What a business is all about

There is way too much noise out there about businesses and their relationships with growth, technology, management, marketing, customer service, social responsibility, tax offices, etc. At times we need to just simply things and below is a simplistic four point view of what a business is all about:

1. A business needs to find customers at start
2. We then need to retain those customers and bring some stability in the business
3. We then need to find more customers
4. We need to grow our staff and operations without losing control of the business

Simple as!

A business can be as simple or as complicated as you want to make it, make yours simple and focus on the four above to achieve whatever it is that you want to achieve from your business.

Why are we being bad to good small businesses?

When we get bad service or products we are endlessly complaining and making sure we tell our friends, family, colleagues and even strangers of what great injustice was done to our spending. This is fine and that is probably how our brain is programmed but what are we doing when we get great service and products from all the good small businesses out there? And the answer might be something not far away from "nothing".

There are thousand of small businesses out there who are providing exceptional service, great products and going over and above what is required from them but what do we do when we receive exceptional value for our money? Nothing!

Next time when you get bad service; feel free to leave bad review, tell people, tweet, put up a post on Facebook or use any other medium to warn others about such players; you are entitled to that. If you are going to use time to complain about the bad, do also take out your time and use the same mediums to promote the good experiences you are having with the small businesses out there because if you don't; you are leaving these good small businesses on level field with the not so good service providers and that just can't be right! The hardworking and honest small businesses from all fields deserve better! 

So next time you receive great service from a small business, tell everyone you can because they might not have the resources to advertise themselves but your couple of minutes might just help them!

BY SURESH RAJANI 

Tax debt transparency laws are here (well almost)...

The government in a bid to increase transparency of tax debt and to provide a true picture of credit worthiness of businesses has released exposure draft legislation for consultation that will allow the Tax Office to disclose business tax debts to credit reporting bureaus where the businesses have not effectively engaged with the ATO to manage their debt.

For most businesses that pay their tax bills as and when they fall due, this is not of concern but for those entities that have ABNs with tax debts of over $10,000 overdue for more than 90 days, this is about time they get their tax affairs sorted and managed.

One of the first signs of a business not being able to manage its finances is when it starts falling behind on paying its tax debts so this is a good piece of legislation for small businesses who need to continually look for new business but don't always have enough information to determine if a new client is creditworthy or not. This law will provide useful information to businesses that are proving credit to new customers or are increasing the credit limits of existing customers.

For those businesses that do the right thing, they need not worry. Those that try and take unfair advantage by not paying their debt and using the money in their business instead, be aware!

By Suresh Rajani

Time is not Money but...

If time was money we would all be equally rich as we all start with 24 hours in a day, 7 days in a week and 52 weeks in a year. The fact is that at the end of any given period (day, week, month or year) we all have earned different amounts of money.

Time is not money and how much time you have has nothing to do with money. What you did, are doing or will do with your time will determine how much money you will have.

You have no job and are not doing great financially. You can either use your time feeling sorry for yourself, look for another job or spend your time brain storming of a business you can start that will enhance your financial position.

You start a business and after a few months things are going really well and things get really busy. You can do two things with your time. You can either keep putting all hours in the business or you can hire and train someone else to do your work and you can focus your time thinking of the bigger picture and working on how you are going to capitalise on the good platform you have got.


BY SURESH RAJANI

Suresh Rajani is the Tax and Business Adviser at TAX FIRST (A tax and business advisory firm)

www.taxfirst.com.au

Businesses need to understand what sunk costs are.

Imagine a gambler having lost tens of thousands of dollars at a casino and still playing in the hope of "recovering" the lost money. Sounds far too familiar doesn't it? Common sense would say that the fact the money has been lost should have no impact on the gambler risking more money but he/she still does. The age old gambling thinking is the simplest example of why businesses need to understand sunk costs.

Sunk costs by the very definition are those costs that have already been incurred and cannot be recovered. If no matter what you decide to do, the sunk costs are gone, you should deem them irrelevant for the future decision making.

