

The primary advantages of being classified as a trader are that you can take deductions on your crypto losses, you can claim related expenses for conducting your business (i.e., a percentage of your rent or mortgage) and you can use the instant write-off for relevant assets (e.g., hardware and software). 

Additionally, crypto traders may choose to do business as a company, which means your crypto traders would be taxed at the company tax rates (either 25 per cent or 30 per cent) instead of your personal tax rate, which could save you a substantial amount of money. With that said, the trading stock rules that apply to cryptocurrency traders are far more complex than we can cover here. 

Are You a Trader or an Investor?

If you currently buy and sell cryptocurrency and you’re wondering what your tax classification is and whether or not you qualify to be taxed as a trader, don’t make any guesses. Reach out to nexZen Accounting for help navigating this complicated topic and we’ll help you devise a strategy that will keep more dollars in your pocket come tax season.

Ready to take the next step? Schedule a consultation today and let our knowledgeable tax professionals answer your questions. 

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Business Value Creation

Cash Flow: How to Run a Business Without Enough Money

Running a small business is often difficult. It’s much harder when you’re stressed about finances, have limited cash flow, and are struggling to juggle all your daily tasks.

In the early days of business, owners often envision success. They know that means hard work, but they expect a return for their efforts. You start work early and end work late. You’re always “on the clock” because it’s your business. There are few breaks, if any. You’re in charge of operations, management, sales, and accounting. You’re the one who sets up utilities, pays the bills, and issues paychecks.

It’s easy to get caught up in the endlessly urgent tasks and suddenly realize your cash is gone. Your bank balance isn’t enough to pay what you owe, and you have nearly nothing to show for all your efforts. Once you pay employees, there’s no cash left for GST, tax, and superannuation. There’s certainly nothing left to pay yourself. Where did all your money go?

What’s the solution? Should you close up shop and consider yourself a failure? Should you buckle down and work even harder, hoping you somehow crank out a meager existence next month?

We have a better solution. nexZen Accounting works with small businesses just like yours. In fact, we specialize in helping new business owners get their organisations up and running. Those early days are some of the most difficult for any entrepreneur. You’re absolutely not alone, and you’re not a failure. Cash flow is a common problem for new businesses, though it’s rarely discussed. We can help you create better cash flow, get ahead on your accounting tasks, and gain increased financial stability. Here’s how.

Cash Flow Reporting

Cash flow is the way money moves in and out of your business. Cash flow reports are one of the most important accounting tasks for a new business owner. They show you where your money went, where it’s going, and where it’s coming from.

Cash Flow Management

Cash flow management works hand-in-hand with cash flow reporting. In fact, cash flow reporting is just one small part of cash flow management. The report helps you see the numbers in one easy-to-read format. Cash flow management takes the task one step farther, helping you stay on top of your finances. We help you see potential problems and fix them. We also help you better manage your bills, pay your suppliers on time, and, perhaps most importantly, pay yourself.

Cash Flow Forecasting

Cash flow forecasting is another part of cash flow management. We’ll help you read and understand the cash flow report. You can predict how much cash you’ll have in the future, better manage your expenses, and know exactly where you stand financially. That’s much better than paying bills and hoping there’s a little something left over for yourself at the end of the month. Are you sick of being surprised when you run out of money? That’s why cash flow forecasting is so important. You’ll never be surprised by a “zero” bank balance again. When you know where you stand financially, you can do something about it.

Budgeting

No one likes budgeting, but it’s part of running a successful business. While a business budget is similar to a personal budget, there’s a lot more to it. We can help you identify all your sources of revenue, organize your fixed expenses and create a calendar of due dates, anticipate your variable expenses, create a savings fund for emergency expenses, and create financial reports with all of this information organized and simplified.

Actual vs. Budget Reporting

So, what happens if you spend more than your budget allows? We can tell you that, too. We will help you analyze your actual spending versus your budgeted spending. With this comparison, we can help you spot discrepancies, analyze your spending trends, and find better ways to save money. If you spent more than you earned this month, we can help you fix the problem before it gets out of hand. Our goal is to help you sleep better at night, wake up refreshed the next morning, and feel able to tackle the day with confidence.

