There are certain items of equipment, machinery and hardware that are essential to the operation of your business – whether it’s the delivery van you use to run your home-delivery food service, or the high-end digital printer you use to run your print business.

But when a critical business asset is required, should you buy this item outright, or should you lease the item and pay for it in handy monthly instalments?

To buy or to lease? That is the question

Buying new pieces of business equipment, plant, machinery or vehicles can be an expensive investment. So, depending on your financial situation, it’s important to weigh up the pros and cons of buying, or opting for a leasing option.

First of all, let’s look at why you might decide to buy the item.

Buying: the pros and cons:

• Pro: It’s a tangible asset – when you buy an item, you own the item outright and it will appear on your balance sheet as one your business assets. As such, by owning these assets outright you increase the perceived capital and value of your business. You can also claim the cost of the asset against your capital allowance for tax purposes.
• Pro: It’s yours for the life of the asset – once you own the item, you have full use of the equipment for the duration of the life of the asset. Your use of the asset isn’t reliant on you being able to keep up regular lease payments, and if your financial circumstances change then you can sell the asset to free up the capital.
• Con: It’s an expensive outlay – paying for the item up-front is a large outlay for the business and will require you having the cash to cover this cost. Spending a large lump sum in this way may take cash away from other areas of the business, so you need to be 100% sure that this purchase is the right decision and a sound investment.
• Con: You may require extra funding – if you don’t have the liquid cash available to buy the item outright, you may need to take out a loan. Asset finance is available from funding providers, but does tie you into a loan agreement that will add to your liabilities as a business – reducing your worth on the balance sheet.

Leasing: the pros and cons:

• Pro: Leasing has a cheaper entry point – if the item you need to purchase has a large price tag, leasing allows you to make use of the asset without the cost of buying it in full. For startups and smaller businesses with minimal capital behind them, this can make leasing a very attractive option. You may not own the asset, but you can make use of it – and this may be the difference between the success or failure of your business.
• Pro: You can spread the cost – there is still an associated cost of leasing, but you can spread the cost over a longer period, making it easier to find the necessary liquid cash to meet your lease payments. With this money saved, you can then invest in other areas of the business, helping you to expand, grow and bring in more customers and revenue.
• Con: You don’t own the asset – there are different types of leasing agreement. Under a capital lease, you do own the asset (once you’ve paid if off). But if you opt for an operating lease, this is a more short-term lease and you won’t own the asset at the end of the contract. Ownership does have its advantages (including being able to sell off the asset if required) so it’s important to consider what kind of leasing agreement you’re entering into and what the advantages/disadvantages may be.
• Con: You may pay more in the long run – most leasing agreements will attract additional costs and interest on your agreement, so you may well end up paying more than the market price for your asset in the long term. If you can cope with the higher cost, this is fine, but bear in mind that buying outright may have offered greater value.
• Con: You may lose the use of the asset – if you can’t keep up your lease payments (due to poor cashflow for example) then the owner of the lease agreement may recall the asset. If this item is crucial to your business model, losing this key asset can have a profound impact on your ability to operate. In this respect, leasing is a more risky prospect, but also an easier option for businesses with less cash to splash.

Talk to us about whether buying or leasing is the best way forward

Whether you opt to buy or lease your equipment isn’t always a straightforward decision to make – so it’s a good idea to consult with your accountant early on in the decision-making process.

We’ll help you review your current financial position, assess your available cashflow and look at your regular cost base to decide whether buying or leasing is the right thing for the business.

Australia’s borders are open, and many Australians have started travelling overseas. Have you dreamed about finding a new business opportunity in another country? If so, this article is for you.

Create an export plan

When you take the big step of going international, having a plan is going to help immeasurably. Writing an export plan gives you a route map to follow and helps to explain to investors, funding providers and your existing home team WHY you’re looking to expand out into a new country.

As a starting point:

• Explain your business reasons for trading in this new territory
• Give a detailed explanation of your supply chain and how it will work
• Outline your strategy for finding customers, making sales and generating revenue
• Summarise the costs of going international and where you hope to find the funding
• Give an overview of the company’s current financial health and cashflow position
• Set your initial targets for the first year and your timescales for achieving them.

