What is the point of having strong numbers and having all of your financial ducks in a row?
Primarily, it's having effective cash flow. Without that, your business will cease to exist. When you can clearly see the numbers, you can save time, know how much to pay and when. You'll also know how much to put aside to future proof your business, all of which will reduce stress.
Being proactive is where it's at and with strong accounting practices, you will be ahead of the curve; ensuring that you're on the right side of the law, keeping the tax man at bay and your business ethically strong.
Legislation is constantly changing and to have a qualified professional is essential.
So let's demystify what you need to know about your accounting and what actually makes up strong accounting practices.
Let's Talk Business Structuring
Business Set Up
Businesses come in all shapes and sizes and all have to start somewhere. So when we talk about setting up your business, we are referring to the following:
Let's Talk Applications
When setting up a new business or entity, more often than not, the following applications are all part of the process.
So as part of a business set up with you, we will:
Let's Talk Business Governance and Compliance
Corporate Governance and Compliance
In a nutshell, corporate governance refers to a framework of procedures, policies, and rules that are used to determine the overall performance and direction of a Company and is used by management to ensure directions, instructions and strategies are carried out effectively. The rules for Australian Companies are listed in their Constitution and for Trusts, in their Deeds.
On the other hand, compliance is a term used to describe the process through which businesses showcase they’ve conformed to requirements in contracts, regulations, policies, and laws.
In relation to us, this means that we act as your agent with the ASIC on behalf of your Company including checking and forwarding your annual review.
And for Companies and other business entities that hold a business name, we monitor your renewals and forward these on also.
We act as your Registered Office - we hold and maintain your Company or Trust Register and our office at 42 Manilla Street in East Brisbane is open during the ASIC's nominated business hours. When you need to change your address/es, members or shareholders details, we update this for you including preparing meeting minutes and relevant ASIC and ATO documentation.
And of course, we prepare your Tax Returns, activity statements and other statutory documents for lodgement with the ATO.
In short, we make your Company and business governance and compliance simpler by managing much of it for you and ensuring you understand your obligations as a Director of a Company or business owner.
End of Year Compliance
When setting up a new business, you may not be aware that after the end of each financial year (generally 30 June), your business will need to prepare an income tax return, and depending on the entity type, a set of financial statements. We do believe that financial statements for all businesses are best so as to provide clarity to all relevant parties as to how the business has operated over the year, for showing future stakeholders the business performance over time and to mitigate disputes.
While Financial Statements aren't usually required for Sole Traders, if you intend to sell your business down the track, transfer to a different entity structure or sometimes even go for finance, it's often better to have these prepared for you. Secondly, if you use a software package like Xero for financial management, we can prepare these fairly easily.
You might not think about this when starting your business, but monthly management reporting is a must - not for any government department, but your own peace of mind and to understand how your business is operating and whether or not it is performing to budget. To that effect, budgets are also key players in ensuring you are meeting targets of income and expenses and overall cash flow management. You don't want to be caught out by not having enough funds in the bank to cover bills, wages, superannuation or taxes - so keeping on top of where it's all going and putting funds aside as you go, it's vital to the health of your business.
Let's Talk Preparation and Lodgement
Income Tax Returns
Everyone with a Tax File Number - individuals & businesses alike - must lodge a tax return each year to declare their taxable income and expenses and finalise the income tax that gets paid to the ATO - this can result in a refundable or payable amount of tax. Some are easy, some are more difficult and more often than not, no two tax returns are the same.
For individuals, to simplify preparing your tax return, we ask you to go through our checklist and collate as much information as possible, we learn about your role/s at work and the industry you are in so as to assist in maximising the deductions relevant to your circumstances.
For those with investment properties without a depreciation report, we use BMT Tax Depreciation Specialists and you can fill in your information to obtain a quote directly with them from our Depreciation page.
For those operating business, we need access to your financial software (or invoices & receipts if you don't have any - though, we prefer it to not be in a shoebox) in order to review the information and ensure that it meets accounting and taxation standards and can report as accurate information as possible. From the information, we prepare your financial statements and your income tax returns.
