Make your Christmas shopping less taxing (ha…)

With only five Saturdays left until Christmas Day, here are some tips to help you get organised and save some money.

The total retail spending for December 2015 in Australia was $24.8billion, and is projected to rise this December1. Great news for all our retail clients, but it can be a bit tough on the annual household budget.

Which brings me to tip number one:

1. Make a budget, and stick to it.

Hopefully you’ve read and adopted our tips on budgeting already, but when it comes to Christmas time it can be particularly important to monitor your spending. Research in 2014 found that 57% of Australians set a budget, but only 19% stuck to it2.

There are plenty of apps for budgeting and tracking your spending - ASIC’s MoneySmart website has some great tips and tools on budgeting, and of course there are many third-party apps for tracking your spending (you can find just a few listed here). Having said that, there’s nothing wrong with a pen-and-notepad approach either - whatever works for you, keeping an eye on what you spend can help curb overspending, and has the added benefit of keeping track of what you’ve bought for whom.

2.  Plan your gift-giving and buying.

If you haven’t already, now is the time to make your list and check it twice. Are you going to get gifts for extended family? Just for their children? Are you part of a Secret Santa draw (a Google search for Secret Santa might help organising the gift-buying)? For all your colleagues? Will you get a few extra gifts, just in case anyone drops by? Perhaps it might be something to discuss with the people with whom you celebrate Christmas, to clear up any confusion and expectations.

Whatever you decide is up to you and what you’re comfortable with - just make sure you plan for it! If you only plan and budget to buy gifts for your immediate family, but decide to get 20 extra gifts once you’re at the shops, you’ll very quickly blow your budget.

Allow plenty of time to buy the gifts you need. If you are going to buy everything in-store, a good idea might be to go a few times and get a few gifts with each visit. Besides helping you scope out gift ideas and compare prices, knowing that you have that extra time will prevent panicked overspending. Plus, if you’re anything like me, after a few hours trudging through the stores you’ll be too drained to be thinking of the perfect gift and just grab what’s closest.

3. Embrace the digital age.

It’s not too late to order online, and if you don’t want to pay for postage, many of the major stores around Australia now offer Click & Collect services, so you can just pop in and grab your items, leaving someone else to do the legwork.

Shopping from the comfort of your home takes the stress and time-pressure out of selecting gifts, and will help avoid impulse buying. You can also take advantage of reading reviews of potential gifts online at the same time. You can even order most gift cards online, and have them sent straight to those family members you won’t be seeing in the holidays.

4. Plan how you’ll pay.

Consider paying in cash only - research on the psychology of spending suggests it’s much easier to overspend when paying with a credit card, or even gift certificate3. If you do pay on credit, as around 20% of aussies do4, make sure you have a plan to pay it off to avoid the sting of late fees and interest.

5. Get a head-start on next year.

I’ve always liked the idea of buying gifts throughout the year, but it can be hard to plan for someone else’s needs, in secret, 12 months in advance. If there are certain gifts you know you’ll be giving next year, consider layby, or keep an eye on sales throughout the year.

If you don’t have any gift ideas yet, why not do everything short of buying the gifts? Start making lists now, and start saving. By putting aside $35 a week now, by December 2017 you’ll have a healthy nest egg of around $2,000 - and that’s not including any interest you might earn on the savings account of your choice. ASIC’s savings calculator can help you plan for your savings goal.

These tips will take the stress out of Christmas gift-buying. If you have any questions about budgeting, tax-savvy tips, planning your work Christmas party (see Andrew’s myth-busting blog here) or planning for the year ahead, please don’t hesitate to contact us.

Our office will be closed on Thursday 22nd December 2016, and re-open Tuesday 3rd January 2017. The team at Vivid Chartered Accountants wishes everyone a safe and happy festive season.

Sources

1. Consumers spend up in December, new figures show - February 2016
2. Festive spending to peak at $17.8 billion - November 2014
3. The psychology of making purchases with cash and credit - July 2014
4. Australia’s Christmas spending - December 2015

DIY Bookkeeping

We offer bookkeeping as well as accounting and business services at Vivid, but we also understand that some small business owners like to keep costs down and take a hands-on approach to bookkeeping. So, we’ve put together some tips for those of you who are already, or are thinking about, Doing It Yourself:

1.  Start with user-friendly accounting software that meets your needs. We use Xero – it is user-friendly and cloud-based, so you can access up-to-date information from any device, anywhere there is an internet connection. Xero also has an add-on market place, so if Xero doesn’t do exactly what you want, someone else has probably already built an add-on that does.

