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Downsizer Contributions and the Main Residence Exemption

Tue, 24 Feb 2026 05:12:23 GMT

When clients sell a long-held family home, they may be able to channel part of the proceeds into superannuation by using the downsizer contribution rules.

Basic Eligibility Conditions

To qualify, the seller must meet a number of conditions:

· They must have reached the eligible age of 55 years (at the time of making the contribution).

· The eligible dwelling must be located in Australia and have been owned for at least 10 years.

· The disposal of the dwelling must be exempt from CGT under the main residence exemption to some extent (full exemption not required).

· The contribution must be made within 90 days of settlement, and an election form must be lodged with the fund no later than when the contribution is received.

The downsizer contribution can only be used once per individual and is limited to the lesser of the gross sale proceeds or $300,000 per person.

Does the Sale Need to be Fully CGT-exempt?

A common question is whether the sale must be fully exempt as the main residence.

Importantly, a full exemption is not required.

Even if only part of the capital gain is exempt under main residence rules, the property may still qualify — provided all other conditions are met.

Is the Property Required to be the Main Residence at Sale?

Equally important: the property does not need to be the seller’s principal residence at the time of sale.

Living in the property for some years and renting it out later does not disqualify it, as long as the ownership and residence history supports at least a partial main residence exemption.

Special Rules for Pre-CGT Properties

Where a property was acquired before CGT began, the rules look at whether part of the gain would have been disregarded had CGT applied.

A key requirement is that there is a dwelling that qualifies as the main residence. Disposal of vacant land will generally not satisfy the test and therefore will not meet downsizer requirements.

Eligibility of a Non-Owning Spouse

It is common for only one spouse to be listed on the property title.

A non-owning spouse may still qualify for a downsizer contribution if all other requirements are met, apart from ownership.

However, a spouse who never lived in the property and could not reasonably have treated it as their main residence is unlikely to be eligible.

Preservation and Access to Funds

A downsizer contribution is subject to the standard preservation rules. Once contributed, the amount cannot be accessed until:

· You reach preservation age (60) and retire, or

· You reach age 65, regardless of retirement status.

Consider future cash-flow needs before making the contribution.

Before you Contribute

Although seemingly straightforward, downsizer contributions involve several nuances. Please contact us if you have any questions.

Holiday Homes Under the Microscope: What the ATO's New Guidance Means for You

Tue, 17 Feb 2026 23:33:21 GMT

For many Australians, a holiday home does double duty. It’s a place to escape with family and friends, and during the rest of the year it’s listed on Airbnb or Stayz to help cover the costs.

Until recently, many owners assumed they could claim most of the usual deductions for the property without much trouble, as long as appropriate apportionments were made. However, that position is now under more scrutiny than ever following the release of some new draft guidance documents by the Australian Taxation Office (ATO) - TR 2025/D1, PCG 2025/D6 and PCG 2025/D7.

The ATO is looking to significantly tighten the rules around holiday homes that are used to derive some rental income. While the documents are still in draft form, they clearly signal the ATO’s compliance focus going forward.

What is the ATO Concerned About?

In simple terms, the ATO wants to distinguish between properties that are genuinely held to maximise rental income and those that are primarily lifestyle assets with some incidental rental use.

The ATO confirms that all rental income must be declared, even if it is occasional or earned through informal arrangements. However, if the property is really a holiday home and isn’t used mainly to produce rental income during the year then the owner can’t claim any deductions for expenses such as interest, rates, land tax, repairs and maintenance.

That is, the ATO might not allow any of these expenses to be claimed as a deduction, even if the property is used to generate taxable rental income for some of the year at market rates. If the property is classified as a holiday home by the ATO then owners can only claim deductions for limited direct expenses such as cleaning or advertising.

The ATO is particularly focused on properties that:

· Are blocked out for private use during peak periods (for example, school holidays or ski season),

· Are advertised inconsistently or at above-market rates,

· Generate ongoing tax losses year after year.

How Expenses Must be Claimed

Even if the property isn’t classified as a holiday home, it will often still be necessary to apportion expenses if the property is only used partly for income producing purposes. PCG 2025/D6 outlines how expenses should be apportioned. The key principle is that claims must be “fair and reasonable”.

Common methods include:

· Time-based apportionment (for example, based on days rented or genuinely available for rent), and

· Area-based apportionment (where only part of a property is rented).

Getting this wrong, or failing to keep evidence, increases audit risk. The ATO has access to booking platform data and can easily compare listings, calendars and reported income.

The Financial Impact can be Significant

Consider a holiday unit that earns $30,000 a year in off-peak rent but is kept for private use during peak holiday periods. Under the new approach, the ATO may conclude the property is really a holiday home and could reduce deductible expenses from tens of thousands of dollars to only a small fraction, resulting in a materially higher tax bill.

Co-ownership also needs care. Income and deductions are generally split according to ownership interests, regardless of who uses the property more. Renting to relatives at discounted rates can further limit deductions.

Practical Steps you Should Take Now

Although the guidance is proposed to apply from 1 July 2026 (with transitional relief for arrangements in place before 12 November 2025), now is the time to review your position:

· Are you holding and using the property to genuinely maximise rental income? Is the property advertised broadly and consistently, including during peak periods?

· Use market pricing: Set rent in line with comparable properties in the same area.

· Keep strong records: Retain booking calendars, advertisements, enquiries, and a diary showing private versus rental use.

· Review ownership and strategy: In some cases, changing how a property is operated can improve its commercial profile and tax outcome, but beware of CGT liabilities, duty and legal fees.

· Document existing arrangements: If you may qualify for transitional relief, evidence is critical.

The Bottom Line

The ATO is not banning deductions for holiday homes, but it is drawing a firmer line between genuine investment properties and lifestyle assets. With the right structure, pricing and record-keeping, many owners can still claim appropriate deductions and improve cash flow.

If you own a holiday property, a proactive review could save you from an unpleasant surprise later. Please contact us if you would like us to assess your current arrangements and help you plan ahead.

Know the Rules Before You Break Them; SMSF Trustee Education: Understanding SISA Compliance and ATO Education Directions

Tue, 27 Jan 2026 01:51:41 GMT

Why SMSF Education Matters More Than Ever.

What is involved in setting up a self-managed super fund (SMSF)?

Deciding to set up a self-managed super fund (SMSF) gives you control, but managing SMSF trustee duties requires strict adherence to the Superannuation Industry (Supervision) Act 1993 (SISA).

Running, or deciding to set up a self-managed super fund (SMSF) gives you control, but it also brings legal responsibilities. The Superannuation Industry (Supervision) Act 1993 (SISA) contains detailed rules on trustee duties, investments, borrowing, payments and recordkeeping. Simply put, you cannot identify or avoid breaches you don’t know exist. For trustees, this should mean education is not optional but rather, is essential for risk management.

Why understanding SISA matters

You can’t comply with what you don’t know: Many common breaches arise from misunderstanding basic SISA duties (for example, sole purpose, arm’s length dealings, or in-house asset limits). Awareness of the rules is the first step to spotting a problem early.
Early identification reduces harm: Knowing what to look for, incorrect benefit payments, related party transactions that aren’t on commercial terms, or records that are incomplete, lets you seek advice before small errors become reportable contraventions.
Education protects members: The consequences of a breach can include loss of tax concessions, penalties and remediation costs that reduce retirement savings for members.

The ATO’s Focus on Education — What Trustees Need to Know

The ATO has recently published a draft Practice Statement (PS LA 2025/D2) explaining when it might issue an education direction under section 160 of SISA. These directions give the ATO power to require trustees (or directors of corporate trustees) to complete specified education, where trustees’ knowledge or behaviour poses a risk to compliance. The draft statement sets out the ATO’s approach and the kinds of circumstances that may lead to an education direction.

However, trustees should not wait for an ATO directive before getting educated – such a directive means the trustees have already breached the rules. The draft Practice Statement is intended to support compliance and public confidence, but it is not a substitute for proactive trustee learning. Acting early and voluntarily is both safer for trustees and viewed more favourably by regulators.

Practical Steps Trustees Can Consider

Use ATO’s official SMSF guidance

Start with the ATO’s SMSF courses on the lifecycle of an SMSF, setting up, running and winding up. These courses are written for trustees and prospective trustees:

Setting up an SMSF: https://smallbusiness.taxsuperandyou.gov.au/setting-up-a-self-managed-super-fund-smsf
Running an SMSF: https://smallbusiness.taxsuperandyou.gov.au/running-a-self-managed-super-fund-smsf
Winding up an SMSF: https://smallbusiness.taxsuperandyou.gov.au/winding-self-managed-super-fund-smsf

Complete the ATO’s ‘knowledge check’

The ATO provides an online “knowledge check” for each course designed to test trustee understanding. It’s a useful starting point, but note a pass mark of 50% should not be taken as a guarantee of safety. Trustees should consider whether aiming for a much higher standard, even 100% comprehension of core duties, is a more appropriate target to reduce risk.

Seek timely professional advice

If a knowledge check or your reading flags uncertainty, contact us early to discuss your concerns. Timely, qualified advice often transforms a potential contravention into a routine fix and may mitigate potential penalties or ATO enforcement action.

Document your learning and decisions

Keep records of training completed, who provided advice, and why investment or payment decisions were made. Good records are persuasive evidence of a trustee’s intent to comply.

Final Word

SMSF trustees hold both opportunity and responsibility. Learning the SISA rules and the ATO’s expectations is the most practical way to prevent costly mistakes. The ATO’s draft Practice Statement shows the regulator is prepared to use education directions where trustees’ knowledge gaps pose risks, but you shouldn’t wait to be told. Build your knowledge, use the ATO’s resources, complete the knowledge check, document what you learn, and seek professional help confidently and early. That approach better protects your fund and retirement outcomes.

Unlocking Tax Savings: "Can I Claim My MBA (or Other Studies) at Tax Time?"

Mon, 19 Jan 2026 01:40:54 GMT

The ATO's rules on self-education expenses are strict - could you be eligible?

If you’ve invested in further study — an MBA, a leadership course, or a postgraduate qualification — you might be wondering: can this help at tax time?

For many professionals, the answer is yes — but only if the right boxes are ticked. The ATO’s rules on self-education expenses are strict, and the line between “deductible” and “non-deductible” can be thin. Getting it right could mean thousands back in your pocket; getting it wrong could mean an ATO adjustment, plus interest and penalties.

Let’s unpack how it works with a real-world example and some practical takeaways.

The Scenario: Sarah’s MBA

Sarah works in the Department of Defence and recently completed an MBA through a private provider. Her employer supported her studies with a $40,000 study allowance, and the course fees totalled $18,000. She deferred payment using the FEE-HELP loan system and declared the allowance as taxable income in her return.

Now she’s asking:

Can I claim a deduction for my MBA fees?

Does it matter that I used FEE-HELP?

Does the employer allowance change things?

The Type of Loan Matters

First, not all funding for education courses is treated equally.

HECS-HELP - no deduction:
If your course is a Commonwealth supported place (most undergraduate and some postgraduate university programs), you can’t claim a deduction. There is specific legislation in the tax system which denies deductions for fees covered by HECS-HELP — even if you pay them upfront and even if the course is closely related to your work.

FEE-HELP - potential deduction:
If you’re in a full-fee course, your tuition fees might be deductible if the study directly relates to your current employment or business activities. The ATO doesn’t allow a deduction for loan repayments later on — just the course fees themselves.

Practical tip:
Check your course statement or loan confirmation to see if you’re under HECS-HELP or FEE-HELP. Only FEE-HELP (or private payment) gives you potential deductibility.

The “Nexus” Test — Linking Study to Your Current Work

Even if the funding passes the first test, the purpose of the study is key. The ATO will only allow deductions if the course maintains or improves the skills you already use in your job, or is likely to increase your income in that same role.

It won’t apply if you’re studying to move into a new field or start a different career.

The ATO issued a detailed ruling on this topic in 2024 which provides some clear examples:

Allowed: A store manager doing an MBA to strengthen leadership and business operations skills.

Denied: A sales rep doing an MBA to change careers into consulting — the link to the current role was too weak.

For Sarah, the deduction depends on whether her MBA subjects (like strategy, policy or management) build directly on her current Defence role. The fact that her employer funded the course helps demonstrate relevance, but it’s not proof on its own.

In some cases you might find that specific subjects or modules are sufficiently linked with current income earning activities, while other subjects are too general in nature for the fees to be deductible.

Employer Allowances and HELP Repayments

The $40,000 allowance Sarah received is assessable income — it’s taxed just like salary. But that doesn’t stop her from claiming eligible self-education deductions for the course fees.

HELP loan repayments later on are not deductible — they’re simply a repayment of debt. The timing of the deduction is based on when the course expense was incurred (not when the loan is repaid).

Making It Practical

If you’re planning further study or reviewing a recent course, here’s how to make sure you get it right:

Check your loan type – FEE-HELP or private fees can be deductible; HECS-HELP cannot.

Gather evidence – Keep course outlines, job descriptions, and any correspondence showing the study supports your current work.

Claim what’s relevant – You can only claim expenses directly connected to your current job (fees, books, and possibly travel).

Be ready for review – Large claims often attract ATO attention. A private ruling can provide peace of mind if the amount is significant.

Key Takeaways

For many professionals, postgraduate studies like an MBA can deliver both career and tax benefits — but only if they relate directly to your current role.

Handled correctly, self-education deductions can return thousands in tax savings. For Sarah, that could mean a refund of over $5,000 on an $18,000 course.

If you’re considering further study, talk to us before you enrol or claim. A quick chat could ensure your next qualification delivers the best return — professionally and financially.

Payday Super : Fundamental Changes for Employers Coming in July 2026

Wed, 14 Jan 2026 05:49:02 GMT

Payday Super is now law - how does it affect your business?

If you run a business, you already know the juggling act that comes with managing the payroll process — paying staff on time, managing cash flow, and staying compliant. From 1 July 2026, there’s a major change coming that will reshape how you handle superannuation contributions for staff.

It’s called Payday Super, and it became law on 4 November 2025. The new rules are designed to close Australia’s $6.25 billion unpaid super gap and make sure employees — especially casual and part-time workers — get their retirement savings when they get paid.

What’s Changing?

From 1 July 2026, you’ll need to pay superannuation guarantee (SG) contributions at the same time as wages, rather than weeks or months later. Employers will have seven business days from payday to ensure contributions hit employees’ super funds.

If payments are late, the Superannuation Guarantee Charge (SGC) will apply — that means paying the missed super plus an interest and administration penalty. Once SGC has been assessed, additional interest and penalties may apply if the SGC liability isn’t paid in full.

Unlike the existing system, SGC amounts will normally be deductible to employers, although penalties for late payment of SGC won’t be deductible.

On top of this, the ATO will retire the Small Business Superannuation Clearing House (SBSCH) platform from 1 July 2026 for all users and alternative options should be sought.

The change isn’t just about compliance — it’s about impact. The Government estimates the earlier payments could boost an average worker’s retirement balance by around $7,700.

Impact on Business

This reform will take a bit of getting used to, but it can actually simplify your payroll process and strengthen your reputation as an employer.

Less admin – Paying super when you run payroll means no more quarterly payment crunches.

Fewer compliance risks – ATO data-matching will pick up issues faster, helping you avoid penalties before they snowball.

Stronger employee trust – Staff can see their super growing in real time, which might help with engagement and retention.

Smoother cash flow management – Paying smaller, regular amounts of super is often easier to manage than large quarterly sums.

The ATO will take a “risk-based” approach for the first year, focusing on education and helping businesses transition smoothly. If you pay on time, you’ll likely be flagged as low risk, meaning fewer compliance checks.

How to Get Ready — Practical Steps to Take Now

You’ve got time before the rules kick in, but the smart move is to prepare early. Here’s how:

1. Check your payroll software.
Most modern systems (like Xero, MYOB, or QuickBooks) already support payday-aligned super. Confirm your setup and check if any updates or integrations are needed.

2. Map your pay cycles.
Note how often you pay staff (weekly, fortnightly, monthly) and calculate the seven-day payment window for each.

3. Brief your team.
Make sure whoever manages payroll understands the changes. The ATO has free online resources and webinars to help.

4. Plan your cash flow.
Consider shifting from quarterly to more regular payments now to get used to the timing. Smaller, frequent super payments can reduce cash flow shocks.

5. Monitor and review.
Set up a monthly check to ensure super contributions have cleared correctly. Keep an eye on ATO updates as final guidance is released.

If you outsource payroll, contact your provider soon — many are already updating systems for Payday Super and can help you make a seamless switch.