Check if you need an export licence

It’s possible that you’ll need an export licence in Australia to trade over country borders. This will depend on what goods you’re exporting, whether they are on any controlled lists and whether there’s an existing trade agreement with your target county.

Free trade agreements (FTAs) may exist between Australia and your export country, reducing or removing some of the regulatory hurdles required to trade between those two territories.

Understand your Tax liability

According to the OECD, 170 countries and territories have some form of Value-Added Tax (VAT) or Goods and Services Tax (GST). These consumption taxes are added to non-essential goods and are paid by the consumer as part of the price they pay at the till.

Knowing whether you’ll need to charge and pay GST/VAT in your new territory is an important consideration. Countries will charge GST/VAT at different rates, on different goods and services. So, it’s important to talk to a specialist who can advise you on how to deal with GST/VAT when trading across borders in your new country.

Move to multi-currency accounting software

If you’ve only traded in Australia, your finances will have been managed in a single currency up to this point. The likelihood is that your new export location will use a different currency.

Whether your new location trades in Korean Won, euros or Chinese Yuan, your accounting software needs to be able to deal with transactions in the Australian dollar and your new international currency. Most of the major cloud accounting platforms will offer a multi-currency subscription, giving you the ability to account in multiple currency types.

Find the best way to get paid in a new currency

When you make your first sales in your international territory, you’ll also need a way to take payment in this new currency. With cashless card transactions now so common in many parts of the world, this is less of an issue than it used to be. However, you will need a bank account that uses your new currency and some means of converting funds into your home currency.

International bank accounts with foreign exchange (forex) capabilities make this easier. Providers like Wise Business, OFX or Revolut, give you the option to collect payments in one currency and then export it in Australia dollar. This makes the forex process much simpler and also much more cost-effective, with rates usually far lower than those your high-street bank would charge for forex transactions.

Market your brand to a new audience

A key step will be marketing your brand to consumers in this new country or finding other businesses to sell to directly. Remember, you’re starting from scratch when it comes to brand awareness and advocacy, so it’s important to do as much research as possible.

Questions to ask include:

• Is there a need for your goods and services in this new market?
• Who are the current brand leaders and your direct competitors?
• How will you differentiate your goods in a crowded market?
• Do you have the resources to create marketing content in a second language?

Remember to also check on cultural sensitivities in your new country. Do you understand the cultural, social and religious differences between Australia and your new territory? Using the wrong words, phrases or colours in your marketing could be disastrous, so learn as much as possible about your new country and get to know the local traditions.

Going international is a significant step for your business. We can help you draw up an export plan and get your tax and accounting ready for operating in a new territory. We also have bilingual accountants to assist with in terms of culture and language.

Talk to us about writing your export plan.

Happy new fiskl year ! A new financial year is a great time to reset your finances and put systems in place to help you keep on top of your tax compliance and business/personal goals.

Here are our tax tips for small business owners to kickstart the 2023 financial year.

Common Tax Deductions for Small Business

Are you claiming all the business tax deductions that you are entitled to?

There are many expenses common to most small business, and there are other expenses that are specific to the nature of the goods or services that your business provides.

• Operating expenses include accounting, administration, advertising and marketing, office premises, office running expenses, trading stock, legal fees, insurance and vehicle expenses.
• Employment expenses include salary and wages, fringe benefits, superannuation and training costs.
• Other operating expenses may include things specific to your business, for example point of sale systems, freight, professional membership fees, professional education, protective equipment, tools or specialised software.
• Capital expenses include machinery and equipment, vehicles, furniture and computers. Depreciation for these assets may also be deductible if the expense was not written off immediately.
• Repairs and maintenance to assets and business premises.

Expenses must relate to the running of the business and providing the goods or services that your business offers.

Some common expenses that are not deductible are fines and penalties, provisions for employee leave, donations to entities not registered as deductible gift recipients and entertainment.

There may be some expenses you want to check with us such as private usage of business vehicles, prepaid expenses, bad debts, loss of stock and borrowing expenses. We’ll make sure to include all the deductions you’re entitled to.

What’s on the ATO Radar for 2022?

This year the ATO will be taking a closer look at record keeping, work related expenses, rental property income and deductions and cryptocurrency transactions.

• Keep records for all business transactions (income and expenses), activity statements and financial reports for at least five years.
• Keep all records relating to employees, contractors and payroll for at least seven years.
• If your business is a company, keep all records for at least seven years, including director meeting minutes.

