Author: Glance Consultants

As we welcome the new year, business owners should consider ways to expand and grow their businesses. Why? Because growth is crucial for reaching the right audience and improving your sales.

Let’s look at the following six tips for growing and expanding your small business, in 2023.

 

Analyse Your 2022 Performance

Look at your successes and failures in 2022 and make a comprehensive list to calculate debt, profit, close ratio, and other key performance indicators (KPIs). Try to stay as objective as you can.

Analysing these factors helps you understand your business outcomes and establish practical business goals for the coming year. You can also develop a spending plan for 2023 based on your financial projections, the team here at Glance Consultants can assist with this.

 

Accelerate Your Digital Transformation 

Transformative technologies play a huge role in businesses. For instance, artificial intelligence (AI), cloud computing, and the internet of things (IoT) have enabled businesses to explore new operations and expand.

These technologies also help automate manual workloads, centralise disparate data streams, and conduct in-depth analyses of huge amounts of data.

Customer relationship management (CRM) systems and enterprise resource planning can help boost productivity and improve business efficiency. These elements are very lucrative for business growth, as an expanding company will have to deal with more data and deliverables.

 

Know Your Numbers 

Your revenue isn’t really yours unless it’s all in the bank. So, it’s important to know exactly what’s owed to you and when. Setting up email reminders through automation software or software such as Xero helps to streamline your payments.

Plus, you should also know your cash position at all times. Why? Because having an overview of your expected cash movements can help you maintain and track your funds. Glance Consultants can assist you with cash flow management.

 

Revise Sales Strategies 

Giving your clients what they want will help you offer a unique selling proposition (USP) and keep your leads interested in your products and services at all times. So, it’s important to analyse market trends and find out what your potential clients are interested in.

Once you do that, optimise your services and goods to what you find in your research. CRM systems can also assist you in developing lucrative sales strategies that are more effective and targeted.

 

Celebrate Small Milestones 

Celebrating milestones is important, no matter how big or small.

But share your company wins with your employees. Why? Because it will help you increase employee motivation and satisfaction, which will, in turn, enhance time-to-completion, task delivery, and business efficiency.

 

Review Your Supply and Costs Chain 

Reviewing the amount your customers pay for your services/products is essential when setting goals for the new year. This is because performing regular analyses helps you see whether or not you’re operating in line with your production costs, demand, and competitors.

A business or competitive analysis will allow you to find ways you could streamline the business process, such as using CRM software to communicate with and save your customers’ personal information.

Similarly, it could help you understand whether you need to make a change in product or service prices.

Contact Glance Consultants today by calling our office on 03 98859793 or emailing us at enquiries@glanceconsultants.com.au

Deciding on how to fund a business is one of the most challenging decisions for entrepreneurs, especially when they’re starting out.

The two major forms of financing that you can refer to include debt and equity financing.

Nonetheless, both major forms of finance come with both advantages and disadvantages that you should consider, particularly if you’re new in the field of business.

 

What is debt financing?

You can refer to debt financing, wherein an external lender, such as a financial institution or bank can lend the business capital you need.

It offers several options for business owners; such as a personal loan, self-funding, debt-based crowdfunding, business loan, or loan from friends or family.

While you can also refer to a home equity loan if you own a property, this option poses higher risks.

 

Upsides

• Gain total control over your business
• If you borrow funds from family or friends, you can negotiate the interest and favorable loan repayment rates to ensure flexibility in the initial business years.
• Settling the business loan interest may be a deductible business expense.

 

Downsides

• Borrowers will need to deal with repayments with interest.
• Generally requires a collateral
• Offers limited opportunities for small enterprises
• If you’re unable to repay the amount you borrowed, there’s a risk that the lender can seize your assets.

What is equity financing?

This form of financing is a means of acquiring capital where the entrepreneur sells their shares in their company or issues new shares.

In other words, equity financing provides the required financing in exchange for part ownership of your business, for instance, selling shares to investors.

It comes in several forms, such as private equity and angel investment firms.

 

Upsides

• Allows you to get finance, even if you can’t get a bank loan
• Continuous advice and learning from investors
• No need to worry about debt repayments
• Enjoy more cash flow for your business
• Investors are ready to wait for a return on their investment (not always!)

Downsides

• Indeterminable payments to investors
• Relinquishment of a portion of the business ownership and profit
• You need to consider the advice of investors’ before decision-making.