The Bottom Line

Payday Super isn’t just a compliance change — it’s an opportunity to make your payroll more efficient, your staff happier, and your business more compliant with less effort. With the laws now passed, it’s time to get ahead of the curve.

If you’d like help reviewing your payroll setup or planning the transition, get in touch with our team — we can help you make sure your business is ready to go when Payday Super commences.

Super Tax Shake-Up

Thu, 06 Nov 2025 02:02:38 GMT

Big Balances Beware!

If your super balance is comfortably below $3 million, you can probably relax — the proposed changes to the super rules shouldn’t adversely affect you (yet). But if your super is nudging that level, or if you’re clearly over, the Treasurer’s latest announcement could change how you think about super’s generous tax breaks.

For some time now the Government has been planning to introduce targeted measures to reduce tax concessions for those with superannuation balances over $3 million. This has commonly been referred to as the Division 296 tax.

However, the Government has reworked the proposed new tax — part of the Better Targeted Superannuation Concessions (BTSC) policy — attempting to make it simpler, fairer, and more practical. After a wave of industry criticism, the revised version keeps the broad policy intent (reducing tax concessions for very large balances) but removes some of the more problematic features.

Let’s break down what’s changed and what it means for you.

What’s Changing — and Why It’s Simpler

The original 2023 proposal aimed to apply an extra 15% tax on “earnings” from super balances above $3 million. The big flaw? “Earnings” included unrealised gains — paper profits on assets like property or shares that hadn’t been sold. This meant some people could have owed tax on increases in value they hadn’t actually received in cash.

The reworked model drops unrealised gains from the equation entirely, taxing only realised earnings — actual income and capital gains when assets are sold. This makes the system far more practical and aligned with everyday tax rules. No more worrying about funding a tax bill on assets you haven’t sold.

A Fairer, Tiered Approach

The new rules introduce a two-tier system for high balances:

· Tier 1 ($3m–$10m): Extra 15% tax on earnings from this portion (making a total rate of 30%).

· Tier 2 (over $10m): Extra 25% tax on earnings above $10m (for a total rate of 40%).

Both thresholds will be indexed annually to inflation ($150,000 steps for the $3m tier and $500,000 for the $10m tier), which should prevent “bracket creep” over time.

Importantly, the start date has been pushed back to 1 July 2026, with the first assessments expected in 2027–28.

The Government estimates less than 0.5% of Australians will be affected at the $3m level, and fewer than 0.1% at the $10m mark.

What This Means in Practice

Here are a couple of examples from Treasury to help you get your head around this.

Consider Megan, who has a $4.5 million super balance split between an SMSF and an APRA fund. She earns $300,000 in realised income for the year within the super system. The super balance above $3m represents is one-third of the total balance, so she’ll pay $15,000 in additional Division 296 tax (15% × 33.33% × $300,000).

Emma, on the other hand, has $12.9 million in her SMSF and $840,000 in earnings. She pays 15% on the Tier 1 portion and an extra 10% on the Tier 2 portion—a total of around $115,000 in extra tax.

These examples show how the tax scales up progressively. The ATO will calculate each individual’s total super balance across all funds (SMSFs and APRA funds) and determine the proportionate amount of earnings to be taxed.

Why It’s Still Good News (for Most)

For many SMSF members, this update is a relief. By removing unrealised gains, it eliminates valuation headaches and liquidity pressures — particularly for those holding property or unlisted assets.

That said, individuals with super balances above $10m will face a higher overall rate (up to 40%), which may prompt a rethink of long-term strategies.

However, remember that updated legislation relating to this measure hasn’t been introduced to Parliament and things could change before the proposed rules become reality.

Low Income Superannuation Tax Offset

In addition to introducing the revamped Division 296 tax, the Government has announced that it will increase the Low Income Superannuation Tax Offset (LISTO) from $37,000 to $45,000 from 1 July 2027.

The maximum payment will also increase to $810.

Treasury estimates that the average increase in the LISTO payment will be $410 for affected workers.

What to Do Now

1. Check your total super balance (TSB) now and project where it may be by 2026.

2. Seek advice early — strategies like managing liquidity, reviewing asset allocations, and timing asset sales could make a real difference.

3. Stay informed — draft legislation is expected in 2026. We’ll keep you updated.

Overall, the Government’s revised approach strikes a more balanced tone: fewer administrative headaches for most, but less generosity for very high balances. If your balance is near or above $3 million, now’s the time to plan ahead — not panic.

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ATO Interest Charges Are No Longer Tax Deductible

Fri, 10 Oct 2025 07:14:21 GMT

What you can do

Leaving debts outstanding with the ATO is now more expensive for many taxpayers.

General interest charge (GIC) and shortfall interest charge (SIC) imposed by the ATO are no longer tax-deductible from 1 July 2025

This applies regardless of whether the underlying tax debt relates to past or future income years.

With GIC currently at 11.17%, this is now one of the most expensive forms of finance in the market — and unlike in the past, you won’t get a deduction to offset the cost.

For many taxpayers, this makes relying on an ATO payment plan a costly strategy.

Refinancing ATO debt

Businesses can sometimes refinance tax debts with a bank or other lender. Unlike GIC and SIC amounts, interest on these loans might be deductible for tax purposes, provided the borrowing is connected to business activities.

While tax debts will sometimes relate to income tax or CGT liabilities, remember that interest could also be deductible where money is borrowed to pay other tax debts relating to a business, such as:

GST
PAYG instalments
PAYG withholding for employees
FBT

However, before taking any action to refinance ATO debt it is important to carefully consider whether you will be able to deduct the interest expenses or not.

Individuals

If you are an individual with a tax debt, the treatment of interest expenses incurred on a loan used to pay that tax debt really depends on the extent to which the tax debt arose from a business activity:

Sole traders: If you are genuinely carrying on a business, interest on borrowings used to pay tax debts from that business is generally deductible.
Employees or investors: If your tax debt relates to salary, wages, rental income, dividends, or other investment income, the interest is not deductible. Refinancing may still reduce overall interest costs depending on the interest rate on the new loan, but it won’t generate a tax deduction.

Example: Sam is a sole trader who runs a café. He borrows $30,000 to pay his tax debt, which arose entirely from his café profits. The interest should be fully deductible.

However, if Sam also earns salary or wages from a part-time job and some of his tax debt relates to the employment income, only a portion of the interest on the loan used to pay the tax debt would be deductible. If $20,000 of the tax debt relates to his business and $10,000 relates to employment activities, then only 2/3rds of the interest expenses would be deductible.

Companies and trusts

If a company or trust borrows to pay its own tax debts (income tax, GST, PAYG withholding, FBT), the interest will usually be deductible if it can be traced back to a debt that arose from carrying on a business.

However, if a director or beneficiary borrows money personally to cover those debts, the interest would not normally be deductible to them.

Partnerships

The position is more complex when it comes to partnership arrangements. If the borrowing is at the partnership level and it relates to a tax debt that arose from a business carried on by the partnership then the interest should normally be deductible. For example, this could include interest on money borrowed to pay business tax obligations such as GST or PAYG withholding amounts.

However, the ATO takes the view that if an individual who is a partner in a partnership borrows money personally to pay a tax debt relating to their share of the profits of the partnership, the interest isn’t deductible. The ATO treats this as a personal expense, even if the partnership is carrying on a business activity.

Practical takeaway

Leaving debts outstanding with the ATO is now more expensive than ever because GIC and SIC are no longer deductible.

Refinancing the tax debt with an external lender might provide you with a tax deduction and might also enable you to access lower interest rates.

The key is to distinguish between tax debts that relate to a business activity and other tax debts. For mixed situations, you may need to apportion the deduction.

If you’re unsure how this applies to you, talk to us before arranging finance. With the right strategy, you can manage tax debts more effectively and avoid costly surprises.

Early Access To Superannuation Funds

Fri, 10 Oct 2025 07:12:39 GMT

Are you trying to access your superannuation for medical treatment or financial hardship?

Superannuation is one of the largest assets for many Australians and offers significant tax advantages, however, strict rules apply to when it can be accessed. While super is most commonly accessed at retirement, death or disability, there are limited situations where earlier access may be possible.

Early access is generally available in two situations:

Financial hardship – where you are receiving a qualifying Centrelink/DVA payment for a minimum period and cannot meet immediate living expenses.
Compassionate grounds – Funding for certain specific scenarios which include preventing a mortgage foreclosure or meeting medical expenses for a life-threatening injury or illness or to alleviate severe chronic pain.

Compassionate grounds access requires an application to be made to the ATO which needs to be accompanied by relevant medical certificates or mortgage information. If approved the ATO will provide instructions to the individual’s superannuation fund to release an amount to cover the expense. We have included some ATO links with more detailed information on compassionate grounds and financial hardship below.

When accessing superannuation under compassionate grounds you would usually collect the relevant supporting documentation and personally make the application for approval using your MyGov account. It has come to the ATO’s attention that there may be medical and dental providers exploiting this access and assisting super fund members to access amounts for cosmetic reasons (you may have even seen advertisements pop up on your social media showing people with a new sparkling smile – and a lower super balance).

The ATO’s concerns are discussed in Separating fact from fiction on accessing your super early .

Superannuation fund members and SMSF trustees should be aware that there can be substantial penalties applied when super is accessed outside of the legislated conditions of release. You should never provide another party with access to your MyGov login or allow a third party to make applications on your behalf. Penalties may also apply for making false declarations.

Should you have any questions or concerns relating to proposed access to your superannuation please reach out to us.

Interest Deductions - Risks & Opportunities

Tue, 16 Sep 2025 01:41:17 GMT

What are the risks and opportunities?

This tax season, we’ve seen a surge in questions about whether interest on a loan can be claimed as a tax deduction. It’s a great question as the way interest expenses are treated can significantly affect your overall tax position. However, the rules aren’t always straightforward. Here’s what you need to know. business accountant toowoomba. business accountant. business edge.

The purpose of the loan

The most important thing when looking at the tax treatment of interest expenses is to identify what the borrowed money has been used for. That is, why did you borrow the money?

For interest expenses to be deductible you generally need to show that the borrowed funds have been used for business or other income producing purposes. The security used for the loan isn’t relevant in determining the tax treatment.

Let’s take a very simple scenario where Harry borrows money to buy a new private residence. The loan is secured against an existing rental property. As the borrowed money is used to acquire a private asset the interest won’t be deductible, even though the loan is secured against an income producing asset.

Redraw vs offset accounts

While the economic impact of these arrangements might seem somewhat similar, they are treated very differently under the tax system. This is an area to be especially careful with.

If you have an existing loan account arrangement, you’ve paid off some of the loan balance and you then use a redraw facility to access those funds again, this is treated as a new borrowing. We then follow the golden rule to determine the tax treatment. That is, what have the redrawn funds been used for?

An offset account is different because money sitting in an offset account is basically treated much like your personal savings. If you withdraw money from an offset account you aren’t borrowing money, even if this leads to a higher interest charge on a linked loan account. As a result, you need to look back at what the original loan was used for.

Let’s compare two scenarios that might seem similar from an economic perspective:

Example 1: Lara's redraw facility

Lara borrowed some money five years ago to acquire her main residence. She has made some additional repayments against the loan balance. Lara redraws some of the funds and uses them to acquire some listed shares. Lara now has a mixed purpose loan. Part of the loan balance relates to the main residence and the interest accruing on this portion of the loan isn’t deductible. However, interest accruing on the redrawn amount should typically be deductible where the funds have been used to acquire income producing investments.

Example 2: Peter's offset account

Peter also borrowed money to acquire a main residence. Rather than making additional repayments against the loan balance, Peter has deposited the funds into an offset account, which reduces the interest accruing on the home loan. Peter subsequently withdraws some of the money from the offset account to acquire listed shares. This increases the amount of interest accruing on the home loan. However, Peter can’t claim any of the interest as a deduction because the loan was used solely to acquire a private residence. Peter simply used his own savings to acquire the shares.

Parking borrowed money in an offset account

We have seen an increase in clients establishing a loan facility with the intention of using the funds for business or investment purposes in the near future. Sometimes clients will withdraw funds from the facility and then leave them sitting in an existing offset account while waiting to acquire an income producing asset. This can cause problems when it comes to claiming interest deductions.

First, even if the offset account is linked to a loan account that has been used for income producing purposes, this won’t normally be sufficient to enable interest expenses incurred on the new loan from being deductible while the funds are sitting in the offset account.

For example, let’s say Duncan has an existing rental property loan which has an offset account attached to it. Duncan takes out a new loan, expecting to use the funds to acquire some shares. While waiting to purchase the shares, he deposits the funds into the offset account, which reduces the interest accruing on the rental property loan. It is unlikely that Duncan will be able to claim a deduction for interest accruing on the new loan because the borrowed funds are not being used to produce income, they are simply being applied to reduce some interest expenses on a different loan.

To make things worse, there is also a risk that parking the funds in an offset account for a period of time might taint the interest on the new loan account into the future, even if money is subsequently withdrawn from the offset account and used to acquire an income producing asset.

For example, even if Duncan subsequently withdraws the funds from the offset account to acquire some listed shares, there is a risk that the ATO won’t allow interest accruing on the second loan from being deductible. The risk would be higher if there were already funds in the offset account when the borrowed funds were deposited into that account or if Duncan had deposited any other funds into the account before the withdrawal was made. This is because we now can’t really trace through and determine the ultimate source of the funds that have been used to acquire the shares.

To do

It’s worth reaching out to us before entering into any new loan arrangements. In this area, mistakes are often difficult to fix after the fact, which can lead to poor tax outcomes. That’s why getting advice from a tax professional before committing to a loan is essential. We can work alongside you and your financial adviser to ensure your loan is structured in a way that makes financial sense and protects your tax position.

accountants toowoomba

Self Managed Super Funds

Thu, 12 Jun 2025 04:28:18 GMT

Self Managed Superannuation Funds continue to be a focus for the Government and the regulators, and a number of changes are being enforced to tighten control over how SMSFs operate.

Coming into 2025-26, there are opportunities but also risks. We explore these in this update:

● In brief - A summary of key changes and actions.

● What’s new - An explanation of key changes that may affect your SMSF.

● Fund housekeeping - Essential pre 30 June actions.

● What we need from you - an outline of what we need to manage your 2024-25 fund compliance.

We want to help you achieve the best result for you and your SMSF. If there is any additional assistance we can provide, or if you would like us to review your personal situation, please contact us.

Kind regards,

Ambrosiussen The Business Accountants

In brief - Upcoming Changes & Actions

What's new

Deductible contributions

If your total superannuation balance allows it, and you have not used your $30,000 concessional contribution cap, you could make a one-off deductible contribution before the end of the financial year and take the higher tax deduction. The cap includes superannuation guarantee paid by your employer, amounts you have salary sacrificed into super, and any amounts you have contributed personally that will be claimed as a tax deduction.

To make a deductible contribution to your SMSF, you need to be aged under 75, lodge a notice of intent to claim a deduction in the approved form with your SMSF and get an acknowledgement from the fund before you lodge your tax return (yes, even if you are giving the paperwork to yourself in your role as trustee). For those aged between 67 and 75, you can only claim a deduction on a personal contribution to super if you meet the work test (i.e., work at least 40 hours during a consecutive 30-day period in the income year, although some special exemptions might apply).

Be aware that any concessional contributions you make are included in the threshold for the high income earner, Division 293 tax. If the total of your assessable income and your concessional contributions is above the threshold ($250,000 for 2024-25), then 15% tax is charged on the excess over the threshold or the taxable super contributions, whichever is less. If you are likely to be close to the threshold, check that any concessional contributions you are planning to make have the intended impact.

Catch-up concessional contributions

If your superannuation balance on 30 June 2024 was below $500,000, you might be able to access any unused concessional cap amounts from the last five years in 2024-25 as a personal contribution. For example, if you were $8,000 under the cap in each of the last 5 years, you could contribute an additional $40,000 and take the tax deduction in this financial year at the higher personal tax rate.

Tax offset for spousal contribution

If your spouse’s assessable income is less than $40,000 and you both meet the eligibility criteria, you could contribute to their superannuation and claim a $540 tax offset.

Indexation of the General transfer balance cap

Indexation of the general transfer balance cap (TBC) will occur from 1 July 2025. The general transfer balance cap will increase by $100,000 from $1.9M to $2M. The general rate for the transfer balance cap (TBC), limits how much money you can transfer into a tax-free retirement account. The TBC is indexed by the December consumer price index (CPI) each year.

Indexation of the general transfer balance cap will impact your personal TBC. You will be entitled to an increase of the cap if you have not previously exceed or used all your cap. Your personal transfer balance cap increase will be a proportion of the $100,000 and will depend on your unused cap space. If you are starting a pension for the first time after 1 July 2025 your personal TBC will be $2M. You can contact us for further details on your personal transfer balance cap or you can access your personal TBC through ATO online services.