Other Common Tax Return Issues

• Work-related travel expenses – travel fares, accommodation, meals. The travel should be directly related to income producing activities and you need records to verify the travel claims.
• Motor vehicle expenses – keep records for fuel, repairs and servicing, finance arrangements, insurance and registration. Keep a logbook to record private travel.
• Superannuation – have you paid the superannuation guarantee on time to employees’ super funds? The ATO will examine your Single Touch Payroll records including superannuation payments.
• Current temporary tax depreciation incentives – There are currently three temporary tax depreciation incentives available to eligible businesses:
  • Temporary full expensing – for assets you start to hold, and first use (or have installed ready for use) for a taxable purpose, from 7.30pm (AEDT) on 6 October 2020 to 30 June 2023.
  • Increased instant asset write-off – if the asset was purchased by 31 December 2020, and first used or installed ready for use before 30 June 2021. The threshold remains at $150,000.
  • Backing business investment.

Talk to us about what applies for your business.

Maximise Your Business Deductions

We can check your business’s eligibility for concessions, offsets, employer incentives and rebates and make sure your business is calculating taxable income correctly, so you don’t pay more tax than you need to!

With so many businesses still affected by COVID-19, it’s important to get the allowable tax deductions right for your business and get in early for your tax return. This way you get more time to plan for payment, or if you are due a refund you will see it in your bank sooner.

It’s nearly time to make a finalisation declaration for Single Touch Payroll. There is no need to issue payment summaries to employees you have reported through STP.

Employers must complete the finalisation declaration by 14 July for employees. Employers with a mixture of employees and closely held payees have until 30 September 2022 to make the declaration.

Small employers (fewer than 19 employees) that only pay closely held payees have until the payee’s income tax return due date. Employers will need to liaise with the individual payee about the exact tax return due date.

You may have some payees who have not been reported through STP, so you still need to issue a payment summary for anyone not reported through STP. You will also need to submit a payment summary annual report (PSAR) for any payments outside the STP system.

Once the STP finalisation has been sent to the ATO, the employee’s information will be released in their myGov account and listed as ‘tax ready’.

STP Payroll Checklist

Be efficient and prepare as much as you can now so that you are able to finalise your data by 14 July.

• Check that your business details, including ABN, registered name and address and authorised contact person are correct in your software.
• You should already have necessary details for all employees, both current and any who have terminated throughout the year if you are using STP. The essential information is full name, date of birth, address and tax file number.
• Review any terminated employees. Is the correct termination date recorded in your software? Are Employment Termination Payments (ETPs) coded correctly?
• Review salary sacrifice payments to superannuation for Reportable Employer Superannuation Contributions (RESC) amounts.
• Check with us for any Reportable Fringe Benefit Tax (RFBT) amounts that should be included.
• Check that all payroll categories are assigned to the correct ATO reporting category. This includes all ordinary earnings, loadings and penalties, allowances, commissions, bonuses, leave payments and termination payments.
• You may have other unusual payments such as those made under a voluntary agreement for contractors or labour-hire arrangements—check that you have reported them correctly.

Finalising Single Touch Payroll

It’s important to verify payroll figures before finalising, in order to minimise the chance of errors and having to re-issue at a later date. The finalisation process is the same whether you are using STP Phase 1 reporting or Phase 2.

Once the payroll year is completed at 30 June, you can then analyse the payroll amounts for each employee and cross-check against the numbers in your profit and loss accounts.

Talk to us today if you would like us to make the STP end of year process easier by reviewing and validating your payroll figures prior to finalising the data and lodging with the ATO. 

From 1 July 2022, there are several changes to superannuation laws that you may be able to take advantage of.

Changes to voluntary contributions

If you are aged between 67 and 74, you will be able to make voluntary contributions into your superannuation without needing to meet the work test. Before 1 July 2022, if you were over the age of 67 you were required to work in gainful employment for at least 40 hours over 30 consecutive days in order to make a voluntary contribution.

The work test is only applicable from 1 July 2022, if you intend to claim a tax deduction for a voluntary contribution.

Bring-forward of non-concessional contributions

From 1 July 2022, you may be able to bring-forward 3 years’ worth of non-concessional contributions up to the age of 75.

