Work Related Expenses Headed For Shake-Up

The upcoming Federal Budget could see work-related expenses claims replaced with standard deductions, in light of the ATO’s castigation of excessive claims in recent months.

The ATO’s campaign against excessive claims have been led by commissioner Chris Jordan, who has publicly lashed out at tax agents for “not fulfilling their duty” after the tax office’s random enquiry program had found that incorrect claiming was worst in agent prepared returns.

Further, the Tax Office’s public statements, speeches and cautions to tax professionals has been backed by the Tax Practitioners Board, which has reminded tax agents to remember their obligations as set out in the Code of Professional Conduct.

Speaking to Accountants Daily, HLB Mann Judd partner, Peter Bembrick, said there has been talk in the industry over the possibility of the ATO adopting a standard deduction, similar to the system used by the Internal Revenue Service (IRS) in the US.

“There have been comments by the commissioner that people are over-claiming in work-related deductions and they are claiming things that are unsubstantiated so if you went to a system like in the US where there is a standard deduction limit, say something like $500, and if you think you’ve spent more and you’ve got the receipts and records to prove it, then by all means claim more, but if you don’t, just claim the $500 and then forget about claiming any other expenses,” said Mr Bembrick.

“There will be one area which will simplify compliance for a lot of people

“The problem we have is that we have the $300 limit in terms of substantiation where there are a lot of people out there that think they are allowed to collect $300 without receipts, which is true but it’s meant to be for really small items and work-related deductions that you have actually spent. If you get a tax audit you’re meant to explain what it is.”

Mr Bembrick further believes a move to a standard deduction would help the ease the ATO’s workload, while simplifying the process for taxpayers.

“With a standard deduction, the ATO doesn’t have to spend any resources analysing because it is in the law and you can make an automatic claim,” said Mr Bembrick.

“It would be a win for people who aren’t claiming anything but it would certainly simplify the process and maybe take a bit of the heat out of the whole issue of work-related deductions because I’m sure the ATO has plenty of other things to focus on.

“That’s one thing that has been mentioned and it is perhaps feasible — I’m not sure what the revenue impact would be in terms of tax collections but more of easing the compliance burden perhaps.


Mr Bembrick’s comments echo those of the Institute of Public Accountants’ general manager of technical policy, Tony Greco, who said “we should consider ourselves lucky” if changes to work-related deductions were avoided in the budget.

“Treasury has been briefed with the results of ATO audits, so the government will be armed with statistics to justify a change in the work-related expenses rules to tighten them and put savings towards tax cuts for all as a possible carrot,” said Mr Greco.

“Australia has one of the most generous work-related expenses tax frameworks, so if we dodge the bullet come the next federal budget we should consider ourselves lucky indeed.”

Scams Targeting ASIC Customers

Scammers pretending to be from ASIC have been contacting Registry customers asking them to pay fees and give personal information to renew their business or company name.

These emails often have a link that provides an invoice with fake payment details or infects your computer with malware if you click the link.

Warning signs the email is not from ASIC.

An email is probably a scam and is not from ASIC if it asks you:
to make a payment over the phone
to make a payment to receive a refund
for your credit card or bank details directly by email or phone
Here is an example of a scam email from 11 April 201.

If the email you received contains the above information, it is not from ASIC.

How do I protect myself from email scams?

To help protect yourself:
keep your anti-virus software up to date
be wary of emails that don’t address you by name or misspell your details and have unknown attachments
don’t click any links on a suspicious email.
You can also check your registration renewal date; ASIC will only issue a renewal notice 30 days before your renewal date. You can search for your business name on our register and if it’s outside our usual timeframe, it might be a scam.


How do I notify ASIC of a potential scam?

If you would like to notify ASIC of a potential scam email, you can forward the entire email to ReportASICEmailFraud@asic.gov.au.

ATO Extends Due Date For 2016/17 SMSF Returns

The ATO will extend the due date for lodgement of self-managed superannuation fund (SMSF) annual returns for 2016/17 to 30 June 2018.

Deputy Commissioner James O’Halloran said “We recognise there are some major new considerations and decisions for SMSFs and their advisers to make in this first financial year of operation of the superannuation reforms that came into effect from 1 July 2017.