Ultimately, by having a deeper understanding of the upsides and downsides of the two major forms of financing, you can ascertain which of them is more suitable for your business at its current level of growth.

Call Glance Consultants on 03 98859793 or at enquiries@glanceconsultants.com.au

 

When you start your business journey, managing your finances may be easy. However, as your business grows, you might start feeling overwhelmed by balancing your books and keeping your finances in check. We get it. Managing your finances is time-consuming, especially when they aren’t your area of expertise. But there’s a handy solution: hire a financial expert to help sort your queries and present practical solutions for your business transactions.

But hiring an accountant or a bookkeeper can be tricky, especially when you don’t know whom to ask for help. If that’s you, don’t worry. We’ll talk about the benefits of accountant and bookkeeper in this article. Let’s dive in!

 

What Does a Bookkeeper or Accountant Do for Your Business?

An accountant or bookkeeper can do much more than reconcile your transactions, prepare your financial statements and your tax returns. They help you maintain a proper record of your finances, advise on tax planning and compliance, and manage your financial reports.

They can also:

• Offer valuable insights
• Reduce your tax bills
• Update your finance books
• Keep track of your payroll
• Help you maximise profits and tax deductions.

But bookkeepers focus more on day-to-day responsibilities, while accountants are responsible for providing tax, accounting, and business advice or financial insights.

 

When Do You Need a Bookkeeper?

A bookkeeper is responsible for recording and classifying a business’s financial transactions. These tasks can include the payment of bills, reconciliations of transactions, loading of expense invoices to your accounting system, payroll etc. Bookkeepers may or may not have a finance degree but usually have a professional qualification.

The motive of a bookkeeper is to paint an accurate picture of your finances. So, what can a competent bookkeeper do for your small business?

 

They Record High Volume Payments

You need a bookkeeper when you have to track high volumes of transactions. This can be tedious and time-consuming. Plus, keeping an eye on cash flow and business growth can take time and effort you don’t have. As a result, you aren’t able to record every transaction you make, and your books become a mess. You can prevent that from happening by obtaining the services of a bookkeeper. They’ll ensure your books are always updated, allowing you to track system flaws and areas of improvement.

 

They Help Make Cash Flow Predictable

Cash flow statements help you sort out the unpredictability of your income and expenses by showing how much money you owe people and vice versa. This will assist in making day to day business decision. So, a bookkeeper keeps you updated on your cash flow on a periodic basis.

 

Automate Administrative Tasks

Their skills help them automate administrative tasks that prevent you from concentrating on your primary business goals.

 

When Do You Need an Accountant?

An accountant can evaluate your financial performance and position. They serve as a more strategic planner, especially during tax time.

 

Wondering if you need an accountant? Here are a few common instances:

Manage Your Debt

From managing the inventory to managing employees, a small business owner has a million things to take care of. But debt is one of the top items on the list. If you find yourself struggling to manage your debts, you need an accountant. An accountant can advise you when to reinvest in your business and find the least expensive borrowing options.

 

Provide Advice on Financial Decision-making

Accountants help your business grow by helping you implement an effective business strategy. They assist in managing your tax debts and assist in liasing with regulatory bodies such as the ATO and ASIC. They can also assist with payroll issues. They prepare your annual tax returns and financial statements including the preparation and lodgement of various statutory documents with the regulatory bodies. An accountant will ensure you are on top of tax compliance so that you are able to focus on your core business.

So, it would be best to work with an accountant when you need assistance with financial decision-making, tax law and obligations, assets investments, cash flow management, entity structures etc.

 

They Can Help Improve Profits

If your business’s revenue has increased, but your profits have not, it’s a sign that you may need to change your strategy and therefore need the assistance of your accountant. A competent accountant can provide key industry specific insights and prepare user friendly management reports that help you recognise where to minimise costs and how to improve revenue in order to increase your profitability. An accountant will assist in minimising your tax liabilities which ultimately lead to increased after tax profits. Part of this strategy could be ensuring you have the correct business structures in place.

 

How to Choose Whom You Need?

Working with a bookkeeper and accountant helps you take control of your business’s financial performance and position. But finding an experienced accountant and bookkeeper is challenging. This is where we come in to the picture.

We help you make the right decisions and gain complete control over payroll, superannuation, invoicing, bank reconciliations, tax return preparation, preparation of financial statements and business strategy.

