Posted on April 3, 2020
Unfortunately, the life of a property investor is not all Private Jets, Champagne and Caviar. One of the most important aspects is making sure that all records are kept correctly from the start. Yes, we are referring to the dreaded record keeping.
There has been a recent push by the ATO to remind all taxpayers of the importance of record keeping and that the rules are the same regardless of whether a taxpayer holds an investment property for 6 months or 20 years.
The ATO can knock on the door at any time and start questioning the income and expenses that have been reported and if valid invoices can not be shown, the ATO can disallow deductions and amend income.
To ensure that an ATO visit does not become a stressful experience, it is important to have the correct record keeping procedures in place. An annual file which contains all income and expense invoices for the financial year is a great start. This can include Rental Agent summaries, bank statements and expense invoices such as Council Rates. It is also important to keep detailed records of all improvements made during the financial year to ensure the correct tax treatment i.e. whether the cost is expensed or depreciated.
At the end of each financial year, this annual file can then be provided to your friendly Accountant to assist in the smooth preparation of the Income Tax Return. It’s a win-win!
But wait, there’s more! The record keeping does not stop there. A separate file can also be kept in regards to the purchase of the property. As properties can be held for an extended period of time, it is important to keep track of these records to avoid any future hassles of chasing up information that is five or ten years old or more. This file can contain information such as:
If an investment property is held for a number of years, or if you hold more than one investment property, record keeping files can pile up and storage can become an issue. That’s why we at Hall Consulting are looking into efficient processes for storing the abovementioned information electronically such as our client portal, where information can be uploaded and accessed at anytime.
A reliable record keeping system will be useful when it comes time to cash in on your investment, calculate that Capital Gain and buy that Luxury Yacht. Now you will just need a file for all those boating expense…
Written by Sean Crowley
Posted on April 3, 2020
1. Be a companion with them on their business and life journey
Our clients need a companion with them to ask the right questions, guide them in their decision making, ensure that they are safe, and arrive at their desired destination – whether it is a business or life journey.
2. Know their needs and support their decisions
We are always asking our clients questions (some of them challenging) so that we truly understand their needs and wishes. Our clients wish to run ideas by us so that, where appropriate, we provide the right advice and can encourage or discourage action and prevent them from making mistakes or paying too high a price. We have accumulated many years of experience and business wisdom gained on our own journey or from the journey of many other clients in the past. We always find the time to talk to our clients about their ideas and decision making process.
3. Simplify transactions and use visualisation
Our clients expect us to talk their language and avoid tax and accounting jargon.
Explaining transactions or proposals with diagrams and other ways of visualising the transaction assist greatly in our clients’ understanding of the purpose of the advice and saves time reading pages and pages of technical explanation and information.
We are business people as well and we value both our client’s and our own time. That is why we provide indirect value by saving our client’s time and ultimately – money.
4. Do cost/benefit analysis
Advice involving numbers is best presented with a cost/benefit analysis. For example, demonstrating the cash effect on buying a car versus novated lease and salary packaging will assist the client to select the right car for the right person at the right price and be aware of the “going forward” cost to the business.
Strategic tax advice is best demonstrated by presenting calculations of what would be the tax if no action is taken compared with the tax post- execution of the proposal. When discussing tax savings, our advisers clearly list the assumptions used in arriving at a particular calculation or number so that clients are informed of any variables or obstacles that will affect the bottom line.
5. Step in the client shoes to find out what they really want from us
Think before the meeting what would be of most value to the client when preparing the agenda or reports and how to structure the explanation so that they walk out feeling satisfied that they have understood the advice. Always look for the positive and not concentrate on criticizing transactions and actions but rather applaud good things that happened in the business.
6. Always ask for updates
Accountants often work on projects discussed at some stage or follow up a lead given to them some time ago. Before the project kicks off, we “check in” with the client to find out if this project is still relevant or there are new twists and traps that need to be addressed. Businesses, as traveling vehicles, slow down at bumps on the road or even run off the road. Entrepreneurial clients quite often change vehicles and the roads they travel. By checking in with the client on the regular basis, we may be there when a crisis happen and prevent a major accident to take place….
7. Deliver good news personally more often – the little things
Everybody loves good news however little they are. When clients hear from their accountants it is usually about extra tax to be paid, penalty for late payment, tax office review or adverse application of the law that will deprive them of certain benefits, removal of exemption they are familiar with or any similar unwelcome news.
A new client once said that he used to book the dental and tax agent’s appointment one after another so that he would still feel numb when he was having the meeting with his accountant after the dental appointment.