Business Plan

If you started a business with no direction, little confidence, and plenty of dreams, you’re not alone. Many successful business owners do the same thing every day. We find that it’s much easier to properly run and manage an organisation if you have a good plan, though. With a solid business plan, you will know exactly where you’re headed and how to get there. You can also apply for loans, impress potential investors, and outline your short-term and long-term goals.

Feel Better, Sleep Better, and Be Happier with nexZen

Sometimes clients ask us why we run our company the way we do. We aren’t just accountants. We don’t just sit behind a desk all day and crunch the numbers. We genuinely care about our clients, and we want them to succeed. If your finances are in disarray, you can’t possibly know whether you’re flying or falling. If you feel like an anxious ball of nerves, that’s why.

We love to get to know our customers first. What’s your biggest concern? What would make you feel better? If you don’t know what you need, we’ll help you figure it out.

Some of our clients don’t know anything about accounting, and that’s okay. We can start at the very beginning and walk through the process together. We’re accounting experts, but we’re people-focused, too.

Other clients know exactly how to crunch the numbers, but they can’t seem to get ahead, no matter what they do. We can help with that, too. In fact, we created a guide to help boost your cash flow immediately. If you want practical, hands-on experience with business management and cash flow budgeting, nexZen is exactly what you’re looking for.

We help business owners get ahead financially and prepare for the future. Our main focus? Creating win-win strategies that give you freedom from stress and worry. Ready to get started? Book a discovery call today.

This is a loser that most people are probably pretty happy about — the government is extending a task force that targets tax avoidance by multinationals, large public and private groups, trusts and wealthy individuals.

It is giving the Australian Tax Office (ATO) more than $600 million over the next three years to keep the scrutiny on those groups.

The budget forecasts the extension of the task force will make the government $2.1 billion in revenue from tax over the next four years.

In bad news for people’s pay packets, real wages are not forecast to grow until later this year at the earliest thanks to higher-than-expected inflation.

At the end of last year, Treasury predicted the inflation rate would be 2.75 per cent. The reality has ended up being around 4.25 per cent.

The budget is predicting wages will only be just higher than inflation in the next couple of years, meaning cost of living pressures are unlikely to ease any time soon.

Despite current price hikes, the budget is forecasting inflation will taper off and wages will grow faster by the middle of the decade.

Buried under the wildly exciting headline of Commonwealth’s Deregulation Agenda, is the $19.9 million spend by the Australian Bureau of Statistics to develop a new reporting application to enable businesses to submit surveys on business indicators directly through their accounting software. Excellent. Real time reporting utilising verified data on the state of Australian business. Guarantee of Origin scheme, and the development of a Biodiversity Stewardship Trading Platform to support farmers to undertake biodiversity activities ahead of the introduction of a voluntary biodiversity stewardship market.

Another $148.6m is for the development of community microgrids and just over $50m to develop gas infrastructure projects.

An additional $652.6m has been set aside to extend the ATO’s Tax Avoidance Taskforce by 2 years to 30 June 2025.
In that time, the taskforce is expected to increase receipts by $2.1bn and increase payments by $652.6m.

Just prior to the Federal Budget, the Government announced the extension of the:

  • Boosting Apprenticeship Commencements wage subsidy, and
  • Completing Apprenticeship Commencement wage subsidy.

    Any employer (or Group Training Organisation) who takes on an apprentice or trainee up until 30 June 2022 can gain access to:
  • 50% of the eligible Australian Apprentice’s wages in the first year, capped at a maximum payment value of $7,000 per quarter per Australian Apprentice,
  • 10% of the eligible Australian Apprentice’s wages in the second year, capped at a maximum payment value of $1,500 per quarter per Australian Apprentice, and
  • 5% of the eligible Australian Apprentice’s wages in the third year, capped at a maximum payment value of $750 per quarter per Australian Apprentice.

From

7:30pm AEDT, 29 March 2022 until 30 June 2024

The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses on external training courses provided to employees. The deduction will be available to small business with an aggregated annual turnover of less than $50 million. External training courses will need to be provided to employees in Australia or online, and delivered by entities registered in Australia.
Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees.
We assume there will need to be a nexus between the employee’s employment and the training program undertaken for the boost, although we are waiting on further details of this initiative to be released. 
The boost for eligible expenditure incurred by 30 June 2022 will be claimed in the tax return for the following income year (that is, the 2023 tax return). The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2024, will be included in the income year in which the expenditure is incurred.

