- March 16, 2015
- Posted by: admin
- Category: Tax Tips
Being in the trades and building industry, you need a Melbourne Melbourne accountant who understands your business and the intricacies.
Here at Melbourne Accountant, we appreciate the unique nature of the trades including the importance of cash flow, quoting, job costing, scheduling, progress payments, retention and variations. This is in addition to the usual small business compliance issues of GST, BAS, PAYG and Superannuation.
We are not your average small accounting firm in Melbourne that just keeps the ‘score’. We specialise in the trades and our mission is to help you grow your business revenues and profits.
With over 20 years experience you can benefit from our extensive knowledge of the trades and below are 12 things every trades person needs to know about running a business.
Call us today if you need an Melbourne Accountant who understands and enjoys working with tradespeople.
Commonly Overlooked Deductions Among Tradies
Software selection is a major decision for people in the trades. Too often we find plumbers, builders, carpenters and electricians using accounting software beyond their business needs and level of accounting skill. This usually leads to considerable frustration and records that amount to nothing more than a ‘computerised shoebox’.
With so many software packages on the market it is easy to become confused and make the wrong decision. They range in functionality and sophistication with a price tag to match and our first step with new clients is review their business needs and level of accounting skill. The software should also ‘talk’ to our systems so you can electronically transfer your data files.
If you don’t understand double entry accounting including debits, credits and journal entries then you’ll probably struggle to cope with higher end programs without undergoing extensive training. If you just need to track your receipts, payments and GST we recommend Cashflow Manager. It lets you generate tax invoices, monitor debtors and produce monthly statements and budgets. If you have staff you can add the wages module.
Consult Melbourne Accountant before you decide on which accounting software to use in your business. The wrong choice of software can be very costly and soak up your valuable time that could be better spent working on your business.
Income Protection Insurance
Working in the trades is not only physically demanding, it carries a high risk of injury. The obvious question then becomes, “What would happen to you and your family if you were sick or injured and unable to work for a period of time in the business?’.
We often ask clients, “What is their most important asset?” Their response might surprise you (apart from their ute and tools!) but the real answer is YOU. The average Australian will earn over $2m over their working lives but insurance industry statistics tell us that every working Australian has a one in three chance of becoming disabled for more than three months before turning age 65. While employees may be entitled to a limited amount of sick pay from their employer, workers’ compensation policies only cover you for work related injuries – a small percentage of the causes of disability.
If you were sick or injured and unable to earn money from the business how would you service your mortgage, vehicle repayments and fund school fees and living costs? Income Protection insurance is a vital link in providing you and your family with a regular income stream during times of illness or injury. These policies will pay you up to 75% of your income (salary plus super and any other benefits) allowing you to maintain your lifestyle and service your mortgage and other debts.
Income Protection Insurance provides worldwide cover, 24 hours a day, seven days a week. There are a number of variables that will impact on the premium you pay including:
- Monthly Benefit – Is the monthly amount of replacement income you will be paid. The maximum is 75% of your monthly gross income (i.e. before tax)
- Benefit Period – Is the length of time your replacement income will be paid for any one uninterrupted claim. Benefit periods can be 2 years, 5 years or to age 65 years. The longer the benefit period the higher the premium.
- Waiting Period – Is the length of time you must wait before your replacement income will commence. Choices of waiting period are 2 weeks, one month, two months, three months, six months, one year or two years. The shorter the waiting period the higher the premium.
The Australian Government announced an ‘investment allowance’ tax break in December 2008 aimed at helping businesses meet the challenges of the economic downturn. The Government then extended the ‘Small Business and General Business Tax Break’ in the May 2009 budget to allow small businesses (with a turnover of $2m) to claim a 50% tax deduction on eligible assets bought by 31 December 2009.
The business tax break is an extra tax deduction available on new, tangible, depreciating assets plus improvements or additions you make to existing assets. It includes motor vehicles (conditions apply), plant & equipment plus computers but excludes software, land and trading stock. The tax break is temporary and deadlines apply so you must buy and use or install the asset within a set timeframe.
The rate of the extra tax deduction depends on the annual turnover of your business. The minimum amount you need to spend also depends on the annual turnover of your business. If your business (and any businesses you are connected with) turns over less than $2 million a year, you may be able to claim the additional 50% tax deduction. You will also need to spend a minimum of $1,000 on an eligible asset. If your business turns over $2 million or more a year, you may be able to claim a 30% or 10% additional tax deduction. You will also need to spend a minimum of $10,000 on an eligible asset.
To qualify for the 50% tax break, you must:
- be a small business with an annual turnover of less than $2 million
- buy an eligible asset between 13 December 2008 and 31 December 2009
- meet the $1,000 minimum threshold (exclusive of GST)
- use or install or improve the asset by 31 December 2010
- use the asset principally in Australia and principally for business, and
- be eligible for a depreciation deduction under section 40-25 of the ITAA (1997)
Please consult with us regarding your eligibility for the tax break and if you plan to finance the asset purchase please talk to us regarding the finance options before you commit to the purchase.