in business? your sales and crm system needs should be one of your top 3 priorities!
Business Owners – Is your sales system working? Do I hear you think…Do we have a sales system?
The four pillars of business are marketing, sales, delivery/operations and administration. All too often confuse marketing and sales but they are two different things. Marketing is identifying your marketing and through activities attract potential clients/customers to your business.
Sales is converting these leads from marketing, into clients and customers who will buy your service/product. Sales is about increasing your conversion rate of leads to sales, and creating a sales process and experience that is leveraged and gives the client a good consistent experience.
Many businesses we talk to don’t have a proper sales system. Even we are in the middle of actually re-documenting our sales process.
Things you need to address with your accountant, business advisor include:
- blueprint for a streamlined sales process
- qualifies leads to become better clients
- creates value for clients
- integrates with an easy CRM
- leveraged sales process that reduces your time and your staff can use
- and more.
We are covering these at our business power lunch, come along to find out more, or call us at Morris Accounting to discuss in further detail your sales system.
Subscriber saves $1400 using Morris Accounting Tax Checklist!
Those who haven’t checked out our tax return checklist (subscribe on the right>!!) are missing out on vital tax deductions resulting in bigger refunds!
We were pleased to hear from Tanya who recently subscribed to receive our free tax return checklist.
“By using your tax return checklist I found more tax deductions to claim to increase my tax refund by $1400! Thankyou Nathan for sending me this, I’m looking forward to receiving more helpful information and when I purchase my rental property I will be letting you take over from there!”
Thanks Tanya, Its always great to receive positive feedback from us giving some time and resources to help those who aren’t even clients.
ATO datamatching, audits and delays with 2011 tax returns-refunds
There is nothing “random” about ATO audits. Taxpayers still don’t realise just how much data the ATO has access to from other sources, like financial institutions, so it can easily see if a taxpayer is withholding information. In January last year the ATO just spent some major money implementing a new computer system which encompasses a number of their old databases and systems. Computer matching makes the exercise of data matching automatic and easy to perform. Morris Accounting expects that the ATO’s data matching activity to increase as a result of the introduction of this new system as a result audit activity will increase accordingly.
This 2011 tax season sees a new initiative of the ATO to withhold processing of returns and refunds to individuals where the ATO is waiting on further information from these data matching sources. Recent notices from the ATO indicate that the returns are not being processed any earlier than 12weeks, a timeframe not supported by us tax professionals and we are lobbying for this to be changed.
If your business, company, trust or individual return is subjected to “random” audit, review or investigation, you are responsible for the costs involved in providing the required information. The costs associated with an audit can start at a couple of thousand and range very high upwards of that. You can protect yourself against these costs by taking out Audit Insurance Cover. Should you wish to find out more information about Audit Insurance please contact our office 1300 219 818.
Our internal workpaper preparation, and the way we disclose information on clients tax returns generally lowers the chance of being audited. The ATO have a number of internal red flags depending on the information provided, and we do our best to mitigate these arising for clients. To this extent we generally query our clients with information and discuss if this may be a problem.
As outlined in our engagement letter, you are obliged to provide true and correct information to us for preparation of your tax returns. If you have done this then you should not be concerned with an ATO audit. For more information on the ATO audit process and other information goto www.ato.gov.au.
Planning for an untimely death
I know that we all like to think we will live forever, but the reality is we don’t. As those of us who have lost loved ones know, it’s hard enough without any added anxiety over worrying about financial matters that may not have been adequately put in place.
The following is a checklist of what you should have sorted out in case you suffer an unexpected illness or death:
- A will – a will leaves clear instructions as to how you want your assets distributed after your death. Estates without a will can take YEARS to sort out if there are multiple beneficiaries. In Queensland the Public Trustee offers a free will-making service, or if your situation is complex, we would be happy to refer you to a solicitor.
- Enduring power of attorney – this legally specifies who you choose to make financial, personal and medical decisions on your behalf should you be unable to (for example, due to an illness or incapacity).
