How to boost your tax refund this year?

This one of the most popular questions during tax time.
If you don’t want to come to your accountant and ask the same question. Get ready for your tax returns this coming financial years to avoid “paying too much tax”

Here are the 5 tips to boost your tax refund

1) Declare your income

Your income statement will show the income you have earned through your employer(s). JobKeeper payments are treated as your normal taxable income from your employers and Centrelink respectively and will be included by the ATO in your tax return
Income protection, sickness and accident insurance payments, redundancy payments, leave payments are also included in your tax return
If you have received access to your superannuation due to Covid-19, you will not need to pay tax on these amounts and will not need to include these payments in your tax returns.
Tip: If you don’t include all your income, there might be a chance the ATO will pick it up and send you an amended Notice of Assessment with additional tax to pay plus interest. So it is important to include all your taxable income during the financial year.

2) Keep all tax receipts for work related expenses

You need receipts for tax deduction claims, you cannot claim tax without having adequate receipts, your tax deductions will be rejected, and you will end up paying more tax than you have to.
The best way is to regularly collect all your tax receipts, take photos and put them all in a folder ready to send to your accountant.
Tip: Think about it as your discounted voucher or cash rebate for what you have spent. It will give you more motivation to do it properly.

3) Make sure you claim all tax deductions

A rule of thumb is that if any expense relates to your earning income, then it will be likely tax deductible.
From general expenses e.g. Tax agent fees, income protection, private health insurance, donations
For work related expenses e.g. tools, professional membership fees, computer, phone, software etc..
And Home office expenses e.g. office equipment, desks, chairs, stationery etc.
Tip: If you are unsure of what you can claim, keep your receipts anyway so you can check with your accountant when you do your tax return.

4) High income earner? Obtain private health cover

if your income is more than 90k for single and 180k for family as you need to pay an extra 1% Medicare levy surcharge. It might be more expensive than a basic private health cover.

5) Find a tax accountant who is up to date with Tax Law

Tip: Treat the fee you pay your qualified accountant as an investment instead of a cost as the fee is usually low compared to what you might be missing out when you are unsure of what to claim in your tax return.

Managing your Business

Tips to Help your Business after Jobkeeper

With the winding down of the lockdowns, many businesses will have to take a hard look at their business financial affairs to decide whether they can continue to employ their current workforce or are even able to operate based on their expected revenue.

Here are 4 tips for continuing to manage your business:

1) Cashflow Planning for multiple scenarios

Business owners should work closely with their accountants to plan for their future cashflow.

My suggestion is to prepare multiple scenarios to capture different outcomes of your business performance over the next 12 months. What happens to your business if your revenue drops by 20%, 30% or even 40%? Can your business survive if you cut your staff by 20%, 30%, or 50%. What happens if some of your customers go bust or can’t afford to pay what they owe you etc..

The more Cashflow scenarios you prepare yourself, the clearer picture of your business Cashflow in the next 12 months you will have.

2) Take stock of your business financials

Take stock of your current financials and workforce situation. For some businesses, reducing your business wages is necessary to be able to stay afloat. If you have to go down that path, then carefully consider how, when and which roles need to be reduced or cut. It is important not to reduce or cut your key staff who have the skill sets, knowledge, and talents that are critical for your business.

Alternatively, reallocate your team’s working hours to do more productive work for your business like sales, business development and customer services and leave non-productive tasks like bookkeeping and data entry jobs to a back office bookkeeping firm.

Working closely with your accountant/bookkeeper to restructure and streamline your business operation by utilising effective sales, accounting, payroll, and inventory software to manage your revenue, employee time sheets, and stock level.

3) Understand your profitability and monitor your business performance

It is important to understand your profit margin and cost structures as only a portion of your revenue will convert into net profit. Because if you don’t, more sales could potentially send you and your business to the wall.

For example, to be able to win jobs, some businesses have been willing to reduce their price just to win jobs and keep the business running with the hope that the economy will bounce back and their business will be back to its glory days. Unfortunately, by reducing their price, they have inadvertently lost not only their profit but also their money by working on the jobs that lose money. Sadly, It is not long before they realise there is no cash in the business to pay wages, suppliers and tax even though they are still very busy with a long list of job orders.

Work with your accountant to find out what your break even point is, or even better, your pricing structure for your products or services and keep monitoring it to make sure you are not running your business into the ground.

4) Access capital and refinance to strengthen your business Cashflow

While cutting costs and business restructuring are important to your business Cashflow, being able to access more affordable finance options is another way to seek more capital funding and competitive repayment rates for your debt commitment.

Work with your accountant and a business finance broker to seek better finance options for your business or home loans.