       

      2.  Set up a bank feed. Setting up a bank feed to your accounting software means that bank statement information is automatically imported each night, making reconciliation easy and giving you up-to-date information.

     

      3.  Bank reconciliation. We’ve heard of businesses not doing this, and it’s really important. You can do it daily, weekly, monthly, or quarterly, but we recommend doing it at least monthly. Reconciling your bank statement allows you to see exactly who has and hasn’t paid, make sure you have recorded all your expenses, and identify any unauthorised transactions. Xero makes this really easy; click on the bank account from the dashboard to see options for reconciling your bank statement.

      4.  Chase your debtors. If you’ve done the work, you need to get paid to keep your business profitable. Keep an eye on outstanding invoices and follow up any that are overdue. Sometimes customers just forget, and a quick reminder makes the difference between getting paid, and working for free. Xero’s dashboard makes it easy to keep an eye on overdue debtors, and can send automatic email reminders, or there are add-ons that go the extra mile and can even call debtors for you.

      5.  Check if you need to register for GST. If your business has a GST turnover of $75,000 per year or more ($150,000 for a non-profit), or you provide taxi or limousine services (including Uber), you need to register for GST. Once your GST turnover exceeds the threshold, you have 21 days to register for GST, so it’s important to keep an eye on your turnover. If you don’t register for GST when required, you may have to pay GST on sales from the time you were required to register, plus possible penalties and interest. See the Australian Taxation Office (ATO) website for more information.

      6.  Submit your Activity Statements. If the ATO has sent you a Business Activity Statement (BAS) or Instalment Activity Statement (IAS) to complete, make sure you do this and make any resulting payment by the due date to avoid penalties. If you need help with completing your BAS or IAS, please don’t hesitate to contact the ATO, or Vivid Chartered Accountants, for assistance.

      7.  Payroll. This is a complicated area that small business owners often find tricky. If you have staff, make yourself familiar with the ATO and Fair Work Australia websites. If you can’t find the information you need, don’t hesitate to call the contact numbers on those websites for advice. We also offer payroll services at Vivid Chartered Accountants.

      We hope these tips help you with DIYing your bookkeeping, but if you would like our assistance, please don’t hesitate to contact us. Our bookkeepers are qualified, Xero Certified, and work closely with our accountants. They can assist you with setting up Xero, full on-going bookkeeping, BAS/IAS preparation only, payroll, and one-off clean-ups or advice.

Goal Setting Part 1

31st December is renowned for being the evening when it comes to setting goals, and waking up to a whole new ‘you’ to kick off the New Year. But what about the slightly-less-celebrated financial new year?  As 30 June brings the year to a close, it can be the perfect time to really look into your business performance and set some goals to reach for the next financial year.

While the concept of goal setting is familiar to everyone, its value is often greatly underestimated. By giving yourself a goal to reach, you’re making a commitment to do something better. Some of the common goals we hear from our clients include;

• Creating wealth and establishing financial security
• Creating work-life balance
• Reducing personal and business debt

When trying to determine your overarching business goal, take the time to really evaluate:

• Where you are now?
• Why you are there?
• Where do you want to be?
• How do you get there?

Ask yourself why you wanted to establish your business in the first place.  Anyone can make a grand sweeping statement and say that’s their goal, but does that goal really have meaning when there’s nothing substantial behind it?

Recognise and evaluate the real information that your financial statements give you.  Take the time to understand what those numbers mean both for your current performance as the indicators towards where you can improve.  Taking on board industry averages and benchmarks, as well as Key Performance Indicators (KPIs) will give you a solid grounding for your goal setting.

Here is a quick checklist of all the best things to keep in mind when trying to establish your goals:

• Make sure your goal is quantifiable – a goal that cannot be measured doesn’t assist in giving you any indicator of performance or progression.  When determining how to measure your goal, be specific about the results you want to achieve.

• Create a time limit for when you want to achieve your goal.  Having a time frame in which to achieve your goal provides focus towards what you really want.

• Make your goals challenging, but also realistic.  You want to continue to push yourself and your business to improve, but setting completely unattainable goals will only demotivate you and your staff when you fall short.