- Binding death benefit nomination – this spells out who receives your superannuation and insurance amounts after you die. Check with your super fund to see what their process is regarding binding nominations – most have a form that needs to be completed with your signature witnessed.
- If you are a business owner make sure your business has an appropriate succession plan in place.
- Have a up-to-date list of who needs to be notified should something happen to you – this may include relatives, friends, employer, clients, business associates, organisations you are involved with, and anyone else you feel appropriate.
- Keep all your important documents together – these should include bank account details (including loans, credit cards, term deposits), insurance policies, super fund details, property deeds, share certificates, birth and marriage certificates, along with the above-mentioned documents.
Finally, make sure a few people know where you keep your important documents – including your spouse, kids/parents and the person nominated as the executor of your will.
Tax time and Happy New Financial Year!
HAPPY NEW FINANCIAL YEAR!
With 1 July brings a new tax season and we’ve already processed a few nice refunds for clients. So please click here use our 2011 tax return checklist to ensure you have the best refund.
We also help client get better refunds in the future by planning their income and investments in a tax effective manner. This also helps our clients increase their wealth and improve their lifestyle over the years.
We look forward to helping you this financial year!
What is a SMSF (self managed superannuation fund)
1. Corporate funds – available by people working for a particular employer or organisation
2. Industry funds – open to people under a particular industry award or in a particular industry. Some industry funds are open to anyone.
3. Retail funds – open to anyone, generally run by financial institutions
4. Self-managed super funds – only open to you and up to three other people.
This information sheet focuses on self-managed super funds.
Australia has over 300,000 self managed superannuation funds, with this number growing by around 2,500 a month (source: Australian Tax Office).
Self managed super funds provide the same function as other super funds – they invest contributions and make them available to its members on retirement. However unlike other super funds, the members of self-managed super funds are also the trustees, and they decide what the contributions are invested in and how benefits are paid. As all the members are trustees, they are all in a position to ensure their interests are protected.
What is a self-managed super fund?
A self-managed super fund is just what it says – a super fund that is managed by the people who invest in it. Like other super funds, the assets and money in a self-managed super fund are solely for retirement benefits. It cannot be used to run a business, renovate a house or benefit you before retirement.
Under guidelines from the Australian Tax Office, a superannuation fund is generally a self managed super fund if (with a few exceptions):
▪ it has a trust deed that meets the requirements of the Superannuation Industry (Supervision) Act 1993 (SIS Act)
▪ it has four or less members
▪ each member of the fund is a trustee
▪ no member of the fund is an employee of another member of the fund, unless they are related, and
▪ no trustee of the fund receives any remuneration for their services as trustee.
Who can set up a self-managed super fund?
Anyone can set up a self-managed super fund – it is not just for people over the age of 40, or those approaching retirement.
The maximum number of people who can be in a self-managed super fund is four. They do not need to be related however it is useful if they have similar investment goals and styles.
Is a self-managed super fund right for me?
Self-managed super funds are not for everyone. Because it is self-managed, you need to do some work. This includes sitting down with your accountant and the other trustees and working out an investment strategy that will grow in value to meet your investment goals.
As you will be a trustee of your own fund, you will be legally responsible for the decisions made, regardless of the professional advice you may seek. It will be your responsibility to ensure the fund is correctly structured, keeps thorough records, and meets all reporting requirements (such as income tax and regulatory returns).
Morris Accounting can help you understand with the legislative requirements and administrative responsibilities of running a fund.
What are some of the benefits of a self-managed super fund?
Perhaps the biggest benefit of a self-managed super fund is that you control what you invest in. And depending on what you choose, there are also opportunities for increased financial gains in short and long term.
Setting up fund with up to three other people also allows you to pool funds together to increase investment and effective diversification
What can my self-managed super fund invest in?
Self-managed super funds can provide significant opportunities to create wealth. Traditionally self-managed super funds invest in listed shares, but there is no need to limit yourself to this. They can use most forms of investment and wealth creation including shares, property, cash (such as term deposits), public and other trusts as well as a number of other options.