For individuals associated with businesses, such as beneficiaries of trusts, we process the business accounts first, then the individuals.
Fringe Benefits Tax (FBT)
You might not know about this lurker, but if you provide entertainment (such as food or drink, tickets to cinemas or events, a night out on the town or regular team lunches), let employees take the business vehicle home overnight, provide parking on-premises or at a paid park facility for your employees, pay for their home internet or personal mobile phone bills or pay for their private health insurance - well, you might be providing an extra benefit to your employees. These types of expenses might attract an additional tax known as fringe benefits tax and it's a curly one. Oh, and the period for FBT is not our standard financial year, it's 1 April to 31 March!
Business Activity Statements (BAS)
As many business owners are aware, a BAS is used to report the sales and expenses and their associated GST for a period (usually quarterly, but can be annually or monthly) and if paying employees, to report their gross wages and PAYGW. It may also be used to prepay income tax via PAYG Instalments which is offset in the income tax return at the end of the year.
Instalment Activity Statements (IAS)
An IAS is generally used to report the gross and PAYGW on a monthly basis. It can also be used to prepay income tax where there is no obligation to report GST but there is obligation to pay income tax.
STP Finalisation (EoFY Payment Summaries)
Single Touch Payroll aka STP is the new method of reporting payroll information to the ATO every pay run. However, at the end of each financial year, the information lodged throughout the year needs to be confirmed and then finalised with the ATO which replaces Payment Summaries (the old Group Certificates).
Taxable Payments Annual Report (TPAR)
Taxable Payment Annual Report primarily relates to payments made throughout the year to contractors in the following industries and due by 28 August each year:
Contractors can include subcontractors, consultants, and independent contractors. They can be operating as sole traders (individuals), companies, partnerships, or trusts.
This information is used to identify contractors who haven't met their tax obligations. See
our related post
around 'cash in hand' payments because if the contractors aren't providing legitimate invoices, there are steps you need to take such as
withholding amounts from their invoices and paying it to the ATO.
Managed by the States and Territories themselves, Payroll Tax is usually levied when businesses pay above a weekly, monthly, or annual threshold set by the States and Territories. As soon as you go over one of the thresholds, you generally need to register with the relevant State or Territory. If you employ staff including contractors across multiple States or Territories, you need to track their wages as while you might be under the threshold in one State but you may have exceeded it in another and need to report in that State or Territory.
2020 - the year that something that we could not see with the naked eye takes modern day business to a whole new level and the Australian Government steps up to assists as many businesses as possible by providing a cash flow boost and a wages top up known as JobKeeper.
Business life hit the fan, drastic changes were made by governments on a daily basis and we, along with everyone else, were bombarded with information and sent into a whirlwind. If the accountants and bookkeepers who are used to reading legislation and related factsheets felt overwhelmed by the constantly changing legislations, explanatory memorandums and ATO guidance documentation - then everyone else is just as overwhelmed.
And as no one business is alike, we review all the documentation on a case by case basis to see how it relevant to you, whether you are eligible for the boosts and JobKeeper payments and if you request, lodge the monthly turnover and projected turnover figures with the ATO.
Let's Talk Liaison with the Tax Office
Being able to speak the same language as ATO is going to save you a lot of bother and heartache. It's an environment full of technical talk that for the uninitiated, can be intimidating, and let's face it, often times bamboozling. As accountants, we will negotiate the ATO processes, weaving in and out of their jargon with ease, whilst ensuring that your interests are forefront. It's often the influence of a financial professional that ensures swift action when implementing lodgements, objections and appeals.
Let's face it, talking to ATO can sometimes be a bit scary and having someone in your corner to knock down those walls between you and ATO
is going to give you the security and support you need and interpret what the realities truly are.
If all of this seems a bit overwhelming, which we know it can be, we are here to help whether it's as your Financial Concierge or your everyday accountant and tax agent. So go on,