• Make your goals your own.  Above everything else you must be honest – create goals that are true to you and what you really want.  In order for goals to be achieved, they must fall in line with your values and reflect you as a person.  Falsifying goals or waiting for someone else to create your passion will never work long-term.

• Become accountable for the goal you have created.  Write your goal down and share it with your staff members, friends and family.


Once the overall goal has been determined, it’s time to start planning how to make your goal into a reality. What actions need to be taken on a daily, monthly and/or quarterly basis to make these goals happen?  Small short-term goals will help to create a path, as well as maintain focus and motivation towards the long-term goals. To plan your short-term goals, they can be broken down into two categories – performance and process.


Performance goals are the benchmarks you need to reach to ensure you are on track to your overall goal.  The best way to achieve these is to break them down into short- and medium-term performances as well as categorise them in line with your determined KPIs.  For example, if your annual goal is to increase sales by 24%, then your performance goal can be to increase sales by 2% per month, or 6% per quarter.


Process goals are the actions necessary to reach the performance goals. In the above example, what needs to be done on a daily basis to ensure there is a 2% growth in sales for the next month?  It is imperative that the processes are measured against the performance goals on a regular basis, as this is the only way to know if your processes are appropriate to your overall goal.  Process goals, although small, are by far the most important component in your goal setting. The reality is, if you can nail your processes, then you’re on track to your overall goal with very little additional planning.



Goal setting is an invaluable business tool and something all of us here at Vivid Chartered Accountants embrace personally, and encourage our clients to take on.  Not only does it give you something to work towards, it creates a clear pathway to keep you moving in the right direction.  By evaluating, understanding and planning what you want from your business in the long-term, you will see yourself exactly in the position you want to be.


Stay tuned for our next instalment - Goal Setting Part 2

Last-Minute Strategies to Consider Before 30 June 2016

30 June 2016 is fast approaching, and now is the time to think of everything possible to minimise tax and prepare for the 2017 financial year. Why, you ask? Because as our friend and childhood mentor Homer Simpson states:

With this in mind, we have listed some strategies below which you should consider implementing before 30 June 2016.

Individuals:

1. Are you going to have significantly less income next year? Then you should consider the following strategies to help bring forward deductions, to reduce your income this financial year (and pay less tax overall):
1. Prepayment of interest – If you have loans that are deductible (i.e. rental property loans), then you should consider prepaying the next 12 months’ interest in advance and claim the tax deduction in the current financial year.
2. Income protection insurance premiums – As per the above, if you have income protection insurance, you can consider prepaying some premiums and claim the tax deduction in the current financial year.
3. Going to make a donation soon? Why not make it in this financial year, while your income is higher, and receive a greater tax benefit.
4. Work related expenses and materials – you could consider bulk purchasing these in the current financial year to maximise your deduction.
2. Review and capital gains and losses If you have sold an asset this financial year with a significant capital gain, you may want to consider selling other assets which have made capital losses to offset this gain. Remember, it is the exchange date which determines the year the capital gain is reported to the ATO, not the settlement date.
3. Recently purchased a rental property in Canberra? Then make sure you pay your stamp duty before 30 June 2016. Stamp duty on rental properties in Canberra is tax-deductible!
4. Review superannuation contribution strategies

With all the changes proposed to superannuation, it is important to speak with your adviser to determine whether your current superannuation strategy is still practical. This includes reviewing:

• Salary sacrifice arrangements
• Personal deductible contributions
• Personal non-deductible contributions
• Transition to retirement strategies.

It is also important to make sure you have not exceeded the concessional contributions cap (currently $30,000 or $35,000 depending on your age) and to ensure you have filled out a ‘notice of intent’ with your superannuation fund for any personal contributions that you want to claim as a tax deduction.

Businesses:

1. Company tax rate – The company tax rate for the current financial year is 28.50% for small business entities and 30% for all other companies. From 1 July 2016 it is likely that the company tax rate for small businesses will reduce to 27.50%. Therefore, a tax deduction in the current financial year provides a greater benefit for small businesses than a tax deduction in the next financial year. With this in mind, strategies which delay income and recognise expenses earlier will not only delay the tax liability but actually reduce the total liability!
2. Stocktake – It is important to have an accurate record of stock on hand as at 30 June 2016. This will give you options when choosing the method to value your stock for tax purposes - a lower value for stock on hand will decrease profit and tax payable.
3. Superannuation – In order for superannuation to be deductible, it needs to have been physically paid, so make sure you pay any outstanding superannuation by 30 June 2016.
4. Buying new assets – If you are a small business entity and are planning on buying an asset that costs less than $20,000, you should consider purchasing the asset before 30 June 2016. This will ensure you receive the tax benefit sooner.
5. Write off bad debts – Any debts that are non-collectable need to be physically removed from your accounting books (written off) in order to receive a tax deduction. A mere provision for bad debts will not provide a tax deduction.
6. Delay income – Ensure you are not invoicing clients or customers in June for work that will not be completed until the next financial year.
7. Increase expenses –  Need to purchase more office supplies? Now is the time. Running low on materials? Buy up now…. you get the point.