Utilising the bring forward rule

The bring forward rule enables you to bring forward up to 2 years’ worth of future non-concessional contributions into the year you make the contribution – this is assuming your total superannuation balance enables you to make the contribution and you are under age 75.

As a result of the indexation of the general transfer balance cap, the total superannuation balance (TSB) will increase from 1 July 2025 for the bring forward rules. This will allow members with a TSB below $2M on 30 June 2025 to make non concessional contributions.

Contribution and bring-forward available to members under 75 from 1 July 2025

Superannuation Guarantee increases to 12%

The Superannuation Guarantee (SG) rate will rise from 11.5% to 12% on 1 July 2025. This is the final increase of the Superannuation Guarantee rate.

If you are employed, what this will mean depends on the terms of your employment agreement. If your employment agreement states you are paid on a ‘total remuneration’ basis (base plus SG and any other allowances), then your take home pay might be reduced by 0.5%. That is, a greater percentage of your total remuneration will be directed to your superannuation fund. For those paid a rate plus superannuation, then your take home pay will remain the same, but your superannuation balance will benefit from the increase. If you are used to annual increases, the 0.5% increase might simply be absorbed into your remuneration review.

30% tax on super earnings for balances above $3m

As a result of the election, the Government is pushing ahead with the proposed additional 15% tax on superannuation fund earnings for those with a total superannuation balance (TSB) above $3m. Whilst the legislation enabling the new tax (Division 296) is scheduled to commence from 1 July 2025, at present there is no legislation drafted to introduce this tax Parliament will comment sitting from July 22 and at this point we expect the legislation to be reintroduced. Our comments are on the basis the legislation is reintroduced in line with the prior legislation that lapsed.

If you are likely to be impacted by the tax, it is very important that the valuation of your superannuation

assets is correct.

The Division 296 tax will apply for the first time to the growth in earnings (realised earnings from the sale of assets and unrealised earnings from the growth in the value of assets) between 1 July 2025 and 30 June 2026, for the portion above $3m.

The ATO will perform the calculation for the tax on earnings. TSBs in excess of the $3 million cap will be tested for the first time on 30 June 2026 with the first notice of assessment expected to be issued in the2026-27 financial year.

Individuals will have the choice of paying the tax personally or from their superannuation fund. Those with multiple accounts can nominate which fund will pay the tax.

From fund perspective, reporting will form part of the current year-end tax return process.

Interests in defined benefit schemes will be appropriately valued and will have earnings taxed under this measure in a similar way to other interests.

If your superannuation balance is close to or above the $3m cap, it is important to seek advice on the best possible options for you.

What’s not changing

Minimum pension drawdown

The minimum pension drawdown, the amount you must draw from your pension each year, also remains

the same:

Areas of ATO concern

Market Valuations

In 2024 the ATO contacted auditors where the SMSF’s they audited reported unchanged values for certain assets across several income years. In 2025 the ATO will continue to review auditors where asset values remain the same and no ACR is lodged:

Valuation fundamentals

Each year, the assets of your SMSF must be valued at ‘market value’ and evidence provided to your auditor.
If your SMSF holds collectible and personal use assets like artwork, jewellery, motor vehicles etc., a valuation must be performed by a qualified independent valuer on disposal to a related party.
The ATO require trustees to value assets based on “objective and supportable data.”

o Commercial and residential real estate does not need to be valued by an independent valuer but an independent valuer should be considered where there have been significant changes to the property or the market, the property represents a significant proportion of the fund’s value, or it is unique or difficult to value.

o If the trustees are completing the valuation themselves, ensure that you document the valuation date and the characteristics that contribute to the valuation (i.e., a 10 year old brick four bedroom property on 640m2 of land in what suburb and any features that make it more or less attractive to a buyer, for example proximity to transport). And, the trustees should access more than one source of credible comparative sales data either on similar properties in the same suburb that have sold recently or from a property data service. Do not use the generic values on online sales sites.

o For commercial property, net income yields are required to support the valuation. Where the tenants are related parties, for example your business leases a commercial property owned by your SMSF, you will need evidence that a comparative commercial rent is being paid and the rent is keeping pace with the market.

o For unlisted companies and unit trusts, the financials alone are not enough to support a valuation. Generally, the starting point is the value of the assets in the entity and/or the consideration paid for the shares/units. For widely held shares or units, this is the entry and exit price. Where property is the only asset, then the valuation principles for valuing real property are likely to apply.

Fund ‘housekeeping’

SMSF compliance status removed if annual returns late

If your SMSF’s annual return is more than two weeks overdue and you have not requested a deferral, the ATO will move your fund’s status on Super Fund Lookup from ‘Complying’ to 'Regulation details removed'. The result is that your fund may not be able to accept contributions from employers or rollovers from APRA regulated funds.

If you are having trouble paying your tax liability, please let us know as soon as possible so we can

negotiate a deferral or payment plan with the ATO on your behalf.

Contributions must be received by 30 June

To claim a tax deduction for super contributions (as an employer or as an individual), the payment needs to be received by the fund no later than 30 June. Merely incurring a liability is not enough. To claim a tax deduction for a personal contribution you need to lodge a notice of intent with the SMSF, advise the amount you intend to claim as a deduction, receive the confirmation from the fund of the tax deductibility of the contribution, and physically make the contribution.

Review and rectify any outstanding compliance issues

If your auditor has highlighted any breaches or issues in previous year fund audits, you should review and rectify these issues by 30 June.

Review the fund’s investment strategy

Trustees are required to ‘regularly review’ the fund’s investment strategy. We recommend that trustees review the strategy, and document the review, at least annually or when the circumstances of the fund change.

Review insurance inside your SMSF

SMSF trustees need to consider the need for insurance cover for the fund members when formulating and reviewing the fund’s investment strategy.

SMSFs are only able to offer or take out new insurance cover where the definitions are consistent with the death, terminal illness, permanent incapacity and temporary incapacity conditions of release under the Superannuation Industry Supervision Act.

It’s important that you review insurance inside your SMSF, not just for compliance with the law, but also effectiveness. An important issue to consider is how any insurance inside your fund should be structured; that is, from where the premiums are paid from the fund and what account any policy proceeds will be paid to inside the fund.

Contributions you didn’t know you made

Trustees are often surprised by what is considered to be a contribution. Beyond money, these can include personally paying fund expenses, obtaining goods and services for less than market value, and some discretionary trust distributions. For example:

In-specie transfer - If an asset is transferred or acquired from a related party for less than fair market value, the difference may be treated as a contribution.
Capital improvements - Capital improvements to existing fund assets for no consideration or less than arm’s length consideration may be treated as a contribution.
Debt forgiveness - A contribution is made if a loan, entered into by the fund is forgiven by the lender (related party). The contribution is made when the deed of release is executed that then relieves the fund from the obligation of repaying the debt.
Guarantor arrangements - A contribution occurs if a guarantor to a debt of the fund (trustees in their own right) satisfies a loan obligation of the fund and then forgoes the right of redemption against the fund (trustees) itself.

What we need from you

This is a general list of what we need to complete your fund’s tax and accounting requirements.

Bank statements (including any new accounts including term deposits) from 1 July 2024 to 30 June 2025.

Contributions :

o A breakdown by member of the types of contributions received by the fund.

Pensions :

o Documentation supporting any pensions commenced during the 2024-25 financial year.

o Any pension payments made and whom it was for if you already have a Pension.

Investments :

o Portfolio valuation as at 30 June 2025 and transaction history reports (if applicable)

o All documentation from your portfolio or wrap provider including year end tax statements

o All dividend & tax statements

o Buy & sell contracts for shares sold or purchased

o Any other documentation received during the year that relates to takeovers, restructures, bonus shares, consolidations etc., for shares held by the fund. Usually these documents advise you to retain them for taxation purposes

o Any other document relating to an investment held within the fund which has not been covered above

Property :

o Agent statements (either monthly or annual) if using an agent to manage property, otherwise, all invoices and rent receipts for the year ending 30 June 2025

o A copy of the current lease/rental agreement (if not already provided)

o Documents for property bought or sold, including the date you entered the contract and the date the asset was first used or installed ready

for use

o Rental appraisal & market valuation from an agent (if you are using one to manage your property)

o Invoices for expenses paid

Rollovers :

o Copy of any Rollover Benefits Statements for money rolled into the fund during the period 1 July 2024 to 30 June 2025

Insurance :

o Copy of life insurance policy annual renewal documentation form (the ownership of the policy should always be in the name of the superannuation fund)

o Copy of documentation relating to any new insurance policies from 1 July 2024.

Other:

o If you have transactions in your fund that do not fall into the above categories, please ensure that you provide us with full details

o Any documentation if you have a LRBA.

o Backup of software file.

Don't Become a Director Until You Read This

Wed, 23 Apr 2025 23:21:07 GMT

The title carries a certain weight, doesn't it? It evokes images of importance, of having "made it", of being in control and steering your own ship.

In private, public, and not-for-profit companies, directors are often placed on a pedestal, embodying prestige, responsibility, and leadership.

The role of a director offers the power and responsibility to make a positive impact and guide a company towards its definition of success.

However, as the well-known adage goes, "with great power comes great responsibility".

In reality, the perceived prestige of being a 'director' in Australia brings significant responsibilities under the Corporations Act and other laws.

The potential risks are substantial; when things go wrong, the spotlight intensifies directly on the director.

Gravity of responsibility

Over 400,000 Australian companies are established annually. It is concerning that the general level of understanding of the risks and responsibilities associated with being a director remains alarmingly low.

The gravity of the responsibilities and associated risks can be underestimated, even by experienced individuals. Participation in programs such as the Australian Institute of Company Directors' course often reveals the full extent of these obligations.

Directors face a dauntingly extensive list of responsibilities and liabilities, irrespective of whether they serve private, public, or not-for-profit entities.

Ignorance of company affairs offers no defense against creditors. The director bears the sole responsibility for consistently fulfilling their duties.

The core message here is this: never undertake the responsibility of being a company director (regardless of the company's size or type) without a genuine appreciation for what is at stake.

Directors key duties

Under the Corporations Act, company directors in Australia are legally bound by a number of key duties:

Act with care and diligence: Exercising the level of care and skill a reasonable person would in that position.
Act in good faith in the company's best interests: Prioritising the company's interests above personal gain or the interests of others.
Act for a proper purpose: Using powers for the legitimate objectives for which they were granted.
Avoid improper use of position or information: Not exploiting the role or confidential information for personal advantage or to harm the company.
Disclose material personal interests: Declaring any personal interests that could conflict with the duties to the company.
Prevent insolvent trading: Ensuring the company does not incur debts when it is unable to pay them as and when they fall due.

Understand the risks and protect yourself

Insolvent trading is a major risk, especially in economic downturns. Directors who authorise loans or debts for an insolvent company risk personal liability and creditor action.

The Australian Taxation Office (ATO) can issue a Director Penalty Notice (DPN), making directors personally liable for unpaid company tax debts.

Personal asset protection is vital. Where possible, directors should minimise personal ownership of significant assets, potentially becoming a less attractive target for legal action. Your accountant and solicitor are invaluable resources in this process.

Always conduct thorough due diligence, maintain a curious and informed understanding of the company's operations, and seek professional advice when you feel uncertain or uncomfortable.

The future of a company lies in the hands of its directors, yet has the gravity of potential risks been given sufficient thought?

Understand the risks. Protect yourself. Directorship is a serious undertaking.

Are you ready for the real responsibility behind the title?

What would happen to your business if you ran it the way the Government is running the economy with the 2025 Budget?

Sun, 06 Apr 2025 23:52:16 GMT

Listening to the treasurer delivering this year’s budget, you would think our economy is doing wonderfully and there is nothing to be concerned about. However, when you look behind the gloss to the real numbers, the story is very different.

The treasurer was making the deficit of $42 billIon for the coming year seem very small. However, what received no mention, was the $85 billion for “off budget” spending over the next four years. In four years time, the government debt will reach $1.22 trillion. The interest bill on this debt, at the Reserve Bank rate of 4.1%, is $50 billion per annum.

If your business had an interest cost like that you would be doing everything to cut your costs or sell assets to reduce the debt levels. The Government on the other hand is increasing its spending. Public sector spending continues to rise at a higher rate than the economy is growing. The biggest increased area of spending is government employment costs.

Long Term Solutions

Despite the huge growth in debt, in our high interest environment, the Government is also offering voters token benefits to keep them happy. Do you find that works in business? My years of being in business tell me that customers want real and long term solutions to their problems. It is providing real help to customers where they need it that makes them loyal to your business and provides real benefit to them.

Instead of a short term $150 energy rebate, work on solutions that will provide long term energy savings. Likewise, the token tax cuts in the budget are masking the lack of resolve to address the long term underlying tax problems. The taxation system does not provide equity or incentives for tax payers. It has been in need of an overhaul for decades. Token tax cuts put a small band aid on the problem, so the Government can continue to ignore the

real problem.

Positive Takeaways

Was there anything good in the budget? One positive thing is the $20,000 instant asset write off being extended until 30 June 2025. This does enable businesses to get an immediate tax deduction when purchasing assets under $20,000. This is useful to tuck away over the next coming weeks when you are doing your year end tax planning.

The answer to the question we asked at the top; would you run your business the way the Government runs the economy? NO! You would not. You are smart enough to realise you would have very few customers and you cannot spend more than you are earning.

Importance of Business Tax Planning

Mon, 24 Mar 2025 01:22:43 GMT

None of us like paying more tax than we have to. The best way to keep the tax down is not by leaving it to the last minute, but by having a year-round process.

Effective tax planning for your business is an ongoing, year-round process, not just something to think about in June. By proactively implementing strategies throughout the year, you can aim to optimise your tax position and potentially minimise your tax liability.

Maintaining accurate and organised records of your income, deductions, and other relevant financial information is essential for substantiating your tax claims and facilitating a smooth tax return process. It is important to review your income and deductions for the year to date and identify any potential deductions you may have missed. Ensuring you have all necessary documentation to support your claims.

Several key strategies could be considered before the 30th of June, and in consultation with an accountant is essential to determine the most appropriate approach for your specific circumstances:

● Superannuation Contributions:

Maximise concessional (tax-deductible) contributions to superannuation, including employer and personal contributions, within allowable limits. Consider non-concessional (after-tax) contributions and spouse contributions, if eligible. To claim a tax deduction in the 2025 financial year, you need to ensure that your employee superannuation payments are received by the super fund or the Small Business Superannuation Clearing House (SBSCH) by 30 June 2025.

● Discretionary Trust Distributions:

Document distribution resolutions before the financial year's end, specifying the distribution of trust income and assets to beneficiaries. Consider tax implications for each beneficiary, aiming to distribute to those in the lowest tax brackets. The ATO have recently released a number of Tax Rulings that may affect trust distributions to adult children, so Tax Planning for 2025 will be vital for anyone using a Family Trust.

● Division 7A Loans:

Ensure compliance with Division 7A of the Income Tax Assessment Act 1936 for company loans to shareholders or associates. Business owners who have borrowed funds from their business in a previous year must ensure they make appropriate loan repayments as per the Division 7A requirements. Current year loans must be either paid back in full or have a loan agreement entered in before the due date of lodgement for the company return, or risk having it counted as an unfranked dividend in the return of the individual.

● Asset Purchases:

Explore potential depreciation deductions for business asset purchases. Take advantage of the instant asset write-off threshold for eligible assets. The timing of asset purchases strategically can potentially maximise depreciation deductions and align with business cash flow and tax planning goals.

● Write Off Bad Debts:

Review accounts receivable and identify genuinely bad and unrecoverable debts for potential tax deductions. It is also important to maintain proper documentation to support bad debt write-offs.

● Obsolete Stock & Fixed Assets:

By conducting a thorough stocktake to identify obsolete or slow-moving stock for potential write-down or write-off. It is also worthwhile looking through your depreciation fixed asset schedule to identify any assets that are lost or scrapped and may need writing off.

● Prepay Expenses:

There may be some business expenses that can be prepaid and deductible in the year they are paid. Always check with your accountant for eligible expenses and please also consider business cash flow.

Disclaimer: This information is of a general nature and does not constitute specific financial or tax advice. Consultation with a qualified professional is essential for specific advice for your particular circumstances.

The Truth About Family Business Succession: Do They Really Want It?

Wed, 05 Mar 2025 06:21:43 GMT

Generational succession - handing your business across to your kids or family - sounds simple enough but, many families end up in a dispute right at the point when the parents, business, and children are most vulnerable. It’s important that generational succession is managed as closely and diligently as if you were selling your business to a stranger to avoid misunderstandings and disputes.

