Tools

FAQs

We tend to come across the same sort of business accounting and finance questions each week - so we wanted to make it easy for you to find some answers!

Taxation and Compliance

Can I claim for work-related expenses?

To claim a work-related deduction, you must have spent the money yourself and weren't reimbursed by your employer, it must directly relate to earning your income, and you must have a record to prove it. If the expense was for both work and private purposes, you can only claim a deduction for the work-related portion. Work expenses reimbursed to you by your employer are not deductible.

What do you recommend for minimising tax as part of a succession plan?

Put simply, speak with us! Whatever strategy is used to transfer business ownership is going to have tax and legal implications for both the current owner and the beneficiaries.

There will likely be Capital Gains Tax and Goods & Services Tax consequences and it can become complicated.

The ATO advises that to reduce the risk of incorrect tax treatment and consequent penalties, make sure your plans are documented and you seek advice from professional advisers where needed.

What records do I need to keep when paying staff?

To ensure employees are receiving their correct wages and entitlements, under Commonwealth Workplace laws employers required to keep accurate and complete records for all of their employees (e.g. time worked and wages paid) and issue pay slips to each employee.

According to FairWork Australia employee records must:

  • Be in a form that is readily accessible to a Fair Work Inspector
  • Be in a legible form and in English (preferably in plain, simple English)
  • Be kept for seven years
  • Not be altered unless for the purposes of correcting an error
  • Not be false or misleading to the employer's knowledge.

Employee records are private and confidential. Generally, no one can access them other than the employee, their employer, and relevant payroll staff. However, Fair Work Inspectors and organisation officials (such as a trade union) may access employee records (including personal information) to determine if there has been a contravention of relevant Commonwealth workplace laws.

What methods can I use to claim motor vehicle expenses?

If you use your own car in performing your work-related duties (including a car you lease or hire), you may be able to claim a deduction for car expenses. If the travel was partly private, you can claim only the work-related portion.

There are two ways to calculate your motor vehicle expenses:

Cents per kilometre method

  • A single rate is used. Your claim is based on 72 cents per kilometre from 1 July 2020 (68 cents for kilometre 1 July 2018 or 66 cents per kilometre for the 2017–18 income year).
  • You can claim a maximum of 5,000 business kilometres per car.
  • You may need to provide written evidence to show how you worked out your business kilometres (for example, by producing diary records of work-related trips)
  • Where you and another joint owner use the car for separate income-producing purposes, you can each claim up to a maximum of 5,000 business kilometres.

Logbook method

  • Your claim is based on the business-use percentage of the expenses for the car.
  • Expenses include running costs and decline in value but not capital costs, such as:
  • the purchase price of your car
  • the principal on any money borrowed to buy it
  • any improvement costs
  • To work out your business-use percentage, you need a logbook and the odometer readings for the logbook period. The logbook period is a minimum continuous period of 12 weeks.
  • You can claim fuel and oil costs based on either your:
  • actual receipts
  • estimate of the expenses based on odometer records that show readings from the start and the end of the period you had the car during the year. 
  • You need written evidence for all other expenses for the car.
How do I know what my business is actually worth?

To get the most accurate picture on the worth of your business we encourage you to seek professional advice. The team at Hillier’s Advisors have extensive experience in undertaking business evaluations, so make an appointment today to meet with one of our trusted accountants.

If you decide to go ahead and value the business yourself, the Australian Government has developed a step-by-step guide that can assist you.

The most important thing is to gather all your relevant information including:

  • Details of your finances and assets
  • Legal information
  • Business profile, procedures and plans
  • Staff, supplier and customer information

Bookkeeping and Software Consultancy

How do I know I’m paying my staff the right amount?

Employees are entitled to be paid a minimum wage, that is the lowest amount as determined by the Fair Work Commission for the type of work they are doing. For most employees, the minimum wage is set by an award that covers their industry or occupation.

You can view the full list of pay guides here.

Some industries or workplaces are covered by an enterprise agreement or a registered agreement. Generally, these agreements have been negotiated through a process known as enterprise bargaining, a process of negotiation generally between the employer, employees and their bargaining representatives with the goal of making an enterprise agreement.

The rules governing enterprise bargaining are set out under the Fair Work Act 2009, as explained here.

What software do you recommend for small business owners?

Xero is the leading global payroll service for small to medium businesses. It is a cloud-based accounting software which is easy to use and navigate. It has a range of features which makes paying your staff and balancing your finances simple! Hillier’s Advisors is a Xero Gold Partner and Certified Advisor.

Business Advisory

I work from home – what deductions can I claim?

You may be able to claim a deduction for expenses resulting from working at home. These can be additional running expenses such as electricity, the decline in value of equipment or furniture and phone and internet expenses. If you’re running your own business from home, different circumstances apply.

Employees generally can't claim occupancy expenses such as rent, mortgage interest, water and rates. You also can’t claim for general household items your employer may have provided you with at work, such as tea and coffee.

How to calculate your home office expenses is explained in detail here.

I use specific tools in my job. What are the rules around claiming for the cost?

Tools, equipment and other items you need to do your job may be claimed as a deduction.

