Ignorance is NOT Bliss!

By Tina Zawila

From time to time we meet clients who have found themselves in some form of financial difficulty, generally with the ATO, their bank, their suppliers, or they are simply struggling to make their business work as it should.

If the client seeks help early, we can usually nip things in the bud, suggest some changes to business strategy, enter into new financial arrangements and generally avoid a serious financial issue.

However, there are times when clients do not seek advice early (for whatever reason) and by the time we become involved, things are quite difficult.  We have seen the ATO issuing garnishee notices on bank accounts, and clients using finance from what is known as “lenders of last resort” with effective interest rates of 67 to 69% pa – yes you read that rate correctly!  We can still help in these scenarios, however, a lot more effort and time will be needed to turn things around.

Don’t let this happen to you!  They say ignorance is bliss, but ignoring a problem does not mean it’s not happening. And the sooner you address the issue the better.  Time does not heal financial wounds, it usually exacerbates them.

If you are new to business, seek advice early.  Make sure you understand your business structure – there is a difference between operating as a sole-trader and being a director of your own operating company.  You should also understand your taxation obligations including income tax, GST, PAYG, and superannuation for employees and/or yourself.  

If you are an existing business and notice that you are struggling to pay your suppliers on time, pay wages, meet loan repayments or taxation liabilities, seek advice immediately.  

Don’t let the situation escalate and don’t feel like you need to solve this on your own.

Early intervention gives you the best chance of working through the issues and finding workable and practical solutions. 

If you are struggling with a financial issue, call the professional team at Sothertons today, on 49721300 and let us help you with strategies to improve your business performance and financial position.

The Growth Strategies in Tough Times

By Steve Marsten

It never ceases to amaze us how some businesses continue to operate without any formal business plan. Is it possible for a business to operate without one? Of course it is. And that’s the conversation we continue to have with small business owners. Do they really know how much better their business could be or how much more their business can deliver in terms of services, value to customers and their employees as well as to themselves without a business plan?

Most businesses still operate with a limited thinking about what their business is capable of and they are not addressing critical issues within their business planning process.

We use business strategies to develop our business plan. It’s a basic 3-4 page document that highlights what needs to happen to drive the business more then just CPI or 5% or 10%.

Your strategy should make you think about 5 key elements at least:

1. Efficiency 

2. Systems 

3. Innovation 

4. Strategy for Growth and Marketing 

5. Risk Management

Efficiency is about doing more with less and SME owners tend to find more ways to operate more efficiently with lower costs. Communicate and discuss with your staff. They are the largest untapped source of knowledge in improving your business.

Depending upon the size of your business, there are different accounting systems that you can use that save you time and hence money! Find out about improvements for small business accounting systems with help from an experienced accountant.

Innovation has to be one of the most important issues of your business planning. It means NOT thinking about what you do now but thinking about how others who maybe moving into your industry, would be establishing themselves differently to you. “Radical” and “New to the world” are the buzzwords however innovation is often about taking something old and tweaking it some more.

Growth Strategies are a key to keeping the top lining improving every year even in a contracting economy. It’s about examining your market; your products and your adaptability to changing markets.

And finally SME’s take on more risk then anyone in the business world. Risk mitigation is the key by having Plan B’s for any major risk issues identified in your business.

I have touched on some key points with business planning. They are all critical to a successful business. Call us at Sothertons to assist you in building a practical Business Plan for the tough times on 4972 1300.

Crypto Currency – The Taxman is Watching

By Joe Smith

The debate over crypto currencies, specifically bitcoin,  has been everywhere over the past few months however one thing that is very important that hasn’t been in the headlines so much is how they are treated for tax purposes in Australia.  The ATO are keeping a close eye on crypto currencies and are consulting with experts on how it should be taxed in the future. 

The current view of the ATO is that bitcoin is nether money or a foreign currency but is similar to a barter arrangement.  From 1 July 2017 the sale and purchase of bitcoin is not subject to GST.  If you are simply using bitcoin to purchase personal goods or services and you are not in business then there are no income tax consequences.  Further to this use, any capital or gain or loss will be treated as a personal asset if the cost of the bitcoin is $10,000 or less.

Where someone is mining bitcoin, this is treated as carrying on a business and as such any income from the transfer of bitcoin to a third party is assessable income.  Any expenses incurred in mining bitcoin are allowed as a tax deduction however non commercial loss provisions may apply.  And if bitcoin stock is held in this scenario it is treated as trading stock.

Finally, the most probable scenario is bitcoin acquired as an investment.  If you are not carrying on a business, any gains or losses will be subject to capital gains tax law with tax payable on any gains made and losses being available to offset against future capital gains.  However, regularly buying and selling bitcoin will most likely be treated as a business by the ATO subject to specific tests and criteria.

And remember the ATO are very resourceful and can look at your lifestyle and living expenses if you get audited and have not declared any capital gains or income.  If you queries on tax and crypto currencies, talk to the tax experts at Sothertons Gladstone on 4972 1300.

Who uses cash these days?

By Tina Zawila

You would think in this modern day of “plastic” money, that the ATO would be less concerned about the cash economy, after all, who uses actual cash these days?!?  Think again, cash economy audits are alive and well with the ATO.

As a business owner, how do you ensure you can survive an ATO cash economy audit unscathed?

It all comes down to record-keeping and supporting evidence.

When the ATO comes knocking they will request things like Cash Register Tapes (Z Reads) and any other Point-of-Sale reports.  Yes, they will ask for your till tapes, so I hope you are closing off the till every night and retaining the register tapes.  They will also ask you about your “close-of-day” procedures used to reconcile daily sales records to bank statements. How you answer these questions and what supporting documentation you have available will determine how the audit is likely to pan out. 

They will also ask you for your personal records including your personal bank statements and will ask you to complete a living expenses worksheet.  The ATO is matching your lifestyle to the income you are declaring in your business.  Remember they have access to information that you may not have thought of, like Main Roads information on that new car, boat or jetski that you purchased during the year.

The ATO also has access to benchmarks which they will use to compare your business to the rest of your industry.  If your sales are low, or your stock purchases or other expenses are high or outside the “norm”, you can expect questions to be asked.  In fact, if there is a lack of evidence, they are likely to rely on these benchmarks to make an adjustment to your income and assess the tax accordingly. And it’s not just income tax, it’s also GST and the interest and penalties for failure to keep records and making false or misleading statements on both your tax return and your activity statements that will hit you hard.

Your best defence to a future ATO Cash Economy audit is to ensure you are well prepared now.

If you need help with your record-keeping or want to know more about the ATO’s industry benchmarks applicable to your business, call the professional team at Sothertons on 4972 1300.