If you need assistance, please get in touch with us on 03 98859793 or at enquiries@glanceconsultants.com.au

 

What is cyber resilience?

Cyber resilience promotes business continuity, organisational security, and information systems under one unit. The concept is based on providing outcomes despite challenging cyber events, including economic slumps, natural disasters, or cyber-attacks.

Cyber resilience is essential when it comes to ensuring seamless business continuation. The benefits aren’t limited to mitigating financial loss. It also helps reduce the risk of exposure to critical business infrastructure. Moreover, a cyber-resilience company can instil trust and loyalty in its clients. A cyber-resilient company also increases your business’s values and increases your business’s competitive advantage.

What is cyber security?

On the other hand, cyber security is the process of defending your electronic devices and data against malware and malicious attacks. The terms extend to a variety of applications. Some typical applications include network security, information security, and operational security.

Cyber security contains three types of cyber threats: cybercrime, cyber-attack, and cyber-terrorism. These pose potential threats to your computer system when malicious software gain control of your system.

Difference between cyber security and cyber resilience

Cyber security is protecting your business assets, servers, databases, customer information, electronic devices, websites, apps, and data from cyber-attacks. It focuses on dynamic solutions that:

● Protect your business from potential hackers and information leaks
● Combat the expansion of cyberattacks like SQL injections, phishing, malware, etc.

In contrast, cyber-resilience refers to the ability of a business to detect, create risk plans for, respond to, and recover from cyber-attacks. Cyber resilient companies can reduce the impact of a cyber-attack and quickly bounce back from it.

How to build a cybersecurity and cyber resilience program

Integrating effective strategies to ensure the optimal security of your business from cyber threats is crucial. A cybersecurity strategy can help you prevent malicious risks, while a cyber resilience strategy can enable you to mitigate the potential effects of these attacks. So, your company needs to have backup plans for both.

The below steps can help you integrate these strategies into your business process.

● Protect backup data

Data protection is an essential tenant of cyber security. If a cyber-attack occurs, saved data will help to resume your normal business operations.

For instance, if your business was hit with an SQL injection — a type of cyber-attack that takes control of and steals data from your database, your data would be exposed, allowing hackers to leak it online or send you a ransom demand.

Protecting your data would come in handy during this time. Plus, regularly checking your data and storing it on a separate network can help restore your database and ensure better cyber resiliency.

● Discuss mitigation and prevention processes

Cyber security and resilience can only be achieved when everyone in your company is on the same page. They need to understand how important this step is to defend themselves against a cyber-attack.

So, if you want your business to be cyber-resilient, you should ensure your board members understand the right metrics and information. It would be best to explain to them the business risks associated with a lack of cyber resilience and security.

● Simulate a security breach incident

If you simulate a practical example of how your business can be affected in the event of a cyber-attack, it will help you develop strategised cyber resilience plans.

You can also escalate a potential security breach to notify clients and investors while making everyone feel involved.

The takeaway

Cyber resilience and security are essential to business success and data protection. But they aren’t the same thing. Cyber security is the practice of preparing for cyber-attacks, while cyber resilience is about recovering from them.

Businesses need to implement both practices to ensure they can provide their customers with as much security as possible.

Contact our friendly team of trusted advisors on 03 98859793 or at enquiries@glanceconsultants.com.au to discuss your needs and our full service offering.

 

Are you thinking of investing in the Australian property market? If so, understanding key concepts such as negative and positive gearing can help you make wise decisions in relation to your property investment plans in the long run. So, let’s have a look at what these terms mean.

 

Understanding Negative Gearing

Gearing means borrowing to invest. In terms of negative gearing, the investor has to put some surplus cash into supporting the investment. That happens because your rental income from the investment property is less than the expenses of holding that property.  

These expenses normally include your loan repayments, which includes the interest expenses on that loan. It can also include other rental property costs such as agent fees, rates, insurance, maintenance costs etc.

If the property expenses which include interest costs and depreciation is greater than the rental income, your investment property is considered to be negatively geared. In short, a negatively geared property will require you to contribute additional funds from your back pocket each year.

 

Understanding Positive Gearing

Contrary to negative gearing, positive gearing adds to your annual income, which means the net return from your investment surpasses its expenses. Hence, you do not need to contribute additionally to holding costs or loan repayments.

 

Which Investment Option Should You Choose?