A 2016 article in The Economist stated, 'Succession is a problem for family businesses the world over. The Family Business Institute calculates that only 30% of such businesses survive into the second generation, only 12% into the third generation and only 3% into the fourth.’

The Economist, succession failure www.economist.com/business/2016/02/04/succession-failure.

Planning to pass your business to family? Consider these critical points:

1. Are they genuinely willing and dedicated to running it?

2. Do they possess the necessary skills and experience?

3. Can they maintain and grow the business's value?

A successful handover relies on "yes" answers to all three.

Capability and willingness of the next generation – do your kids really want the business?

There needs to be a realistic assessment of whether or not the business can continue successfully after the transition. In some cases, the exiting generation will pursue generational succession either as a means of keeping the business in the family, perpetuating their legacy, or to provide a stable business future for the next generation. All of these are reasonable objectives, however, they only work where there is capability and willingness.

The alternative scenario can also exist where generational succession is pursued by the younger generation. In some cases, it’s seen as their birth right. In these cases, the willingness will exist but this does not automatically translate to capability.

Failing to plan for succession, and simply assuming it will happen, risks significant financial losses and

damaged family relationships.

Capital transfer – how much money needs to be taken out of the business during the transition?

What level of capital do the current business owners, generally the parents exiting the business, need to extract from the business at the time of the transition? The higher the level of capital needed, the greater the pressure that will be placed on the business and the remaining equity stakeholders.

In most cases, the incoming generation will not have sufficient capital to buy out the exiting generation.

This will require the vendors to maintain a continuing investment in the business or for the business to take on an increased level of debt, or possibly a vendor finance arrangement that brings with it its own complications. It is not uncommon to see external bank loan repayment terms that put so much pressure on cash flow, that the buyer ends up with no extra money after taxes and repayments, which can

demotivate the buyer.

In many cases, the exiting generation will want to maintain a level of equity investment. This might be a means of retaining an interest in the business or alternatively staging their transition. In either case, it is important to map the capital transition both from a business and shareholder perspective. This needs to be documented and signed off firstly from the business’s perspective and then by both generational groups. No generational transition should be undertaken without a clear and agreed capital program.

Income needs – ensuring remuneration is on commercial terms

In many SMEs, the owners arrange their remuneration from the business to meet their needs rather than being reasonable compensation for the roles undertaken. This can result in the business either paying too much or too little.

Under a generational succession, there should be an increased level of formality around compensation to directors and shareholders. Compensation should be matched to roles and where performance incentives exist these should be clearly structured.

Operating and management control

Once the capability and capital assessments have been completed, it is important to look at the transition of control. This can be a very sensitive area. It’s essential to establish and agree in advance how operating and management control will be maintained and transitioned. The plan for operating and management control should be documented and signed off by all parties with either timelines for time driven succession or milestones for event-focussed transitions.

Uncertainty in management leads to business-damaging confusion or a power vacuum. When a founder's identity becomes inextricably linked to the business, their reluctance to relinquish control can become counterproductive and even self-sabotaging. Founder's syndrome is common, with the founder clinging to control and resistant to change, often creating an environment where successors feel stifled, undervalued, and ultimately driven away.

Without a documented (and followed) plan, issues arise:

● Successors want autonomy.

● They feel powerless without control.

● Predecessors want continued influence.

● Investment is seen as control.

● Roles are unclear.

Transition timeframes and expectations

Generational succession is often a process rather than an event and achieved over an extended period of time. The critical issue is to identify and ensure that all parties have a common understanding and acceptance of the time period over which the transition will take place. This should be included in the documented succession plan.

The need for greater formality and management structure

Generational succession often requires a greater level of formality in the management and decision making process. This formality should achieve a separation of function between management, the Board (if applicable), and shareholders.

Often in an SME business, these roles merge and there are no clear dividing lines or boundaries. Roles, responsibilities, and clear key performance indicators (KPIs) for management should be agreed and documented.

Navigating family business succession is a complex journey, fraught with potential pitfalls and emotional complexities. As we've highlighted, assuming a smooth transition can lead to significant financial and family strain. Ensuring a successful handover requires meticulous planning, open communication, and a realistic assessment of all parties involved. From evaluating the next generation's true aspirations and capabilities to structuring a sustainable capital transfer and defining clear management roles, every aspect demands careful consideration.

Don't let your legacy become another statistic.

To safeguard your business and your family's future, contact us today. We can help you develop a comprehensive succession plan that addresses these critical issues, ensuring a seamless and prosperous transition for generations to come.

The Importance of Up-to-Date Accounts

Mon, 03 Feb 2025 23:03:38 GMT

Keeping your accounts up-to-date is essential for the smooth and successful operation of any business.

Accurate and timely record-keeping is not just about compliance with tax regulations, as it offers a multitude of benefits that can significantly impact your business's financial health and overall success.

What are Up-to-Date Accounts - how do they look?

● Knowledge is power - accurate and timely financial information empowers business owners to make informed decisions and potential issues can be addressed before they escalate.

● Bank balances match - ensuring that recorded transactions in accounting software align with bank statements.

● Debtors are up to date - ensuring invoices are completed and sent to customers as early as possible, reconciling payments made by debtors will help identify potential bad debts. This can also inform credit policies and prevent further sales to non or late payers.

● Creditors - bills put in, not waiting for statements - entering bills in once items are purchased ensures accurate liability tracking, facilitates ontime payments, and helps to maintain good supplier relationships. This can also help take advantage of early payment discounts.

● Inventory - accurate and updated inventory records can be relied upon for decision making. Regular review and management of stock ensures the right level of stock is on hand to minimise obsolescence and possibly reduce carrying costs.

● Expenses are entered so that value for money is reviewed - timely recording of expenses allows for accurate cost tracking, expense analysis and highlights potential cost saving opportunities.

● Margins can be monitored regularly and adjusted - up-to-date accounts enable the regular monitoring of profit margins, allowing for timely adjustments to pricing, to ensure profitability.

The use of digital tools such as Dext, HubDoc, and debtor-chasing apps can streamline financial processes and improve efficiency.

Benefits of Up-to-Date Accounts

● Informed Decision-Making: By maintaining up-to-date accounts, you can gain a clear and comprehensive understanding of your business's financial current position and performance. This knowledge allows and empowers you to make informed decisions about all areas of your business, such as inventory, staffing, and pricing.

● Access to Funding: When you are looking to apply for a loan or investment, potential lenders and investors will scrutinise your financial records. Up-to-date accounts demonstrate your financial responsibility and viability. This will make it easier to secure the funding you may need to grow your business.

● Compliance with Regulations: Keeping accurate records ensures that you can meet your tax, superannuation, and employer obligations. This helps you avoid penalties and legal issues that can arise from non-compliance.

● Effective Cash Flow Management: By tracking your income and expenses, you can identify trends and potential cash flow problems before they become critical. This allows you to take proactive steps to manage your cash flow and ensure that you have the funds you need to meet your obligations.

Importance of Accurate Financial Records

Accurate financial records are the foundation of sound financial management. They provide a reliable picture of your business's financial position and enable you to:

● Prepare Accurate Financial Statements: Financial statements, such as the balance sheet and income statement, are essential for understanding your business's financial health. Accurate records ensure that these statements are reliable and can be used to make informed decisions.

● Protect Against Fraud and Errors: Regular reconciliation of your accounts helps you identify and rectify discrepancies, protecting your business from fraud, mismanagement, and costly errors.

● Future compliance trends - Trends like e-invoicing, the ATO’s vision toward real-time tax lodgements, and increased reporting requirements for Single Touch Payroll (STP) will become more prevalent.

Efficiency of Digital Record-Keeping

Establishing a digital record-keeping system can streamline your accounting processes and save you valuable time. Digital records are easily searchable and can be backed up securely, reducing the risk of data loss. In many cases, digital records can replace paper copies, unless specific regulations require physical records.

Key Takeaway

Keeping your accounts up-to-date is not just a legal requirement. It is a strategic business decision for anyone involved in business as it improves your ability to succeed in today's competitive environment. By investing time and resources in accurate and timely record-keeping, you can gain valuable insights, make informed decisions, and build a strong financial foundation for your business's future.

Payday Super: What Small Business Owners Need to Know

sam@ambrosiussen.com.au (Sam Wright) — Thu, 16 Jan 2025 03:07:43 GMT

Big changes are planned by the Federal Government to the way employers handle superannuation payments, and if you’re a small business owner, it’s time to get prepared.

The new ‘payday super’ system is set to transform how superannuation guarantee contributions are made. Here’s everything you need to know to stay ahead of the game.

What Is Payday Super?

From 1 July 2026, employers will need to pay superannuation guarantee contributions on the same day as salary and wages, replacing the current quarterly payment schedule. This shift aims to reduce the estimated $3.4 billion gap between what employees are owed and what’s been paid.

Announced in the 2023-24 Federal Budget, payday super is not yet law, but Treasury has already released guidance to help employers prepare.

How Will Payday Super Work?

Under the new system:

Superannuation guarantee payments will need to be paid on payday, so they are received in an employee’s super account within 7 calendar days of payday .
Exceptions include:
New employees: Superannuation guarantee payments will be due after their first two weeks of work.
Small or irregular payments outside normal pay cycles.

Since many businesses already use single-touch payroll systems for salary and wage reporting, payday super is expected to integrate into these existing systems. However, there will likely be updates to these systems to collect data about ordinary time earnings.

The Cashflow Challenge

One significant change for employers will be the impact on cash flow. Currently, businesses can hold superannuation guarantee amounts (currently 11.5%, and from July 2025 it will increase to 12%) until 28 days after the end of the quarter. With payday super, this amount will be due on payday, requiring tighter cash flow management.

Late Payments: The Consequences

Penalties for late or unpaid superannuation guarantee amounts are already very tough and they will remain so under payday super. Here’s what happens if payments are late under the proposed changes:

Superannuation Guarantee Charge calculation:

Outstanding shortfall amount: Based on ordinary time earnings only, not total salaries and wages as is currently the case.
Late payment penalty interest: Daily interest on the shortfall amount at the general interest charge rate, compounding daily.
Administrative penalty: A penalty of up to 60 % of the shortfall amount, reduced for voluntary disclosures. This reduction applies when employers proactively disclose any super that wasn’t paid in full and on time.
Ongoing general interest charge: Applied to outstanding amounts, including penalties.
Additional penalty: Up to 50% of unpaid amounts after 28 days of the notice of assessment.

2. Tax Deductibility:

Unlike the current charge, the proposed charge (the unpaid superannuation - excluding penalties and interest) will be tax deductible if paid within 28 days.

Missed payments can quickly spiral into significant liabilities.

The Retirement of the ATO Small Business Superannuation Clearing House

The Small Business Superannuation Clearing House will be retired from 1 July 2026. Many small businesses currently rely on this platform, so its decommissioning will introduce some changes to the process for those businesses. Many small business accounting software packages, like MYOB and Xero, have clearing house capability.

Preparing for the Transition

While payday super is not yet law, it is essential to start planning:

Review your payroll systems to ensure they are ready to handle more frequent superannuation guarantee payments. If you are currently using the ATO's Small Business Superannuation Clearing House, start thinking about some options for a clearing house to use.
Assess your cash flow and identify potential challenges that require changes like customer payment terms or an overdraft facility.
Stay informed as further details emerge.

Final Thoughts

Change can be daunting, but by preparing early you can ensure a smooth transition and avoid costly penalties. Start planning now to ensure your business is ready for the payday super era.

*This article was written and published in January 2025. The information provided is current at the time of publication.

Managing Debt in these Extended High Interest Times

Tue, 17 Dec 2024 00:55:11 GMT

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Economists have been predicting interest rates to fall months ago.

The current interest rate reduction predictions of early next year are still optimistic. The reality is that the economy is staying just strong enough that the most likely outlook is that interest rates will stay where they are for the foreseeable future.

Higher interest rates suck vital cash flow from your business. Managing your business on the basis of optimistic predictions is dangerous. It is like allowing your business to hemorrhage, while you watch on.

Interest costs have doubled over the past year. With business interest rates at around 8% they are now a major expense item for many businesses. There was a saying that it was smarter to use other people's money to fund your business. The current level of interest rates now make that a myth.

What has exacerbated the high interest problem is that inflation has come down. Whereas when interest rates first went up you could put your prices up by 5% or more and cover much of the interest cost. Now with inflation down to 3.5% the ability to lift prices has come down, but interest rates have not come down. Your business is caught in a pincer.

What should you do to keep your cash flow intact and your business strong?

Sell unnecessary assets:

If you have machinery or property that is not core to your business, consider selling it, especially if it has a loan attached to it. Selling this will remove the loan and may also give you additional funds to reduce other debts.

When purchasing an asset consider the ROI (return on investment):

Will the asset give you a good return on your investment? As a rule of thumb ask: will the asset pay for itself in 3 years or less? Also consider whether you can pay for the equipment from cash flow. Do not buy business assets that feed your ego, such as big expensive utes.

Being smart with your working capital:

Making a profit is important to cash flow. However it does not guarantee cash flow. How you manage your debtors, stock and work in progress can make an even bigger difference.

Debtor Control:

Is there room for improvement in your debtor control? Do you get part of your customer’s invoice upfront, while you wait for the goods to arrive or finish the job?

Stock Control:

With stock more difficult to get, you need to have adequate levels to make the sales. However, do you only keep the stock that customers regularly need?

Likewise work in progress should be kept as low as possible. If it is too high, consider progress payments.

Making good use of Cash Flow you generate:

With the cash flow generated it is important to have a buffer. Two months of overheads is a good rule of thumb. However if your loans have a redraw or offset facility this is a way you can keep the interest down and have access to your cash reserves if needed.

If you cannot get a redraw facility on your loans then carefully consider whether it is wise to use some of the cash flow generated to reduce debt.

Alternatively you could hold the surplus cash in a high interest account, such as a cash management account or term deposit and earn around 5%.

Cash Flow is the lifeblood of your business. Persistent high interest rates are adding a significant pressure to business cash flows. What is the state of your cash flow? How could you reduce the interest rate pressure and strengthen your cash flow?

Navigating Uncertainty in 2025

sam@ambrosiussen.com.au (Sam Wright) — Wed, 27 Nov 2024 00:36:35 GMT

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Business thrives on predictability. We crave the stability needed to plan, invest, and make confident decisions.

While the stock and property markets continue to grow, inflation has remained sticky and interest rates have been on hold for 12 months, held up higher and for longer with government subsidies and spending, and with no sign of being cut in the short term. As we come into the Christmas and holiday season, many business leaders and owners will be looking to 2025 to plan ahead.

While crystal ball predictions are best left to fortune tellers, some factors are clear for 2025:

Retail's Impact on Rates: Black Friday and Christmas spending levels will influence the Reserve Bank's decision on interest rates in the new year.
Global policy: US policy under a Trump presidency from January - tariffs, tax policy, and China's underperforming economy create international uncertainty.
Australian Election: A federal election looms in the first half of 2025, potentially with an early budget. This can lead to a frustrating "wait-and-see" period for businesses until election results provide certainty.

As a result, 2025 is shaping up to be a year of uncertainty, potentially with higher interest rates for longer and a tight labour market.

But remember, where there's uncertainty, there's also opportunity. This could include developing a new product or service, entering a new market, bringing manufacturing operations in-house to reduce reliance on suppliers, or strategically acquiring another business to expand market share or access new technologies.

Here's how your business can navigate the coming year:

Be Prepared for the Unexpected: Consider building a cash buffer – approximately two months' worth of taxes, fixed expenses, and loan repayments – to weather potential dips.
Know Your Breakeven Point: Track your sales levels closely to understand the minimum amount of revenue needed to cover fixed costs.
Stay Liquid: Maintaining a healthy current ratio (current assets divided by current liabilities) – ideally above 2:1 – demonstrates the ability to meet short-term obligations.
Manage Your Debt Wisely: Review your debt levels and work on a strong relationship with your bank manager for future financing needs.
Listen to Your Customers: Understanding their revenue challenges helps you anticipate changes in demand for your products or services.
Be Ready to Invest: Having a financial buffer puts you in a prime position to capitalise on opportunities that may arise. However, carefully consider the right mix of cash and debt financing.

The key takeaway? 2025 may be unpredictable, but with the right planning, you can position your business to not just survive, but thrive. The best way to navigate 2025 is to be adaptable, informed, and prepared to thrive in a dynamic environment.

Avoiding the Christmas Tax Grinch!

