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Mel’s Valentines Day Answers

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15 / Feb / 2013

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I run a home based business. When do I start having to do BAS statements and paying tax?
Sue

I was just reading an article yesterday about the importance of home based business in the Australian economy & how the government is putting more support and framework around assisting these businesses.

There is some useful information on the ATO website, follow this link

http://www.ato.gov.au/content/43191.htm

Also, you would have seen my article in Wednesday’s Advocate regarding registering for GST. If your business turnover (sales) is greater than $75,000 you must register for GST. If it is under that registering is voluntary.

If you’re registered for GST you will do a BAS each quarter. The one covering the Oct-Dec ’12 Qtr is due on 28 Feb. Jan-Mar ’13 Qtr due in April, April-June in July, July-Sept due in Oct.

If you’re not registered for GST then you won’t do a BAS. You will just report your business trading when you do your tax return after the end of the financial year.

I’m taking it that you’re operating your business as a sole trader and this is your first year in business. (If not let me know & I can answer to the exact circumstances). If that is the case, then you don’t pay any tax on your business income until you lodge your tax return.

During your first year of trading the ATO does not have any way to estimate what you will earn & how much tax you will pay. So, it leaves it up to you to save and plan for that and waits to collect it from you once you do your tax return.

So, make sure you’re saving for some tax – 20% of your sales is a good safe amount that should cover your tax by the end of the year.

Once that first year is reported the ATO will know how your business is trading and put you on the PAYG Installment system. This means you will pay 1/4 of your estimated tax throughout the year, so that by the time you do your tax return for the 2014 year you should have paid most of your tax. The PAYG payment cycle is the same as the BAS cycle.

Does a business receive any tax benefit or gov’t incentive to allow workers a paid day per year to volunteer to a registered charity? Thanks Mel.
Russ

Hi Russ,
Love your thinking in helping motivate people and businesses to volunteer for the Westpac Rescue Helicopter (and other worthwhile charities!).

Since January 2010, the National Employment Standards have allowed for Community Service Leave, see link:

http://www.fairwork.gov.au/leave/community-service-leave/pages/default.aspx

This is unpaid leave, and there is no limit to the amount of leave that can be taken. Service must be with a recognised emergency management body.

What are the taxation rules regarding university text books?
Belinda

Ahh Belinda, great question. There was a very interesting case a few years ago where a student successfully claimed education expenses against receipt of Austudy income.

The Tax Commissioner lost the case, so they have since changed the law so that, for the 2012-year and later years, you cannot claim a deduction for expenses you incur that relate only to your receipt of Austudy, ABSTUDY and Youth Allowance to study.

In order to claim education expenses there must be a significant connection between your current employment and the course you undertake – see the following link

http://www.ato.gov.au/individuals/content.aspx?menuid=0&doc=/content/33125.htm&page=2&H2

As a family day care provider is it better from a tax perspective to be registered for GST?
Rebecca

As the income you earn is of an educational nature you do not charge GST on it – it is GST exempt. So, we are recommending that Family Daycare providers DO register for GST.

Being registered will mean that you can claim back the GST on the expenses you incur. Getting a refund of this GST is worth more to you than the tax deduction on the GST (i.e. you paid $10 in GST on a expense of $110 – getting the GST refund gives you $10, claiming a tax deduction gives you say 20% of $10).

Just be careful with expenses like groceries that have mixed supplies (i.e. items that have GST & items that have no GST) – you will need to check your receipts & only claim back on those items that have GST.

My company paid a personal expense for me ove the net and I paid it back the same day. Do I need to put that through the accounts and if so in what format?
John

Hi John
Great to see you paying the company back and not creating a loan issue, which is the ATO’s big bug bear and every accountants nightmare!

Even though you have an in and an out that cancel each other the same day for the same amount I do recommend both entries be accounted for in the bookkeeping. A good audit trail that matches the transactions in the bank account makes it easy to see what’s happened and gives transparency to the data.

I would do it as a simple “Spend Money” allocating the personal bill the company paid to a Loan account for yourself. Then I would do a ”Receive Money” to record the repayment by you and allocate that also to the same Loan account.

I haven’t done any accounting this financial year. I have a boxful of crumpled receipts and a bunch in my email that I’ve not printed yet. It’s a mess. Where do I start?
Alyssa

Hi Alyssa
What good timing – there is an article on this in our latest Newsletter. For now have a look at this link

http://www.mjaccountants.com.au/choosing-right-small-business-accounting-software

It never seems like a big thing to do your bookkeeping & is easily put off. But when we do that for long enough it’s very daunting to face that mountain of receipts.

I suggest you start by sorting them all into categories of the type of expense they are – e.g. stationary, motor vehicle, telephone, etc. Then put them in date order.

Take it month by month with your bookkeeping – have your bank statements handy as well to make sure you capture everything & don’t miss any direct debits, bank fees, etc.

Once you get it all up to date – keep it that way. Its difficult to know where your business and cashflow are at if you don’t have timely information.

There are some great products on the market that can cut down your bookkeeping time. The above article discusses these. Something like Xero could help you, as it downloads the bank transactions on a daily basis – you can memorise your regular suppliers & payments so it accounts for them automatically. This kind of technology saves so much time in data entry and takes the pain out of the bookkeeping>

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