Focusing on your investment strategy is crucial. You might wonder why you would invest in a property that is negatively geared but choosing between negatively and positively geared investment properties solely depends on your long-term goals.

If you’re hoping to earn extra income from your investment property each year, then you may be best placed to look at positive gearing. Although finding a positively-geared property that still has good growth potential can be challenging.

On the other hand, negative gearing can help to minimise your taxable income and may have more growth potential long term. For this reason, negative gearing is traditionally favoured by individuals who don’t need extra annual income but would like to see the value of their investment property increase long-term.

 

What Should You Consider Next?

Before moving forward with any type of investment, it’s important to do your research. We recommend reviewing your financial capacity to ensure that you could service an investment property throughout changing market conditions.

It’s also worthwhile thinking about those unexpected costs relating to having an investment property, such as a sudden surge in Body Corporate contributions if you’re looking at an apartment or townhouse. Other costs like land taxes and landlord insurance cannot be passed onto tenants and need to be factored into your calculations. 

The good news is that we are able to support you throughout the process of securing an investment property. There are many pitfalls that can be avoided with proper advice.

Contact Glance Consultants today to get the right advice and help with your business on 03 98859793 or at enquiries@glanceconsultants.com.au

 

2022–23 Labor Federal Budget Highlights

The Federal Treasurer, Dr Jim Chalmers, handed down the Labor government’s first Federal Budget at 7:30 pm (AEDT) on 25 October 2022.

Despite an uncertain global economic environment, the Treasurer has lauded Australia’s low unemployment and strong export prices as reason for a 3.5% growth in the current financial year, slowing to 1.5% in 2023–24. The Budget projects a deficit of $36.9 billion, lower than the forecast earlier this year of $78 billion.

Described as a sensible Budget for the current conditions, it contains various cost of living relief measures including cheaper child care, expanding paid parental leave and encouraging downsizing to free up housing stock. Key tax measures are targeted at multinationals, particularly changes to the thin capitalisation rules, and changes to deduction rules for intangibles.

Importantly, no amendments have been proposed to the already legislated Stage-3 individual tax rate cuts. Additional funding for a range of tax administration and compliance programs have also been announced. Finally, the fate of a suite of announced but unenacted tax measures, including a few that have been around for at least 10 years, has been confirmed.

The full Budget papers are available at www.budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au. The tax, superannuation and social security highlights are set out below.

 

Businesses

• Electric vehicles under the luxury car tax threshold will be exempt from fringe benefits tax and import tariffs.

• A number of Victorian and ACT based business grants relating to the COVID-19 pandemic will be non-assessable non-exempt income for tax purposes.

• Grants will be provided to small and medium-sized businesses to fund energy efficient equipment upgrades.

• The tax treatment for off-market share buy-backs undertaken by listed public companies will be aligned with the treatment of on-market share buy-backs.

• The 2021–22 Budget measure to allow taxpayers to self-assess the effective life of intangible depreciating assets will not proceed.

• Heavy Vehicle Road User Charge rate increased from 26.4 to 27.2 cents per litre of diesel fuel, effective from 29 September 2022.

• Australia has signed a new tax treaty with Iceland.

• Additional tariffs on goods imported from Russia and Belarus have been extended by a further 12 months, to 24 October 2023.

• Ukraine goods are exempted from import duties for a period of 12 months from 4 July 2022.

• Technical amendments to the taxation of financial arrangements (TOFA) rules proposed in the 2021–22 Budget will be deferred.

• Amendments to simplify the taxation of financial arrangements (TOFA) rules proposed in the 2016–17 Budget will not proceed.

• The proposed measure from the 2018–19 Budget to impose a limit of $10,000 for cash payments will not proceed.

• Proposed changes in the 2016–17 Budget to amend the taxation of asset-backed financing arrangements will not proceed.

• The new tax and regulatory regime for limited partnership collective investment vehicles proposed in the 2016–17 Budget will not proceed.

• The Pacific Australia Labour Mobility (PALM) scheme will be expanded and enhanced.

 

Individuals

• The amount pensioners can earn in 2022–23 will increase by $4,000 before their pension is reduced, supporting pensioners who want to work or work more hours to do so without losing their pension.

• To incentivise pensioners to downsize their homes, the assets test exemption for principal home sale proceeds will be extended and the income test changed.