Mon, 11 Nov 2024 02:14:22 GMT

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The Christmas season inspires us to share and give freely. Yet the tax office, playing Ebenezer Scrooge, sets strict boundaries on this generosity. But amidst the cheer, the Australian Taxation Office (ATO) has some guidelines to keep in mind. Let's explore these considerations to ensure your generosity lands well with both your team, customers, and the taxman.

Employers face FBT on certain perks provided to employees or their family members. This tax burden comes on top of the actual cost of the benefit itself. It's a restrictive measure that particularly impacts retail and hospitality spending, though it aims to create fairness for individual taxpayers who can't claim everyday work expenses like lunch.

FBT is separate from income tax. It's calculated on the taxable value (the private value) of the fringe benefit. However, the Minor Benefits Exemption allows for certain gifts and benefits under $300 per employee to be exempt from FBT.

Christmas bonuses

If you are planning to provide your team with a cash bonus rather than a gift voucher or other benefit, remember that this will be taxed in much the same way as salary and wages. This is paid through the payroll system (and normally needs superannuation paid on top of the bonus).

Tax effective ways to give staff gifts

If you are considering making a gift to your employees, there are some things you can consider that may give your business a better tax result.

Is the gift ‘entertainment’ or not - under the ATO’s definition?

The ATO casts a broad net on "entertainment." Food and drinks, especially off-site, recreational activities, and even travel related to entertainment fall under this category.

“Non-entertainment” benefits provided to employees are usually exempt from FBT if the total cost is less than $300 (inclusive of GST) per employee. Some examples of non-entertainment gifts include flowers, non-entertainment based gift vouchers (Coles/Myer, Bunnings, Woolworths, etc), and hampers. The good news is that a tax deduction and GST can still be claimed for these types of gifts.

Entertainment gifts would include paying for a holiday, industry awards nights, day spa treatments, and tickets to see a movie, sporting event or a theatre show. If the gift is ‘entertainment’ and under $300 (GST inclusive), FBT wouldn’t be payable, but you wouldn't be able to claim a tax deduction or GST credits.

To qualify as a minor benefit, gifts must be occasional and not regularly expected. Recurring gifts, like gym memberships or multiple vouchers exceeding $300 per employee, are not exempt from FBT.

Aside from the tax issues, think about what will be of value to your team. The most appreciated gift is the one that means something to the individual.

FBT on the Christmas party

Keep off-site celebrations under $300 per person to sidestep FBT using the minor benefits exemption. While this means no tax deductions or GST credits, you'll avoid the FBT hit - depending on your other entertaining activities throughout the year.

If you're planning to give gifts and host a party, it's best to do them at different times. This way you can get the $300 minor benefit exemption for both the gift and party.

If your business hosts more extravagant parties and goes above the $300 per person minor benefit limit, you will need to pay FBT - but you can also claim a tax deduction and GST credits for the cost of the event.

Giving to clients tax effectively

The most effective way of sharing the Christmas joy with customers and clients is not necessarily the most tax effective. For example, if you take your client out or entertain them in any way, it’s not tax deductible and you can’t claim back the GST. That doesn’t mean you can’t do it - but there’s no tax benefit.

There are specific rules designed to prevent tax benefits from being claimed when the expenses relate to entertainment, regardless of whether there is an expectation of generating goodwill and increased business sales. Restaurants, a show, golf, and corporate race days all fall into the ‘entertainment’ category.

This baffles many businesses because these activities are done to generate more sales and grow business relationships. The ATO sees these as entertainment and won’t let you get a tax benefit.

However, if you send your customer a gift, then the gift is tax deductible as long as there is an expectation that the business will benefit (and assuming the gift is not entertainment as described above).

The bottom line

Before spreading your festive cheer too far and wide, a quick chat with your accountant could save you from unwanted tax surprises. They can help structure your Christmas giving to maximise the benefits while keeping the ATO satisfied.

While tax considerations matter, remember the true spirit of giving and generosity. The most valued gifts reflect the thoughtful consideration of the recipient. Just keep the ATO's rules in mind while spreading your Christmas cheer!

Don't Let Your Business Run on Empty: The Importance of Cash Flow Monitoring

Thu, 31 Oct 2024 06:49:30 GMT

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Imagine your business as a road trip. You wouldn't set off without checking the fuel gauge and planning for refills, right?

Similarly, understanding your current and future cash flow is crucial.

Understanding Key Levers and Drivers in Cash Flow and Profitability

A proactive approach to cash flow will help to ensure you are putting enough cash away and do not fall short or hit empty. There are profitable businesses that are put into administration because even though they are making profits they run out of cash and cannot pay their bills as they are due.

Recognising how specific levers and drivers of operations influence cash flow and profitability is essential. For instance, regularly monitoring the gross profit margin percentage (GP%) on a weekly or monthly basis can reveal emerging issues before they become significant problems. The management of work-in-progress, raw materials, finished goods, and inventory requires close attention as these areas can significantly impact cash flow.

While these assets represent potential future revenue and profit, they also tie up cash that is not immediately available for other business needs like paying taxes and bills. This situation creates a financial holding pattern where cash is invested in short-term assets but not yet received through sales and subsequent customer deposits.

Accurate Financial Records and Cash Flow Planning

Getting a true indication of the current state of the business can only be achieved by having your books up to date. Many business owners run the business by what is in the bank account at any one time. This is deceiving because current and upcoming obligations are not factored in.

Invoicing customers as soon as the work is completed, managing inventory turnover, and being fully aware of your obligations and amounts the business owes are critical to planning ahead and not being caught short of cash.

All business obligations, including future tax obligations, must be considered to ensure enough cash is put aside. In addition to the assets mentioned previously, planning ahead to manage future tax obligations assists with managing cash flow. A good strategy is to have a separate bank account for taxes. Having an estimate of what your tax liabilities are likely to be, and when they need to be paid to the ATO is critical information to use in planning.

One way to plan for the coming months is to create a simple cash flow projection that looks at regular outgoings and expenses and purchases of inventory, assets, tax payments, and employee obligations. On the income side, estimating when sales are expected to be received in cash is key to planning.

Cash Flow as the Fuel of Business

Cash flow is an important indicator in business, and just like fuel for a car if you have no fuel a car won’t operate. Once the business starts getting behind in obligations and failing to make payments on time, action needs to be taken immediately. If strategies and plans are not put in place as soon as possible it can be hard to get back on track.

Profitable businesses can and do go broke because of a lack of cash flow at the right time to pay the bills - while waiting to get paid for sales or holding lots of inventory.

Using the road trip example, if you have a great car (a good profitable business) but run out of fuel (cash) along the way, it won’t be the yellow RACQ roadside assist ute coming to help you - but the tax office and creditors asking for their money.

When Times Get Tough, The Tough Track Their Key Numbers

sam@ambrosiussen.com.au (Sam Wright) — Fri, 18 Oct 2024 03:01:59 GMT

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The economic climate is a challenge for many people. Rising costs of living, from housing to groceries, are putting a squeeze on household budgets, and consumers are feeling the pinch.

Consumer confidence data released this week by ANZ for the short and medium term also confirms this. This is particularly relevant for businesses that rely on discretionary spending, like retail stores, cafes, and restaurants.

While these challenging times can feel daunting, it's important to remember that economic cycles are just that - cyclical. Just as discretionary spending feels tight, a brighter future awaits with the potential for lower interest rates and increased consumer spending.

The key to navigating this period lies in proactive management and a deep understanding of your business's financial benchmarks.

But here's the good news : even during economic downturns, there's an opportunity for resilience and positioning the business for the upturn.

Here are some key questions to consider, helping businesses to navigate this period and emerge stronger:

Do You Know Your Numbers? This is crucial. Understand fixed costs, gross profit margins (on each product), and sales volume needed to cover expenses, loans, and taxes.

Cost or Value? Identify your competitive edge. Does the business compete on price or value? If it's value, ensure the marketing effectively communicates the benefits your product or service offers. If it competes on cost, review cost structures and negotiate with suppliers for better deals.

Are You Reaching Your Full Customer Base? Engage with and listen to existing customers. Is your market saturated, or are there geographical or online markets waiting to be explored? Consider using distributors or alternative sales channels to increase the market size.

Planning and Budgeting: A well-defined budget with close monitoring allows you to identify and address variances. Open communication with suppliers builds trust and strengthens your business relationships. Remember, good communication goes both ways – don't leave suppliers hanging.

Strategic Thinking: Why do people choose your product over alternatives? How can you maintain visibility and stay top-of-mind for consumers? Is there an opportunity to pivot to another venture that you could operate in profitably? Is profitability able to be improved by offering enticing deals that capture or increase customer spending without sacrificing value?

Remember, you're not alone. Many businesses are facing similar challenges. By staying informed, being proactive, and seeking support when needed, you can weather this storm and come out stronger on the other side.

By focusing on good planning, cost management, communication, supplier relationships, and a strategic value proposition, you can navigate these challenging times and build a bridge to a brighter future.

This economic cycle, like all others, is temporary. Consumer confidence will return, and with it, increased spending. By taking proactive steps now, your business will be well-positioned to thrive when brighter days arrive.

The Holistic Approach to True Business Success

Wed, 02 Oct 2024 01:14:38 GMT

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The Holistic Approach to True Business Success

We are seeing some great finals football. The teams that succeed have all aspects of their game and team working well and together. In the same way a truly successful business person focuses on developing their business investment and their personal investments at the same time.

We have all heard of people that have had good businesses and when it came time to sell or retire they had very little. I’m sure you went into business to do well for yourself and your family. How do you ensure this happens?

Self Discipline from the Beginning

This takes some self discipline. It is a very common response to live lavishly when the money starts rolling into the business. We think there is plenty of time to invest for the future. The trap is that business, and life, is not a straight upward line. Things can go wrong no matter how well we manage them.

Hence setting some good disciplines makes a big difference. The most important discipline is to keep the business finances separate from your personal. Don’t see the business cash as yours to use for personal items.

Keep Business & Personal Finances Separate

The first way to keep the cash separate is to Pay yourself a wage from the business when you pay your staff. Make it a commercial wage with tax deducted and super paid. This way you reduce the big tax bills at the end of the year that suck cash. Also paying super means you are building an asset outside of the business.

The second is to manage your personal expenditure. A personal budget is good. However if that is not going to work for you, then a simpler approach is to have two bank accounts where your wage goes into. One is for spending during the next fortnight. The other is for larger lumpy expenses like electricity and council rates etc.

In the early days of a business it often needs as much cash it can get while it grows. However by the 5th year it should be in a place where you can take some profits out on a monthly basis.

Smart Investments

These profits could go to pay your home loan down faster and start making small safe investments. You may also want to purchase a commercial property for your business. As long as this makes good financial sense from a commercial rental perspective and from the business perspective then it could be a good investment.

It is smart if these investments generate enough income to support themselves and not suck cash from the business. Even better still the investments make a positive return and can be reinvested and accelerate the investment growth.

The key to a successful business life, as it is with a sporting team, is to work on all aspects. For a business owner this means working on both the business and the personal financial side, and to start now. It is never too late to start!

The Business Spring Clean: Unleashing Potential for New Renewal

Wed, 18 Sep 2024 04:53:36 GMT

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The Importance of a Business Spring Clean

Spring has sprung! Spring brings with it the thoughts of new life and new beginnings, with vibrant flowers bringing colour and joy throughout this season.

As the weather warms, many of us engage in spring cleaning at home. However, it's also a great time to consider giving our businesses a thorough spring clean. There are lots of good hygiene steps that can be taken to improve your business processes and efficiencies.

Leveraging Technology for Cash Flow Management

Using technology to its fullest can ensure there is a true measure of the business's cash flow. Reconciling the accounting software on a regular basis will help highlight potential issues with cash flow and profit margins that can be dealt with promptly.

Reviewing Debtors & Invoicing

The business debtor list should be monitored closely. Are there accounts that require follow-up? Are customers paying within their agreed terms or are there some that really should be considered bad debts? Consider the processes in place to invoice customers. Are invoices being sent out quickly to receive timely payments?

Effective Management of Work In Progress (WIP)

It is also important to ensure the WIP (work in progress) of the business is managed carefully. Items sitting in WIP and not being invoiced will reduce the likelihood of being paid on a timely basis. Understanding the debtors list and having a gauge on the reliability of it being paid (and when) is really important to be truly across the business's cash flow.

Controlling Spending Patterns

Take a closer look at spending patterns. Are there unexplained fluctuations in expenses? Have you noticed a sharp increase in certain items? If you've noticed a sharp increase, consider adjusting commitments to ensure it is necessary for the business's needs. The business may be spending more with a particular supplier that could allow a negotiation of better terms or reduced rates.

Reviewing Inventory Levels & Mix

It is important to keep inventory up to date and monitor inventory levels to enable a better understanding of customers' buying habits. Keeping too much or not enough inventory can have a direct impact on the business's costs and sales.

The Role of Staff in Business Success

Staff are an integral part of a business and need to be managed and monitored to ensure the right people are in the right seats. Would the implementation of a mentoring program assist with staff development, or do they need further training in particular areas? Ensuring staff are happy and enabling them to see a future within your firm can assist with increased job satisfaction and productivity.

Setting the Stage for Growth & Success

A business is more than just a way to make money. It's something to be proud of and look after. Taking time to improve the business can help it grow stronger. By looking at these areas, business owners can make sure their business is on the right track. A spring clean for the business might just lead to new opportunities and better results.

Going for Gold in Business: Lessons from the Olympics

sam@ambrosiussen.com.au (Sam Wright) — Tue, 03 Sep 2024 03:22:00 GMT

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Key Lessons from Olympic Athletes

With the Olympics just finished, the physical achievements of competitors were on display for the world to see. Our Australian athletes, with their best-ever medal haul, have shown us what's possible with years of dedication, focus, and meticulous preparation.

Just as our athletes have demonstrated excellence in their respective fields, businesses can strive for similar levels of success through careful preparation and strategic planning. The aim is a business journey that emulates Ariarne Titmus's gold medal-winning performances.

The Importance of Preparation for Business

Successfully navigating going into business is a little bit similar, where the preparation and assessing the competition are key to success. The figures and statistics on business failures are depressing, and so conducting thorough research, commonly referred to as ‘due diligence’ and understanding key issues are crucial steps towards a positive outcome.

Understanding Due Diligence

When considering the acquisition of an existing business, the initial step is to obtain the Information Memorandum from the seller or their representative. It serves to filter out unqualified candidates and provides an overview of the business. This document lists key information about the business; such as history, products/services, the market, financial information, owner involvement and growth opportunities.

One of the most important questions to ask the seller is why is the business for sale? More often than not there are good reasons for the sale on the open market - being retirement, health, or a change in personal circumstances. If the reason for the sale is more to do with falling profitability or poor management, the best way to uncover this is often by completing a thorough due diligence process on the business.

The due diligence process for prospective buyers involves a review of the business's financial information, legal documents, and operational practices. Potential buyers also analyse market conditions, customer and supplier relationships, and the current value of physical and intangible assets. This helps make informed decisions about the value of the business before making a decision to proceed with the purchase.

Much of the information provided comes from the seller's broker, who wants to make a sale. Therefore, independent checks are crucial.

How will the business be funded?

Financing is another key consideration. If the purchase is to be financed through borrowing the profits of the business need to be enough (after tax) to make the repayments plus a good buffer for trading cash flow, owner’s wages and taxes.

The value of proper due diligence

Our experience has shown that a fair number of due diligence processes result in buyers deciding not to proceed with the purchase. This may seem discouraging, but this underscores the value of the process. We have uncovered various issues during due diligence, including profitability inconsistencies, over-reliance on key customers, unjustified adjustments to inflate sale prices, and inaccuracies in financial statements.

The value of proper due diligence

The journey into business ownership shares parallels with Olympic preparation. The due diligence process serves as a training ground, building knowledge and insight, crucial for informed decision-making. Successful entrepreneurs often apply this level of rigour to their business ventures, mirroring the dedication of world-class athletes.

The Essential 30 June Guide

sam@ambrosiussen.com.au (Sam Wright) — Thu, 13 Jun 2024 21:47:09 GMT

The end of the financial year is fast approaching. We outline the areas at risk of increased ATO scrutiny and the opportunities to maximise your deductions.

For you

Opportunities

Take advantage of the 1 July 2024 tax cuts by bringing forward your deductible expenses into 2023-24. Prepay your deductible expenses

where possible, make any deductible superannuation contributions, and plan any philanthropic gifts to utilise the higher tax rate.