There are new laws around self-managed super funds that now allow most forms of borrowing, as long as rules are met.
What does a self-managed super fund cost?
Self-managed super funds generally have upfront and annual fees, however these can often be offset with greater gains than normal superannuation accounts with lower returns and % based fees.
Talk to Morris Accounting for more information on costs and how much you should have in your fund to make it viable.
How do I set up a self-managed super fund?
Talk to Morris Accounting! As well as being accountants, we are also qualified to discuss financial matters and therefore authorized to help you set up a self-managed super fund as well as advise you on what your fund should invest in.
We can do a lot of the hard work for you!
The Australian Tax Office (www.ato.gov.au) and the Australian Securities and Investments Commission (www.fido.gov.au) can also provide information on self-managed super funds.
How to use your superannuation to purchase property
Self-managed super funds provide the same function as other super funds – they invest contributions and make them available to its members on retirement. However unlike other super funds, the members of self-managed super funds are also the trustees, and they decide what the contributions are invested in and how benefits are paid. Perhaps the biggest benefit of a self-managed super fund is that you control what you invest in.
This information sheet provides a simple guide on setting up a self-managed super fund and then using it to invest in property.
For more general information on what a self-managed super fund is, read the information sheet Self-managed superannuation funds.
Who can set up a self-managed super fund?
Anyone can set up a self-managed super fund – it is not just for people over the age of 40, or those approaching retirement.
The maximum number of people who can be in a self-managed super fund is four. They do not need to be related however it is useful if they have similar investment goals and styles.
What does it cost?
Setting up a SMSF costs around $2000 if set up with individual trustees or around $2200 if it is set up with a corporate trustees (the additional cost is due to higher government fees and charges). There are also annual costs of around $2000, depending on how many different investments your SMSF has.
Apart from the dollar costs, you also need the time and skills to manage your own super fund, both of which can be burdensome.
What is the difference between a corporate trustee and individual trustees?
A corporate trustee is when a company is the trustee. Each director of the company is a member of fund, and each member of the fund must also be a director of the company.
When a fund has individual trustees, each member of the fund is a trustee.
The main difference is that it is easier – and cheaper – for fund members to change (ie new members join, other members leave) if the trustee is a company. For example a new member may join if the fund is established by mum and dad and their child wants to join once they start making superannuation contributions.
Regardless of which method is chosen, all members of the fund are required to be trustees, which ensures each member is fully involved and has the opportunity to participate in the decision making process of the fund.
How do I set up my own self-managed super fund?
There are a few steps involved in setting up your own self-managed super fund.
Action that needs to be undertaken
1. Check with your employer that you can change your super fund – some employers, such as the Queensland Government, have a requirement that a specific fund is used. Who does this – SMSF members
2. Complete an application form requesting Morris Accounting setup the fund. This can be downloaded fromwww.morrisaccounting.com or by calling 07 3105 5926. Who does this – SMSF members
3. Decide whether you want to set up the fund with a corporate trustee or with individual trustees. Who does this – SMSF members
4. Return the completed form and relevant the fee to Morris Accounting. Who does this - SMSF members
5. The fund documentation is prepared – called the Trust Deed. Who does this - Morris Accounting
6. Apply to the Australian Tax Office (ATO) for the fund to be regulated, and to obtain an ABN and tax file number.
This process can take around two weeks. Who does this - Morris Accounting
7. Once the ABN and TFN has been obtained, the paperwork needs to be reviewed and signed by each of the SMSF members. It is recommended that each member of the SMSF keep a copy of this paperwork for their records. Who does this - Morris Accounting
8. Contact your existing super funds to arrange for any monies to be rolled over into the new SMSF. This process can take up to 6 weeks. Who does this - Morris Accounting
(please note that in some instances Morris Accounting will not be able to do this on your behalf, however you will be notified if this is the case)
9. Prepare an investment strategy. This needs to consider the risk, return, diversification, cash flow, asset allocation and the ability to discharge existing and prospective liabilities. Who does this - SMSF members – can be done in consultation with Morris Accounting
10. Establish a bank account for your super fund. This can be set up at a financial institution of your choices with your own choice of bank. The account name needs to be the same as the name of your super fund. Who does this - SMSF members
11. Advise your employers of the details of your SMSF so super can be paid directly into the new fund. Who does this - SMSF members
12. Monies are transferred into your super fund bank account and it is ready to commence receiving your own super contributions and make investments!