Examples given by the ATO include:

  • Calculators
  • Computers and software
  • Desks, chairs and lamps
  • Filing cabinets and bookshelves
  • Hand tools, such as spanners, hammers and screwdrivers or power tools, such as grinders, sanders and hammer drills.
  • Protective items, such as hardhats, safety glasses, sunglasses, sunscreens and cosmetics containing sun protection
  • Professional libraries
  • Safety equipment
  • Technical instruments

If you use items for both personal and work-related purposes you need to keep records to show the purpose of use of the item.

You may also be able to claim a deduction for a handbag, briefcase or satchel to carry items you are required to use and carry for your work, such as laptops, tablets, work papers or diaries. 

If your work means you are exposed to the sun you may be able to claim for sunscreen, so long as the Therapeutic Goods Administration (TGA) deems the product is safe and effective.

Other deductions

A range of other deductions outside of work-related expenses can also be claimed, including:

Financial Planning and Retirement

Why is financial planning important?

Whether you’re a business owner or an individual, financial planning is crucial tofeeling safe and secure about your current situation, and your future. Having a plan is essential to helping meet your short-and-long-term financial goals. Equally important to creating a plan is monitoring in on an ongoing basis and making the necessary adjustments to keep you on the path to reach your goals.

What advice do you have for business owners looking to retire?

Plan. It’s as simple as that. If you have a good succession plan in place, your transition out of your business will happen more easily.

Make sure your succession plan is realistic and achievable.

There are no set rules about what to include in a succession plan, however you may want to include details of:

  • The successor - family member, business partner, other
  • Succession type - partial or full succession
  • Time frame
  • Key personnel changes and skill retention strategies
  • Legal considerations - buy-sell agreement, reference to a will
  • Risk management
  • Financial considerations - retirement income, sale price, tax implications.

The other key piece of advice is to speak with an expert. Our team has been helping business owners with exit strategies for over 30 years.

What is a Self-Managed Superannuation Fund (SMSF) and how does it differ from a regular super fund?

A self-managed super fund (SMSF) is a private super fund that you manage yourself. SMSFs are different to professionally managed funds like industry and retail funds.

When you manage your own super, you put themoney you would normally put in a professionally managed fund into your ownSMSF. You choose the investments and the insurance, and you run every aspect ofthe fund yourself.

According to moneysmart.gov.au on average, a SMSF will not perform as well as a professionally managed superfund, also known as an 'APRA-regulated fund' (APRA is the Australian Prudential Regulation Authority).

APRA-regulated funds use highly skilled professionals to manage their investments. You need to be confident that the investments you choose will perform better.

Our team of experienced accountants provide expert advice for establishing and managing your SMSF.

Where can I get advice regarding investment strategies?

Hillier’s Advisors provides quality advice regarding investments and will help determine which is the right path for you. Investments can be one of the most valuable things in your life, but also one of the riskiest! Planning and researching are the two most important steps to complete before you choose to invest in something.

It’s time I got my financial affairs in order. What should I do?

You need to speak to a professional about the creation of your estate plan. Our estate specialists are compassionate and sensitive to the varying complexities of planning wills and will work with you to determine the best options for your estate.

An estate plan can include documents such as:

  • Your will
  • A testamentary trust (as part of your will)
  • Superannuation binding nominations
  • An advance healthcare directive (what you'd like done with your body)

It also covers how you want to be cared for — medically and financially — if you can no longer make your own decisions.

This part of your estate plan may include:

  • Any powers of attorney
  • A power of guardianship (giving someone the right to choose where you live and to make decisions about your medical care)
  • An anticipatory direction (stating your wishes about your future medical treatment)

Estate planning is essential to ensure you have peace of mind that what you’ve achieved financially in your lifetime will be distributed as you wish and in the most tax-effective way.

COVID-19

Can I choose which of my staff I pay under JobKeeper?

No. Once an employer decides to participate in the JobKeeper scheme and their eligible employees have agreed to be nominated by the employer, the employer must ensure that all eligible employees are covered by their participation in the scheme. This includes all eligible employees who are undertaking work for the employer or have been stood down.The employer cannot select which eligible employees will participate in the scheme. This ‘one in, all in’ rule is a key feature of the scheme.

I’m a sole trader receiving JobKeeper. How do include these payments in my tax return?

If you’re a sole trader who has received JobKeeper payments, you need to include the payments as business income in your individual tax return. If your business is a partnership, trust or company, and you received JobKeeper payments, you don’t need to include it as assessable income in your individual tax return – but you need to report it as part of your business income.

Our business is back pre-COVID for now. What happens with JobKeeper? Do I just stop submitting the declarations to stop the payments?

This is the most common question we get and also the biggest misconception. Once you have met the 30% decline in turnover test for one month you are eligible for the whole period. You DO NOT need to retest eligibility each month.

You are entitled to receive it until it ends. You can choose to withdraw if you like. We believe JobKeeper has multiple purposes. Whilst it is to help businesses struggling it is also to stimulate the economy. So, the idea is if you continue to receive it then have additional cash available to buy new equipment or something similar then it is still having its desired effect.

I’ve worked from home a lot because of COVID-19. Can I claim home office expenses?

You are eligible to claim home officeexpenses if you are doing any work from home, even if it is just invoicing/bookkeeping of an evening. You should keep a diary of hours worked from your phone office to maximise your claim.

How to calculate your home office expensesis explained in detail here.

Due to COVID-19, the ATO previously announced that the work from home rate was increased from 52c per hour to 80c per hour from 1 March 2020 to 30 June 2020. It has now been announced that this has been extended to 30 September 2020.