Bolstering superannuation

If growing your superannuation is a strategy you are pursuing, and your total superannuation balance allows it, you could make a one-off deductible contribution to your superannuation if you have not used your $27,500 cap. This cap includes superannuation guarantee paid by your employer, amounts you have salary sacrificed into super, and any amounts you have contributed personally that will be claimed as a tax

deduction. And, if your superannuation balance on 30 June 2023 was below $500,000 you might be able to access any unused concessional cap amounts from the last five years in 2023-24 as a personal contribution. For example, if you were $8,000 under the cap in each of the last 5 years, you could contribute an additional $40,000 and take the tax deduction in this financial year at the higher personal tax rate.

To make a deductible contribution to your superannuation, you need to be aged under 75, lodge a notice of intent to claim a deduction in the approved form (check with your superannuation fund), and get an acknowledgement from your fund before you lodge your tax return. For those aged between 67 and 75, you can only make a personal contribution to super if you meet the work test (i.e., work at least 40 hours during a consecutive 30-day period in the income year, although some special exemptions might apply). And, if your spouse’s assessable income is less than $37,000 and you both meet the eligibility criteria, you could contribute to their superannuation and claim a $540 tax offset. If you are likely to face a tax bill this year, for example, you made a capital gain on shares or property you sold, then making a larger personal superannuation contribution might help to offset the tax you owe.

Charitable donations

When you donate money (or sometimes property) to a registered deductible gift recipient (DGR), you can claim amounts over $2 as a tax deduction. The more tax you pay, the more valuable the tax deductible donation is to you. For example, a $10,000 donation to a DGR can create a $3,250 deduction for someone earning up to $120,000 but $4,500 to someone earning $180,000 or more (excluding Medicare levy). To be deductible, the donation must be a gift and not in exchange for something. Special rules apply for amounts relating to charity auctions and fundraising events run by a DGR. Philanthropic giving can be undertaken in a number of different ways. Rather than providing gifts to a specific charity, it might be worth exploring the option of giving to a public ancillary fund or setting up a private ancillary fund. Donations made to these funds can often qualify for an immediate deduction, with the fund then investing and managing the money over time. The fund generally needs to distribute a certain portion of its net assets to DGRs each year.

Investment property owners

If you do not have one already, a depreciation schedule is a report that helps you calculate deductions for the natural wear and tear over time on your investment property. Depending on your property, it might help to maximise your deductions.

Risks

Work from home expenses

Working from home is a normal part of life for many workers, and while you can’t claim the cost of your morning coffee, biscuits or toilet paper (seriously, people have tried), you can claim certain additional expenses you incur. But, work from home expenses are an area of ATO scrutiny. There are two methods of claiming your work from home expenses; the short-cut method, and the actual method. The short-cut method allows you to claim a fixed 67c rate for every hour you work from home. This covers your energy expenses (electricity and gas), internet expenses, mobile and home phone expenses, and stationery and computer consumables such as ink and paper. To use this method, it’s essential that you keep a record of the actual days and times you work from home because the ATO has stated that they will not accept estimates.

The alternative is to claim the actual expenses you have incurred on top of your normal running costs for working from home. You will need copies of your expenses, and your diary for at least 4 continuous weeks that represents your typical work pattern.

Landlords beware

If you own an investment property, a key concept to understand is that you can only claim a deduction for expenses you incurred in the course of earning income. That is, the property needs to be rented or genuinely available for rent to claim the expenses. Sounds obvious but taxpayers claiming investment property expenses when the property was being used by family or friends, taken off the market for some reason or listed for an unreasonable rental rate, is a major focus for the ATO, particularly if your property is in a holiday hotspot. There are a series of issues the ATO is actively

pursuing this tax season.

These include:

Refinancing and redrawing loans – you can normally claim interest on the amount borrowed for the rental property as a deduction. However, where any part of the loan relates to personal expenses, or where part of the loan has been refinanced to free up cash for your personal needs (school fees, holidays etc.,), then the loan expenses need to be apportioned and only that portion that relates to the rental property can be claimed. The ATO matches data from financial institutions to identify taxpayers who are claiming more than they should for interest expenses.
The difference between repairs and maintenance and capital improvements. While repairs and maintenance can often be claimed immediately, a deduction for capital works is generally spread over a number of years. Repairs and maintenance expenses must relate directly to the wear and tear resulting from the property being rented out and generally involve restoring the property back to its previous state, for example, replacing damaged palings of a fence. You cannot claim repairs required when you first purchased the property. Capital works however, such as structural improvements to the property, are normally deducted at 2.5% of the construction cost for 40 years from the date construction was completed. Where you replace an entire asset, like a hot water system, this is a depreciating asset and the deduction is claimed over time (different rates and time periods apply to different assets).
Co-owned property – rental income and expenses must normally be claimed according to your legal interest in the property. Joint tenant owners must claim 50% of the expenses and income, and tenants in common according to their legal ownership percentage. It does not matter who actually paid for the expenses.

Gig economy income

It’s essential that any income (including money, appearance fees, and ‘gifts’) earned from platforms such as Airbnb, Stayz, Uber, OnlyFans, youtube, etc.,

is declared in your tax return. The tax rules consider that you have earned the income “as soon as it is applied or dealt with in any way on your behalf or as you direct”. If you are a content creator for example, this is when your account is credited, not when you direct the money to be paid to your personal or business account. Squirrelling it away from the ATO in your platform account won’t protect you from paying tax on it.

Since 1 July 2023, the platforms delivering ridesourcing, taxi travel, and short-term accommodation (under 90 days), have been required to report

transactions made through their platform to the ATO under the sharing economy reporting regime. This is the first year that the ATO will have the income tax returns of taxpayers to match to this data. All other sharing economy platforms will be required to start reporting from 1 July 2024. If you have income you have not declared, do it now before the ATO discover it and apply penalties and interest.

For your business

Opportunities

Bonus deductions

There are a series of bonus deductions available to small business in 2023-24, these include the instant asset write-off, energy incentive, and the skills and training boost.

Announced in the 2023-24 Federal Budget, the increase to the instant asset write-off threshold enables small businesses with an aggregated turnover of less than $10 million to immediately deduct the full cost of eligible depreciating assets costing less than $20,000. In the 2024-25 Federal Budget, the Government extended this measure to 30 June 2025.

Without these measures, the instant asset write-off threshold would be $1,000.

However, legislation to enact the 2023-24 measure has not passed Parliament following a disagreement between the House of Representatives and the Senate about the amount of the threshold, and whether the measure should apply to medium businesses as well (up to $50m).

Similarly, the $20,000 energy incentive that provides an additional 20% deduction on the cost of eligible depreciating assets or improvements to existing depreciating assets that support electrification and more efficient use of energy in 2023-24, is not yet law. Assuming both measures pass Parliament by 30 June 2024, any assets need to be first used or installed ready for use, or the improvement costs incurred, between 1 July 2023 and 30 June 2024 to be written off in 2023-24.

What is certain is the bonus 20% deduction for eligible expenditure for external training provided to your employees. The ‘skills and training boost’ is available to businesses with an aggregated annual turnover of less than $50 million. To claim the boost, the training needs to have been provided by a registered training provider and registered and paid for between 29 March 2022 and 30 June 2024. Typically, this is vocational training to learn a trade or courses that count towards a qualification rather than professional development.

Write-off bad debts

Your customer definitely not going to pay you? If all attempts have failed, the debt can be written off by 30 June. Ensure you document the bad debt on your debtor’s ledger or with a minute.

Obsolete plant & equipment

If your business has obsolete plant and equipment sitting on your depreciation schedule, instead of depreciating a small amount each year, scrap it and write it off before 30 June.

For companies

If it makes sense to do so, bring forward tax deductions by committing to directors’ fees and employee bonuses (by resolution), and paying June quarter super contributions in June.

Risks

Tax debt and not meeting reporting obligations

Failing to lodge returns is a huge ‘red flag’ for the ATO that something is wrong in the business. Not lodging a tax return will not stop the debt escalating because the ATO has the power to simply issue an assessment of what they think your business owes. If your business is having trouble meeting its tax or reporting obligations, we can assist by working with the ATO on your behalf.

Professional firm profits

For professional services firms – architects, lawyers, accountants, etc., - the ATO is actively reviewing how profits flow through to the professionals involved, looking to see whether structures are in place to divert income to reduce the tax they would be expected to pay. Where professionals are not appropriately rewarded for the services they provide to the business, or they receive a reward which is substantially less than the value of those services, the ATO is likely to take action.

Need support or have questions? Talk to us today about maximising your outcomes and reducing your risks.

Lessons from Electric Vehicles For Your Business Strategy

Thu, 16 May 2024 07:42:00 GMT

You have probably noticed an increasing number of electric vehicles on our roads. Or maybe you haven’t noticed them, when they scaringly and silently come up behind you in a car park. However despite their seemingly rapid growth, that growth rate is declining. Car makers have overestimated the demand and are facing serious losses on their electric vehicle production. Many car makers have gone too big too soon on this new trend.

Getting this timing balance right is an important strategic decision we as business leaders must make.

Toyota for example, has taken a different timing approach to most other car makers. It brought the hybrid in very early, when full electric vehicles were in their infancy. Their sales are still growing, despite not being eligible for the latest fringe benefit tax concessions.

Well known business author & researcher Jim Collins in his book Great by Choice has a chapter headed “Fire Bullets, then Cannonballs”. In other words test out new services or products in a small way, the “bullets” and make sure you are hitting the mark and then commit significant resources, the “cannonballs”

We need to be aware of trends that are impacting our industry. In facilitating a recent strategy session the extent of the growing demand for GPS driven and linked products caught the attention of the company’s leaders and the impact on their strategy direction.

Artificial Intelligence is a major development that is likely to have as big an impact as the internet has had. How will we make use of this technology in terms of timing and applications will be important questions for us to grapple with over the next two years. One thing is for certain we cannot ignore it.

In bringing in new technologies we do not want to lose the core of who we are as an organisation. We want to stick to our core values (what we stand for) and core purpose (why we do what we do) Also sticking to our core competencies (what sets us apart) is essential.

We want the new technologies to enhance our competencies. For example car makers still have to make electric cars great vehicles to drive. It is not just about the power source, driving experience and reliability is still essential.

Bringing on new products or services will require cash for such things as equipment, stock, staff wages for researching to name some. This is where a good cash flow based budget is important to ensure that the costs are identified and there is sufficient cash to fund the new technology.

The cash flow budget will need to be monitored to ensure that expenditure is kept in line with the budget and there are no overruns. Financial discipline needs to be maintained with the creative innovations.

New innovations are occurring at an increasingly rapid rate. Doing nothing is not an option. For us as leaders we are to first ensure we are aware of what is happening in the wider area that may impact our business. Then we will be in a place to quickly adapt and introduce the new technologies with wisdom.

Working with Small Businesses

Wed, 20 Mar 2024 03:43:19 GMT

Hear our top reason's we enjoy working with small businesses from Sam & Tania.

The Ambrosiussen's Experience.

Mon, 08 Jan 2024 02:14:26 GMT

The Ambrosiussen's Experience. ��☕��

We're the Business Accountants that empower you to succeed.

Bah humbug: The Christmas tax dilemma

Fri, 08 Dec 2023 03:01:01 GMT

Don’t want to pay tax on Christmas? Here are our top tips to avoid giving the Australian Tax Office a bonus this festive season.

1. Keep team gifts spontaneous

$300 is the minor benefit threshold for FBT so anything at or above this level will mean that your Christmas generosity will result in a gift to the ATO at a rate of 47%. To qualify as a minor benefit, gifts also have to be ad hoc - no monthly gym memberships or giving one person multiple gift vouchers amounting to $300 or more.

Gifts of cash from the business are treated as salary and wages – PAYG withholding is triggered and the amount is normally subject to the superannuation guarantee.

Aside from the tax issues, think about what will be of value to your team. The most appreciated gift is the one that means something to the individual. Giving a bottle of wine to someone who doesn’t drink, chocolates to a health fanatic, or time off to someone with excess leave, isn’t going to garner much in the way of goodwill. A sincere personal message will often have a greater impact than a generic gift.

2. The FBT Christmas party crunch

If your work Christmas party is out of the office, keep the cost of your celebrations below $300 per person if you want to avoid paying FBT. The downside is that the business cannot claim deductions or GST credits for the expenses if there is no FBT payable in relation to the party.

If the party is held somewhere other than your business premises, then the taxi travel is taken to be a separate benefit from the party itself and any Christmas gifts you have provided. In theory, this means that if the cost of each item per person is below $300 then the gift, party and taxi travel can potentially all be FBT-free. Just remember that the minor benefits exemption requires a number of factors to be considered, including the total value of associated benefits provided across the FBT year.

If entertainment is provided to employees and an FBT exemption applies, you will not be able to claim tax deductions or GST credits for the expenses.

If your business hosts slightly more extravagant parties and goes above the $300 per person minor benefit limit, you will pay FBT but you can also claim a tax deduction and GST credits for the cost of the event. Just bear in mind that deductions are only useful to offset against tax. If your business is paying no or limited amounts of tax, a tax deduction is not going to help offset the cost of the party.

3. Avoid client lunches and give a gift

The most effective way of sharing the Christmas joy with customers is not necessarily the most tax effective. If, for example, you take your client out or entertain them in any way, it’s not tax deductible and you can’t claim back the GST. There are specific rules designed to prevent deductions and GST credits from being claimed when the expenses relate to entertainment, regardless of whether there is an expectation of generating goodwill and increased business sales. Restaurants, a show, golf, and corporate race days all fall into the ‘entertainment’ category.

However, if you send your customer a gift, then the gift is tax deductible as long as there is an expectation that the business will benefit (assuming the gift does not amount to entertainment). Even better, why don’t you deliver the gift yourself for your best customers and personally wish them a Merry Christmas. It will have a much bigger impact even if they are not available and the receptionist tells them you delivered the gift.

From a marketing perspective, if your budget is tight, it’s better to focus on the customers you believe deliver the most value to your business rather than spending a small amount on every customer regardless of value. If you are going to invest in Christmas gifts, then make it something people remember and appropriate to your business.

You could also make a donation on behalf of your customers (where your business takes the tax deduction) or for your customers (where they receive the tax deduction).

4. Charities love cash

Charities love cash. They don’t have to spend any of their precious resources to receive it – unlike a lot of charity dinners, auctions, and promotional campaigns. And, from a tax perspective, it’s the safest way to ensure that you or your business can claim a deduction for the full amount of the donation.

There are a few rules to giving to charities that make the difference between whether you will or won’t receive a tax deduction.

The charity must be a deductible gift recipient (DGR). You can find the list of DGRs on the Australian Business Register (use the advanced search).

If you buy any form of merchandise for the ‘donation’ – biscuits, teddies, balls or you buy something at an auction – then it’s generally not deductible. Your donation needs to be a gift, not an exchange for something material. Buying a goat or funding a child’s education in the third world is generally ok because you are generally donating an amount equivalent to the cause rather than directly funding that thing.

The tax deduction for charitable giving over $2 goes to the person or entity who made the gift and whose name is on the receipt.

5. Christmas bonuses

If you are planning to provide your team with a cash bonus rather than a gift voucher or other item of property, then remember that this will be taxed in much the same way as salary and wages. A PAYG withholding obligation will be triggered and the ATO’s view is that the bonus will also be treated as ordinary time earnings (unless it relates specifically to overtime work) which means that it will be subject to the superannuation guarantee provisions.

2023 is almost over!

Fri, 01 Dec 2023 08:02:28 GMT

2023 is almost over! Now is the perfect time to reflect.

Ready to chat? Contact our team today. ��

$20k deduction for ‘electrifying’ your business

Tue, 21 Nov 2023 06:32:19 GMT

Electricity is the new black. A new, limited incentive nudges businesses towards energy efficiency. We show you how to maximise the deduction!

The small business energy incentive is the latest measure providing a bonus tax deduction to nudge the

investment behaviour of small and medium businesses, this time towards more efficient energy use and

electrification. Fossil fuels are out, gas is out, electricity is the name of the game.

Legislation before Parliament will see SMEs with an aggregated turnover of less than $50 million able to claim a

bonus 20% tax deduction on up to $100,000 of their costs to improve energy efficiency in the business. But, the

tax deduction is time limited. Assuming the legislation passes Parliament, you only have until 30 June 2024 to

invest in new, or upgrade existing assets.

How much?

Your business can invest up to $100,000 in total, with a maximum bonus tax deduction of $20,000 per business

entity. The energy incentive is not provided as a cash refund, it either reduces your taxable income or increases

the tax loss for the 2024 income year.

What qualifies?

The energy incentive applies to both new assets and expenditure on upgrading existing assets. There is no

specific list of assets that can qualify. Instead, the rules provide a series of eligibility criteria that need to be

satisfied.