Our clients are getting used to receiving a personal phone call or a message from the senior director first thing in the morning letting them know that their tax refund has arrived and they can start planning to spend it. They may be surprised by the bottle of wine or flowers waiting at the door on their birthday. They are no longer surprised to receive a “thank you for your prompt payment” electronic card with the happy faces of the team instead of opening a “overdue payment reminder letter”. It does also feel great to have a senior director of our firm joining a client on their trip overseas to promote their new business so that we can understand that business better, support our client in the new venture and even subsidize some of the trip expenses! It gets better, a trip like this seals the relationship and may result in a friendship for life!
We love doing little things for our clients as we care and we are human, we understand their busy life and their commitment to their businesses and we want to make a difference to their life so that they continue their journey with a smile!
Posted on April 3, 2020
The Australian Securities & Investments Commission (ASIC) has recently released a new smartphone application to help small business owners undertake important checks before entering into business transactions with other organisations.
As said by ASIC Commissioner Greg Tanzer “What you see on the surface isn’t always what you get.
Due diligence needs to start the moment you’re thinking about starting a relationship with a business, not after you find out you’re chasing money from a business that doesn’t exist.
ASIC’s Business Checks app provides some general guidance on the steps small businesses can take to reduce the risk of being swindled by unreliable operators and fly-by-night businesses.
There will always be an element of risk when you enter into business transactions, but you can help protect your interests by doing your homework and checking for warning signs”.
The ‘ASIC Business Checks’ app encourages small business owners to;
ask the right questions about the company, business and individuals they’re dealing with
check ASIC’s registers and verify that the information they’ve been given is accurate
seek ASIC’s help if they need more information or the support of a professional business adviser, and
report suspected misconduct to ASIC if they believe a company, business or individual is acting unlawfully.
The app is available for download now via iTunes or Google Play.
Posted on April 3, 2020
For business, July is the month you need to make sure you have properly closed off the last year and can start the New Year the right way. Here is the essential checklist to prevent last year overflowing into this year:
Reconcile your GST control account.
Does the income declared in your BAS for the last year reconcile to your annual income?
Check that the minutes for all director and trustee resolutions pre June 30 are documented and signed off.
Make sure that your stock take has been completed and documented.
If you have paid management fees to a related entity during the year, ensure that all of the tax invoices have been documented and that there is a reasonable commercial basis for the charges applied.
Where dividends have been declared to manage Division 7A loan payments, ensure that there are letters of instruction on file that the dividend is to be credited against the loan account. Dividend statements still need to be completed.
If you have cross border related party transactions make sure you have your transfer pricing file completed with all of the requirements signed off.
Review all contractors for the year going forward to ensure that they would not be deemed to be employees.
Get your operating budget completed for the year.
Get your cash flow budget in place.
Check the adequacy of your funding arrangements with your bank.
Check that you meet any loan covenants that you have with the bank at June 30.
As there is no real time limit on the recovery of outstanding SG obligations, business owners need to take a proactive approach reviewing arrangements to ensure that the business is not exposed to material liabilities – the start of the new financial year is a great time to do this.
The underlying issue is often that employers take the contractor relationship at face value – that is, what the piece of paper describing the relationship actually says. The reality is quite different as the law is based on the character of the relationship not what is stated in writing. So, if your business has contractors (or you are a contractor) performing the same role as an employee, then it’s possible the ATO will classify them as employees for SG purposes.
A genuine independent contractor who is providing personal services will typically be:
Autonomous rather than subservient in their decision-making;
Financially self-reliant rather than economically dependent upon the business of another; and,
Chasing profit (that is a return on risk) rather than simply a payment for the time, skill and effort provided.
There are a number of tests that can apply to help determine the status of a contractor – such as control, whether the worker has been hired to produce a result, the ability for them to freely delegate work to someone else, risk exposure, ownership of tools and equipment, and the treatment of business expenses, etc.
Employers cannot contract out SG responsibilities by adding fail safe clauses in contracts. And, there is no certainty that a contractor using an interposed entity (for example setting up a company and operating through it) is fool proof.
(Courtesy of KnowledgeShop)
Posted on April 3, 2020
The advice people in their 40s and 50s give to the younger generation
(By Mark Manson based on survey)
Start Saving for Retirement Now, Not Later
Start getting your financial house in order and start saving for retirement… today.
Make it your top priority to pay down all of your debt as soon as possible.
Keep an “emergency fund” — there were tons of horror stories about people getting financially ruined by health issues, lawsuits, divorces, bad business deals, etc.
Stash away a portion of every paycheck
Don’t spend frivolously. Don’t buy a home unless you can afford to get a good mortgage with good rates.
Don’t invest in anything you don’t understand.
