What changes on 1st July will affect your business?

The only constant with our tax system is that it is ALWAYS CHANGING. With the new Federal Budget comes a bunch of changes, which may or may not affect your small business. Let’s take a look…

Superannuation Going Up

Contributions are going up, again

The “Superannuation Guarantee” (compulsory super contributions) was always meant to change from 9.25% to 9.5% on the 1st July and this is still happening – this change will not be changing. Apparently we are also still aiming for 12%, but the “schedule” has changed so that the (new) rate of 9.5% will remain fixed until 30th June 2018. It is supposed to then resume increasing by 0.5% every year after that. So far, we’ve only had the rate increase once (twice, if you include the change that’s about to happen) and the politicians have already fiddled with it, so let’s not be too surprised if this changes again NEXT year…

Will you need to update your accounting system or is it something like eLEDGER, which will automatically update this sort of thing for you, behind the scenes?

Deficit Levy Coming In

Starting on the 1st July will be yet another new tax – the (apparently three year) “Deficit Levy” will be imposed on anyone earning over $180,000 (per annum) at a rate of 2% (of each dollar you earn over $180k). So for example:2% tax on high income earners

  • You make $200,000 – you pay an extra $400 (2% of $20,000)
  • You make $300,000 – you pay an extra $2,400 (2% of $120,000)

This could affect small businesses operating as Sole Traders and Partnerships, like husbands and wives or a couple of mates who have started a business together and reinvest their profits into their business – if you haven’t already done so, you may need to review your salary packaging arrangements to keep those salaries under the $180,000 threshold.

Be careful with those salary packages – the government is also increasing the Fringe Benefits Tax rate to 49% on 1st April, 2015 (it already increased to 47% on April Fools Day, this year) so you may well be better off paying the 2% instead of creating a salary package which triggers the FBT!

Fuel Excise Going Up

petrol pump

Will you be hit at the pump?

In 2001 the government had cut the Fuel Excise Levy by 1.5c and frozen it “in perpetuity” at a rate of 38c per litre. The unfreezing of this federal excise will increase petrol prices twice a year in line with inflation, from 1st August 2014. It is expected to add around 2c per litre to the cost of fuel and keep going up from there. The Prime Minister recently admitted this is essentially the new government’s version of a “Carbon Tax”.

If your business is heavily reliant on company vehicles (which use petrol) then this could hit quite hard – it will certainly add to the already high cost of fuel you are paying, now.

Some Fiddling Around the Edges

The Medicare Levy will also be going up, from 1.5% to 2%,
on 1st July. As with changes to Super, you may need to update your accounting system if you aren’t using something like eLEDGER, which automatically makes these changes for you.

R&D

Less money for developing your product

R&D Tax Concessions will be going down by 1.5% – that’s less money to help you develop your product.

  • refundable offset will be 43.5%
  • non-refundable offset will be 38.5%

mature age worker

The Dependent Spouse Offset will be gone, as will the Mature Age Worker Offset – which will be replaced by a new incentive scheme called “Restart”. Details of this new scheme are a little thin on the ground at the moment, beyond that it will be “up to $10,000 to employers who hire a job seeker aged 50 or more who has been on income support for at least six months.” The Dependent Carer Offset will increase to a maximum of $2,535 per dependent.

Strictly speaking not a budget/tax decision, but the Fair Work Commission also recently announced its Wage Review, which will also come into effect 1st July. Notably the Minimum Wage will be increased from $16.37 per hour ($622.20 per week) to $16.87 per hour ($640.90 per week) – basically an extra 50c per hour. Leave loading will also be reduced from 75% to 50% on Sundays for (casual) bar, café and restaurant workers, starting in July. Other casual staff will be unaffected.

So… Are you going to have to madly scramble to rethink how you run your business – and possibly do that whole “Please Wait While New Updates Are Downloaded” thing with your accounting system – or are you going to be able to carry on, “business as usual” when this Financial Year ends and another one begins? To be fair, this year’s changes are relatively minor compared to some from past years – although there’s still the spectre of messing about with the GST looming in the shadows…

 

Sterling Smith

Sterling has extensive experience in important sounding stuff and something about his opinions and blablabla are you seriously reading this right now?

Is Keeping Track of Bank Records Actually Worth It?

No doubt you’ve heard about this wonderful new feature accounting packages like MYOB are now offering – Direct Bank Feeds into your accounts. It sounds like a good idea, right? You authorise them to talk directly to your bank and grab all your transactions on a regular basis and plug them directly into your accounting software, which of course means you don’t have to bother manually importing those records, yourself.

It sounds like it is saving you time – bank reconciliations can become a breeze and it can even match up your bank records against payment records in your ledger, usually requiring no more than a tick of approval that they found the right record. That’s obviously a lot easier than going through those records and matching them up yourself – it’s a no-brainer!

Here’s the thing…

When was the last time you actually did a bank reconciliation? Could you explain to a child why it is actually useful to do them? If you have an accounting background, I’m sure you have been taught the theory behind them and can rattle off a few ideas about “overdrafts” and bouncing cheques and so on… Maybe even the idea that your bank might make a mistake or someone could be stealing from you!