First, the expenditure incurred in relation to the asset must qualify for a deduction under another provision of

the tax law.

If your business is acquiring a new depreciating asset, it must be first used or installed for any purpose, and a

taxable purpose, between 1 July 2023 and 30 June 2024. If you are improving an existing asset, the expenditure

must be incurred between 1 July 2023 and 30 June 2024.

If your business is acquiring a new depreciating asset the following additional conditions need to be satisfied:

The asset must use electricity; and
There is a new reasonably comparable asset that uses a fossil fuel available in the market; or
It is more energy efficient than the asset it is replacing; or
If it is not a replacement, it is more energy efficient than a new reasonably comparable asset available in the market; or
It is an energy storage, time-shifting or monitoring asset, or an asset that improves the energy efficiency of another asset.
If you are improving an existing asset the expenditure needs to satisfy at least one of the following conditions:
It enables the asset to only use electricity, or energy that is generated from a renewable source, instead of a fossil fuel;
It enables the asset to be more energy efficient, provided that asset only uses electricity, or energy generated from a renewable source; or
It facilitates the storage, time-shifting or usage monitoring of electricity, or energy generated from a renewable source.

What doesn’t qualify?

Certain kinds of assets and improvements are not eligible for the bonus deduction, including where the asset or

improvement uses a fossil fuel. So, hybrids are out. Solar panels and motor vehicles are also excluded.

In addition, the following assets are specifically excluded from the rules:

Assets, and expenditure on assets, that can use a fossil fuel;
Assets, and expenditure on assets, which have the sole or predominant purpose of generating electricity (such as solar photovoltaic panels);
Capital works (such as buildings and structural improvements);
Motor vehicles (including hybrid and electric vehicles) and expenditure on motor vehicles;
Assets and expenditure on an asset where expenditure on the asset is allocated to a software development pool; and
Financing costs, including interest, payments in the nature of interest and expenses of borrowing.

What does qualify?

The legislation contains a few examples of what would qualify:

Electrifying heating and cooling systems
Upgrading to more efficient fridges and induction cooktops (for example replacing gas cook tops)
Installing batteries and heat pumps
Installing an electric reverse cycle air conditioner instead of a gas heater
Replacing a coffee machine with a more energy efficient coffee machine if the manufacturer’s electricity consumption information supports this – keep the documentation!
Thermal storage that can store heat or cold from a renewable source
Solar thermal hot water system (assuming it meets the other criteria)

The legislation to implement the energy incentive is before Parliament. We’ll keep you updated on its progress. If you intend to make a major outlay to take advantage of the bonus deduction, talk to us first just to make sure it qualifies.

How to navigate through the inflationary environment

Tue, 07 Nov 2023 06:54:16 GMT

Sam Wright unpacks navigating your business through an inflationary environment.

CEEM Engineering Testimonial

Wed, 13 Sep 2023 07:52:51 GMT

We've been working with CEEM Engineering in Toowoomba.

They've had some fantastic growth in their business. We love championing businesses within our region. Find out more about their story below!

Succession: What does it take to and your business to the next generation?

Thu, 10 Aug 2023 05:30:43 GMT

What is the end game for your business? Succession is not just a topic for a TV series or billionaire families, it’s about successfully transitioning your business and maximising its capital value for you, the owners.

When it comes to generational succession of a family business, there are a few important aspects:

· Succession of the business;

· Succession of the ownership of the business;

· Succession planning/pathway; and

· Moving from a business family to an investment family.

For generational succession to succeed, even if that succession is the sale of the business and the management of the sale proceeds for the benefit of the family, communication is essential. Where generational succession fails, it is often because succession has not been formalised until a catalyst event or retirement planning requires it.

A concept of ‘legacy’ is not enough. Successful succession occurs when the guiding principles of governance, family rules, aligning values, dispute resolution, succession and estate planning are managed well before discontent tears it apart.

Generational succession usually involves the transfer of an interest in a business to another generation of a family (usually younger). It is often a family in business rather than simply a family business.

“One-third of Australian family businesses expect that the next generation will become the majority shareholders within 5 years time. Yet only 25% of Australian family businesses have a robust, documented and communicated succession plan in place.”
PWC Family Business Survey

The options for how a movement of an interest may occur are many and varied but usually focus on the transfer of some or all of the equity held in the business over a period or at a defined point in time and the payment of some form of consideration for the equity transferred. Alternatively, a part of the equity transfer may ultimately be dealt with through the estate.

Generational succession comes with its own set of issues that need to be dealt with:

Capability and willingness of the next generation

A realistic assessment of whether the business can continue successfully after the transition. In some cases, the older generation will pursue generational succession either as a means of keeping the business in the family, perpetuating their legacy, or to provide a stable business future for the next generation. While reasonable objectives, they only work where there is capability and willingness. Communication of expectations is essential.

Capital transfer

Consider the capital requirements of the exiting generation. To what extent do you need to extract capital from the business at the time of the transition? The higher the level of capital needed, the greater the pressure on the business and the equity stakeholders.

In many cases, the incoming generation will not have sufficient capital to buy-out the exiting generation. This will require the vendors to maintain a continuing investment in the business or for the business to take on an increased level of debt. Either scenario needs to be assessed for its sustainability at a business and shareholder level. In some scenarios the exiting owners will transition their ownership on an agreed timeframe.

Managing remuneration

In many small and medium businesses, the owners arrange their remuneration from the business to meet their needs rather than being reasonable compensation for the roles undertaken. This can result in the business either paying too much or too little. Under generational succession, there should be an increased level of formality around compensation. Compensation should be matched to roles, and where performance incentives exist, these should be clearly structured.

Who has operational management and control?

Transition of control is often a sensitive area. It is essential to establish and agree in advance how operating and management control will be maintained and transitioned. This is important not only for the generational stakeholders but also for the business. Often the exiting business owners have a firm view on how the business should be run. Uncertainty in the management and decision making of the business can lead to confusion or a vacuum - either will have an adverse impact. Tensions often arise because:

· The incoming generation want freedom of decision making and the ability to put their imprint on the business.

· Without operating control, they feel that they have management in name only.

· The exiting generation believe that their experience is necessary to the business and entitles them to a continued say.

· A perception that capital investment should equate to ultimate operating control.

· An uncertainty by either or both generations about the extent of their ongoing roles.

Agreeing transition of control in advance, on an agreed timeframe, can significantly reduce tensions.

Transition timeframes and expectations

Generational succession is often a process rather than an event. The extended timeframe for the transition requires active management to ensure that there are mutual expectations and to avoid the process being derailed by frustration.

The established generation may have identified that they want to scale down their business involvement and bring on other family members to succeed them. This does not necessarily mean that they want to withdraw completely. An extended transition period is not uncommon and can often assist the business in managing the change. This can also work well in managing income and capital withdrawal requirements.

The need for greater formality and management structure

A danger for many SMEs is the blurring of the boundaries between the role of the Board, shareholders, and management. With generational succession, this can become even more pronounced. Formality in these structures is important, with clear definitions of the roles and clarification of the expectations. For example, who should be a director and what is their role?

For some, the role of the family is managed by a family constitution – an agreed set of rules. For others there will be an external advisory group that advises the family to ensure that the required independent expertise is brought to bear.

Successfully managing generational change is a process we can help you navigate.

What changed on 1 July 2023?

Thu, 10 Aug 2023 05:27:49 GMT

Employers & business

Superannuation guarantee increases to 11% from 10.5%
National and Award minimum wage increases take effect.

Superannuation

Superannuation guarantee increases to 11%
Indexation increases the general transfer balance cap to $1.9 million.
Minimum pension amounts for super income streams return to default rates.
SMSF transfer balance event reporting moves from annual to quarterly for all funds.

For you and your family

The new 67 cent fixed rate method for working from home deductions – make sure you have a record of when you work from home. The ATO won’t accept a simple “I work from home every Wednesday” x 8 hours calculation.
The child care subsidy will increase from 10 July 2023 for families with household income under $530,000. See the Services Australia website for details.
New parents able to claim up to 20 weeks paid parental leave.
Access the age pension increased to 67 years of age.

Important: 1 July 2023 wage increases

For employers, incorrectly calculating wages is not portrayed as a mistake, it’s “wage theft.” Beyond the reputational issues of getting it wrong, the Fair Work Commission backs it up with fines of $9,390 per breach for a corporation. In 2021-22 alone, the Fair Work Ombudsman recovered $532 million in unpaid wages recovered for over 384,000 workers.

On 1 July 2023, award rates of pay and the National Minimum Wage increased by 5.75%.

It is critically important that all employers review their payroll systems and ensure they are applying the correct rates and Awards.

The National Minimum Wage applies to workers not covered by an Award or registered agreement. From 1 July 2023, the National Minimum wage has increased to $23.23 per hour ($882.80 per week for a full time employee working a standard 38 hours week).

For casuals, the minimum wage including the 25% casual loading is a minimum of $29.04 per hour.

For workers under an Award, adult minimum award wages increase by 5.75% applied from the first full pay period on or after 1 July 2023. Proportionate increases apply to junior workers, apprentice and supported wages.

In addition, the superannuation guarantee increased from 10.5% to 11% on 1 July 2023.

If the employment agreement with your workers states the employee is paid on a ‘total remuneration’ basis (base plus SG and any other allowances), then their take home pay might be reduced by 0.5%. That is, a greater percentage of their total remuneration will be directed to their superannuation fund. For employees paid a rate plus superannuation, then their take home pay will remain the same and the 0.5% increase will be added to their SG payments.

Cents per kilometre increase

The cents per kilometre rate for motor vehicle expenses for 2023-24 has increased to 85 cents.

The 120% technology and skills ‘boost’ deduction

Thu, 10 Aug 2023 05:10:22 GMT

The 120% skills and training, and technology costs deduction for small and medium business have passed Parliament. We’ll show you how to take maximise your deductions.

Almost a year after the 2022-23 Federal Budget announcement, the 120% tax deduction for expenditure by small and medium businesses (SME) on technology, or skills and training for their staff, is finally law. But there are a few complexities in the timing - to utilise the technology investment boost, you had to of purchased the technology and when it comes to acquiring eligible assets, installed it ready for use by 30 June 2023; that’s just seven days from the date the legislation passed Parliament.

Who can access the boosts?

The 120% skills and training, and technology boosts are available to small business entities (individual sole traders, partnership, company or trading trust) with an aggregated annual turnover of less than $50 million. Aggregated turnover is the turnover of your business and that of your affiliates and connected entities.

$20k technology investment boost

The Technology Investment Boost provides SMEs with a bonus deduction for expenses and depreciating assets for digital operations or digitising from 7:30pm (AEST) on 29 March 2022 until 30 June 2023.

You ‘incur’ an expense when you are in debt for it; this might be a tax invoice or it might be a contract where you are legally liable for the cost.

For depreciating assets, like computer hardware, there is an extra step. The technology needs to have been purchased and installed ready for use. For example, if you ordered 10 computers, you need to have received the computers and had them set up ready to use by at least 30 June 2023. Ordering them on 29 June won’t be enough to claim the boost if you did not receive them.

The types of expenses that might be eligible for the technology boost include:

· Digital enabling items - computer and telecommunications hardware and equipment, software, internet costs, systems and services that form and facilitate the use of computer networks;

· Digital media and marketing - audio and visual content that can be created, accessed, stored or viewed on digital devices, including web page design;

· E-commerce - goods or services supporting digitally ordered or platform-enabled online transactions, portable payment devices, digital inventory management, subscriptions to cloud-based services, and advice on digital operations or digitising operations, such as advice about digital tools to support business continuity and growth; or

· Cyber security - cyber security systems, backup management and monitoring services.

The technology also must be “wholly or substantially for the purposes of an entity’s digital operations or digitising the entity’s operations”. That is, there must be a direct link to your business’s digital operations. For example, claiming the drone you bought at say Christmas 2022 won’t be deductible unless your business is, for example, a real estate agency that needed a drone to take aerial images of client homes to market on their website. The expense needs to relate to how the business earns its income, in particular its digital operations.

Repair and maintenance costs can be claimed as long as the expenses meet the eligibility criteria.

Where the expenditure has mixed use (i.e., partly private), the bonus deduction applies to the proportion of the expenditure that is for business use.

There are a few costs that the technology boost won’t cover such as costs relating to employing staff, raising capital, construction of business premises, and the cost of goods and services the business sells. The boost will not apply to:

· Assets that you purchased but then sold within the relevant period (e.g., on or prior to 30 June 2023).

· Capital works costs (for example, improvements to a building used as business premises).

· Financing costs such as interest expenses.

· Salary or wage costs.

· Training or education costs, that is, training staff on software or technology won’t qualify (see Skills and Training Boost).

· Trading stock or the cost of trading stock.

Let’s look at the example of A Co Pty Ltd (A Co) that purchased multiple laptops on 15 July 2022 to help its employees to work from home. The total cost was $100,000. The laptops were delivered on 19 July 2022 and immediately issued to staff entirely for business use.

As the holder of the assets, A Co is entitled to claim a deduction for the depreciation of a capital expense. A Co can claim the cost of the laptops ($100,000) as a deduction under the temporary full expensing in its 2022-23 income tax return. It can also claim the maximum $20,000 bonus deduction in its 2022-23 income tax return.

The $20,000 bonus deduction is not paid to the business in cash but is used to offset against A Co’s assessable income. If the company is in a loss position, then the bonus deduction would increase the tax loss. The cash value to the business of the bonus deduction will depend on whether it generates a taxable profit or loss during the relevant year and the rate of tax that applies.

The good news for many eligible businesses is that your technology subscriptions and other products you use in your business might qualify for the boost.

The boost is claimed in your tax return with the extra 20% sitting on top your normal claim. That is, however the way the expense or asset is claimed (immediately or over time), the bonus 20% applies in the same way.

The Skills and Training Boost

The Skills and Training Boost gives you a 120% tax deduction for external training courses provided to employees. The aim of this boost is to help SMEs grow their workforce, including taking on less-skilled employees and upskilling them using external training to develop their skills and enhance their productivity.

Sole traders, partners in a partnership, independent contractors and other non-employees do not qualify for the boost as they are not employees. Similarly, associates such as spouses or partners, or trustees of a trust, don’t qualify.

As always, there are a few rules:

· Registration for the training course had to be from 7:30pm (AEST) on 29 March 2022 until 30 June 2024. If an employee is part the way through an eligible training course, enrolments in courses or classes after 29 March 2022 are eligible, not before.

· The training needs to be deductible to your business under ordinary rules. That is, the training is related to how the business earns its income.

· A registered training provider needs to charge your business (either directly or indirectly) for the training (see What organisations can provide training for the boost).

· The training must be for employees of your business and delivered in-person in Australia or online.

· The training provider cannot be your business or an associate of your business.

Training expenditure can include costs incidental to the training, for example, the cost of books or equipment necessary for the training course but only if the training provider charges the business for these costs.

Let’s look at an example. Animals 4U Pty Ltd is a small entity that operates a veterinary centre. The business recently took on a new employee to assist with jobs across the centre. The employee has some prior experience in animal studies and is keen to upskill to become a veterinary nurse. The business pays $3,500 for the employee to undertake external training in veterinary nursing. The training meets the requirements of a GST-free supply of education. The training is delivered by a registered training provider, registered to deliver veterinary nursing education.

The bonus deduction is calculated as 20% of the amount of expenditure the business could typically deduct. In this case, the full $3,500 is deductible as a business operating expense. Assuming the other eligibility criteria for the boost are satisfied, the bonus deduction is calculated as 20% of $3,500. That is, $700.

In this example, the bonus deduction available is $700. That does not mean the business receives $700 back from the ATO in cash, it means that the business is able to reduce its taxable income by $700. If the company has a positive amount of taxable income for the year and is subject to a 25% tax rate, then the net impact is a reduction in the company’s tax liability of $175. This also means that the company will generate fewer franking credits, which could mean more top-up tax needs to be paid when the company pays out its profits as dividends to the shareholders.

What organisations can provide training for the boost?

Not all courses provided by training companies will qualify for the boost; only those charged by registered training providers within their registration. Typically, this is vocational training to learn a trade or courses that count towards a qualification rather than professional development.

Qualifying training providers will be registered by:

· Tertiary Education Quality and Standards Agency ( search the register – includes States and Territories)

· Australian Skills Quality Authority (ASQA)

· Victorian Registration and Qualifications Authority ( search the register )

· Training Accreditation Council of Western Australia

While some training you might want to have engaged might not be delivered by registered training organisations, there is still a lot out there, particularly the short-courses offered by universities, or the flexible courses designed for upskilling rather than as a degree qualification. If you have recently completed performance reviews for staff and training is part of their development pathway, it might be worth exploring.