It's  a norm for a business to spend thousands of dollars in developing a product, service or an idea. If even after trying its best the product/service/idea is not profitable, then it would make sense to cut your losses and drop the idea. The fact that you have spent thousands of dollars (sunk costs) to get to a certain stage does not give you the license to waste many more thousand of dollars in the hope of turning things around.

Don't sink your business further to recover the sunk costs!

BY SURESH RAJANI

Suresh Rajani is the Tax and Business Adviser at TAX FIRST (A tax and business advisory firm)

www.taxfirst.com.au

What is the worst that can happen?

Fear and lack of confidence holds us all back. The fear of what would happen if you do something or lack of confidence in yourself knowing something can be done but not believing in yourself to be able to do it.

We all have ideas that we are not sure would work or things that we don't bring into motion as we are uncertain if they will be successful. Next time you have any of these thoughts, just ask yourself "What is the worst that can happen if I do this?" As long as the answer to the question is not "You will die", then go ahead and do it.

Have an idea that you think can be a great business but are pursuing it? Go ahead and get it in to play. What is the worst that can happen? You will loose a bit of money. There are lots of jobs out there and money can be earned back.

Have a thought about how the business that employs you can be improved? Go ahead and let the manager or owner know. What is the worst that happen? It would be knocked down as not such a great idea or not implemented. At least you would be seen as someone who cared about the business and what happens in it instead of just getting paid for your work.

BY SURESH RAJANI

Suresh Rajani is the Tax and Business Adviser at TAX FIRST (A tax and business advisory firm)

www.taxfirst.com.au

What a business can learn from a car indicator?

You are driving down a busy road and you realize you have to change lanes as the lane is either moving too slowly or your exit/turn is coming up. You flick the indicator to let others know of your intention to change the lane and to your surprise, no one gives you the space to change the lanes. You are furious as you think the other people are intentionally not letting you change lanes. With lots of struggle you somehow manage to change lanes and barely make it to your destination. 

 

Next day while driving the same thing happens and you wonder why. You check the car and realize that the  the signal light at the back of your car is not working and now you understand why no one was giving you way.

The above scenario is very much relevant to every business out there. You believe your business offers great products and/or services but no one seems to be willing to give you a chance to break in to the market or grow your business. The reason may not necessarily be the people around you. Maybe you are flicking the indicator but the indicator light is not blinking enough to catch the attention of your potential customers. So instead of blaming everyone else for not wanting to buy your great products and/or services, you should fine tune your business practices and find ways to improve what you do.

BY SURESH RAJANI

Suresh Rajani is the Tax and Business Adviser at TAX FIRST (An accounting and business advisory firm)

www.taxfirst.com.au

Appreciating your employees at Christmas with gifts and parties and its tax implications.

There is no better time for a business to thank the staff for their services and show appreciation for their work than Christmas. Holding Christmas parties and providing gifts has its own tax implications. Below is a summary:

NON-ENTERTAINMENT GIFTS

·         Non Entertainment gifts are gifts such as gift vouchers, hampers, flowers, alcohol, etc. Where the total value of non-entertainment gift is less than $300 (GST Inclusive), they will be exempt from Fringe Benefit Tax (FBT) and the business will be able to claim a tax deduction and GST credits.

ENTERTAINMENT GIFTS

·         Entertainment Gifts are gifts such as tickets to movies, theatre, sporting event, etc. Where the total value of entertainment gift is less than $300 (GST Inclusive), they will be exempt from Fringe Benefit Tax (FBT) but the business will NOT be able to claim a tax deduction or GST Credits.

CHRISTMAS PARTY – OFF SITE

·         When the cost for the employee and their associate is each less than $300 (GST Inclusive), the expense would be exempt from FBT but the business will not be able to claim a tax deduction and GST credits.

CHRISTMAS PARTY – ON SITE

·         When the Christmas party is held on a working day at the business premises with only employees and clients attending and only finger food or light meal and no alcohol is provided, the expense would be exempt from FBT and the business will be able to claim a tax deduction for the entire cost. GST Credits can be claimed for the entire cost too.