From

1 July 2021

As previously announced, workrelated COVID19 test expenses incurred by individuals will be made tax deductible. 
Changes will also be made to ensure that FBT will not be payable by employers if they provide fringe benefits relating to COVID19 testing to their employees for workrelated purposes.
The changes for deductions will be effective from 1 July 2021, with the FBT changes to apply from 1 April 2021.
At this stage it is not entirely clear whether the deduction rules will cover expenses incurred where the employee is able to work from home. The initial media release indicates that the measure will cover situations where the individual has the option of working remotely, while the Budget only refers to costs of taking a COVID-19 test to attend a place of work but doesn’t specifically refer to employees who can work from home.

From

1 July 2022

Back in the 2019-20 Budget, the Government announced that Australian Business Number (ABN) holders would be stripped of their ABNs if they failed to lodge their income tax return. In addition, ABN holders would be required to annually confirm the accuracy of their details on the Australian Business Register.


This measure has been deferred for 12 months, which means that the tax return lodgement obligation is due to commence from 1 July 2022 with the annual confirmation of ABN details to commence from 1 July 2023.

As announced prior to the Budget, the Government will commit $6.6 million for the development of IT infrastructure that will enable the ATO to share Single Touch Payroll (STP) data with State and Territory Revenue Offices on an ongoing basis. 

The funding will be deployed following further consideration of which states and territories are able and willing to make investments in their own systems and administrative processes to pre-fill payroll tax returns with STP data in order to reduce compliance costs for businesses.

The measure that enables payments from certain state and territory COVID-19 business support programs to be treated as non-assessable non-exempt (NANE) income has already been extended until 30 June 2022. 
The Government has announced that the following state and territory grant programs have been made eligible for this treatment since the 2021-22 MYEFO, although it is not clear whether the relevant legislative instruments have been issued as yet:

  • New South Wales Accommodation Support Grant 
  • New South Wales Commercial Landlord Hardship Grant 
  • New South Wales Performing Arts Relaunch Package 
  • New South Wales Festival Relaunch Package 
  • New South Wales 2022 Small Business Support Program 
  • Queensland 2021 COVID 19 Business Support Grant 
  • South Australia COVID 19 Tourism and Hospitality Support Grant 
  • South Australia COVID 19 Business Hardship Grant.

    This builds on the list of existing grants paid by New South Wales and Victoria that can already qualify for NANE income treatment. 

From

1 January 2024

As announced prior to the Budget, businesses will be able to report Taxable Payments Reporting System data via their accounting software on the same lodgment cycle as their activity statements.
The measure is expected to reduce the costs of complying with the system and increase transparency.

From

1 January 2024

As announced prior to the Budget, companies will be able to choose to have their pay as you go (PAYG) instalments calculated using current financial performance, extracted from business accounting software, with some tax adjustments. 
The move is intended to ensure that instalment liabilities are aligned to the businesses cashflow. In addition, the digitisation of PAYG instalments will improve transparency and provide more accurate data on performance. 

From

2022-23 income year

Normally, GST and PAYG instalment amounts are adjusted using a GDP adjustment or uplift. For the 2022-23 income year, the Government is setting this uplift factor at 2% instead of the 10% that would have applied. 

The 2% uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods for instalments for the 2022-23 income year and are due after the amending legislation comes into effect:

  • Up to $10 million annual aggregated turnover for GST instalments and 
  • $50 million annual aggregated turnover for PAYG instalments 
From 7:30pm AEDT, 29 March 2022 until 30 June 2023
The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud based services. The technology boost will be available to small business with an aggregated annual turnover of less than $50 million.An annual expenditure cap of $100,000 will apply to the boost. The boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year. The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2023 will be included in the income year in which the expenditure is incurred. That is, the additional deduction available under this measure is expected to be claimed in the 2023 tax return.  

The temporary 50% reduction in superannuation minimum drawdown requirements for account-based pensions and similar products has been extended to 30 June 2023. 