A good business manager understands that those kinds of risks are basically in the same category as being present during a bank robbery or locking your keys in the car. Sure, they’re not entirely impossible but they are far less likely to happen, in the modern age.

The problem is that those accounting principles you learned were developed in a far more industrial age where the word “computer” was used to describe someone you employed to do sums, using logarithms and a slide-rule.

 

Do you run your business like this?

Do you run your business like this?

Traditional accounting reports were developed to present an accurate view of a company to outsiders

The traditional accounting methods you are probably employing were developed in the early 1900’s to support companies with large batch production and high labour costs and inventory levels, not the plethora of small businesses which are so prevalent today. Worse still, traditional accounting reports were developed to present an accurate view of a company to outsiders – their purpose was to give someone an idea of how much your company was “worth”, rather than help you actually manage the business…

Skip to present day and even the most “cutting-edge” accounting products for small business, using the latest cloud-based technologies and modern design trends are still being created by unimaginative accountants using those same outdated Depression-Era methods and principles.

Remember where failure to adapt and “accounting irregularities” can lead!

If you can accept that running your business does not have to involve regularly trawling through detailed bank records then suddenly the idea of filling up your accounts with them, thanks to a drip feed that you’ve set up directly into the main artery of your bank account, starts to not look like such a clever idea, after all…

Illustration by Claudio Munoz

Sterling has extensive experience in important sounding stuff and something about his opinions and blablabla are you seriously reading this right now?

When book-keeping is not quite easy enough…

Even when you’ve created something “quick and easy” there is still a learning curve, no matter how gentle. The eLEDGER support team know that the “Get Help” section has been pretty sparse and they’ve been busy creating some new features to expand that section.

For a start, the most Frequently Asked Questions (and the answers, too) are now also included in that Help section. They’ve assured us they’ll be adding more questions and answers in there over time, so things like how Invoices or Purchase Orders work can be worked out, without having to take time reaching out to someone.

The big news is that there are now tutorials in that section as well – in video form!

Not only are these in the Help section, there is now also a handy little “tutorial” button, when you are doing something which there is a tutorial available for.

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For your quick reference, here is a list of these tutorials, which are also accessible on YouTube:

Keep up the good work!

 

Sterling has extensive experience in important sounding stuff and something about his opinions and blablabla are you seriously reading this right now?

Bundling

“Bundling” has been a huge part of business for many years – from the simplest “2 for the price of 1” offer to the Maccas “Meal Deal” to the all-encompassing Phone/Broadband/CableTV/Mobile deals from companies like Telstra. Of course, this is something your business can do – and probably already does! The good news is that it is as easy as ordering that online pizza when you are on eLEDGER.

Instead of entering a bunch of separate lines for each item in an Order

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…simply select “create a new package” from your Store menu and enter those items into your Package instead. Your costs are automatically calculated for you, as is GST (as always) but of course the beauty of a Package deal is that the price can be absolutely anything!

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You can include intangible items in there, like Delivery Fees or Extended Warranties or maybe a free iPhone app you include as part of a promotion, if you like, and even make the entire package intangible (although be careful with that if you need to keep track of stock levels!) with a single click.

Now this package is available to select for your Order – in fact you can do so, as soon as you save it, with a single-click on the next screen – and it will only need a single line of entry, at your (discounted) package price…

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Can you do this on your smartphone or tablet while you are out of the office, maybe onsite with your supplier? Of course! This is eLEDGER we’re talking about, after all.

 

Keep up the good work!

long fuse

OK let’s do this!

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So I must admit I’ve been a little bit afraid of starting a blog…

It’s the idea that this will be something with grand aspirations at the very beginning but then, three years later I’ve not bothered to keep up with it and there’s just two posts on here, including this one. If you’re reading this in 2017 and this short introduction represents a significant proportion of what has been written thus far, I apologise now in advance and consider the prophecy fulfilled.

If by chance this actually turns into something great, then hey I knew it all along! (nothing wrong with an each way bet ;)

The idea is simple – for too long, Small Business has been encumbered by methods and principles that were developed for BIG Business and somehow, magically, these are supposed to be “transferable” and don’t worry there shouldn’t be any problems, hey look! A rabbit!

Well anyone who has actually run a small business can tell you almost nothing that applies to Big Business applies equally to Small Business.

Mostly, we get by and sort of just make up the rules as we go along. Maybe bring on some expertise when we need it – an accountant here, a lawyer there – usually a friend of the family – and if it works, don’t fix it. If it doesn’t work well, then we are told by a whole bunch of people how statistically so many small businesses fail every year and “in this economy” and bla bla…

Well I’m here to tell you that is RUBBISH! The best way you can ensure your small business remains healthy and runs smoothly is to not try to run it like it’s a big business! Obviously we’re coming at things mostly from an accounts and record-keeping perspective, but the general idea is still the same – you might say “transferable” even.

Anyhow, if you’re still reading then you are awesome and hopefully next time you come back there will be some actual articles you will undoubtedly find infinitely more compelling and enlightening than this humble introduction.

Keep up the good work!

 

 

Sterling has extensive experience in important sounding stuff and something about his opinions and blablabla are you seriously reading this right now?