“We have therefore decided to extend the lodgement date for 2016/17 SMSF annual returns so that SMSF trustees and their advisers can focus on these important matters.

“We have heard from many professionals that their current focus is on providing important advisory services to their SMSF clients to ensure they are in the best position to make decisions to take into account some of the recent superannuation reforms including eligibility for transitional capital gains relief.”

The extended lodgement time frame therefore means that all SMSFs who are eligible for transitional CGT relief as a result of the $1.6 million transfer balance cap will have additional time to consider and make relevant elections before the due date for lodgement of their 2016/17 SMSF annual return.
Because the extended due date of 30 June 2018 falls on a Saturday, in accordance with relevant administrative provisions of the tax laws, lodgement of 2016/17 SMSF annual returns can made on the next business day, Monday 2 July, without penalty.
General advice disclaimer

General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.]

Ref: ATO media release, 19 January 2018

5 money mindsets that hold you back

What’s holding you back from taking control of your financial future? Discover the five mind tricks that can stop you from achieving financial success and what you can do to avoid them.

Fear of Failure

Earning and saving money from your salary is all very well. But setting up an alternative income stream from an investment portfolio can help you make the most of your personal wealth potential. So, what is it that holds people back from taking their first steps into investing? According to recent surveys, 70% of millennials would rather keep their savings in cash1 instead of investing it and getting the benefit of compound interest. And one of the main reasons for their reluctance is their fear of losing what little money they have.

Fear is certainly one of the biggest reasons for avoiding the risks, large or small, that come with investing money. And no-one has a magic wand to eliminate these risks altogether. But with advice from a professional who understands your financial circumstances and goals, you can get off to a successful start in investing that builds your confidence as well as your wealth.

Waiting for wealth

It’s all too easy to just wait for someone else to sort out your financial future. You might keep saying that you’ll start building your savings and wealth when that golden goose lays its egg for you. And that egg you’re counting on – whether it’s a higher salary, bonus or redundancy payout for your employer or a gift or inheritance from your family – may never arrive.
If this is the fairy story you’ve been telling yourself, it’s time to rewrite it with yourself as the hero. By sticking to a budget, coming up with your most important goals and creating a financial plan to help you reach them, you’ll soon become your very own golden goose.

The high price of inertia

We’re all busy people and we all have a comfort zone. And that’s why inertia can so often stand in the way of spending less and saving more. In fact, inertia is considered, such a big problem for personal financial security in the UK that a new Institute of Inertia has been established at the University of Sheffield to study behaviour that’s estimated to cost the nation £7.6 billion2.
Inertia can mean spending more than you need to on your energy or grocery bills. It could also be stopping you from tracking down lost super and/or bringing together all your super savings in a single fund to save on fees. Or it could mean sticking with the same mortgage when you could be saving thousands in interest by switching. Whatever it is that you’re not getting around to doing to save money, having a financial coach – personal or professional – can keep you accountable in taking small steps towards big savings.

The lifestyle inflation trap

The “earn more, spend more” phenomenon has been dubbed “lifestyle inflation” and it’s something that can really get in the way of preparing for a better financial future. The dangers of behaviour that comes from lifestyle inflation are twofold. The first is what’s known as the Diderot effect3. This happens when you buy something new, stylish and beautiful and it makes all your other stuff seem shabby and old. So, you start to replace everything else as well.

The second issue is your new level of wealth can’t last forever. Even if you keep earning more a time is going to come when you’ll stop. We call it retirement and if you’re not saving and planning for it, the fall in your spending and standard of living is going to be very steep indeed. So, if you’re finding it hard to save even when you’re earning more, try looking in to the future and imagining how much you’ll be enjoying life when you must budget carefully to pay for food and other essentials, let alone buy anything new.

Winging it won’t work

Leaving your finances to chance won’t bring you the peace of mind that comes with prosperity. Having the money to back future choices – for your career, family and lifestyle – isn’t going to happen by accident. People who make it look easy have probably put in quite a lot of time and effort to ensure they’re in a good place financially.