If you are 74 years of age on 1 July 2022, and have a total superannuation balance of less than $1.48 million, your non-concessional contribution limit is $330,000 using the bring-forward rule.

Downsizer contributions

If you are over the age of 60 and you sell your family home, you may be able to make a downsizer contribution of $300,000 per person. Before 1 July 2022, the age limit was 65.

Certain eligibility requirements apply, such as owning the main residence for 10 years and making the contribution within 90 days of settlement.

Superannuation guarantee

The superannuation guarantee rate will increase from 10% to 10.5% for earnings after 1 July 2022. This rate is legislated to consistently rise up to 12% for the 2025–26 income year.

First home super saver scheme

From 1 July 2022, the maximum amount of contributions that can be released from your superannuation under the first home super saver scheme (FHSSS) will increase from $30,000 to $50,000. The increase will apply to withdrawal requests from 1 July 2022.

The yearly limit that an individual can apply to withdraw remains the same at $15,000 per year. To be eligible to access the FHSSS, these contributions must be voluntary contributions.

Any of these changes may greatly benefit your ability to grow your retirement savings, and we would be delighted to work with you in this matter.

Smart ways to get your costs under control

Cashflow has been a big issue for thousands of businesses this year, and when the money’s not rolling in, it can help to rethink your costs. To do it effectively involves more than just keeping an eye on outgoings. It’s about looking at all the moving parts of your business to see if your systems (or lack of) are costing you unnecessarily. Here’s how:

• Muck in – Do a cost control audit to work out where your big cost centres are and look at your systems for managing them.
• Be aware – Don’t just slash your expenses. Track costs and look out for opportunities to trim fat or take a different approach.
• Unite your team – Bring everyone together to monitor and analyse inputs and expenses. Reviewing and developing your systems? Get your team’s feedback.
• Look to your peers – How do your costs compare to others? If a business of a similar size and production system to you is performing well, but spending less, explore what they’re doing differently.
• Seek advice – Got a good idea of where the issues are, or feeling totally confused? Talk to your advisors about your next steps

What’s Required in Contractor Agreements?

You should have a comprehensive agreement with every independent contractor.

The contract should include:

• Details of the nature of the working relationship to demonstrate that a genuine contractor relationship exists.
• All rights and obligations of both the contractor and the business.
• Terms and conditions of the agreement.
• Whether superannuation applies.
• The main factors used to assess the worker as a contractor such as independence, ability to delegate work, the basis of payment, the use of tools and equipment, the degree of control or the ability to take on other work.
• The date of the next review of the contract.

Many factors are involved in assessing whether a worker is deemed to be an employee or contractor, and the relationship can change over time. There is no single overriding factor in deciding if a worker is truly an independent contractor. Therefore, each working relationship must be assessed separately and individually.

Sales and conversion rates

An obvious metric to track is the number of sales you’re making each month. You’ll have set a target for these sales in your business plan, so it’s important to record each sale and see how the startup is performing over the first six months of the business.

It’s also important to log and track the drivers that lead to these sales. How many sales enquiries are you receiving? How many of these enquiries are being converted into actual sales? How many customers are being engaged by your marketing campaigns, and is this engagement leading to interest in your products and/or services.

The more detail you can track from your sales and marketing activity, the more forensic you can get with which campaigns are actually delivering the goods.

Final Payments

Final payments for employees can range from very simple to highly complex. It depends on the circumstances of the termination, the industry, the modern award or registered agreement, age and other factors.

Before you pay an employee who is leaving your business, you’ll need to gather information to ensure accuracy.

• Final date worked and reason for termination – resignation, retirement, abandonment of work, dismissal, redundancy, end of contract or medical invalidity.
• Check termination provisions in the relevant award.
• Check the National Employment Standards for the minimum notice period and redundancy pay if applicable.
• If you usually pay annual leave loading, this is also paid on termination.
• Amount of leave owing, and if there are any accrued rostered days off or time in lieu.

A termination payment can be made up of several elements:

• Final ordinary hours.
• Unused annual leave, loading and long service leave.
• Redundancy payment.
• Pay in lieu of notice.
• Unused rostered days off.
• Superannuation.
• Ex gratia payment.
• Other payments made in case of death, invalidity, or compensation or as required by certain awards.