• The income threshold for the Commonwealth Seniors Health Card will be increased from $61,284 to $90,000 for singles and from $98,054 to $144,000 (combined) for couples.

• The Paid Parental Leave Scheme will be amended so that either parent is able to claim the payment from 1 July 2023. The scheme will also be expanded by 2 additional weeks a year from 1 July 2024 until it reaches 26 weeks from 1 July 2026.

• The maximum Child Care Subsidy (CCS) rate and the CCS rate for all families earning less than $530,000 in household income will be increased.

• The current higher Child Care Subsidy (CCS) rates for families with multiple children aged 5 or under in child care will be maintained.

• Legislation will be introduced to clarify that digital currency (or crypto currencies) will not be treated as foreign currency for income tax purposes.

 

Superannuation

• Eligibility to make a downsizer contribution to superannuation will be expanded by reducing the minimum age from 60 to 55 years.

• The 2021–22 Budget measure that proposed relaxing residency requirements for SMSFs and small APRA-regulated funds (SAFs) from 1 July 2022, has been deferred.

• The 2018–19 Budget measure that proposed changing the annual audit requirement for certain self-managed superannuation funds (SMSFs) will not proceed.

• A requirement for retirement income product providers to report standardised metrics in product disclosure statements, originally announced in the 2018–19 Budget, will not proceed.

 

Multinationals

• Thin capitalisation rules for non-ADIs will be amended from 1 July 2023, with tests relating to ratios replaced by earnings-based tests.

• Significant global entities will be denied a tax deduction for payments to related parties in relation to intangibles held in low- or no-tax jurisdictions.

• Significant global entities and public companies will have additional reporting requirements for income years commencing from 1 July 2023.

• Proposed amendments to the debt/equity tax rules mentioned in the 2013–14 MYEFO will not proceed.

 

Tax administration

• Penalty unit increase to $275 from 1 January 2023.

• Personal Income Taxation Compliance Program extended a further 2 years to 30 June 2025

• Shadow economy compliance program extended to 30 June 2026.

• The ATO tax avoidance taskforce will receive additional funding and is being extended to 30 June 2026.

• Financial penalties for breaches of foreign investment compliance to double from 1 January 2023.

• Access to refunds of indirect tax, including GST, fuel and alcohol taxes, under the Indirect Tax Concession Scheme has been expanded to the diplomatic and consular representations of Bhutan.

• The proposed extension of reportable transactions relating to the sharing economy deferred by 12 months to 1 July 2024

 

Tax agents

• Funding to be given to the Tax Practitioners Board to increase compliance investigations.

• Additional funding will be provided to support the delivery of government priorities in the Treasury portfolio.

 

Not-for-profit

• Deductible gift recipients list to be updated.

• The 2021–22 MYEFO measure to establish a deductible gift recipient category for providers of pastoral care will not proceed.

 

Click to view our Federal Budget Update Glance Consultants 2022-23 October via PDF

 

 

 

If tax amendments that were introduced to Parliament recently are passed, the eligibility for the one-off bump to retirement savings will have widened. 

The new bill would allow individuals over the age of 55 to make downsizer super contributions provided they meet the eligibility criteria. It could apply as soon as October. 

A reduction has already recently taken place, bringing the age currently down to 60. Should this amendment be passed, it would have reduced the age by a decade in a matter of months. 

This will allow a one-off post-tax contribution of up to $300,000 after a main residence has been sold(subject to other requirements).

This will have the potential to free up suitable housing for growing Australian families, by encouraging empty nesters or older Australians to sell up and downsize to something more suitable.

There are other benefits as well. An additional ten years does give people more time to learn what suits them and what doesn’t. It also allows for more money to get into the system if you have reached your contribution cap and have maxed out on the total super balance. 

There are a couple of things to consider. In order to be eligible, the home being sold must have been owned for at least a decade, be at least partially exempt from CGT under the main residence exception and the super contribution needs to be deposited within 90 days post sale. 

The scheme can only be used once, however couples can double the $300,000 limit. 

If you would like to understand more about downsizer super payments to determine whether you are eligible, you are more than welcome to discuss your situation with us.

Such an amendment will change the dynamics of the scheme as participants will have their money locked away for 10 years.

So individuals need to consider their plans and decide whether they will need that money within that time frame; whether they act strategically and make a non-concessional contribution from excess sale proceeds and save this scheme for a later date. 