If you’re naturally a happy go lucky kind of person you’re probably well-liked for your carefree generosity. Especially when you’re the first among your friends to open your wallet and pay the lion’s share of the bar or restaurant bill. Sticking to a budget doesn’t have to mean being stingy. It’s more a case of picking and choosing your generous moments so you can still cover your day-to-day expenses and put some of your money towards providing for your future.

Whatever obstacle you’re trying to overcome on the path to financial success, a financial planning professional can offer valuable advice on making changes to get you in control of your finances.

Contact us today for a free initial meeting with us, and we will give you a plan to make your business worth a lot more when you decide to eventually sell it.

Source: Financial Planning Association Money & Life

1. Nerdwallet, “Fear keeps millennials on investing sidelines”, Brad Sherman, 2 August 2016, https://www.nerdwallet.com/blog/investing/millennials-fear-investing/?trk=nw-wire_305_283020_24452

2. The University of Sheffield, “Britain’s psychological inertia contributes to ‘financial hardship’”, 23 September 2015, https://www.sheffield.ac.uk/news/nr/psychological-inertia-contributes-to-financial-hardship-1.510235

3. Lifehacker, “The ‘Diderot Effect’ Turns You into A Weak, Mindless Consumer,” Kristin Wong, 16 September 2015, https://www.lifehacker.com.au/2015/09/the-diderot-effect-turns-you-into-a-weak-mindless-consumer

General advice disclaimer
General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.

The 2 Key Things That Can Affect Your Business Value

How can you make your business worth a larger amount when you want to sell it?

Before we answer this question, remember: your business will only be worth what someone else is willing to pay for it.

So, you may think it is worth $1 million, but if your best offer is only $500,000, then $500,000 is realistically what your business is worth.

How can you attract a buyer and get them to pay the price you want?

A basic business value formula

Most small and medium sized businesses are valued using a business valuation method known as the “Capitalisation of Earnings” method.

This valuation technique works by taking the earnings (before interest and tax – referred to as EBIT) of a business and multiplying them by what is known as a multiple.

Business Value = Earnings before Interest and Tax (EBIT) x Multiple.

Working out the appropriate multiple is often the most difficult thing to agree on when valuing a business. For most of small and medium sized businesses, the multiple would be between 1 and 5.

For example: A business making an EBIT of $200,000 is assessed by an accountant to have a multiple for sale purposes of 3.

Business value = $200,000 x 3 = $600,000.

How to increase business value

Using the above valuation technique, there are 2 ways to increase your business value.

1. Increase EBIT; and/or

2. Increase the multiple
Increasing EBIT is all about your business making higher profits by increasing revenue and possibly by decreasing expenses.

Increasing the multiple involves making your business less “risky” to the buyer.

Why?

What the buyer is buying is a cashflow from your business into the future. If you can clearly demonstrate to the buyer that this cashflow is strong, is not expected to stop, and is expected to increase over time with business growth – then the multiple you can ask for will be higher.

Here’s a few things that will lead to less risk for your business, and therefore should lead to a higher multiple when you sell your business:

• Proper systems so the business can work without the business owner having to be there.

• Prove to the buyer the future growth of the business

• A diverse, expansive customer base (so the business doesn’t just rely on a few key customers)

• Contracts with key suppliers that will continue after the business is sold.

This information is just a general starting point to help you understand how to make your business worth more.

But…

It doesn’t happen overnight. You need a 3 to 5 year plan to properly do everything needed to have your business sale ready.

Our expert accountants have had huge experience in this area.

Contact us today for a free initial meeting with us, and we will give you a plan to make your business worth a lot more when you decide to eventually sell it.
General advice disclaimer
General advice warning:


The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.]

Business owners – what is your end game?

Why do you own a business?

It’s interesting to consider this because we are shocked at how many business owners haven’t taken the time to consider this fundamental question.


From a big picture perspective, having a business provides you with a lifestyle. That’s it!

It gives you cash now to fund your family spending, and hopefully a lot of cash in the future when you sell your business.

And it’s very similar to having a Self Managed Super Fund (SMSF), an investment property or share investments. They give you cash either now or in the future, or a combination of now and future.