What can the super fund invest in?
Strict rules govern what the super fund can invest in. The main rule is that the fund cannot invest in or purchase from any members of the fund. This is called the In house Asset test. Here is a short list of what your fund can and cannot invest in.
Allowed
Cash/Bank Accounts/Bonds
Public Company Shares (ie listed on Stock Exchange)
Commercial Property
Residential Property (let out to 3rd party tenants)
Loans to 3rd Party companies, business,
Not Allowed
Residential Property (members home or holiday)
Loans to members or non-arms length parties
Private Company Shares
Also remember that the general rule is that Superannuation funds are not allowed to borrow. So that all investments are normally made in cash. This means that previously property was generally not an investment option as most property is purchased using finance.
How can I use my super fund to invest in property?
Following legislative changes in 2007, SMSFs can now borrow for residential and commercial property investments providing strict rules are met.
SMSF loans are fairly straightforward to arrange, and need to adhere to the following rules:
▪ The loan is non-recourse – meaning it can only be used to borrow against the secured property asset, not other assets of the super fund (ie if the loan is to purchase property A, it cannot then be used to pay for shares)
▪ The SMSF is the beneficial owner of the property until the loan is paid out
▪ The trustees of the SMSF have effective operational control of the property – ie the trustees determine the rent, select the tenants, pay for maintenance etc
▪ SMSF loans can only be used to fund the purchase of income producing property – it cannot be used to buy a vacant block of land that will not generate an income.
The basic steps involved are:
Action that needs to be undertaken
▪ Select a property to purchase. Who does this - SMSF members
▪ Create a bare trust and loan document within the SMSF. Who does this - Morris Accounting
▪ Select the loan product (ie the lender, whether it is interest only or principle and interest, fixed or variable rates etc) Who does this -SMSF members
▪ The financial institution lends money to the bare trust, which legally owns the property on the loan. Who does this -Financial institution
▪ The SMSF provides the deposit and the monies to meet the loan repayments. Who does this -SMSF
▪ All income generated from the property is also paid into the SMSF.
Morris Accounting strongly recommends that a financial or mortgage broker is engaged to select the loan product – Nathan can provide referrals if necessary.
Note that finance broker and accountant setting this up need to communicate to ensure that the correct documentation drawn up to meet the requirements of the financiers. This is crucial especially as each financier have their own internal policies and rules for this borrowing.
Experience has shown that it is better for one person to undertake all the legal documentation – ie Morris Accounting. Legally we are not allowed and do not prepare the documentation ourselves, this is outsourced to the relevant legal practice to prepare. We manage this process for our clients using our experience and QA checklists to ensure that all matters are being taken care of.
So whilst there are a lot of rules in relation to the superannuation environment, Morris Accounting manage those for our clients so that they can get on with the easy party of managing their own superannuation money and getting far greater results for their long term wealth creation strategy. Contact Morris Accounting today to take control of your own super!
A guide to using a self-managed super fund to invest in property. (Downloadable version)
Buying a business?
Buying a motor vehicle
Our clients often ask us what the most tax effective way to purchase a motor vehicle is. Should they buy it outright, lease it or undertake a hire purchase/chattel mortgage arrangement.This information sheet aims to set out the different options and the pros and cons of each.
Business motor vehicle purchases over $1,000 made between 13 December 2008 and 31 December 2009, and installed by 31 December 2010 are eligible for the bonus tax break the Federal Government has introduced for small business owners.