Contact us here if you need to explore your finance options for your business. Our finance team is working closely with our accounting team to help achieve the best solutions for our clients.

Why your Bookkeeper needs to see those records

Under tax law, if you are operating a business you are required to keep ALL records explaining declared income and expenses, (i.e., tax deductions), whether it is a $5,000 sale or a $2.00 deduction, the ATO want to see some form of proof and also they may seek out inconsistencies.

These inconsistencies may be seen in sales invoice numbering, cheque numbers, cost of goods to total sales margins, travel expenses, motor vehicle claims and this list goes on. Don’t assume the ATO won’t look…

The ATO states:

To claim GST credits, you must have a valid tax invoice for the goods and services that you purchase for your business. However, you can claim GST credits for business purchases you make up to $82.50 without holding a tax invoice as long as you keep records that support the claim, (for example, cash register dockets or receipts).

You must have something to show proof of payment in order to claim an expense, even if it is less than $82.50.

Format of Records

You may keep records in paper or digital format. The same criteria apply for both:

The nature of the transaction must be clear
The document must be written in English and legible
The document can be easily accessed, printed or reproduced as needed
The documents are stored securely and are not altered or manipulated

How Long to Keep Records

Business records must be kept for a period of five years from the time your tax return is lodged.

Payroll records must be kept for seven years after the end of financial year.

Records you must keep:

Sales Records Including:

Sales invoices, vouchers or receipts
Cash register tapes and daily reports
Bank and credit card statements
Point of sale system records

Purchase Records Including:

Valid tax invoices
Purchase receipts or proof of payment
Cheque butts, bank and credit card statements
Electronic transfer information
Private usage workings

End of Year Records Including:

Asset and vehicle purchase records
Debtors and creditors lists
Inventory and Stocktake details
Depreciation schedules
Shares bought and sold

Payroll Records Including:

Employee details including full name, date of birth, address, phone number, date of commencement with employer, tax file number
Applicable modern award or other instrument governing employee entitlements and conditions, including job classification and description
Employment contracts and individual flexibility arrangements
Employment basis (casual, part-time or full-time), hours of work, rate of pay, allowances, loadings and other applicable payment amounts
Timesheets and rosters
Superannuation choice form
Termination records—type of termination, type of payments applicable, basis of calculations
Fringe benefits provided
Leave entitlement records

Other records such as:

Fuel tax credits calculations
Capital gains tax records
BAS amendments
BAS lodged with ATO
Business sale or purchase contracts and related documents
Business registrations and licenses

At Accounting Advisors we do more than prepare your BAS statements. With over 30 years experience and certified accountants on our team, we help you with all financial aspects of your small businesses. We can give you the right advice and information so you can make healthy decisions for your business.

Taxable Payments Annual Report

The Taxable Payments Annual Report (TPAR) is an industry-specific report through which businesses inform the ATO of the total payments made to contractors for services in that financial year. This information is then used by the ATO to match the contractors’ income declarations to improve their compliance efforts.

The ATO estimates that around 280,000 businesses are required to lodge a taxable payments annual report (TPAR) for the 2019–20 year, following the regime’s extension last year to businesses providing road freight services, information technology services, and security, investigation or surveillance services.

Businesses providing building and construction, cleaning, or courier services are also required to lodge a TPAR.

With the annual 28 August deadline now well overdue, the ATO has confirmed that more than 60,000 businesses have yet to lodge their TPAR, with failure-to-lodge penalties looming.

ATO assistant commissioner Peter Holt has urged these businesses to lodge immediately, noting that the taxable payments reporting system (TPRS) aims to create a level playing field for contractors.

“As any good tradie will tell you, the spirit level is a critical tool to ensure construction work is being done on the level,” Mr. Holt said.

“I like to think of the TPRS as a bit of a spirit level for tax obligations. Our role is to make sure the ‘bubble’ is centered as much as possible to keep things on the level and fair for everyone.”

Mr. Holt also believes that many more businesses might be captured under the TPRS for the first time ever after COVID-19 forced businesses to pivot to a delivery service model.

“Many restaurants, cafés, grocery stores, pharmacies and retailers have started paying contractors to deliver their goods to their customers,” Mr. Holt said.

“These businesses may not have previously needed to lodge a TPAR. However, if the total payments received for these deliveries or courier services are 10 per cent or more of the total annual business income, you’ll need to lodge.”

Bookkeeping Tip:

Always make sure you have the name, ABN and business address of contractors you employ. Additionally make sure you check the veracity of their ABN here https://www.abr.business.gov.au/ and don’t pay the contractor without a valid tax invoice matching their GST status on the ABR register.