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Short-term vs long-term financing

Posted on August 19, 2019 by admin

Maintaining healthy cash flow can be challenging; between ongoing expenses and bills, poor cash flow can severely impact your customers, staff and bottom line. Business owners need to understand the differences between short and long-term financing when developing a cash flow strategy. There are various sources of financing available, with each being useful for different situations. Choosing the right source and mix is key for good cash flow, with financing options often being classified into two categories based on time period: short-term and long-term. To find the right plan for you, determine your needs and then match a financing option to meet those needs. Short-term financing:Short term financing, or working capital financing, looks at needs that arise in relation to financing current assets – for a period of less than one year. Working capital is the funds that are used in the day-to-day trading operations of a business. Short-term financing can help you to pay suppliers, increase inventory and cover expenses when you do not have sufficient cash on hand. Long-term financing:Long-term financing options can help you invest in overall improvements to your business, for a period of more than 5 years. Capital expenditures, such as upgrading equipment, buying additional […]

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Evaluating risks in business  

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Business owners are faced with constant challenges and tough decisions to make on a day-to-day basis. Risk-taking is often necessary to achieve more in the business, but owners need to make informed choices to avoid potential damages. To manage risk effectively, a proactive stance needs to be taken in identifying and responding to risks before a crisis strikes. Identify risks:Risks can be hazard-based, uncertainty-based or opportunity-based, with both tangible and intangible items posing risks for your business. Owners may find it easy to list the physical items at risk such as assets and infrastructure, yet neglect intangibles such as injury to staff, loss of important business information and more. It is important for business owners to be aware of the risks they could face in their business. Calculate your risks:Making an educated assessment of both the likelihood and potential severity of risks can help prioritise your responses. Once the risks have been identified they should be ranked on the likelihood of occurrence and the severity of consequence it might impose on the business. Risk ranking can help you to determine what situations need more time, attention and resources. Manage your risks:Finally, the risks need to be managed effectively. Avoidance is […]

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What to look for when choosing a super fund

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Over the course of your life, the contributions made to your superannuation fund can often end up being your greatest asset. Because of this, selecting a super fund is an important decision, choosing a fund with the right investment strategies for you could be the difference between retiring comfortably or not. There are five different types of superannuation fund to choose from but not all options are available to everyone. SMSFs:Self-managed super funds (SMSFs) are those where the trustee is responsible for managing and making regular contributions to the fund. This option allows for more responsibility in terms of administration, compliance and investment decisions. Industry funds:Industry funds generally cater to employees from a specific industry although they are open to everyone. Industry funds are not-for-profit, meaning they have historically charged lower fees on average with profits funnelled back into members’ funds. Retail funds:Retail funds are offered to everyone and are usually run by investment companies or banks. A portion of the profits derived from the activities of retail super funds then goes to the shareholders. Corporate funds:Corporate funds are offered to specific corporations or if you are employed by a particular employer. They often return profits to their members (although […]

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FBT car parking threshold changes

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The ATO has released the Taxation Determination 2019/9, which outlines changes to the fringe benefits tax (FBT) car parking threshold. The car parking threshold for the year commencing on 1 April 2019 is $8.95. This replaces the amount of $8.83 which applied to the FBT year ended 31 March 2019. The increase has been set by adjusting the previous year amount by a factor equivalent to the movement in the Consumer Price Index (1.3%). Section 39A of the Fringe Benefits Tax Assessment Act 1986, sets out a number of conditions that must be met before car parking facilities provided by an employer to their employees will be subject to FBT. These conditions include: A commercial car parking station is located within a one-kilometre radius of the employer-provided car park. The lowest fee charged by the car park operator is more than the car parking threshold. The car is parked for more than four hours between 7 am and 7 pm on any day. There are circumstances where car parking benefits are exempt from FBT. These exemptions may apply to: Employers who meet the conditions of a small business entity. Institutions of certain research, education, religion and charity. Employees with a […]

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Deduction rules for small businesses

Posted on August 12, 2019 by admin

Spending on capital assets usually cannot be deducted immediately. Instead, small businesses claim the costs over time in accordance with the asset’s depreciation. There are many different processes that businesses can employ to make claims on their assets. For small businesses with lower-cost assets, methods such as simplified depreciation or the threshold rule can help to make more effective claims. Simplified depreciation:Under simplified depreciation rules, business owners can immediately deduct the business portion of each depreciating asset that was first used or installed ready for use up to: $30,000 from 7.30pm (AEDT) on 2 April 2019 until 30 June 2020. $25,000 from 20 January 2019 until 7.30pm (AEDT) on 2 April 2019. $20,000 before 29 January 2019. Owners can also pool the business portion of most other depreciating assets that cost more than the relevant threshold in a small business asset pool. Then they can claim a 15% deduction in the first year, regardless of whether they were purchased/acquired during the year, and then a 30% deduction each year after. The threshold rule:The threshold rule allows owners to claim an immediate deduction for most expenditure of $100 or less, including any GST, to buy physical assets for the business. The […]

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Ineligible downsizer contributions and how they are administered