Minimum superannuation drawdown rates 2019-2023

Age 

Default minimum drawdown rates (%) 

Reduced rates by 50% for the 2019-20 to 2022-23 income years (%) 

Under 65 

65-74 

2.5 

75-79 

80-84 

3.5 

85-89 

4.5 

90-94 

11 

5.5 

95 or more 

14 

 

From

1 July 2024


Trust and beneficiary income reporting and processing will be digitalised with all trusts being provided with the option of lodging income tax returns electronically.

While this measure will reduce compliance costs, it will also increase transparency and provide the ATO with a greater insight into where anomalies are occurring.

From

1 July 2021

The Medicare levy low income thresholds for seniors and pensioners, families and singles will increase from 1 July 2021.

 

2020-21 

2021-22 

Singles 

$23,226 

$23,365

Family threshold 

$39,167 

$39,402

Single seniors and pensioners 

$36,705 

$36,925

Family threshold for seniors and pensioners 

$51,094 

$51,401

 
For each dependent child or student, the family income thresholds increase by a further $3,619 instead of the previous amount of $3,597. 

The Home Guarantee Scheme guarantees part of an eligible buyer’s home loan, enabling people to buy a home with a smaller deposit and without the need for lenders mortgage insurance. The Government has extended two existing guarantees and introduced a new regional scheme.

Just prior to the Budget, the Government announced:

  • First Home Guarantee – from 1 July 2022, an increase from 10,000 to 35,000 guarantees to support eligible first homebuyers to purchase a new or existing home. 
  • Single parent Family Home Guarantee – 5,000 guarantees each year from 1 July 2022 to 30 June 2025. The family home guarantee supports eligible single parents with children to buy their first home or to re-enter the housing market with a deposit of as little as 2%.
  • Introduction of a Regional Home Guarantee. This guarantee will support eligible citizens and permanent residents who have not owed a home for 5 years (including non-first home buyers) to purchase or construct a new home in regional areas with a minimum 5% deposit areas (subject to the passage of enabling legislation).

From

April 2022

A one-off $250 ‘cost of living payment’ will be provided to Australian resident recipients of the following payments and concession card holders:

  • Age Pension 
  • Disability Support Pension 
  • Parenting Payment 
  • Carer Payment 
  • Carer Allowance (if not in receipt of a primary income support payment) 
  • Jobseeker Payment 
  • Youth Allowance 
  • Austudy and Abstudy Living Allowance 
  • Double Orphan Pension 
  • Special Benefit 
  • Farm Household Allowance 
  • Pensioner Concession Card (PCC) holders 
  • Commonwealth Seniors Health Card holders 
  • Eligible Veterans’ Affairs payment recipients and Veteran Gold card holders.

    The payments are exempt from taxation and will not count as income support for the purposes of any income support payment. An individual can only receive one payment.

From

1 July 2021 to 30 June 2022

The low and middle income tax offset (LMITO) currently provides a reduction in tax of up to $1,080 for individuals with a taxable income of up to $126,000.

The tax offset is triggered when a taxpayer lodges their 2021-22 tax return.

For the 2021-22, the LMITO will be increased by $420 which means that the proposed new rates for individuals are as follows:

 

Taxable income 

Offset 

$37,000 or less 

$675

Between $37,001 and $48,000 

$675 plus 7.5 cents for every dollar above $37,000, up to a maximum of $1,500

Between $48,001 and $90,000 

$1,500

Between $90,001 and $126,000 

$1,500 minus 3 cents for every dollar of the amount above $90,000 

From12.01am 30 March 2022

There are a few jokes going around social media about the price of fuel.

As widely predicted, the Government will temporarily reduce the excise and excise-equivalent customs duty rate that applies to petrol and diesel by 50% for 6 months from Budget night. That is, the current 44.2 cents per litre excise rate will reduce to 22.1 cents per litre from Budget night. However, the measure is subject to the passage of the enabling legislation so don’t expect to see a change right away. 

 The reduction extends to all other fuel and petroleum based products except aviation fuels.

At the conclusion of the 6 months on 28 September 2022, the excise and excise-equivalent customs duty rates revert to previous rates including any indexation that would have applied during the 6 month period. 

The Australian Competition and Consumer Commission (ACCC) will monitor the price behaviour of retailers to ensure that the lower excise rate is passed on to consumers.

The measure comes at a cost of $5.6bn.

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