Having a business, SMSF or an investment property is not the important thing. The important thing is what the cash you receive from owning these allows you and your family to do.

Your plans for what you do will do with your business, SMSF or investment property in the future are what we call your ‘end game’.

A good business mentor and friend of mind once taught me that “the point of having a business is to sell it – even if you don’t want to right now.”

This one pearl of wisdom could mean hundreds of thousands or even millions of dollars more for you in the future if you let it guide you now.

Here’s how… as you run your business, start to make decisions now to plan for selling it – even if you don’t plan to sell it for many years.

The biggest thing you can do is to make changes so that your business does not depend on you. If your business needs you to operate – can you really sell it? Absolutely not.

Setting up systems for your business is the key. You can them train your team to follows your systems, and then you can gradually delegate what you do to the right team members, and then you’ll find that you’ve got a business that can partially run without you.


Would you like us to be your sounding board?

As your accountants, we can help you to work out your end game, and plan to have a business that you can sell for a much larger amount in the future because it doesn’t depend on you.

Contact us today for a free initial meeting about creating your end game.

Next month, we’ll explain the 2 key things that affect the valuation of your business, and how you can improve your business value in a future sale.


General advice disclaimer
General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.

Keeping your Business Alive

What’s your strategy to keep cash flowing through your business?

High sales and consistent profits are great aspects to have in your business, but without cash rolling in regularly you won’t be able to pay your suppliers, staff, even yourself! Give yourself some security by preparing a Cash Flow Forecast for your business.

What is a Cash Flow Forecast?

A cash flow forecast is a projection of all of your income and expenses for your business over the next 12 months, with an emphasis on when the cash from the income and expenses will be received and sent. This includes when your income locked up in Debtors will be received and when your Creditors will need to be paid.

Once you prepare your 12 month cash flow forecast you will be able to spot weaknesses in the year and plan for it. By taking a proactive approach and planning ahead means you can start making changes now to help you through those tight periods, such as introduce tighter credit policies with your customers or acquire a line of credit to help you through the period in the future.

What’s even better is banks love them! Are you looking to lease some new equipment? If you are looking for finance it’s going to be easier for the banks to approve you if they can see you have capacity to make loan repayments.

Would you like security in your business this year? Are you interested in preparing your own forecasts for the year?

If you would like Select Accounting to prepare a 12 month cash flow forecast for your business give us a call on 02 4337 5155

What can I claim against my tax?

What can I claim against my tax?

It’s tax time again. What can you claim to reduce your tax?

Please take just 2 minutes to read this blog article. We’ll explain:

• Deductions you can claim

• The importance of a fantastic tax accountant

• The “tax trap” you need to avoid

• Links to more information about specific deductions

Deductions you can claim

According to the Australian Taxation Office (ATO) website, there are 3 things you need to claim a work-related deduction:

1. You must have spent the money yourself and weren’t reimbursed;

2. It must be directly related to earning your income; and

3. You must have a record to prove it.

The ATO allows you to claim up to $300 for work related expenses without having kept any receipts – but you must have spent the money and it must be related to your employment.

If the expense was for both work and private purposes, you can only claim a deduction for the work-related portion.

If the cost of any item is over $300, it will have to be depreciated (a portion of the cost claimed each year over its effective life).

The importance of a fantastic tax accountant

Many accountants seem to be working for the ATO. Instead of trying to maximise what you claim, they’re often too scared of upsetting the ATO rather than fighting to get you the largest legal tax deductions.

Rather than using an accountant who “works for the ATO” – use an accountant who works in your best interest.

At Select Accounting – we’ll help you to claim every last dollar you can, and make sure you stay out of jail by not claiming anything you shouldn’t. Our team are aware of everything you can and can’t claim and what you should do this year to give you a bigger tax refund next year.

Our extraordinary accountants are all highly trained specialists at legally reducing your tax – so talk with us today!

The “tax trap” you need to avoid


Everyone wants to increase their tax refund (or reduce their tax payable). We’re here to help you to do this!