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When a downsizer contribution is ineligible, the fund must re-assess the amount in accordance with the Superannuation Industry (Supervision) Regulations 1994 and the trust deed. This is to determine if the amount can be retained as a non-concessional contribution. Provided the trust deed allows so, the fund can return the contribution to the member or adjust the prior downsizing contributions to nil and report this amount as a non-concessional contribution when the member meets the age and work tests. When a contribution can’t be returned or returned in full:Members who no longer have a super interest with the fund, or an insufficient return amount, must have their contribution re-reported as non-concessional, even if the contribution was returned because the member did not meet the age/work tests. Some of the contribution may be an excess non-concessional contribution (ENCC). Regardless of the age of the member, if this is the case the member will receive an ENCC determination or when the fund can’t return the full amount. Members will continue to have access to all review rights under the ENCC scheme. Even if the member is in pension phase, the funds will still need to return an ineligible downsizer contribution if it […]

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New ATO toolkit helps small businesses get expenses right

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The ATO has developed a new toolkit that helps small business owners to understand their entitlements and avoid mistakes in their tax returns. The 2019 Tax Time Toolkit Small Business covers information about: Three of the most common expenses: home-based business, motor vehicle, and business travel. Single Touch Payroll (STP) for small employers. These toolkits are designed to highlight areas that small businesses may struggle with at tax time. Subjects include: Information about claiming deductions for home-based business expenses. Types of motor vehicle expenses that you can claim. The importance of accurate record keeping. How to differentiate between business and private use. One of the factsheets, in particular, provides options and support for employers using STP. Some of the important topics outlined in the fact sheet include: What information you need to report and when you need to report it. How to correct the amounts reported. The changes to payment summaries. Information you need to provide to your employees. Available exemptions. As it is common for there to be confusion around these topics, taking the time to understand your obligations as a business owner can streamline the returns process and help to ensure correct reporting.

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Getting on top of cash flow

Posted on August 6, 2019 by admin

Managing cash flow is critical to the success of a small business. While it is necessary to be profitable, your profit is a number that shows up on your accounts at the end of the year whereas your cash is the money you have in the bank. By incorporating the following tricks, you can help to maintain the flow of money coming in and keep the business running smoothly. Prepare a cash flow projection:There are always unforeseen challenges or changes in the marketplace. While you won’t always be able to predict or forecast these, you can gain a better grasp on industry trends and patterns. Drawing up a cash flow projection can help you plan the ups and downs of your spending. In your projection, be sure to include: Cash receipts, including income from sales and income from financing. Cash disbursements, including all expenses (cost of goods, operating expenses, loan payments, income tax payments, etc). Net cash flow — opening cash balance plus receipts, minus disbursements. Ending cash balance. Generate new business:The business is going well; you’re meeting your targets, money is coming in, and you’re happy. This is not a time to relax, it is a time to be […]

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Be wary of unregistered tax preparers

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The Australian Taxation Office (ATO) is warning taxpayers to keep an eye out for people posing as tax agents who are not registered with the Tax Practitioners Board (TPB). Only a registered tax agent can charge a fee to prepare and lodge your tax return. There are concerns from the ATO about the number of people claiming to be tax agents, often promising refunds that sound too good to be true, or providing discounted services much cheaper than registered, legitimate tax agents. Unregistered preparers will often use a taxpayer’s personal login details to access their ATO Online account through myGov to lodge tax returns. To protect yourself from a large tax bill or from facing penalties, check that your tax agent is registered on the TPB website or ask to see their Certificate of Registration of Tax Agent. Protecting your myGov login details and password will also ensure safety as a legitimate tax practitioner will never ask for your myGov credentials. Registered tax agents can access the information they need themselves through ATO online services dedicated to lodging returns for their clients. Individuals should also be aware that if you use an unregistered tax or BAS agent and they are […]

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Boost employee productivity

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All businesses need to look at ways to increase the productivity of their staff. When your employees get more work done, it will ultimately lead to the business making a bigger profit. As well as increasing productivity, employers should also aim to improve the happiness and wellbeing of their workers. Here are some ways to boost employee productivity without losing staff engagement. Use feedback:Collect as much data as you can from your employees. This can inform how you create the workplace to best suit their needs. Data you might collect could include information on their performance levels by installing productivity tracking software on their devices. You could also regularly survey your staff to gain more qualitative data on their personal insights and happiness levels at work. Provide good tools:A business can only foster a productive environment when employees have access to the best tools. Provide your staff with excellent hardware, software and office supplies. This includes laptops, office furniture, and amenities. The more comfortable that your employees feel at work, the more work they will get done. High-quality software will also help your business to achieve work more efficiently. Allow flexibility:Having an employee schedule in place may be one way […]

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Using your tax return wisely

Posted on July 8, 2019 by admin

Getting your tax refund back is exciting, but as tempting as it is to splurge, consider other ways you can put that money to good use. It is easy to get caught treating your return as extra money when you shouldn’t see it any differently than your regular paycheck. Give the money a purpose by thinking about your personal financial situation and determining your needs.

Emergency fund:
An emergency fund can make all the difference if a difficult financial situation comes up, acting as a backup in the case of an emergency such as losing your job or medical costs. Building an emergency fund with enough money to cover at least three months worth of expenses is a good starting point. Make sure the money is added to a high-interest savings account to utilise compound interest. If you are contributing regularly to this fund, adding money from your tax return can boost it above schedule.

Make debt repayments:
With a bit more money at your disposal, now is the time to make repayments on debts you may have. Start with the higher interest debts and work down, your interest repayments will drop when you lower your outstanding balance. These debts can be things like credit cards, personal loans, outstanding bills or mortgage repayments.

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