Start Taking Care of Your Health Now, Not Later
“Your mind’s acceptance of age is 10 to 15 years behind your body’s aging. Your health will go faster than you think but it will be very hard to notice, not the least because you don’t want it to happen.” (Tom, 55)
The way you treat your body has a cumulative effect; it’s not that your body suddenly breaks down one year, it’s been breaking down all along without you noticing.
Get healthy and stay healthy Now!
Don’t Spend Time with People Who Don’t Treat You Well
“Learn how to say “no” to people, activities and obligations that don’t bring value to your life.” (Hayley, 37)
Gently let go of those who are not making your life better.
Enforce stronger boundaries in your life and dedicate your time to better people.
Don’t tolerate people who don’t treat you well. Don’t tolerate them for financial reasons, or emotional reasons, or for the children’s sake or for convenience sake.
Don’t settle for mediocre friends, jobs, love, relationships and life.
Stay away from miserable people… they will consume you, drain you.
Surround yourself with people that make you a better version of yourself, that bring out your best parts, love and accept you.
People typically struggle with boundaries because they find it difficult to hurt someone else’s feelings, or they get caught up in the desire to change the other person or make them treat them the way they want to be treated. This never works. And in fact, it often makes it worse. As one reader wisely said, “Selfishness and self-interest are two different things. Sometimes you have to be cruel to be kind.”
Be Good to the People You Care About
“Show up with and for your friends. You matter, and your presence matters.” (Jessica, 40)
Make the time for those friends and family that we do decide to keep close.
Appreciate those close to you. You can get money back and jobs back, but you can never get time back.
Be the person that others can count on when tragedies happen in life. Helping someone through these times by simply being there, listening and not judging is an honor and will deepen your relationships in ways you probably can’t yet imagine.
You can’t have everything; Focus On Doing a Few Things Really Well
“Everything in life is a trade-off. You give up one thing to get another and you can’t have it all. Accept that.” (Eldri, 60)
For some people, this will mean taking big risks, even in their 30s and beyond. It may mean ditching a career they spent a decade building and giving up money they worked hard for and became accustomed to. Which brings us to…
Don’t Be Afraid of Taking Risks, You Can Still Change
Don’t let fear be a detrimental driving force in your life
Take action on a problem you were aware of 10 years prior but failed to act
Don’t be afraid of tearing it all down if you have to, you have the power to build it all back up again.
You Must Continue to Grow and Develop Yourself
“You have two assets that you can never get back once you’ve lost them: your body and your mind. Most people stop growing and working on themselves in their 20s. Most people in their 30s are too busy to worry about self-improvement. But if you’re one of the few who continues to educate themselves, evolve their thinking and take care of their mental and physical health, you will be light-years ahead of the pack by 40.” (Stan, 48)
Nobody (Still) Knows What They’re Doing, Get Used to It
“Unless you are already dead — mentally, emotionally, and socially — you cannot anticipate your life 5 years into the future. It will not develop as you expect. So just stop it. Stop assuming you can plan far ahead, stop obsessing about what is happening right now because it will change anyway, and get over the control issue about your life’s direction. Fortunately, because this is true, you can take even more chances and not lose anything; you cannot lose what you never had. Besides, most feelings of loss are in your mind anyway – few matter in the long term.” (Thomas, 56)
Most of what you think is important now will seem unimportant in 10 or 20 years and that’s OK. That’s called growth. Just try to remember to not take yourself so seriously all the time and be open to it.
You really don’t know what’s going to happen and neither does anyone else, no matter how confidently they talk. While this is disturbing to those who cling to permanence or security, it’s truly liberating once you grasp the truth that things are always changing.
There might be times that are really sad. Don’t dull the pain or avoid it. Sorrow is part of everyone’s lifetime and the consequence of an open and passionate heart. Honor that. Above all, be kind to yourself and others, it’s such a brilliant and beautiful ride.
Invest in Your Family; It’s Worth It
“Spend more time with your folks. It’s a different relationship when you’re an adult and it’s up to you how you redefine your interactions. They are always going to see you as their kid until the moment you can make them see you as your own man. Everyone gets old. Everyone dies. Take advantage of the time you have left to set things right and enjoy your family.” (Kash, 41)
It seems that while family is not absolutely necessary to have a happy and fulfilling life, the majority of people have found that family is always worth the investment, assuming the relationships are healthy and not toxic and/or abusive.
Be kind to yourself, respect yourself
“Be a little selfish and do something for yourself every day, something different once a month and something spectacular every year.” (Nancy, 60)
Be kind to yourself.
Don’t sweat the small stuff; and it’s almost all small stuff.
When confronted with a perceived problem, ask yourself, ‘Is this going to matter in five years, ten years?’ If not, dwell on it for a few minutes, then let it go.”