Uncertain Business Times - We're here

Thu, 10 Aug 2023 05:06:36 GMT

We're here to help you during uncertain times ��

Talk to our team of experts today.

Ambrosiussen Accountants Office Sneak Peak

Thu, 10 Aug 2023 05:05:53 GMT

Here's another sneak peak into our exciting office renovations ��

We're so excited to show you our completed space soon!

Tax Planning with Ambrosiussen Accountants

sam@ambrosiussen.com.au (Sam Wright) — Mon, 26 Jun 2023 01:08:41 GMT

What is tax planning / pre financial year planning and why should you do it?!

Sam explains more in this video. ��

Tax Planning is essential!

sam@ambrosiussen.com.au (Sam Wright) — Mon, 26 Jun 2023 01:02:03 GMT

If your current accountant doesn’t offer or hasn’t done it - let’s us help.

Contact us today to arrange a first consultant.

Welcoming Tania Collie as a Partner

Wed, 05 Apr 2023 23:02:26 GMT

We are excited to formally welcome Tania Collie into the partnership of Ambrosiussen Accountants ��

Business strategy, direction, goal setting or financial monitoring - We're here to help

Wed, 05 Apr 2023 23:01:34 GMT

Is your business ready to step up?

Whether its business strategy, direction, goal setting or financial monitoring - we can help. ��

Supply Driven Economy - Securing Supply Will Now Drive Your Business Profits

Tue, 14 Dec 2021 03:54:17 GMT

Supply Driven Economy - Securing Supply Will Now Drive Your Business Profits

Securing Supply Will Now Drive Your Business Profits

Entering into the third year of a pandemic, Covid-19 has undoubtedly turned basic economics on its head. For the first time in 60 years, supply is determining economic growth, rather than demand. The difficulty in getting supply is a problem; but finding ways to get good supply can create great opportunities - if you have the product you will make the sale.

As a business manager, you have rightly needed to focus on sales. 90% of your time was spent on sales, and 10% on supply. This now needs a big shift. Securing regular and well priced supplies must now take 50% of your time; it is that important.

Demand has been so strong coming out of Covid, with no overseas travel and low interest rates having been a big driver of this. The challenge for business is how to supply this.

It is expected this high demand will last for all of next year. As supply shortages and slow shipping times are expected to continue for all of 2022, you cannot ignore what is happening. If you are not proactive with securing good supply, your business will not only miss out on this opportunity, but your business will go backwards.

Building up stock will need you to manage cash flow well. Keeping a cash buffer, or loan funds available, is important during these uncertain Covid times. Securing good credit on your supply will also help with cash flow.

Another challenge with short supply is that the price of many goods are rising; for example, steel. The problem with this, is that it can erode your margins. If you quote a price, then when you get the stock it costs you more, you have lost profit on the sale; thus, having the product in stock could mean the opposite. The stock is now worth more than you paid for it, so you can make even higher margins than normal.

Are you ready to turn the supply problem into an opportunity for your business?

Are You Losing Profits In Your Business? See How A Business Accountant Will Get Your Profits Back In The Bank…

Mon, 08 Feb 2021 06:04:30 GMT

If you’re one of the many entrepreneurs out there who are hands-on in their business, then you know for yourself how difficult it is to play multiple roles all at once.

Taking on your daily operations is hard enough, which is why many business owners have a hard time keeping track of their finances.

This is where the benefits of having a professional business accounting firm come into play…

They help you keep track with your finances as well as improve and expand your business.

Business accountants can take care of more than your financial reports, tax, and plans.

Their knowledge, skills, and experience can actually help you find ways to improve your profits and get profits you may have lost, back in the bank.

Here’s how:

Focusing on the Profitable Products or Services and Getting Rid of the Unprofitable ones

Business accountants will conduct a thorough review to look for products and services within your business to see profit contribution each is making.

You can both take a look at margin levels of all your products and services and find those things that need to be dropped if they’re contributing poorly or simply aren’t worth it. Then focus more of your effort on the profitable areas to grow them and increase the money you get for your effort

Restructure Your Finances

Finance restructuring is extremely important for any business, especially if you want to save interest on business loans.

A good business accountant will find cheaper options out there, or ones with lower interest that can boost your profits and cash flow.

Find The Right Pricing

By reviewing your pricing system across all products and services you offer, and determining which ones are in line with the market’s expectations, business accountants will maximize your current price levels.

Maybe you have a price that is long overdue for an increase?

Identify Valuable Customers

The goal of running a business is not just to get customers, but also to retain those that provide good value.

Thus, your accountant can help you identify these people from your database and work out the most profitable strategy to keep them, and get them to buy more and often from you.

Review Labor Costs

Labour costs are generally one of the largest costs of a business. A Business Accountant can tell you how efficient your people are. There are more efficient ways to utilize your workforce, and your accountant can help you consider options to improve this.

Do you know how much an hour it really costs you for an employee? It is not just there wage. The full cost includes, super, workcover and payroll tax. The number of hour available is not 52 weeks. It is reduced by public holidays, annual leave, sick leave, training days, internal meetings. Is your labour charge out rate enough? What is their productivity level? These are important questions a Business Accountant can guide you through.

Maximising the return on your labour costs make a big boost to profits

Help Analyze Your Business’ Expenses

It’s important to know which expenses are too high based on industry industry’s benchmarks.

Business accountants can help you save money by examining your operating costs so you can switch your efforts directly to those that make more profit for you while costing you less.

Track Your Ad Investments

Advertising is a must for every business.

It can be hard and expensive.

And too many business owners fail to keep track of the money they spend on ads and marketing.

Or more importantly the return on that spend.

A good business accountant will help calculate the rate of each penny you spend on advertising; pinpoint which ones are effective and are really generating sales and which ones are just costing you dollars.

Reduce Your Business’ Bad Debts

Many businesses out there lose their hard-earned money from bad debts.

Business accountants will help you implement an efficient debtor management systems for your business so you can improve your cash flow.

They will also give you options of collecting more money from customers up front, to reduce your risk and improve your cash flow further

Plan for Profit

Last and definitely not the least, business accountants will sit down with you so you can discuss plans to grow your profits in the future.

Obviously, an increase in profit doesn’t just happen – it’s a result of thorough planning and well-executed strategies.

A good business accounting firm will help you come up with flexible business plans to help you achieve your goals, so you can have your profits back in the bank.

If you’re ready to speak to business accountants with a proven track record of growing profits and making life easier for business owners in the Toowoomba regional area or west or south of Toowoomba give us a call.

We’d be happy to have a chat with you to discuss how we’ll help you in areas of need.

3 Things Your Accountant Needs To Set Up To Future Proof Your Business

Mon, 08 Feb 2021 05:59:08 GMT

Starting and running your own business can be really exciting.

But it can also be quite stressful.

One of its stressful sides is the accounting part.

Accounting may not be fun for you, but it’s an extremely important aspect in your business.

Businesses need comprehensive accounting now more than ever, as those days of hiring accountants for payroll and tax purposes are long gone.

If you want your business to keep running, then you definitely need the services of a business accountant.

Accountants are needed for financial statements and tax returns. However, these two only tell the story of what your business was – NOT where it could be heading.

Obviously, we can’t see what the future holds. And unless you have a crystal ball, we can’t really say what our business would look like 5, 10 or 15 years from now.

This uncertainty can jeopardize the chances of growth.

We can however, take drastic measures to future-proof our business, and the only way to do that is to start thinking differently about different risks.

And this is where a good business accountant comes into the picture.

Here are 3 things a business accountant can setup to help future proof your business.

Get Tech Savvy

The world is getting high-tech.

If you want your company to keep up and survive, then you should embrace technology.

In the case of business, cloud computing is the future.

Moving your business data to cloud computing saves you from PC storage and on-site servers, allowing data to be accessed anywhere, anytime.

Obviously, cloud computing has its pros and cons.

The obvious cons are the safety and security.

And with that, it’s important you seek the most reputable global cloud provider that fits your needs.

This is to ensure the safety of your information and easy and convenient disaster recovery process.

Also, the whole world is heading into app-based society, which depends heavily on various social media platforms.

Thus, you can invest on designing apps for your business, update social media profiles, and make sure your customers have an easier time finding and doing business with you online.

Setup A Customer-Driven Marketing Force

Traditional forms of advertising will become less and less important in the future.

Thus, spending money to place your business on ad magazines once a month, or making a radio ad probably won’t give you the same results as they did 10 or 15 years ago.

What’s the best option?

Well, you and your accountant can actually devise a way to empower your consumers and customers to become advocates of your brand.

How?

Again, we can go back to being tech savvy – through online digital strategy and carefully considered social media campaigns.

Just like positive word-of-mouth can catapult a brick-and-mortar business, social media campaigns that injects high level of “talk-ability” among consumers is the key to grow your business fast.

Also, make sure your use social media to share valuable information to your consumers.

Industry information, expert tips, guides, shortcuts, interesting news, testimonials, etc., will help you position yourself as an authority in your industry.

Thus, make sure you setup and invest in a good social media campaign.

Free Up Your Cash Flow

When running a business, no matter how much cash you have, you will never have enough.

There will always be external circumstances that are beyond your control, such as natural disasters, new consumer trends, changes in the economy, etc.

Thus, make sure you and your accountant setup cash flow strategies that will protect your business for the years to come.

Ask your accountant how to manage your cash flow better.

Also, it’s crucial that you keep your business and personal expenses separate.

This is to avoid problems in your cash flow.

Reconcile your bank and credit statements regularly, and keep original receipts.

We're here to help...

If you would like to have an obligation free consultation with the firm partners please enter your details.

How To Double The Size of Your Business In 2 years

Mon, 08 Feb 2021 05:42:05 GMT

For businesses the new financial year is a great time to evaluate the previous years performance, and to look forward to the future.

It’s also the best time to plan for the growth of your business.

Planning isn’t really hard, same goes for its implementation.

The difficult thing is to stay consistent with it.

But before we talk about different strategies to double your business, it’s important to know what it actually means to double the size of your company.

Is it about doubling the office space?

The number of employees?

The revenue?

Most of us would answer revenue, so for the sake of this post, we will talk about annual revenue and establishing a cost structure that will allow businesses to double their profits.

Fix Your Financial Statements

There is no way you can sustainably double the size of your company if your financial statement is a mess.

This is why it’s extremely important to have a really strong accounting system that can pull up reports for key metrics and trust that your cash cycle is well protected.

This also means that your books must be tight enough, customers are invoiced on time with little to no problems in your collection, and bills are paid with the right cash injections.

Financial reports (and cash!)are the heartbeat of your company.

It must be well-laid out that you can easily see profitability and margin at a glance, including cash balances, etc.

Commit Only 10%

Before we dig deeper, we need to understand that doubling the size of your company is NEVER a good idea if you’re not actually making money in the end.

The profit and bank balance must reflect the growth.

If you implement growth strategies and you’re actually not making money, then why go through the hassle of going bigger?

It’s important for you to learn how to run your business on 90% of your cash.

Meaning, the remaining 10% must be stashed for wealth, building, taxes, and to prepare for rainy days.

Have a Real Marketing Budget

Now that you have your financial statement intact, and you’re running 10% cash, your next move is to look at the marketing budget.

You would be surprised how few companies actually do marketing. Common reasons for this include:

They don’t really understand marketing
They tried marketing once and it failed, which cost them a large amount of money
They think it won’t work for their business
They don’t know how to market online

This list can go on and on.

Put it simply, if you’re not marketing, then you are NOT growing.

Sure you can get by with some word-of-mouth growth, or even attract some people on a walk-ins basis, but if you’re looking to grow your business and increase your sales volume, then you should let people know about you.

Your goal is to add some fuel to the fire…

And here’s the good part – you don’t actually have to know how to do it.

There are countless marketing firms and experts out there waiting for you, and would be glad to lend a helping hand.

As a business owner, your job is to find them.

The idea is to grow bigger each year, and ideally marketing should take up about 6% to 8% of your revenue.

This means if you’re earning $100,000 a month, then you should be spending around $6,000 to $8,000 a month for your marketing campaign.

This may seem like a lot of money, but if done right, this will leave your competitors in the dust.

We're here to help.

If you would like to have an obligation free consultation with the firm partners please enter your details below.

IFRAMING GOES HERE

ambrosiussen-the-business-accountants

Downsizer Contributions and the Main Residence Exemption

Holiday Homes Under the Microscope: What the ATO's New Guidance Means for You

Know the Rules Before You Break Them; SMSF Trustee Education: Understanding SISA Compliance and ATO Education Directions

Why SMSF Education Matters More Than Ever.

﻿

Unlocking Tax Savings: "Can I Claim My MBA (or Other Studies) at Tax Time?"

The ATO's rules on self-education expenses are strict - could you be eligible?

Payday Super : Fundamental Changes for Employers Coming in July 2026

Payday Super is now law - how does it affect your business?

Super Tax Shake-Up

Big Balances Beware!

ATO Interest Charges Are No Longer Tax Deductible

What you can do

Early Access To Superannuation Funds

Are you trying to access your superannuation for medical treatment or financial hardship?

Interest Deductions - Risks & Opportunities

What are the risks and opportunities?

accountants toowoomba ﻿

Self Managed Super Funds

Don't Become a Director Until You Read This

The title carries a certain weight, doesn't it? It evokes images of importance, of having "made it", of being in control and steering your own ship.

Gravity of responsibility

Directors key duties

Understand the risks and protect yourself

What would happen to your business if you ran it the way the Government is running the economy with the 2025 Budget?

Listening to the treasurer delivering this year’s budget, you would think our economy is doing wonderfully and there is nothing to be concerned about. However, when you look behind the gloss to the real numbers, the story is very different.

Importance of Business Tax Planning

None of us like paying more tax than we have to. The best way to keep the tax down is not by leaving it to the last minute, but by having a year-round process.

The Truth About Family Business Succession: Do They Really Want It?

Capability and willingness of the next generation – do your kids really want the business?

Capital transfer – how much money needs to be taken out of the business during the transition?

Income needs – ensuring remuneration is on commercial terms

Operating and management control

Transition timeframes and expectations

The need for greater formality and management structure

﻿

The Importance of Up-to-Date Accounts

Keeping your accounts up-to-date is essential for the smooth and successful operation of any business.

Payday Super: What Small Business Owners Need to Know

Big changes are planned by the Federal Government to the way employers handle superannuation payments, and if you’re a small business owner, it’s time to get prepared.

What Is Payday Super?

How Will Payday Super Work?

The Cashflow Challenge

Late Payments: The Consequences

The Retirement of the ATO Small Business Superannuation Clearing House

Preparing for the Transition

Final Thoughts

Managing Debt in these Extended High Interest Times

Economists have been predicting interest rates to fall months ago.

Navigating Uncertainty in 2025

Business thrives on predictability. We crave the stability needed to plan, invest, and make confident decisions.

Avoiding the Christmas Tax Grinch!

Christmas bonuses

Tax effective ways to give staff gifts

FBT on the Christmas party

Giving to clients tax effectively

The bottom line

Don't Let Your Business Run on Empty: The Importance of Cash Flow Monitoring

Imagine your business as a road trip. You wouldn't set off without checking the fuel gauge and planning for refills, right?

﻿ Similarly, understanding your current and future cash flow is crucial.

Understanding Key Levers and Drivers in Cash Flow and Profitability

Accurate Financial Records and Cash Flow Planning

Cash Flow as the Fuel of Business

When Times Get Tough, The Tough Track Their Key Numbers

The economic climate is a challenge for many people. Rising costs of living, from housing to groceries, are putting a squeeze on household budgets, and consumers are feeling the pinch.

The Holistic Approach to True Business Success

The Holistic Approach to True Business Success

Self Discipline from the Beginning ﻿

Keep Business & Personal Finances Separate ﻿

Smart Investments ﻿

The Business Spring Clean: Unleashing Potential for New Renewal

The Importance of a Business Spring Clean

Leveraging Technology for Cash Flow Management

Reviewing Debtors & Invoicing

Effective Management of Work In Progress (WIP)

Controlling Spending Patterns

Reviewing Inventory Levels & Mix

The Role of Staff in Business Success

Setting the Stage for Growth & Success

accountants toowoomba

Similarly, understanding your current and future cash flow is crucial.

Self Discipline from the Beginning

Keep Business & Personal Finances Separate

Smart Investments

The Ambrosiussen's Experience. ��☕��

We're the Business Accountants that empower you to succeed.

We've been working with CEEM Engineering in Toowoomba.

They've had some fantastic growth in their business. We love championing businesses within our region. Find out more about their story below!