Tax Q&A

Feel free to ask some more direct questions, if my answer was too general...

Hi Justin,

As a biz owner you should be able to view your accountant as an investment rather than a fee. Many accountants will give you a fixed price too. There is a great report talking about it on the link. Hope this helps, Cheers, Lisa.

http://accountantsadelaidesa.com.au/

Because the income of a side business is taxed at marginal rates there is value in considering a little tax planning.
If your spouse is not working then maybe you should consider either operating the business activity in their name or perhaps using a trust for the business so that the profits can be diverted away from the person with the highest income.

A great tax accountant will ensure that they review your financials regularly, help you set up budgets so you can compare your actual results against your budget plus ensure that you are not missing any expenses you could be claiming.  They can also help you ensure that your service or sales prices are covering your expenses and giving you the profit margin you are wanting.  Everyone of my clients want to pay less tax (and so do I) - so I will review each transaction of my business clients to ensure we are not missing any obvious expenses plus having a knowledge of how to apply tax legislation to achieve the best tax results is a plus.

It's also important if you are making a loss. They are carried forward and can be recouped when you are earning - rules apply, and you're better off talking to an accountant about the best way to use them for tax purposes. I'd also talk to an accountant to make sure you are claiming all your deductions.

What Dionne has written is correct. If you are a partnership you have to consider if the other partner needs to lodge their tax return. If you're operating through a trust you definitely have to lodge - and have an accountant on board!

Good luck with your business.

Sitting down with your accountant for a tax planning session is a great way to review your finances and find ways to reduce your tax liability (as much as legally possible) by looking at tax deductions, small business tax concessions, credits, tax exemptions, rebates, etc that you may be eligible for. Tax planning can be quite complex and it's crucial to ensure that your tax planning is within the law to avoid penalties, which is why it's recommended to do this only through a qualified tax accountant. 

The cost of tax planning really depends on how complex your tax situation is and whether it’s included in your tax preparation or a standalone service. An interim tax planning report with recommendations typically costs between $500 to $1,000 for small businesses. For an hourly fee, you're probably going to be charged around $200 to $300 p/hour.

Great question - would love to hear your thoughts @Amanda Hoffmann - Certified Bookkeeper, BAS Agent @Mark Chapman !

There are two methods of calculating FBT on a company car that you can choose from:

1. Statutory Formula Method
2. Operating Cost Method

You can alternate between the two from year to year, so I recommend picking the method that provides you with the lowest taxable value.

Statutory Formula Method:

Vehicle Base Cost x Statutory Rate x Holding Period - Contribution Collected

In this formula: 

Vehicle Base Cost is the price to purchase the vehicle. 
The statutory rate is the rate provided by legislation. (All leases have a rate of 20%)
Holding Period is the amount of time the vehicle was available for use. 
Contribution Collected is any post-tax deductions you received during the year. 

Example: 

A leased vehicle with a Base Cost of $50,000 and packaged for the entire year would be calculated as so:

$50,000 x 20% = $10,000

If you received any deductions during the FBT, you would subtract that from the $10,000 taxable value. 

Operating Cost Method 

Total Operating Expenses of the Vehicle x (100% - Business Use Percentage) - Contribution Collected.

In this formula: 

Operating Expenses are the total costs of the vehicle for the year. (For example, a lease and all running costs.)
Business Use Percentage is calculated based on the number of km drove for business use as a percentage of overall driving during a 12 week period in which a logbook is kept. (To qualify, you must have held an ATO compliant logbook for at least 12 weeks. 

Example: 

A vehicle lease with $20,000 in total costs that has a registered business use of 90% would be calculated as so: 

$20,000 x (100% - 90%)
$20,000 x 10% = $2000

If you received any deductions during the FBT, subtract that from the $2000 taxable value. 

There's also a Fringe benefits tax calculator on the Australian Taxation Office website that's extremely useful. I hope that answered your question :)