·         When the Christmas party is held on a working day at the business premises with only employees and alcohol is provided, the expenses are exempt from FBT for employees with no dollar value limit but no tax deduction or GST credit can be claimed. Where the employees’ associates attend and the cost attributable to each associate is more than $300 (GST Inclusive), there is FBT on the associate’s portion, and a tax deduction and GST credits can be claimed on the associate’s portion.

 BY SURESH RAJANI

Suresh Rajani is the Tax and Business Adviser at TAX FIRST (An accounting and business advisory firm)

www.taxfirst.com.au

 

 

Is it worth paying Goodwill?

There are two ways of owning a business. You either start it from scratch or buy an existing business and continue running it or even better, improving it.

When you buy an existing business; over and above the value of the assets, the seller is likely to ask for a Goodwill amount for the non tangible value of the business. Even with small businesses, the amount of Goodwill being asked for currently is ridiculously high and can run into hundreds of thousands of dollars and for some even over the million dollar mark. The question then becomes if the Goodwill is worth paying.

My advice is simple: If you want the easy way out then pay the Goodwill or else start something from nothing and make it into a successful business.

There is an argument out there that paying Goodwill is worth it as you start earning profits from day one. But do you really? Remember if you paid Goodwill, you need to recover the  investment before you can really tell yourself you are making money. So if you invested say $500,000 as Goodwill then until you can earn it all back in a few year's time you haven't even reached your recovery stage and the longer the recovery stage the better off you would have been if you had started from scratch and even though you may have made losses at start, you may not have taken that long to recover them all back.

So don't be fooled by just following the crowd but do what really works best for you.

BY SURESH RAJANI

Suresh Rajani is the Business Leader at TAX FIRST (An accounting and business advisory firm)

www.taxfirst.com.au

 

 

5 things to consider at the start of a leasing arrangement

Most businesses need to lease commercial or industrial premises to conduct their day to day operations from. Yet so many business owners find themselves trapped into lease arrangements they either didn't understand or they thought were just standard practice and didn't pay attention to. Below are 5 things business owners need to consider when starting a lease arrangement:

1. Outgoing inclusive or rent plus outgoings. Most leases have the tenants pay the outgoings (land tax, water rates, council rates, etc) and not knowing the estimated outgoings can leave a big dent in the cash flow of a business.
2. Rent in advance plus security bond. The amount that needs to be paid upfront maybe much higher than just one months rent as the lease agreement would specify the amount of rent to be paid in advance and the security bond that needs to be paid.
3. Annual rent review. Just because you are signing a lease for x amount of years does not mean that your rent is going to be fixed for the x amount of years. Commercial leases normally have an annual rent increase percentage by which the rent is going to increase.
4. GST inclusive or plus GST. Many commercial landlords are registered for GST and that means they will have to charge you GST. Paying attention to and understanding if the rent is including GST, plus GST or owner not registered for GST is very important.
5. Set up and modifications. Most businesses would need to make certain changes to the premises to suit their business and it is highly recommend that you check what the lease says about the process of such modifications and what happens when your lease ceases.

BY SURESH RAJANI

Suresh Rajani is the Business Leader at TAX FIRST (An accounting and business advisory firm)

www.taxfirst.com.au

 

 

3 ways foreigners can invest in Australia

 

Australia has been a robust economy and having proven its resilience to the global economic downturn of 2008 and beyond it is only natural for investors world over to want to invest in our economy. Below are 3 of the many ways people can invest:

1. Loan the funds to a business and receive interest payments for the amount lent. This is ideal if the owners of the business are known to you and you trust them. The advantage of lending in this fashion is that a maximum tax of 10% is withheld from the interest before its paid to you and that is taken to be final tax under the Australian Taxation System.
2. Buy shares in the Australian company you want to invest in. Buying shares in a company (no matter how small or big your shareholding is) gives you (partial) ownership of the company. If your return (dividend) are paid out to you out of taxed profits (franked dividends) then no additional tax is payable by you as the Australian Taxation System considers the 30% tax paid by the company as final for non-residents.
3. Invest directly under your name in properties, etc. It may be more time-consuming and may get complex managing your investments directly in Australia, but there is no reason you cant invest directly in Australia under your name. The taxation implication of this is that even though you may be a non-resident for tax purposes, you still would have to pay the Australian Tax Office your share of tax as a non-resident on all Australian Sourced income at rates determined under the Australian Taxation System.