What this means, is that small businesses with a turnover of less than $2 million can claim a bonus tax deduction of 50 per cent of the cost of the vehicle.
This is subject to various conditions. More information is available on the fact sheet Federal Government tax incentives for small business.
Definitions
Lease – leasing provides the customer with the benefits of owing a motor vehicle while the financier maintains actual ownership. The customer pays the financier a fixed regular fee (usually monthly) for the term of the lease.
When the lease expires the customer has the option of paying a final amount and taking ownership of the vehicle, trading it in for another vehicle or refinancing the residual and continuing the lease.
Hire purchase – very similar in payments to a lease in that a regular fee is paid to a finance company that purchases the vehicle on behalf of the customer. As with a lease, there is also an optional payout at the end of the hire purchase agreement to the customer will own the vehicle. However from a legal and taxation point of view it is viewed that the car is purchased and the facility is a loan.
Chattel mortgage – an agreement whereby a finance company lends money to a customer to purchase a chattel (in this case, a motor vehicle). The customer takes ownership of the vehicle at the time of purchase and makes regular repayments to the finance company.
However, the finance company also takes out a “mortgage” over the vehicle by way of an ASIC-registered Fixed and Floating Charge to provide security for the loan.
When the term of the loan expires the customer has the option of paying a final amount and taking ownership of the vehicle, trading it in for another vehicle or refinancing the residual.
Before making a decision as to how to purchase a motor vehicle, talk to a finance broker regarding specific repayment requirement and interest rates, as these may differ depending on which option you select.
There are different tax implications for each, as the Tax Office considers a lease arrangement to be the same as a rental, but a hire purchase and chattel mortgage are seen as legally owning the asset with an option to payout a residual and own it at the end of finance.
All options have a residual at the end of the term. Leases are less flexible in this regard, where as you can negotiate the residual with a hire purchase and chattel mortgage which can make repayments higher or lower depending on cash-flow requirements.
Combination of interest and accelerated depreciation rates on assets usually means that hire purchase and chattel mortgage more tax effective than leases.
| Features | Buy outright | Lease | Hire purchase / chattel mortgage |
| 50%/30% small business owners investment allowance | Yes | No | Yes |
| Upfront GST claim on cost of asset | Yes | No | Yes (No if GST on cash basis) |
| Ongoing GST claim on repayments | No | Yes | No (Yes if GST on accruals basis) |
| Deductible monthly tax payments | N/A | Yes | No |
| Deductive interest on finance | Yes | No | Yes |
| Depreciation on asset | Yes | No | Yes |
Here is an example:Nathan buys a car for $55,000 on 30 June 2009.
If Nathan pays cash for the car and his GST is registered under the accrual basis, he would have a $5,000 GST credit, and a $25,000 investment allowance deduction in his 2008-09 tax return.
If Nathan leases the car he has no tax advantages in the 2008-09 year.
In the 2010 year, if leased, Nathan would have GST credits of $1000 over the year, and $10,000 in lease repayments deductions.
If Nathan uses hire purchase or chattel mortgage he would have no GST credits but would have tax deductions of approximately $4,500 interest and $10,000 depreciation.
How to grow your business using practical accounting
1. Set some financial goals
Ideally you will have a business plan that includes financial goals, such as expected growth, turnover, projected staffing increases, what your business strategy is (eg growth, acquisition, winding up the business etc). Your goals should be measurable over a period of time, for example, to increase turnover in the next 12 months. Ideally you will review these quarterly. If you are not sure where to start with setting some financial goals, then speak to Morris Accounting and we can help you out.