Tax saving strategies generally involve you spending money on “something” which creates for you a tax deduction. The “something” you spend your money on could be an expense, an asset, or an investment related payment (like superannuation or prepaid interest on an investment loan).

However – please don’t fall into a common trap of spending money just to get a tax deduction. You only save tax based on the marginal tax rate proportion on the amount you spend, NOT the full amount you spend.

For example, if you earn say $85,000 a year, your marginal tax rate (including Medicare levy) is 34.5%. This means any extra dollar you earn will be taxed at 34.5%, and any extra dollar you claim as a deduction will save you 34.5%.

So, if you spend $100 on something that you can claim a deduction for, you will get back $34.50 from the ATO. But it will still cost you $65.50. So only spend money on what you NEED, not just to create extra tax deductions for yourself.

We are here to help!

To make an appointment with us to discuss and prepare your 2017 Tax Return please do not hesitate to contact us
02 4337 5155 or via email info@selectacc.com.au.

General advice disclaimer
General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.

We’re a lucky country, but will you have enough for retirement?

If you were to watch the news recently (by recently I mean in the last 2 decades) you would think that Australia maybe about to lose its ‘Lucky Country’ tag. However research released by Credit Suisse Research Institute has Australia fairing very well in the wealth rankings.

The richest nations in the world are classed as those with a wealth per adult figure of over USD 100,000. Below is a table ranking these nations in order of wealth per adult.

Rank        Nation          Avg. wealth per     Change since mid-2013

                                    adult (in USD)
1              Switzerland  581,000*               10.5%

2              Australia      431,000                 5.0%

3              Norway        359,000                 4.0%

4              USA             348,000                10.6%

5              Sweden       333,000                 4.8%

6              France        317,000                 9.1%

7              Belgium       301,000                11.7%

8              Denmark     293,000                16.1%

9              UK               293,000                18.3%

10           Singapore    290,000                  2.0%

*Dollar appreciation and strong equity performance has resulted in this significant increase and new world record for the Swiss.

Australia is placed nicely in 2nd place, punching well above their weight. When you look at median wealth per adult, which gives an indication of wealth equality, Australia tops the list (as it has for the past 5 years) at USD 225,000.

So what does this mean?

It means that things are still pretty good here in Oz. With high wealth per adult and strong growth in household wealth it’s a good time to be in business.
With only 6% of all Australians with a net worth of less than USD 10,000, that equates to plenty of potential customers.

To Promote & Protect

Depending on your stage of life, having money coming in and compulsory superannuation tucked away for you, it’s important to know that you’re protected and that your future is secure.
Have you considered salary sacrificing into your super to maximize the compound interest effect before you retire?
Or you may already be well set up, are your assets protected?
Australia certainly still is the lucky country, however it’s never a good idea to rest on your laurels.


Source: https://publications.credit-suisse.com/tasks/render/file/?fileID=60931FDE-A2D2-F568-B041B58C5EA591A4

General advice disclaimer
General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.]

More Bang for your Buck

Start planning NOW to maximise your tax refund next year!

We do a lot of tax returns. One thing we constantly hear our clients say is “I didn’t know I could claim that!” or “I wish I had kept my receipts!”

What’s the best way to avoid disappointment at tax time? Start planning NOW.

To help our clients we’ve been giving them a report of what strategies they can implement to maximise their refund next financial year. Here are our top 3 strategies:

1. Keep a Log Book for your Motor Vehicle Expenses
If you use your motor vehicle for work make sure you keep a 12 week log book to work out the work % of your vehicle use. By doing this, you will be able to claim this % of all your expenses during the year including fuel, depreciation, insurance and registration.

2. Prepay the Interest on your Investment Loans
Your deductions are claimed in the financial year they are paid. Therefore, by prepaying the interest on any investment loans means you claim the deduction now instead of waiting to the following financial year.

3. Make sure you have Income Protection Insurance

Protecting your number one asset, your income, is extremely important. It’s also worth noting any premiums you pay outside of superannuation are tax deductible (and when you think about it, the tax refund you receive lowers the out-of-pocket cost of the premium).

Interested in getting More Bang for your Buck? Make sure you talk to us about planning now to maximise your tax refund next year.