 

The importance of getting your situation specific advice cannot be emphasised enough so do make sure you consult with taxation professionals in both your country and in Australia to understand the implications of investing in Australia both in terms of risk and reward.

BY SURESH RAJANI

Suresh Rajani is the Business Leader at TAX FIRST (An accounting and business advisory firm)

www.taxfirst.com.au

 

 

 

 

 

Is your business structure right for you?

There is no such thing as "one business structure fits all or even similar businesses" and getting the business structure wrong can cost you in the long run.

Don't simply register a company and think that it is the best structure for you because everyone else is using it and you are in a hurry or to save a few dollars at the start.

There are four main types of business structures used by small and medium sized businesses in Australia and in most cases using them in a combination may work in your favour in the long run. These four are:

1. Company
2. Trust
3. Sole Trader
4. Partnership

Below are the the features/differences of the four structures:

COMPANY

• Regulation: Heavily by ASIC
• Profit distribution/ Tax effectiveness: Not flexible
• Taxation: Company tax rate
• Liability: Limited

TRUST

• Regulation: Minimal
• Profit distribution/ Tax effectiveness: Flexible
• Taxation: At beneficiary level
• Liability: Limited to trust assets

SOLE TRADER/PARTNERSHIP

• Regulation: Minimal
• Profit distribution/ Tax effectiveness: Not flexible
• Taxation: At individual's (or partner's) marginal rate
• Liability: Unlimited

Your business is probably going to be your biggest source of income so give the business structure some thought and just don't rush into it.

BY SURESH RAJANI

Suresh Rajani is the Business Leader at TAX FIRST (An accounting and business advisory firm)

www.taxfirst.com.au

 

 

7 things business owners are getting caught out on

Being a business owner may be rewarding but owning a business comes with the responsibility of making sure that the business complies with various tax office and other obligations. Below are the 7 things business' are  getting caught out on:

1. Minimum wages. The current minimum wage is $640.90 per week ($16.87 per hour) and paying employees below that either intentionally or unintentionally can result in penalties.
2. Annual Leave. All employees (except for casual employees) are entitled to annual leave. Full-time and part-time employees get 4 weeks of annual leave, based on their ordinary hours of work. The leave accumulates gradually during the year and any unused annual leave will roll over from year to year.
3. Superannuation payment. Almost all employees in Australia are entitled to a superannuation contribution, paid by their employer into a super fund. It doesn’t matter if the employee is full time, part time or casual (depending on income and hours). Even some contractors may be entitled to super contributions. Australia’s superannuation law is strict with regards to paying by the due date (28 days after end of every quarter). Even if you’re late by one day, you can be penalised.
4. Fringe Benefit Tax (FBT) on motor vehicles. If you operate your business as a company or trust, you can claim a full deduction for expenses you incur in running a motor vehicle that your company or trust leases or owns. If you, or other company or trust employees (or their associates), use the vehicle for private purposes, you may have to pay fringe benefits tax (FBT).
5. Goods taken for private use. It is a common practice in businesses such as bakers, greengrocers, convenience stores and restaurants – but business owners need to realise that accounting for goods taken out of stock for private use has tax consequences. Goods taken out of stock by a business operator for private use have to be included in the business' income.
6. Putting aside money for income tax. Unless you plan ahead for tax, it can be difficult to pay tax bills when they fall due. So it's worth making this a priority for your business. As you become more established the Australian Taxation Office (ATO) might also require you to make quarterly pay as you go (PAYG) tax instalments.
7. Getting involved in cash economy. Businesses that deliberately hide income to avoid paying the right amount of tax or superannuation are part of what is generally called the cash economy. The ATO can issue default assessments when you cannot substantiate your income or lifestyle. 

BY SURESH RAJANI

Suresh Rajani is the Business Leader at TAX FIRST (An accounting and business advisory firm)

 

 www.taxfirst.com.au