It really does depend on your personal situation and what is going to be the best financial outcome for you in the end. 

Contact our friendly team of trusted advisors on 03 98859793 or at enquiries@glanceconsultants.com.au to discuss your needs and our full service offering.

 

 

An election ago, the 2022-23 Budget proposed a 120% tax deduction for expenditure by small and medium businesses on technology, or skills and training for their staff. This proposal has now been adopted by the current Government and details released in a recent exposure draft by Treasury.

 

Timing

Two investment ‘boosts’ will be available to small and medium businesses with an aggregated annual turnover of less than $50 million:

• Skills & Training Boost
• Technology Investment Boost

The Skills and Training Boost is intended to apply to expenditure from 7.30pm ACT time on Budget night, 29 March 2022 until 30 June 2024. The business, however, will not be able to start claiming the bonus deduction until the 2023 tax return. That is, for expenditure incurred between 29 March 2022 and 30 June 2022, the additional 20% ‘boost’ deduction will not be claimable until the 2022-23 tax return (assuming the announced start dates are maintained if and when the legislation passes Parliament).

The Technology Investment Boost is intended to apply to expenditure from 7.30pm ACT time on Budget night, 29 March 2022 until 30 June 2023. As with the Skills and Training Boost, the additional 20% deduction for eligible expenditure incurred by 30 June 2022 will be claimed in the 2023 tax return.

The boost for eligible expenditure incurred on or after 1 July 2022 will be included in the income year in which the expenditure is incurred.

When it comes to expenditure on depreciating assets, the bonus deduction is equal to 20% of the cost of the asset that is used for a taxable purpose. This means that, regardless of the method of deduction that the entity takes (i.e., whether immediate or over time), the bonus deduction in respect of a depreciating asset is calculated based on the asset’s cost.

 

Technology Investment Boost

The Technology Investment Boost is a 120% tax deduction for expenditure incurred on business expenses and depreciating assets that support digital adoption, such as portable payment devices, cyber security systems, or subscriptions to cloud-based services.

The boost is capped at $100,000 per income year with a maximum deduction of $20,000.

To be eligible for the bonus deduction:

• The expenditure must be eligible for deduction (salary and wage costs are excluded for the purpose of these rules)
• The expenditure must have been incurred between 7.30pm (AEST), 29 March 2022 and 30 June 2023
• If the expenditure is on a depreciating asset, the asset must be first used or installed ready for use by 30 June 2023.

To be eligible, the expenditure must be wholly or substantially for the entity’s digital operations or digitising its operations. For example:

• digital enabling items – computer and telecommunications hardware and equipment, software, systems and services that form and facilitate the use of computer networks;
• digital media and marketing – audio and visual content that can be created, accessed, stored or viewed on digital devices; and
• e-commerce – supporting digitally ordered or platform enabled online transactions.

Repair and maintenance costs can be claimed as long as the expenses meet the eligibility criteria. Where the expenditure has mixed use (i.e., partly private), the bonus deduction applies to the proportion of the expenditure that is for an assessable income producing purpose.

The bonus deduction is not intended to cover general operating costs relating to employing staff, raising capital, the construction of the business premises, and the cost of goods and services the business sells. The boost will not apply to:

• Assets that are sold while the boost is available
• Capital works costs (for example, improvements to a building used as business premises)
• Financing costs such as interest expenses
• Salary or wage costs
• Training or education costs
• Trading stock or the cost of trading stock

For example:

A Co Pty Ltd (A Co) is a small business entity. On 15 July 2022, A Co purchased multiple laptops to allow its employees to work from home. The total cost was $100,000 (GST-exclusive). The laptops were delivered on 19 July 2022 and immediately issued to staff entirely for business use. As the holder of the assets, A Co is entitled to claim a deduction for the depreciation of a capital expense.

A Co can claim the full purchase price of the laptops ($100,000) as a deduction under temporary full expensing in its 2022-23 income tax return. It can also claim the maximum $20,000 bonus deduction in its 2022-23 income tax return.

The $20,000 bonus deduction is not paid to the business in cash but is used to offset against A Co’s assessable income. If the company is in a loss position, then the bonus deduction would increase the tax loss. The cash value to the business of the bonus deduction will depend on whether it generates a taxable profit or loss during the relevant year and the rate of tax that applies.