Remember the power is in your hands to implement a lot of these strategies, so be a smart tax payer/business owner and do it!

If Homer Simpson has taught us anything in life, it is that if someone else can do it for you, let them! So if you haven’t spoken with your accountant lately, now is the time. These strategies can save you thousands of dollars in tax if used correctly!

Call us on 02 6171 6000.

Tax Planning

When it comes time to pay your tax bill, you don’t want to feel like the ATO has gone all Stewie Griffin on you.

Instead, a pre-30 June tax planning meeting with your accountant at the corner of

could be very helpful.  Aside from wanting to catch up with your accountant for their good looks and funny jokes, there are several reasons as to why you should meet up prior to the end of the financial year.  

It is an opportunity to review and analyse your results in real time, rather than waiting until after the end of financial year when it can be too late to have any impact.  Modern accounting software can be very helpful, but it is a great idea to sit down with a professional and analyse things like:

o   Results vs budget

o   Spending patterns such as staff costs vs revenue

o   Profitability of various cost centres

o   Revenue issues

o   Cash flow issues

o   Required expansion and capital expenditure

o   Debtors

Next, it is time to do what Liam Neeson would do and use your (or your accountant’s) very particular set of skills to take any action required to ensure compliance and legally minimise your tax.  This might include:

o   Completing required trust resolutions.

o   Completing annual stock-take at 30 June.

o   Ensuring deductible expenses are paid prior to 30 June (e.g. income protection insurance premiums).

o   Ensuring vehicle log books are completed, if required.

o   Ensuring your staff superannuation is paid prior to 30 June to allow the tax deduction in this financial year.

o   Acquiring any required new assets especially if you are eligible for the small business write-off of up to $20,000.

o   It is also an opportune time to consider your business structure, especially considering the changes to the company tax rate and the small business restructure rollover.  This rollover can allow small businesses to restructure into another entity from 1 July 2016 without incurring a capital gains tax liability.

If your interest in all things super piqued when Dean Cain wore his undies on the outside then listen up because this is also the ideal time to review your personal superannuation.

o   The proposed changes in the 2016 budget mean that the concessional contribution cap is scheduled to be reduced to $25,000 for everyone from 1 July 2017.  With the cap currently $30,000 (or $35,000 for those aged over 50), the next two years might be the last opportunity to utilise the higher contribution caps.

o   Any additional contributions you choose to make should always be made in consideration of your overall financial position and any other upcoming liabilities.  You should also be mindful of not breaching your contribution cap limit.  Be sure you consider contributions from all sources, including salary sacrifice amounts and contributions for insurance policies held in a superannuation environment.

o   Depending on your adjusted taxable income, there may also be additional tax on your contributions including Superannuation Guarantee Contributions made by your employer.  Division 293 Tax results in additional 15% tax on all contributions if your adjusted taxable income is in excess of $300,000.  This cap is proposed to be reduced to $250,000 from 1 July 2017.

Being aware of all of these considerations allows you to accurately plan for upcoming tax liabilities.

Although in many cases your tax liability for 2016 may not be due until May 2017, it is much better to identify any liability sooner rather than later so that you can put aside cash as required.

It is also a good time to map out all of your tax liabilities for the next 12 months, including calculating future PAYG instalments.  These are calculated by the ATO based on your last lodged return and where taxable income varies there can be sudden and dramatic changes in your quarterly instalment.  Setting the

expected liabilities out in a calendar format can be very helpful.

Understanding your results and likely tax position also allows you the opportunity to vary your PAYG instalments.  After all, if you haven’t made as much money as last year you’re much better off varying your instalment down to avoid paying any more than necessary to the ATO.

If you’d like to discuss any of these issues please contact any of the friendly team at Vivid Chartered Accountants.