2. Review your record keeping systems
Make sure you have a simple but accurate way of keeping your financial records. For some people this might be in a shoebox, but I would recommend a simple filing system – either two-ring binders or manila files in a filing cabinet. Remember, having an accurate record keeping system will make life much easier at tax time – and probably save you bookkeeping and accountant fees! Your record keeping systems should include:
▪ keeping a record of all invoices and when they are paid
▪ keeping a record of all income and when it is received
▪ regular review of financial statements, including reconciliations of bank statements, and review of income and expenditure
3. Develop a budget – work out what business expenses you can claim
Developing a budget can help you decide what your financial goals are and help you achieve them. The easiest way to develop a budget is to write down a list of all your income and all your expenses. Consider splitting your expenses into two groups:
i. the must haves – such as rent/mortgage, electricity/gas bills, insurance, salaries, office and plant equipment, etc
ii. the nice to haves – updating office furniture, computer equipment, etc
Regularly review and monitor your costs. Look to see how you can cut costs, find better suppliers, negotiate better deals with suppliers, reduce unnecessary purchases etc.
Set cost control systems so that you have a process whereby you or someone in an executive position approves all purchases – or all purchases over a certain amount. Encourage your employees to validate all purchase requests.
There are a lot of easy to use budget planners on the web – type budget planner into Google, or go to the links section ofwww.morrisaccounting.com.au for a link to an easy to use budget planner. While these are for personal use they can easily be converted for a small business.
4. Be tax compliant
Micro businesses (defined by the Tax Office as those with turnover under $2m) pay 11% of the tax collected by the ATO and employ nearly 22% of all people employed in Australia, and are comprised of nearly 1 million sole traders, consultants and contractors, 700,000 companies and 420,000 partnerships – it should not therefore come as a surprise that these businesses fall under the tax office’s radar in terms of tax compliance!
You need to keep copies of all records for five years. This includes records of sales (including sale of the business) and purchases, payments to employees, and payments to other businesses.
Morris Accounting has developed systems and checklists to help our clients claim the maximum tax deductions possible, providing them with the best possible tax return. As well as lodging your annual tax returns, Morris Accounting also offers advice on salary sacrificing, establishing self-managed super funds, bookkeeping services, assistance with BAS and PAYG.
5. Don’t be scared to outsource!
If you are too busy to keep your books then hire a bookkeeper or accountant to help you. You will probably find it a lot cheaper than you think (many charge an hourly rate), not to mention the time if will free up for you to spend doing the more interesting things in your business. Services a bookkeeper or accountant can take over include paying salaries, coordinating and handling accounts receivable and payable, balancing ledgers and bank accounts and organizing financial information required for business plans, loan proposals, cash-flow statements, etc, etc, etc.
6. Protect yourself from fraud
Invoice fraud is one of the biggest types of fraud that small business is susceptible to, and small business owners juggling lots of demands can make easy targets for scammers.
According to the Queensland Office of Fair Trading (OFT) invoice fraud is common. This occurs when a business is sent a fake invoice requesting payment, usually for advertising in bogus directories or publications. The invoice looks legitimate and is often paid by businesses who don’t check they are genuine. To avoid being scammed, OFT recommends traders:
▪ do not approve purchases over the phone – get it in writing first
▪ request previous editions of any publications you are considering advertising in
▪ do not pay an invoice unless you have paper work to show you ordered the goods or services
▪ check the publication’s circulation (Audit Bureau of Circulation at www.auditbureau.org.au)
▪ check for scam alerts at www.fairtrading.qld.gov.au orwww.fido.asic.gov.au.
(Source: www.fairtrading.qld.gov.au)
7. Look at how you can leverage any profit
Once your business starts to make a profit you need to think about how you can turn this into more wealth. One of the best ways to create wealth is through leverage, which can offer great tax breaks in the accumulation of capital growth assets. By leveraging your existing cash balances or cash flow to hold as many capital appreciating assets as you are comfortable with, you will increase your wealth. One example is to consider purchasing a premises (rather than renting).
About Morris Accounting
Morris Accounting works with a large cross section of individual and business clients, based throughout Australia and around the world, on advisory issues such as tax minimization, wealth creation, business management, and business expansion planning. Morris Accounting also helps clients with business valuations, acquisitions and sales.
Contact us today to find out how we can help your business grow.
Phone: 1300 219 818
Email: info@morrisaccounting.com.au
www.morrisaccounting.com.au