 

Skills and Training Boost

The Skills and Training boost is a 120% tax deduction for expenditure incurred on external training courses provided to employees.

External training courses will need to be provided to employees in Australia or online, and delivered by training organisations registered in Australia.

To be eligible for the bonus deduction:

• The expenditure must be for training employees, either in-person in Australia, or online
• The expenditure must be charged, directly or indirectly, by a registered training provider and be for training within the scope (if any) of the provider’s registration
• The registered training provider must not be the small business or an associate of the small business
• The expenditure must be deductible
• Enrolment for the training must be on or after 7.30pm, 29 March 2022.

The training must be necessarily incurred in carrying on a business for the purpose of gaining or producing income. That is, there needs to be a nexus between the training provided and how the business produces its income.

Only the amount charged by the training organisation is deductible. In some circumstances, this might include incidental costs such as manuals and books, but only if charged by the training organisation.

Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees. The training boost is not available to:

• Sole traders, partners in a partnership, or independent contractors (who are not employees)
• Associates of the business such as a relative, spouse or partner of an entity or person, a trustee of a trust that benefits an entity or person and a company that is sufficiently influenced by an entity or person.

 

For example:

Cockablue Pets Pty Ltd is a small business entity that operates a veterinary centre. The business recently took on a new employee to assist with jobs across the centre. The employee has some prior experience in animal studies and is keen to upskill to become a veterinary nurse. The business pays $3,500 (GST exclusive) for the employee to undertake external training in veterinary nursing. The training is delivered by a registered training provider, whose scope of registration includes veterinary nursing.

The bonus deduction is calculated as 20% of 100% of the amount of expenditure that can be deducted under another provision of the taxation law. In this case, the full $3,500 is deductible under section 8-1 of the ITAA 1997 as a business operating expense. Assuming the other eligibility criteria for the bonus deduction are satisfied, the bonus deduction is calculated as 20% of $3,500. That is, $700.

In this example, the bonus deduction available is $700. That does not mean the business receives $700 back from the ATO in cash, it means that the business is able to reduce its taxable income by $700. If the company has a positive amount of taxable income for the year and is subject to a 25% tax rate, then the net impact is a reduction in the company’s tax liability of $175. This also means that the company will generate fewer franking credits, which could mean more top-up tax needs to be paid when the company pays out its profits as dividends to the shareholders.

Any queries or need help with your business? Contact our friendly team of trusted advisors at Glance Consultants on 03 98859793 or at enquiries@glanceconsultants.com.au

 

There has been a new Bill proposed in Parliament – one made in a bid to incentivise electric car purchases by removing fringe benefits tax (FBT).

This proposed FBT exemption will reduce costs for a few thousand owners each year. The first year cost is around $20 million, reaching $90 million by 2025/2026. 

The removal of FBT from electric, plug-in hybrid and hydrogen cars that are supplied by employers to staff, if the vehicle price is below the luxury car tax threshold (which is $84,916 for the financial year 2022-2023), would benefit business financially.

It could save an employer $9,000 for an EV costing $50,000, or $4,700 where the arrangement includes salary sacrificing.

If enacted, the Bill will apply to all eligible vehicles first held and used on or after 1 July 2022. 

There is confidence that this move will lower the barrier to the uptake of EVs in Australia. It will encourage more affordable vehicles into the market, which is a welcome relief in the face of the rising cost of fuel. 

There are some implications of this proposed Bill that have been observed.

For example, gifting an EV to an employee will not allow for FBT exemptions as technically this would make it a ‘property benefit’ and not a ‘car benefit’.

Some concern has been expressed regarding reportable fringe benefit amounts (RFBAs) and how providing use of an eligible EV will still be included in determining this amount. 

However, this should not be too much of a deterrent for those willing to benefit from the proposed scheme, as the approach does seem equitable when considering RFBAs are used to determine various other entitlements. 

There is also the issue of the lack of supply, which is a critical factor that is stagnating the uptake in Australia. This contributes to inflated prices and although we may eventually reach a second-hand market, data is thin on the resale value of EVs.

The threshold which is just shy of $85,000 does encompass several brands available in the Australian market today, however does not accommodate the cost of additional features and modifications that some businesses may wish to purchase. 

If you like to understand the benefits of this proposed measure to you and your business, the team at Glance Consultants are happy to assist. Call us now on 03 98859793 or email us at enquiries@glanceconsultants.com.au